As filed with the Securities and Exchange Commission on April 28, 2000
Registration No. 33-41245
811-6337
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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. 17 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
Amendment No. 22 /X/
(Check appropriate box or boxes)
---------------------------------
ACCESSOR FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1420 Fifth Avenue
Suite 3600
Seattle, Washington 98101
(206) 224-7420
(Address, including zip code, and telephone
number, including area code, of Principal
Executive Offices)
---------------------------------
J. ANTHONY WHATLEY III
1420 Fifth Avenue
Suite 3600
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:
PHILIP J. FINA
Kirkpatrick & Lockhart LLP
75 State Street
Boston, MA 02109
---------------------------------
Approximate date of proposed public offering: As soon as practicable after the
effective date of the registration statement. It is proposed that this filing
will become effective (check appropriate box):
/__/ immediately upon filing pursuant to paragraph (b)
/__X/ on April 29, 2000 pursuant to paragraph (b)
/__/ 60 days after filing pursuant to paragraph (a)(1)
/__/ on (date) pursuant to paragraph (a)(1)
/_/ 75 days after filing pursuant to paragraph (a)(2)
/__/ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/__/ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
[GRAPHIC] ADVISOR CLASS SHARES
ACCESSOR(R)FUNDS, INC. Prospectus April 29, 2000
Equity Funds
Growth Fund
Value Fund
Small to Mid Cap Fund
International Equity Fund
Fixed-Income Funds
Intermediate Fixed-Income Fund
Short-Intermediate Fixed-Income Fund
High Yield Bond Fund
Mortgage Securities Fund
U.S. Government Money Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
[LOGO] ACCESSOR
<PAGE>
THE ACCESSOR FUNDS
[Graphic] A family of nine mutual funds (each a "Fund"), each with two classes
of shares. This prospectus describes the Advisor Class Shares of the Funds.
[Graphic] A variety of equity and fixed-income mutual funds.
[Graphic] When used together, designed to help investors realize the benefits of
asset allocation and diversification.
[Graphic] Managed and administered by Accessor Capital Management LP ("Accessor
Capital").
[Graphic] Sub-advised by Money Managers ("Money Managers") who are selected and
supervised by Accessor Capital (other than the U.S. Government Money Fund which
is advised directly by Accessor Capital).
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DIVERSIFICATION is the spreading of risk among a group of investment assets.
Within a portfolio of investments, it means reducing the risk of any individual
security by holding securities from a variety of companies. In a broader
context, diversification means investing among a variety of security types to
reduce the importance of any one type or class of security.
ASSET ALLOCATION is a logical extension of the principle of diversification. It
is a method of mixing different types of investments (for example, stocks and
bonds) in an effort to enhance returns and reduce risks.
[Graphic]
Diversification and asset allocation do not, however, guarantee investment
results.
<PAGE>
TABLE OF CONTENTS
THE FUNDS
Fund Summaries........................................................1
Performance..........................................................10
Equity Funds' Expenses...............................................14
Fixed-Income Funds' Expenses.........................................15
Equity Funds' Objectives and Strategies..............................16
Equity Funds' Securities and Risks...................................18
Fixed-Income Funds' Objectives and Strategies........................20
Fixed-Income Funds' Securities and Risks.............................24
Management, Organization and Capital Structure.......................27
SHAREHOLDER INFORMATION
Purchasing Fund Shares...............................................35
Exchanging Fund Shares...............................................37
Redeeming Fund Shares................................................38
Dividends and Distributions..........................................39
Valuation of Securities..............................................39
Taxation.............................................................40
Financial Highlights.................................................41
APPENDIX A
Description of Fund Indices..........................................49
<PAGE>
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[GRAPHIC] GROWTH FUND
SUMMARY
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INVESTMENT OBJECTIVE The Growth Fund seeks capital growth through investing
primarily in equity securities with greater than average growth characteristics
selected from the Standard & Poor's 500 Composite Stock Price Index ("S&P 500").
PRINCIPLE STRATEGIES The Fund invests primarily in stocks of companies chosen
from the S&P 500 that Chicago Equity Partners Corp. ("Chicago Equity Partners"),
the Fund's Money Manager, believes will outperform peer companies, while
maintaining an overall risk level similar to that of the benchmark. The Money
Manager attempts to exceed the performance of the S&P 500/BARRA Growth Index
over a cycle of five years.
Chicago Equity Partners uses a disciplined structured investment approach and
quantitative analytical techniques designed to identify stocks with the highest
probability of outperforming their peers coupled with a portfolio construction
process designed to keep the overall portfolio risk characteristics similar to
that of the benchmark.
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PRINCIPAL INVESTMENT RISKS Stock Market Volatility. Stock markets are volatile
and can decline significantly in response to adverse issuer, political,
regulatory, market or economic developments.
Company Risk. The value of an individual security or particular type of security
can be more volatile than the market as a whole and can perform differently than
the market as a whole. Growth stocks are often more sensitive to economic and
market swings than other types of stocks because market prices tend to reflect
future expectations.
Sector Risk. Different parts of the market can react differently to these
developments. For example, large cap stocks can react differently than small cap
stocks, and "growth" stocks can react differently than "value" stocks. Issuer,
political or economic developments can affect a single issuer, issuers within an
industry or economic sector or geographic region, or the market as a whole.
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SPECIAL NOTE
Accessor Funds' domestic equity funds are designed so that investments in the
S&P 500 Index are covered equally by investments in the Accessor Growth and
Accessor Value Funds. The Accessor Small to Mid Cap Fund is primarily designed
to invest in domestic stocks outside the S&P 500 Index.
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AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
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<PAGE>
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[GRAPHIC] VALUE FUND
SUMMARY
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INVESTMENT OBJECTIVE The Value Fund seeks generation of current income and
capital growth by investing primarily in income- producing equity securities
selected from the S&P 500.
PRINCIPLE STRATEGIES The Fund's Money Manager, Martingale Asset Management, L.P.
("Martingale"), analyzes fundamental information about companies such as their
assets, earnings and growth to identify undervalued stocks. The Money Manager
attempts to exceed the total return performance of the S&P 500/BARRA Value Index
over a cycle of five years.
Martingale focuses primarily on stocks issued by:
[graphic] Companies with low price to earnings and/or price to book ratios
[graphic] Companies with improving growth of earnings and/or growth of
dividends
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PRINCIPAL INVESTMENT RISKS Stock Market Volatility. Stock markets are volatile
and can decline significantly in response to adverse issuer, political,
regulatory, market or economic developments.
Company Risk. The value of an individual security or particular type of security
can be more volatile than the market as a whole and can perform differently than
the market as a whole. Value stocks tend to be issued by larger, more
established companies, and may underperform in periods of general market
strength. Value stocks contained in the S&P 500 have generated less current
income in recent years than they have in earlier periods.
Sector Risk. Different parts of the market can react differently to these
developments. For example, large cap stocks can react differently than small cap
stocks, and "growth" stocks can react differently than "value" stocks. Issuer,
political or economic developments can affect a single issuer, issuers within an
industry or economic sector or geographic region, or the market as a whole.
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AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
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<PAGE>
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[GRAPHIC] SMALL TO MID CAP FUND
SUMMARY
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INVESTMENT OBJECTIVE The Small to Mid Cap Fund seeks capital growth through
investing primarily in equity securities of small to medium capitalization
issuers.
PRINCIPLE STRATEGIES The Fund invests at least 65% of its total assets in the
stocks of small and medium capitalization companies that are expected to
experience higher than average growth of earnings or stock price. The Fund will
maintain an average market capitalization similar to the average market
capitalization of the Wilshire 4500 Index, and will attempt to have a roughly
similar distribution of stocks by market capitalization as the Wilshire 4500
Index.
Symphony Asset Management LLC ("Symphony"), the Fund's Money Manager, uses a
quantitative approach to analyze earnings forecasts, price movements and other
factors to identify growth stocks with attractive fundamentals relative to
price. The Money Manager attempts to exceed the performance of the Wilshire 4500
Index over a cycle of five years.
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PRINCIPAL INVESTMENT RISKS Stock Market Volatility. Stock markets are volatile
and can decline significantly in response to adverse issuer, political,
regulatory, market or economic developments.
Company Risk. The value of an individual security or particular type of security
can be more volatile than the market as a whole and can perform differently than
the value of the market as a whole. Small and medium capitalization companies
often have greater volatility, lower trading volume and less liquidity than
larger capitalization companies.
Sector Risk. Different parts of the market can react differently to these
developments. For example, large cap stocks can react differently than small cap
stocks, and "growth" stocks can react differently than "value" stocks. Issuer,
political or economic developments can affect a single issuer, issuers within an
industry or economic sector or geographic region, or the market as a whole.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the market capitalization range of the Wilshire 4500 Index
was $36,180 to $86,143,000,000 and the median (average) cap of the index was
$123,000,000, which will vary from month to month.
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AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
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<PAGE>
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[GRAPHIC] INTERNATIONAL EQUITY FUND
SUMMARY
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INVESTMENT OBJECTIVE The International Equity Fund 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.
PRINCIPLE STRATEGIES The Fund will invest at least 65 % of its total assets in
the stocks of companies domiciled in Europe and the Pacific Rim. The Fund
normally intends to maintain investments in at least three different countries
outside the United States.
The investment approach of Nicholas-Applegate Capital Management
("Nicholas-Applegate"), the Fund's Money Manager, reflects a focus on individual
security selection. Nicholas-Applegate uses fundamental qualitative and
quantitative analysis to seek companies that are industry leaders and in the
process of positive change to construct a portfolio that generally parallels the
countries comprising the Morgan Stanley Capital International ("MSCI") EAFE(R) +
EMF Index. The firm's bottom-up approach drives the portfolio toward issues
demonstrating positive fundamental change, evidence of sustainability and
timeliness. The Money Manager attempts to exceed the total return of the MSCI
EAFE + EMF Index. See Appendix A for a list of countries included in the MSCI
EAFE+EMF Index.
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PRINCIPAL INVESTMENT RISKS Stock Market Volatility. Stock markets are volatile
and can decline significantly in response to adverse issuer, political,
regulatory, market or economic developments.
Company Risk. The value of an individual security or particular type of security
can be more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Sector Risk. Different parts of the market can react differently to these
developments. For example, large cap stocks can react differently than small cap
stocks, and "growth" stocks can react differently than "value" stocks. Issuer,
political or economic developments can affect a single issuer, issuers within an
industry or economic sector or geographic region, or the market as a whole.
Foreign Exposure. Foreign markets, particularly emerging markets, can be more
volatile than the U.S. market due to increased risks of adverse issuer,
political, regulatory, market or economic developments and can perform
differently than the U.S. market.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the market capitalization range of the MSCI EAFE+EMF Index
was $5,000,000 to $252,102,000,000 and the median (average) cap of the index was
$1,081,000,000, which will vary from time to time.
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AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
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<PAGE>
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[GRAPHIC] INTERMEDIATE FIXED-INCOME FUND
SUMMARY
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INVESTMENT OBJECTIVE The Intermediate Fixed-Income Fund 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 (the "LBGC Index").
PRINCIPLE STRATEGIES The Fund primarily invests in investment grade debt
securities or debt securities unrated but of similar quality, but may invest up
to 20% of the net assets of the Fund in securities rated BBB by Standard &
Poor's Corporation ("S&P") or Baa by Moody's Investors Service, Inc.
("Moody's"), and up to 6% of the net assets of the Fund in securities rated BB
by S&P or Ba by Moody's or debt securities unrated but of similar quality.
Cypress Asset Management ("Cypress"), the Fund's Money Manager, uses
quantitative analyses and risk control methods to ensure that the Fund's overall
risk and duration characteristics are consistent with the LBGC Index. Cypress
seeks to enhance the Fund's returns by systematically overweighting its
investments in the corporate sector as compared to the index.
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PRINCIPAL INVESTMENT RISKS Bond Market Volatility. Individual securities are
expected to fluctuate in response to issuer, general economic and market
changes. An individual security or category of securities may, however,
fluctuate more or less than the market as a whole.
Interest Rate Risk. Increases in interest rates can cause the price of a debt
security to decrease. Debt securities with longer maturities tend to be more
sensitive to interest rates than bonds with shorter maturities.
Issuer Risk. Changes in the financial condition of an issuer, changes in
specific economic or political conditions that affect a particular issuer, and
changes in general economic or political conditions can adversely affect the
credit quality or value of an issuer's securities.
Credit Risk. Credit risk is the possibility that an issuer will fail to make
timely payments of interest or principal. Some issuers may not make payments on
debt securities held by a Fund, causing a loss. Or, an issuer may suffer adverse
changes in its financial condition that could lower the credit quality of a
security, leading to greater volatility in the price of the security and in
shares of a Fund. A change in the quality rating of a bond or other security can
also affect the security's liquidity and make it more difficult for a Fund to
sell. Lower quality debt securities and comparable unrated debt securities in
which a Fund may invest are more susceptible to these problems than higher
quality obligations.
Lower Rated Debt Securities. Debt securities rated lower than BBB by S&P or
lower than Baa by Moody's are commonly referred to as "junk bonds." Lower rated
debt securities and comparable unrated debt securities have speculative
characteristics and are subject to greater risks than higher rated securities.
================================================================================
DURATION
Duration, one of the fundamental tools used by money managers in security
selection, is a measure of the price sensitivity of a debt security or a
portfolio of debt securities to relative changes in interest rates. For
instance, a duration of "three" means that a portfolio's or security's price
would be expected to decrease by approximately 3% with a 1% increase in interest
rates.
================================================================================
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AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
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[GRAPHIC] SHORT-INTERMEDIATE FIXED-INCOME FUND
SUMMARY
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INVESTMENT OBJECTIVE The Short-Intermediate Fixed-Income Fund 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 Government/Corporate 1-5 Year Index (the
"LBGC1-5 Index").
PRINCIPLE STRATEGIES The Fund primarily invests in investment grade debt
securities or debt securities unrated but of similar quality, but may invest up
to 20% of the net assets of the Fund in securities rated BBB by S&P or Baa by
Moody's and up to 6% of the net assets of the Fund in securities rated BB by S&P
or Ba by Moody's or debt securities unrated but of similar quality. Cypress, the
Fund's Money Manager, uses quantitative analyses and risk control methods to
ensure that the Fund's overall risk and duration characteristics are consistent
with the LBGC1-5 Index. Cypress seeks to enhance the Fund's returns by
systematically overweighting its investments in the corporate sector as compared
to the index.
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PRINCIPAL INVESTMENT RISKS Bond Market Volatility. Individual securities are
expected to fluctuate in response to issuer, general economic and market
changes. An individual security or category of securities may, however,
fluctuate more or less than the market as a whole.
Interest Rate Risk. Increases in interest rates can cause the price of a debt
security to decrease. Debt securities with longer maturities tend to be more
sensitive to interest rates than bonds with shorter maturities.
Issuer Risk. Changes in the financial condition of an issuer, changes in
specific economic or political conditions that affect a particular issuer, and
changes in general economic or political conditions can adversely affect the
credit quality or value of an issuer's securities.
Credit Risk. Credit risk is the possibility that an issuer will fail to make
timely payments of interest or principal. Some issuers may not make payments on
debt securities held by a Fund, causing a loss. Or, an issuer may suffer adverse
changes in its financial condition that could lower the credit quality of a
security, leading to greater volatility in the price of the security and in
shares of a Fund. A change in the quality rating of a bond or other security can
also affect the security's liquidity and make it more difficult for a Fund to
sell. Lower quality debt securities and comparable unrated debt securities in
which a Fund may invest are more susceptible to these problems than higher
quality obligations.
Lower Rated Debt Securities. Debt securities rated lower than BBB by S&P or
lower than Baa by Moody's are commonly referred to as "junk bonds." Lower rated
debt securities and comparable unrated debt securities have speculative
characteristics and are subject to greater risks than higher rated securities.
================================================================================
DURATION
Duration, one of the fundamental tools used by money managers in security
selection, is a measure of the price sensitivity of a debt security or a
portfolio of debt securities to relative changes in interest rates. For
instance, a duration of "three" means that a portfolio's or security's price
would be expected to decrease by approximately 3% with a 1% increase in interest
rates.
================================================================================
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AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
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<PAGE>
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[GRAPHIC] HIGH YIELD BOND FUND
SUMMARY
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INVESTMENT OBJECTIVE The High Yield Bond Fund seeks high current income by
investing primarily in lower-rated, high-yield corporate debt securities.
PRINCIPLE STRATEGIES The Fund invests primarily in lower-rated, high-yield
corporate debt securities commonly referred to as "junk bonds." Under normal
conditions, at least 65% of the Fund's total assets will be invested in debt
securities rated lower than Baa by Moody's or lower than BBB by S&P, or
securities judged to be of equivalent quality by the Money Manager. The Fund
will normally maintain 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 U.S. Corporate High Yield Index.
Financial Management Advisors, Inc. ("FMA"), the Fund's Money Manager, selects
debt securities on a company-by-company basis, emphasizing fundamental research
and a long-term investment horizon. Their analysis focuses on the nature of a
company's business, its strategy, and the quality of its management. Based on
this analysis, the Money Manager looks primarily for companies whose prospects
are stable or improving, and whose bonds offer an attractive yield. Companies
with improving prospects are normally more attractive in the opinion of the
Money Manager because they offer better assurance of debt repayment.
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PRINCIPAL INVESTMENT RISKS Bond Market Volatility. Individual securities are
expected to fluctuate in response to issuer, general economic and market
changes. An individual security or category of securities may, however,
fluctuate more or less than the market as a whole.
Interest Rate Risk. Increases in interest rates can cause the price of a debt
security to decrease. Debt securities with longer maturities tend to be more
sensitive to interest rates than bonds with shorter maturities.
Issuer Risk. Changes in the financial condition of an issuer, changes in
specific economic or political conditions that affect a particular issuer, and
changes in general economic or political conditions can adversely affect the
credit quality or value of an issuer's securities. Lower quality debt securities
can be more sensitive to these factors. Lower quality debt securities can be
difficult to resell and issuers may fail to pay principal and interest when due
causing the Fund to incur losses and reducing the Fund's return.
Credit Risk. Credit risk is the possibility that an issuer will fail to make
timely payments of interest or principal. Some issuers may not make payments on
debt securities held by a Fund, causing a loss. Or, an issuer may suffer adverse
changes in its financial condition that could lower the credit quality of a
security, leading to greater volatility in the price of the security and in
shares of a Fund. A change in the quality rating of a bond or other security can
also affect the security's liquidity and make it more difficult for a Fund to
sell. Lower quality debt securities and comparable unrated debt securities in
which a Fund may invest are more susceptible to these problems than higher
quality obligations. Because of its investments in junk bonds, the High Yield
Bond Fund is subject to substantial credit risk. Credit quality in the
high-yield bond market can change suddenly and unexpectedly, and even
recently-issued credit ratings may not fully reflect the actual risks of a
particular high-yield bond.
Lower Rated Debt Securities. Debt securities rated lower than BBB by S&P or
lower than Baa by Moody's are commonly referred to as "junk bonds." Lower rated
debt securities and comparable unrated debt securities have speculative
characteristics and are subject to greater risks than higher rated securities.
================================================================================
DURATION
Duration, one of the fundamental tools used by money managers in security
selection, is a measure of the price sensitivity of a debt security or a
portfolio of debt securities to relative changes in interest rates. For
instance, a duration of "three" means that a portfolio's or security's price
would be expected to decrease by approximately 3% with a 1% increase in interest
rates.
================================================================================
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AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
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[GRAPHIC] MORTGAGE SECURITIES FUND
SUMMARY
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INVESTMENT OBJECTIVE The Mortgage Securities Fund 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").
PRINCIPLE STRATEGIES BlackRock Financial Management, Inc. ("BlackRock"), the
Fund's Money Manager, uses quantitative risk control methods to ensure that the
Fund's overall risk and duration characteristics are consistent with the LBM
Index. BlackRock's investment philosophy and process centers around four key
principles:
[graphic] controlled duration (controlling sensitivity to interest rates);
[graphic] relative value sector rotation and security selection (analyzing
a sector's and a security's impact on the overall portfolio);
[graphic] rigorous quantitative analysis to security valuation
(mathematically analyzing a security's value); and
[graphic] quality credit analysis (analyzing a security's credit quality).
BlackRock's Investment Strategy Committee determines the firm's broad investment
strategy based on macroeconomics (for example, interest rate trends) and market
trends, as well as input from Risk Management and Credit Committee
professionals. Fund managers then implement this strategy by selecting the
sectors and securities which offer the greatest relative value within investment
guidelines.
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PRINCIPAL INVESTMENT RISKS Bond Market Volatility. Individual securities are
expected to fluctuate in response to issuer, general economic and market
changes. An individual security or category of securities may, however,
fluctuate more or less than the market as a whole.
Interest Rate Risk. Increases in interest rates can cause the price of a debt
security to decrease. The market value of mortgage related securities can and
will fluctuate as interest rates and market conditions change. Fixed-rate
mortgages can decline in value during periods of rising interest rates.
Prepayment Risk. The ability of an issuer of a debt security to repay principal
prior to a security's maturity can cause greater price volatility if interest
rates change. For example, if interest rates are dropping and an issuer pays off
an obligation or a bond before maturity, the Fund may have to reinvest at a
lower interest rate.
Issuer Risks. Changes in the financial conditions of an
issuer, changes in specific economic or political conditions that affect a
particular issuer, and changes in general economic or political conditions can
adversely affect the credit quality or value of an issuer's securities.
================================================================================
DURATION
Duration, one of the fundamental tools used by money managers in security
selection, is a measure of the price sensitivity of a debt security or a
portfolio of debt securities to relative changes in interest rates. For
instance, a duration of "three" means that a portfolio's or security's price
would be expected to decrease by approximately 3% with a 1% increase in interest
rates.
================================================================================
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
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[GRAPHIC] U.S. GOVERNMENT MONEY FUND
SUMMARY
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INVESTMENT OBJECTIVE The U.S. Government Money Fund 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.
PRINCIPLE STRATEGIES Accessor Capital directly invests the assets of the Fund.
Accessor Capital uses quantitative analysis to maximize the Fund's yield. The
Fund follows industry standard requirements concerning the quality, maturity and
diversification of its investments. The Fund seeks to maintain an average
maturity of 90 days or less, while maintaining liquidity and maximizing current
yield.
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PRINCIPAL INVESTMENT RISKS Interest Rate Risk. The Fund's yield will vary and is
expected to react to changes in short-term interest rates.
Inflation Risk. Over time, the real value of the Fund's yield may be eroded by
inflation.
Stable Net Asset Value. Although the U.S. Government Money Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
PERFORMANCE
- --------------------------------------------------------------------------------
The following tables illustrate changes (and therefore, the risk elements) in
the performance of Advisor Class Shares of the Funds from year to year and
compare the performance of Advisor Class Shares to the performance of a market
index over time. As with all mutual funds, how the Funds have performed in the
past is not an indication of how they will perform in the future.
Note: Performance figures for the High Yield Bond Fund will not be available
until May 1, 2001, when the Fund has one year of performance.
- --------------------------------------------------------------------------------
GROWTH FUND
- -----------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1993 14.21% Fund 25.87% 31.68% 25.03%
1994 3.99 S&P 500/BARRA
1995 34.32 Growth Index(1) 28.25% 33.64% 23.87%**
1996 19.83 *8/24/92 inception date
1997 33.24 **Index measured from 9/1/92
1998 46.65
1999 25.87
As of 12/31 each year
Best Quarter: Q 4 `98 27.65%
Worst Quarter: Q 3 `98 -7.07%
- --------------------------------------------------------------------------------
(1) THE S&P 500 IS AN UNMANAGED INDEX OF 500 COMMON STOCKS CHOSEN TO REFLECT THE
INDUSTRIES IN THE U.S. ECONOMY. THE S&P 500/BARRA GROWTH INDEX IS AN UNMANAGED
INDEX OF GROWTH STOCKS IN THE S&P 500. LARGE CAPITALIZATION GROWTH STOCKS ARE
THE STOCKS WITHIN THE S&P 500 THAT GENERALLY HAVE HIGH EXPECTED EARNINGS GROWTH
AND HIGHER THAN AVERAGE PRICE-TO-BOOK RATIOS.
- --------------------------------------------------------------------------------
VALUE FUND
- ----------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1993 14.69 Fund 6.87% 21.51% 16.91%
1994 -1.93 S&P 500/BARRA
1995 33.25 Value Index(1) 12.72% 22.93% 18.49%**
1996 23.94 *8/24/92 inception date
1997 32.94 **Index measured from 9/1/92
1998 12.89
1999 6.87
As of 12/31 each year
Best Quarter: Q 4 `98 18.96%
Worst Quarter: Q 3 `98 -15.24%
- --------------------------------------------------------------------------------
(1) THE S&P 500/BARRA VALUE INDEX IS AN UNMANAGED INDEX OF VALUE STOCKS IN THE
S&P 500. LARGE CAPITALIZATION VALUE STOCKS ARE THE STOCKS WITHIN THE S&P 500
THAT GENERALLY ARE PRICED BELOW THE MARKET AVERAGE BASED ON EARNINGS AND LOWER
THAN AVERAGE PRICE-TO-BOOK RATIOS.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
PERFORMANCE
- --------------------------------------------------------------------------------
SMALL TO MID CAP FUND
- ---------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1993 14.39 Fund 27.26% 27.06% 21.21%
1994 -4.07 Wilshire-4500
1995 31.98 Index(1) 35.49% 23.68% 19.37%**
1996 24.85 Small to Mid Cap
1997 36.14 Composite Index(2) 35.49% 23.56% 20.13%**
1998 15.98 *8/24/92 inception date
1999 15.98 **Index measured from 9/1/92
1999 27.26
As of 12/31 each year
Best Quarter: Q4 `98 24.23%
Worst Quarter: Q3 `98 -18.56%
- --------------------------------------------------------------------------------
(1) THE WILSHIRE 4500 INDEX IS AN UNMANAGED INDEX OF STOCKS OF MEDIUM AND SMALL
CAPITALIZATION COMPANIES NOT IN THE S&P 500.
(2) THE SMALL TO MID CAP COMPOSITE INDEX IS A HYPOTHETICAL INDEX CONSTRUCTED BY
ACCESSOR CAPITAL, WHICH COMBINES THE BARRA INSTITUTIONAL SMALL INDEX AND THE
WILSHIRE 4500 INDEX. THE COMPOSITE IS INTENDED TO PROVIDE A BENCHMARK FOR
COMPARISON THAT REFLECTS THE DIFFERENT INVESTMENT POLICIES THAT THE FUND HAS
FOLLOWED IN THE PAST. IN AUGUST 1995, SHAREHOLDERS APPROVED CHANGES TO THE
FUND'S INVESTMENT POLICIES TO CHANGE THE FUND FROM A SMALL CAP FUND TO A SMALL
TO MEDIUM CAP FUND. ACCORDINGLY, PRIOR TO OCTOBER 1995, THE BARRA INDEX IS USED.
STARTING OCTOBER 1995, THE WILSHIRE INDEX IS USED.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1995 7.63 Fund 48.93% 18.62% 17.05%
1996 13.78 MSCI EAFE + EMF
1997 10.96 Index(1) 30.32% 12.15% 10.62%**
1998 16.07 International
1999 48.93 Composite Index(2) 30.32% 12.47% 11.11%**
As of 12/31 each year *10/3/94 inception date
**Index measured from 11/01/94
Best Quarter: Q4 `99 30.20%
Worst Quarter: Q3 `98 -13.36%
- --------------------------------------------------------------------------------
(1) THE MSCI EAFE + EMF INDEX IS AN UNMANAGED INDEX OF 45 DEVELOPED (EXCLUDING
THE UNITED STATES AND CANADA) AND EMERGING MARKET COUNTRIES, INCLUDING JAPAN,
THE UNITED KINGDOM, GERMANY AND FRANCE.
(2) THE INTERNATIONAL COMPOSITE INDEX IS A HYPOTHETICAL INDEX CONSTRUCTED BY
ACCESSOR CAPITAL, WHICH COMBINES THE MSCI EAFE INDEX AND THE MSCI EAFE+EMF
INDEX. THE COMPOSITE IS INTENDED TO PROVIDE A BENCHMARK FOR COMPARISON THAT
REFLECTS THE DIFFERENT INVESTMENT POLICIES THAT THE FUND HAS FOLLOWED IN THE
PAST. PRIOR TO MAY 1996, THE FUND DID NOT INVEST IN EMERGING MARKET SECURITIES.
BEGINNING IN MAY 1996, THE FUND WAS PERMITTED TO DO SO. ACCORDINGLY, PRIOR TO
MAY 1996, THE MSCI EAFE INDEX IS USED. STARTING IN MAY 1996, THE MSCI EAFE+EMF
INDEX IS USED.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
PERFORMANCE
- --------------------------------------------------------------------------------
INTERMEDIATE FIXED-INCOME FUND
- ------------------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1993 9.53 Fund -3.58% 6.60% 5.42%
1994 -5.24 Lehman Govt/
1995 18.26 Corp Index(1) -2.15% 7.60% 6.45%**
1996 2.56 *6/15/92 inception date
1997 8.62 **Index measured from 7/1/92
1998 8.38
1999 -3.58
As of 12/31 each year
Best Quarter: Q 2 `95 6.13%
Worst Quarter: Q 1 `94 -3.53%
- --------------------------------------------------------------------------------
(1)THE LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX IS AN UNMANAGED INDEX OF
FIXED-RATE GOVERNMENT AND CORPORATE BONDS RATED INVESTMENT GRADE OR HIGHER.
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE FIXED-INCOME FUND
- ------------------------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1993 5.63 Fund 1.22% 5.84% 4.90%
1994 -1.42 Lehman Govt/
1995 11.42 Corp1-5 Yr Index(1) 2.10% 6.83% 5.97%**
1996 3.63 *5/18/92 inception date
1997 6.33 **Index measured from 6/1/92
1998 6.87
1999 1.22
As of 12/31 each year
Best Quarter: Q 1 `95 3.58%
Worst Quarter: Q 1 `94 -1.34%
- --------------------------------------------------------------------------------
(1) THE LEHMAN BROTHERS GOVERNMENT/CORPORATE 1-5 YEAR INDEX IS AN UNMANAGED
INDEX OF FIXED-RATE GOVERNMENT AND CORPORATE BONDS RATED INVESTMENT GRADE OR
HIGHER, ALL WITH MATURITIES OF ONE TO FIVE YEARS.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
PERFORMANCE
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND
- ------------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ --------
1993 7.26 Fund 1.19% 7.51% 6.14%
1994 -1.65 Lehman
1995 16.03 Mortgage-Backed
1996 4.95 Securities Index(1) 1.85% 7.98% 6.56%**
1997 9.53 *5/18/92 inception date
1998 6.43 **Index measured from 6/1/92
1999 1.19
As of 12/31 each year
Best Quarter: Q 1'95 5.11%
Worst Quarter: Q 1 `94 -1.21%
- --------------------------------------------------------------------------------
(1) THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX IS AN UNMANAGED INDEX
OF 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").
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
- --------------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ --------
1993 2.81 Fund 4.72% 4.98% 4.37%
1994 3.70 Salomon Brothers
1995 5.33 U.S. 3 Mo.
1996 4.78 T-bill Index(1) 4.74% 5.21% 4.65%**
1997 5.07 * 4/9/92 inception date
1998 5.00 **Index measured from 5/1/92
1999 4.72
As of 12/31 each year
Best Quarter: Q 2 `95 1.37%
Worst Quarter: Q 2 `93 0.66%
- --------------------------------------------------------------------------------
(1) THE SALOMON BROTHERS U.S. 3 MONTH T-BILL INDEX IS DESIGNED TO MEASURE THE
RETURN OF THE 3 MONTH TREASURY BILLS.
THE U.S. GOVERNMENT MONEY FUND'S 7-DAY EFFECTIVE YIELD ON 12/31/99 WAS 5.10%.
FOR THE FUND'S CURRENT YIELD, CALL TOLL-FREE (800) 759-3504.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
EQUITY FUNDS' EXPENSES
- --------------------------------------------------------------------------------
The following tables describe the fees and expenses that you may pay if you buy
and hold Advisor Class Shares of the Equity Funds. Except where noted, the
tables reflect historical fees and expenses of the Funds.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
GROWTH(2) VALUE(2) SMALL TO INTERNATIONAL
MID CAP(2) EQUITY(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES(1)(2) (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge Imposed none none none none
on Purchases (as a percent of offering price)
Maximum Sales Charge Imposed none none none none
on Reinvested Dividends
Maximum Deferred Sales Charge none none none none
Redemption Fee(3) none none none none
- ----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees(4) 0.66%(5) 0.58% 1.02% 1.12%(6)
Distribution and Service (12b-1) Fee none none none none
Other Expenses 0.22 0.21 0.23 0.23
---- ---- ---- ----
Total Annual Fund Operating Expenses 0.88 0.79 1.25 1.35
==== ==== ==== ====
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) SHARES OF THE FUNDS ARE EXPECTED TO BE SOLD PRIMARILY THROUGH FINANCIAL
INTERMEDIARIES THAT MAY CHARGE SHAREHOLDERS A FEE. THESE FEES ARE NOT
INCLUDED IN THE TABLES.
(2) AN ANNUAL MAINTENANCE FEE OF $25.00 MAY BE CHARGED BY ACCESSOR CAPITAL, AS
THE TRANSFER AGENT TO EACH IRA WITH AN AGGREGATE BALANCE OF LESS THAN
$10,000 ON DECEMBER 31 OF EACH YEAR.
(3) THE TRANSFER AGENT MAY CHARGE A PROCESSING FEE OF $10.00 FOR EACH CHECK
REDEMPTION REQUEST.
(4) MANAGEMENT FEES CONSIST OF THE MANAGEMENT FEE PAID TO ACCESSOR CAPITAL AND
THE FEES PAID TO THE MONEY MANAGERS OF THE FUNDS.
(5) MANAGEMENT FEES ARE RESTATED TO REFLECT THE CHANGE IN THE MONEY MANAGER OF
THE GROWTH FUND.
(6) MANAGEMENT FEES ARE RESTATED TO REFLECT THE BASE FEE CAP BY THE MONEY
MANAGER OF THE INTERNATIONAL EQUITY FUND.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE:
- ----------------
The Example shows what an investor in Advisor Class Shares of a Fund could pay
over time. The Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Advisor Class Shares of a Fund
for the time periods indicated and then redeem all of your shares by wire at the
end of those periods. The Example does not include the effect of the $10 fee for
check redemption requests. The Example also assumes that your investment has a
5% rate of return each year and that the Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
================================================================================
Fund One Year Three Years Five Years 10 Years
Growth $ 90 $281 $489 $1087
Value 80 251 436 972
Small to Mid Cap 127 397 686 1511
International Equity 137 428 739 1624
================================================================================
<PAGE>
================================================================================
FIXED-INCOME FUNDS' EXPENSES
- --------------------------------------------------------------------------------
The following tables describe the fees and expenses that you may pay if you buy
and hold Advisor Class Shares of the Fixed-Income Funds. Except where noted, the
tables reflect historical fees and expenses of the Funds.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE SHORT HIGH U.S
FIXED- INTERMEDIATE YIELD MORTGAGE GOVERNMENT
INCOME(2) FIXED-INCOME(2) BOND(2)(3) SECURITIES(2) MONEY(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER FEES(1)(2)
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge Imposed none none none none none
on Purchases (as a percent of offering price)
Maximum Sales Charge Imposed none none none none none
on Reinvested Dividends
Maximum Deferred Sales Charge none none none none none
Redemption Fee(4) none none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES DEDUCTED FROM FUND ASSETS)
Management Fees (5) 0.38% 0.38% 0.51% 0.59% 0.25%
Distribution and Service (12b-1) Fee none none none none none
Other Expenses 0.28 0.30 0.45 0.30 0.23
----- ----- ----- ---- -----
Total Annual Fund Operating Expenses 0.66 0.68 0.96 0.89 0.48
===== ===== ===== ===== =====
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------
(1) SHARES OF THE FUNDS ARE EXPECTED TO BE SOLD PRIMARILY THROUGH FINANCIAL
INTERMEDIARIES THAT MAY CHARGE SHAREHOLDERS A FEE. THESE FEES ARE NOT
INCLUDED IN THE TABLES.
(2) AN ANNUAL MAINTENANCE FEE OF $25.00 MAY BE CHARGED BY ACCESSOR CAPITAL, AS
THE TRANSFER AGENT TO EACH IRA WITH AN AGGREGATE BALANCE OF LESS THAN
$10,000 ON DECEMBER 31 OF EACH YEAR.
(3) BECAUSE HIGH YIELD BOND FUND COMMENCED OPERATIONS ON MAY 1, 2000, ANNUAL
FUND OPERATING EXPENSES ARE ESTIMATED.
(4) THE TRANSFER AGENT MAY CHARGE A PROCESSING FEE OF $10.00 FOR EACH CHECK
REDEMPTION REQUEST.
(5) MANAGEMENT FEES CONSIST OF THE MANAGEMENT FEE PAID TO ACCESSOR CAPITAL AND
THE FEES PAID TO THE MONEY MANAGERS OF THE FUNDS. ACCESSOR CAPITAL RECEIVES
ONLY THE MANAGEMENT FEE AND NOT A MONEY MANAGER FEE FOR THE U. S.
GOVERNMENT MONEY FUND THAT IT MANAGES DIRECTLY.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE:
- ----------------
The Example shows what an investor in Advisor Class Shares of a Fund could pay
over time. The Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Advisor Class Shares of a Fund
for the time periods indicated and then redeem all of your shares by wire at the
end of those periods. This Example does not include the effect of the $10 fee
for check redemption requests. The Example also assumes that your investment has
a 5% rate of return each year and that the Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
================================================================================
Fund One Year Three Years Five Years 10 Years
Intermediate Fixed-Income $67 $211 $368 $ 822
Short-Intermediate Fixed-Income 69 218 379 847
High Yield Bond 98 306 N/A N/A
Mortgage Securities 91 284 493 1096
U.S. Government Money 49 154 269 604
================================================================================
<PAGE>
================================================================================
EQUITY FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
GROWTH FUND
- -----------
INVESTMENT OBJECTIVE The Growth Fund seeks capital growth through investing
primarily in equity securities with greater than average growth characteristics
selected from the S&P 500.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its 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 exceed the total return performance of the S&P 500/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.
OTHER INVESTMENT STRATEGIES The Fund may be invested in common stocks of foreign
issuers with large market capitalizations whose securities have greater than
average growth characteristics. The Fund may engage in various portfolio
strategies (for example, options) to reduce certain risks of its investments and
may thereby enhance income, but not for speculation.
- --------------------------------------------------------------------------------
VALUE FUND
- ----------
INVESTMENT OBJECTIVE The Value Fund seeks generation of current income and
capital growth by investing primarily in income-producing equity securities
selected from the S&P 500.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its objective by
investing principally in common and preferred stocks, convertible securities,
and rights and warrants of companies 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 exceed the
total return performance of the S&P 500/BARRA Value Index over a market cycle of
five years. Value stocks contained in the S&P 500 have generated less current
income in recent years than they have in earlier periods.
OTHER INVESTMENT STRATEGIES The Fund may be invested in equity securities of
foreign issuers with large market capitalizations. The Fund may engage in
various portfolio strategies (for example, options) to reduce certain risks of
its investments and to enhance income, but not for speculation.
- --------------------------------------------------------------------------------
SMALL TO MID CAP FUND
- ---------------------
INVESTMENT OBJECTIVE The Small to Mid Cap Fund seeks capital growth through
investing primarily in equity securities of small to medium capitalization
issuers.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its objective by
investing at least 65% of the value of its total assets in stocks of small and
medium capitalization issuers. The Fund will attempt to maintain an average
market capitalization similar to the average market capitalization of the
Wilshire 4500 Index, and will attempt to have a roughly similar distribution of
stocks by market capitalization as the Wilshire 4500 Index. Generally, small
capitalization issuers are issuers that have a capitalization of $1 billion or
less at the time of investment and medium capitalization issuers have a
capitalization ranging from $1 billion to $10 billion at the time of investment.
The Money Manager will attempt to 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. The Fund invests principally in common and
preferred stocks, securities convertible into common stocks, and rights and
warrants of such issuers.
<PAGE>
================================================================================
EQUITY FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
OTHER INVESTMENT STRATEGIES The Fund may invest up to 20% of its net assets in
common stocks of foreign issuers with small to medium market capitalizations.
The Fund may engage in various portfolio strategies (for example, options) to
reduce certain risks of its investments and may thereby enhance income, but not
for speculation.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the market capitalization range of the Wilshire 4500 Index
was $36,180 to $86,143,000,000 and the median (average) cap of the index was
$123,000,000, which will vary from month to month.
================================================================================
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
INVESTMENT OBJECTIVE The International Equity Fund 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.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its objective by
investing at least 65% of its total assets principally in stocks 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, New Zealand and Singapore). The Fund intends to
maintain investments in at least three different countries outside the United
States. The Money Manager will attempt to exceed the net yield (after
withholding taxes) of the MSCI EAFE + EMF Index. The Fund's Money Manager
reflects a focus on individual security selection. Nicholas-Applegate uses
fundamental qualitative and quantitative analysis to seek companies that are
industry leaders and in the process of positive change to construct a portfolio
that generally parallels the countries comprising the Morgan Stanley Capital
International ("MSCI") EAFE + EMF Index. The firm's bottom-up approach drives
the portfolio toward issues demonstrating positive fundamental change, evidence
of sustainability and timeliness. The Money Manager attempts to exceed the total
return of the MSCI EAFE(R) + EMF Index.
OTHER INVESTMENT STRATEGIES The Fund 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") See Appendix A for a full list of the countries. The Fund
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 that derive, or are expected to derive, a significant portion
of their revenues from their foreign operations. The Fund may engage in various
portfolio strategies (for example, options) to reduce certain risks of its
investments and may thereby enhance income, but not for speculation.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the market capitalization range of the MSCI EAFE+EMF Index
was $5,000,000 to $252,102,000,000 to and the median (average) cap of the index
was $1,081,000,000, which will vary from time to time.
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
EQUITY FUNDS' SECURITIES AND RISKS
- --------------------------------------------------------------------------------
This section describes the security types for and risks of investing in the
Growth, Value, Small to Mid Cap, and International Equity Funds, Accessor Funds'
"Equity Funds."
Many factors affect each Fund's performance. A Fund's share price changes daily
based on changes in financial markets and interest rates and in response to
other economic, political or financial developments. A Fund's reaction to these
developments will be affected by the financial condition, industry and economic
sector, and geographic location of an issuer, and the Fund's level of investment
in the securities of that issuer. When you sell your shares of a Fund, they
could be worth more or less than what you paid for them.
In response to market, economic, political or other conditions, each Fund's
Money Manager may temporarily use a different investment strategy for defensive
purposes. If a Money Manager does so, different factors could affect a Fund's
performance and the Fund may not achieve its investment objective. Each Fund is
actively managed. Frequent trading of portfolio securities will result in
increased expenses for the Funds and may result in increased taxable
distributions to shareholders. Each Fund's investment objective stated in the
Equity Funds' Objectives and Strategies section is fundamental and may not be
changed without shareholder approval.
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY TYPES
- ------------------------
[Graphic] EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority in the
event of the bankruptcy of the issuer. Equity securities include common stocks,
preferred stocks, convertible securities and warrants.
- --------------------------------------------------------------------------------
OTHER SECURITY TYPES
- --------------------
[Graphic] DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must repay the
amount borrowed at the maturity of the security. Some debt securities, such as
zero coupon bonds, do not pay current interest but are sold at a discount from
their face values. Debt securities include corporate debt securities, including
convertible bonds, government securities, and mortgage and other asset-backed
securities.
[Graphic] OPTIONS, FUTURES AND OTHER DERIVATIVES The Funds may use techniques
such as buying and selling options or futures contracts in an attempt to change
the Funds' exposure to security prices, currency values, or other factors that
affect the value of the Funds' portfolios.
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
- ---------------
[Graphic] Stock Market Volatility. Stock values fluctuate in response to issuer,
political, market and economic developments. In the short term, stock prices can
fluctuate dramatically in response to these developments. Securities that
undergo an initial public offering may trade at a premium in the secondary
markets. However, there is no guarantee that a Fund will have the ability to
participate in such offerings on an ongoing basis.
[Graphic] Company Risk. Changes in the financial condition of an issuer, changes
in specific economic or political conditions that affect a particular type of
issuer, and changes in general economic or political conditions can affect the
credit quality or value of an issuer's securities. The value of securities of
smaller capitalization issuers can be more volatile than that of larger issuers.
[Graphic] Sector Risk. Different parts of the market can react differently to
these developments. For example, large cap stocks can react differently than
small cap stocks, and "growth" stocks can react differently than "value" stocks.
Issuer, political or economic developments can affect a single issuer, issuers
within an industry or economic sector or geographic region, or the market as a
whole.
<PAGE>
================================================================================
EQUITY FUNDS' SECURITIES AND RISKS
- --------------------------------------------------------------------------------
[Graphic] Foreign Exposure. Foreign exposure is a principal risk for the
International Equity Fund, which concentrates its investments in foreign
securities, and may also be a risk for the other Equity Funds. Foreign
securities, foreign currencies and securities issued by U.S. entities with
substantial foreign operations can involve additional risks relating to
political, economic or regulatory conditions in foreign countries. These risks
include fluctuations in foreign currencies; withholding or other taxes; trading,
settlement, custodial and other operational risks; and the less stringent
investor protection and disclosure standards of some foreign markets.
Investing in emerging markets involves risks in addition to and greater than
those generally associated with investing in more developed foreign markets. The
extent of foreign development, political stability, market depth, infrastructure
and capitalization and regulatory oversight are generally less than in more
developed markets. Emerging market economies can be subject to greater social,
economic regulatory and political uncertainties. All of these factors can make
foreign investments, especially those in emerging markets, more volatile and
potentially less liquid than U.S. investments. In addition, foreign markets can
perform differently than the U.S. market.
- --------------------------------------------------------------------------------
OTHER RISKS
- -----------
[Graphic] Interest Rate Changes. The stock market is dependent on general
economic conditions. Changes in interest rates can affect the performance of the
stock market.
<PAGE>
================================================================================
FIXED-INCOME FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
INTERMEDIATE FIXED-INCOME FUND
- ------------------------------
INVESTMENT OBJECTIVE The Intermediate Fixed-Income Fund 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 (the "LBGC Index") or another relevant index approved
by the Board of Directors.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the LBGC Index duration was 5.45, although that duration
will vary in the future
================================================================================
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund 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 Fund invests principally in debt securities
with durations of between three and ten years and rated A or higher by S&P, or
by Moody's at the time of purchase. The Fund may invest up to 20% of its net
assets in securities rated BBB by S&P or Baa by Moody's and up to 6% of its net
assets in securities rated BB by S&P or Ba by Moody's. The Money Manager may
also invest in debt securities not rated by S&P or Moody's if the Money Manager
or Accessor Capital determines the securities to be of comparable quality to
rated securities at the time of purchase. The Fund may invest in the following
debt securities: 1) corporate bonds, 2) U.S. government and agency bonds, and 3)
mortgage asset backed securities.
Investment selections will be based on fundamental economic, market and other
factors leading to variation by sector, maturity, quality and other criteria
appropriate to meet the Fund's objective. The Fund may purchase lower quality
debt securities when the Money Manager views the issuer's credit as stable or
improving, and the difference in the yield offered by investment grade and below
investment grade securities is large enough to compensate for the increased
risks associated with investing in lower rated securities. The Money Manager
will attempt to exceed the total return performance of the LBGC Index.
OTHER INVESTMENT STRATEGIES The Fund may be invested in debt securities of
foreign issuers if the Money Manager or Accessor Capital determines the
securities to be of comparable quality to securities rated A or higher at the
time of purchase. The Money Manager will also seek to enhance returns through
the use of certain trading strategies such as purchasing odd lot securities. The
Fund 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.
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE FIXED-INCOME FUND
- ------------------------------------
INVESTMENT OBJECTIVE The Short-Intermediate Fixed-Income Fund 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 Government/Corporate 1-5 Year Index (the
"LBGC 1-5 Index") or another relevant index approved by the Board of Directors.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the LBGC 1-5 Index duration was 2.34, although that
duration will vary in the future.
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
FIXED-INCOME FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund 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 Fund invests principally in
debt securities with durations between one and five years and rated A or higher
by S&P, or by Moody's at the time of purchase. The Fund may invest up to 20% of
its net assets in securities rated BBB by S&P or Baa by Moody's and up to 6% of
its net assets in securities rated BB by S&P or Ba by Moody's. The Money Manager
may also invest in debt securities not rated by S&P or Moody's if the Money
Manager or Accessor Capital determines the securities to be of comparable
quality to rated securities at the time of purchase. The Fund may invest in the
following debt securities: 1) corporate bonds, 2) U.S. government and agency
bonds, and 3) mortgage asset backed securities.
Investment selections will be based on fundamental economic, market and other
factors leading to variation by sector, maturity, quality and other criteria
appropriate to meet the Fund's objective. The Fund may purchase lower quality
debt securities when the Money Manager views the issuer's credit as stable or
improving, and the difference in the yield offered by investment grade and below
investment grade securities is large enough to compensate for the increased
risks associated with investing in lower rated securities. The Money Manager
will attempt to exceed the total return performance of the LBGC1-5 Index.
OTHER INVESTMENT STRATEGIES The Fund may be invested in debt securities of
foreign issuers if the Money Manager or Accessor Capital determines the
securities to be of comparable quality to securities rated A or higher at the
time of purchase. The Money Manager will also seek to enhance returns through
the use of certain trading strategies such as purchasing odd lot securities. The
Fund 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.
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
- --------------------
INVESTMENT OBJECTIVE The Fund seeks high current income by investing primarily
in lower-rated, high-yield corporate debt securities.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the Lehman Brothers U.S. Corporate High Yield Index
duration was 4.95, although that duration will vary in the future.
================================================================================
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its objective by
investing primarily in a diversified portfolio of lower-rated, high-yield
corporate debt securities, commonly referred to as "junk bonds." Under normal
conditions the Fund will invest at least 65% of its total assets in high-yield
corporate debt securities rated lower than Baa by Moody's or lower than BBB by
S&P or unrated securities judged to be of equivalent quality by the Money
Manager. The Fund will not invest in securities that, at the time of initial
investment, are rated higher than Baa+ or lower than B3 by Moody's or higher
than BBB+ or lower than CCC- by S&P.
The Fund will maintain 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 U.S. Corporate High Yield Index or another relevant index
approved by the Board of Directors.
Investment selections will be based on fundamental economic, market and other
factors leading to variation by sector, maturity, quality and such other
criteria appropriate to meet the Fund's objective. The Money Manager will
attempt to exceed the total return performance of the Lehman Brothers U.S.
Corporate High Yield Index.
<PAGE>
================================================================================
FIXED-INCOME FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
OTHER INVESTMENT STRATEGIES The Fund may also invest in bonds of foreign issuers
provided that the Fund will not invest in foreign bonds that are rated lower
than Baa by Moody's or lower than BBB by S&P or unrated securities judged to be
of equivalent quality by the Money Manager. The Fund will not invest in
securities that, at the time of initial investment, are rated higher than Baa+
or lower than B3 by Moody's or higher than BBB+ or lower than CCC- by S&P, or in
unrated securities that the Money Manager or Accessor Capital determines to be
of comparable quality. The Fund may also invest in preferred stocks, convertible
securities, and non-income producing high-yield bonds, such as zero coupon bonds
that pay interest only at maturity, or payment-in-kind bonds, which pay interest
in the form of additional securities. The Fund 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 attempt to
enhance income, but not for speculation.
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND
- ------------------------
INVESTMENT OBJECTIVE The Mortgage Securities Fund 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.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the LBM Index duration was 4.29, although that duration
will vary in the future.
================================================================================
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its objective by
investing at least 65% and generally more than 80% of its total assets in
mortgage related securities. The Fund invests principally in mortgage related
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and will only invest in non-U.S. Government mortgage related
securities rated A or higher by S&P or Moody's or determined to be of equivalent
quality by the Money Manager or Accessor Capital at the time of purchase.
Investment selections will be based on fundamental economic, market and other
factors leading to variation by sector, maturity, quality and such other
criteria appropriate to meet the Fund's objective. The Money Manager will
attempt to exceed the total return performance of the LBM Index.
OTHER INVESTMENT STRATEGIES The Fund 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.
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
- --------------------------
INVESTMENT OBJECTIVE The U.S. Government Money Fund 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.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund follows industry guidelines concerning
the quality and maturity of its investments. The dollar-weighted average
portfolio maturity of the Fund will not exceed 90 days. The Fund seeks to
achieve its objective by investing at least 65% and generally more than 80% of
the Fund's total assets in fixed-income securities.
<PAGE>
================================================================================
FIXED-INCOME FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The U.S. Government Money Fund seeks to maintain a stable share par value of
$1.00 per share, although there is no assurance that it will be able to do so.
It is possible to lose money by investing in the U.S. Government Money Fund.
Other Investment Strategies The Fund may enter into repurchase agreements
collateralized by U.S. Government or agency securities.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
FIXED-INCOME FUNDS' SECURITIES AND RISKS
- --------------------------------------------------------------------------------
This section describes the security types for and the risks of investing in the
Intermediate Fixed-Income, Short-Intermediate Fixed-Income, High Yield Bond,
Mortgage Securities, and U.S. Government Money Fund, Accessor Funds'
"Fixed-Income Funds."
Many factors affect each Fund's performance. A Fund's yield and (except the U.S.
Government Money Fund's) share price changes daily based on changes in the
financial markets, and interest rates and in response to other economic,
political or financial developments. A Fund's reaction to these developments
will be affected by the financial condition, industry and economic sector, and
geographic location of an issuer, and the Fund's level of investment in the
securities of that issuer. A Fund's reaction to these developments will also be
affected by the types, durations, and maturities of the securities in which the
Fund invests. When you sell your shares of a Fund, they could be worth more or
less than what you paid for them.
In response to market, economic, political or other conditions, each Fund's
Money Manager may temporarily use a different investment strategy for defensive
purposes, including investing in short-term and money market instruments. If a
Money Manager does so, different factors could affect a Fund's performance and
the Fund may not achieve its investment objective. Each Fund is actively
managed. Frequent trading of portfolio securities will result in increased
expenses for the Funds and may result in increased taxable distributions to
shareholders. Each Fund's investment objective stated in the Fixed-Income Funds'
Objectives and Strategies section is fundamental and may not be changed without
shareholder approval.
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY TYPES
- ------------------------
[Graphic] DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must repay the
amount borrowed at the maturity of the security. Some debt securities, such as
zero coupon bonds, do not pay current interest but are sold at a discount from
their face values. Debt securities include corporate debt securities including
convertible bonds, government securities, and mortgage and other asset-backed
securities.
[Graphic] HIGH-YIELD CORPORATE DEBT SECURITIES are a principal security type for
the High Yield Bond Fund and also may be purchased by the Intermediate and
Short-Intermediate Fixed-Income Funds. High-yield corporate debt securities are
often issued as a result of corporate restructurings - such as leveraged
buyouts, mergers, acquisitions, or other similar events. They also may be issued
by less creditworthy or by highly leveraged companies, which are generally less
able than more financially stable firms to make scheduled payments of interest
and principal. These types of securities are considered speculative by the major
rating agencies and rated lower than BBB by S&P or lower than Baa by Moody's.
[Graphic] MORTGAGE RELATED SECURITIES are a principal security type for the
Mortgage Securities Fund and may also be purchased by the Intermediate,
Short-Intermediate Fixed-Income and High Yield Bond Funds. Mortgage-related
securities are interests in pools of mortgages. Payment of principal or interest
generally depends on the cash flows generated by the underlying mortgages.
Mortgage securities may be U.S. Government securities or issued by a bank or
other financial institution.
[Graphic] U.S. GOVERNMENT SECURITIES are a principal security type for the U.S.
Government Money Fund and may also be purchased by the other fixed-income Funds.
U.S. Government Securities are high-quality securities issued or guaranteed by
the U.S. Treasury or by an agency or instrumentality of the U.S. Government.
U.S. Government securities may be backed by the full faith and credit of the
U.S. Treasury, the right to borrow from the U.S. Treasury, or the agency or
instrumentality issuing or guaranteeing the security.
[Graphic] MONEY MARKET SECURITIES are a principal security type for the U.S.
Government Money Fund and may also be purchased by the other fixed-income Funds.
Money Market Securities are high-quality, short-term debt securities that pay a
fixed, variable or floating interest rate. Securities are often specifically
structured so that they are eligible investments for a money market fund. For
example, in order to satisfy the maturity restrictions for a money market fund,
some money market securities have demand or put features which have the effect
of shortening the security's maturity.
<PAGE>
================================================================================
FIXED-INCOME FUNDS' SECURITIES AND RISKS
- --------------------------------------------------------------------------------
OTHER SECURITY TYPES
- --------------------
[Graphic] EQUITY SECURITIES such as common stock and preferred stock, represent
an equity or ownership interest in an issuer. Certain types of equity
securities, such as warrants, are sometimes attached to or acquired in
connection with debt securities. Preferred stocks pay dividends at a specified
rate and have precedence over common stock as to the payment of dividends.
[Graphic] REPURCHASE AGREEMENTS are an agreement to buy a security at one price
and a simultaneous agreement to sell it back at an agreed upon price.
[Graphic] OPTIONS, FUTURES AND OTHER DERIVATIVES The Funds may use techniques
such as buying and selling options or futures contracts in an attempt to change
the Funds' exposure to security prices, currency values, or other factors that
affect the value of the Funds' portfolios.
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
- ---------------
[Graphic] Bond Market Volatility. Individual securities are expected to
fluctuate in response to issuer, general economic and market changes. An
individual security or category of securities may, however, fluctuate more or
less than the market as a whole.
[Graphic] Issuer Risk. Changes in the financial condition of an issuer, changes
in specific economic or political conditions that affect a particular type of
issuer, and changes in general economic or political conditions can adversely
affect the credit quality or value of an issuer's securities. The value of an
individual security or category of securities may be more volatile than the debt
market as a whole. Entities providing credit support or a maturity-shortening
structure are also affected by these types of changes. Any of a Fund's holdings
could have its credit downgraded or could default, which could affect the Fund's
performance.
[Graphic] Credit Risk. Credit risk is a principal risk for the High Yield Bond
Fund, which concentrates its investments in securities with lower credit
quality, and for the Intermediate and Short-Intermediate Fixed-Income Funds.
Credit risk is the possibility that an issuer will fail to make timely payments
of interest or principal. Some issuers may not make payments on debt securities
held by a Fund, causing a loss. Or, an issuer may suffer adverse changes in its
financial condition that could lower the credit quality of a security, leading
to greater volatility in the price of the security and in shares of a Fund. A
change in the quality rating of a bond or other security can also affect the
security's liquidity and make it more difficult for a Fund to sell. Lower
quality debt securities and comparable unrated debt securities are more
susceptible to these problems than higher quality obligations.
Because of its concentration in investments in junk bonds, the High Yield Bond
Fund is subject to substantial credit risk. Credit quality in the high-yield
bond market can change suddenly and unexpectedly, and even recently issued
credit ratings may not fully reflect the actual risks of a particular high-yield
bond. The Funds' Money Managers will not rely solely on ratings issued by
established credit rating agencies, but will utilize these ratings in
conjunction with its own independent and ongoing credit analysis.
[Graphic] Lower Rated Debt Securities. Lower rated debt securities are a
principal risk for the High Yield Bond Fund, which concentrates its investments
in lower rated debt securities, and are also a risk for the Intermediate and
Short-Intermediate Fixed-Income Funds. Debt securities rated lower than BBB by
S&P or lower than Baa by Moody's are commonly referred to as "junk bonds." Lower
rated debt securities and comparable unrated debt securities have speculative
characteristics and are subject to greater risks than higher rated securities.
These risks include the possibility of default on principal or interest payments
and bankruptcy of the issuer. During periods of deteriorating economic or
financial conditions, the ability of issuers of lower rated debt securities to
service their debt, meet projected goals or obtain additional financing may be
impaired. In addition, the market for lower rated debt securities has in the
past been more volatile and less liquid than the market for higher rated debt
securities. These risks could adversely affect the Funds that invest in these
debt securities.
<PAGE>
================================================================================
FIXED-INCOME FUNDS' SECURITIES AND RISKS
- --------------------------------------------------------------------------------
[Graphic] Interest Rate Risk. Debt and money market securities have varying
levels of sensitivity to changes in interest rates. In general, the price of a
debt or money market security falls when interest rates rise and rises when
interest rates fall. Securities with longer durations generally are more
sensitive to interest rate changes. In other words, the longer the duration of a
security, the greater the impact a change in interest rates is likely to have on
the security's price. In addition, short-term securities tend to react to
changes in short-term interest rates, and long-term securities tend to react to
changes in long-term interest rates. When interest rates fall, the U.S.
Government Money Fund's yield will generally fall as well.
[Graphic] Prepayment Risk. Prepayment risk is a principal risk for the Mortgage
Securities Fund, which concentrates its investments in mortgage securities, and
may also be a risk for the other Fixed-Income Funds. Many types of debt
securities, including mortgage securities, are subject to prepayment risk.
Prepayment occurs when the issuer of a security can repay principal prior to the
security's maturity. For example, if interest rates are dropping and an issuer
pays off an obligation or a bond before maturity, the Fund may have to reinvest
at a lower interest rate. Securities subject to prepayment generally offer less
potential for gains during periods of declining interest rates and similar or
greater potential for loss in periods of rising interest rates. In addition, the
potential impact of prepayment features on the price of a debt security can be
difficult to predict and result in greater volatility. Prepayments on assets
underlying mortgage or other asset backed securities held by a Fund can
adversely affect those securities' yield and price.
[Graphic] Inflation Risk. The real value of the U.S. Government Money Fund's
yield may be eroded by inflation over time. The U.S. Government Money Fund may
under perform the bond and equity markets over time.
- --------------------------------------------------------------------------------
OTHER RISKS
- -----------
[Graphic] Stock Market Volatility. The value of equity securities fluctuates in
response to issuer, political, market and economic developments.
[Graphic] Foreign Exposure. Foreign securities, such as debt securities of
foreign issuers, can involve additional risks relating to political, economic,
or regulatory conditions in foreign countries. All of these factors can make
investing in foreign securities more volatile and less liquid than U.S.
investments.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
MANAGER AND ADMINISTRATOR Accessor Capital Management LP, 1420 Fifth Avenue,
Suite 3600, Seattle, WA 98101
Each Fund is a portfolio of Accessor Funds, Inc. ("Accessor Funds"), a Maryland
corporation. Accessor Capital develops the investment programs for the Funds,
selects the Money Managers for the Funds, and monitors the performance of the
Money Managers. In addition, Accessor Capital invests the assets of the U.S.
Government Money Fund. J. Anthony Whatley, III, is the Executive Director of
Accessor Capital. Ravindra A. Deo, Vice President and Chief Investment Officer
of Accessor Capital, is primarily responsible for the day-to-day management of
the Funds either directly or through interaction with each Fund's Money Manager.
Mr. Deo is also responsible for managing the liquidity reserves of each Fund.
The Securities and Exchange Commission issued an exemptive order that allows
Accessor Funds to change a Fund's Money Manager without shareholder approval, as
long as, among other things, the Board of Directors has approved the change in
Money Manager and Accessor Funds has notified the shareholders of the affected
Fund within 60 days of the change.
Each Fund pays Accessor Capital an annual management fee for providing
management and administration services equal to the following percentage of each
Fund's average daily net assets:
- --------------------------------------------------------------------------------
MANAGEMENT FEE TO ACCESSOR CAPITAL
FUND (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- --------------------------------------------------------------------------------
Growth 0.45%
Value 0.45%
Small to Mid Cap 0.60%
International Equity 0.55%
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
High Yield Bond 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
- --------------------------------------------------------------------------------
Each Fund has also hired Accessor Capital to provide transfer agent, registrar,
dividend disbursing agent and certain other services to the Funds. For providing
these services, Accessor Capital receives (i) a fee equal to 0.13% of the
average daily net assets of each Fund and (ii) a transaction fee of $.50 per
transaction.
On the following pages is information on each Fund's Money Manager and a
description of how each Money Manager is compensated for the services it
provides.
Each Fund paid the following management fees in fiscal year 1999 (reflected as a
percentage of average net assets) to Accessor Capital and/or the Fund's Money
Manager:
- --------------------------------------------------------------------------------
TOTAL MANAGEMENT FEES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
FUND FOR FISCAL YEAR 1999
- --------------------------------------------------------------------------------
Growth 0.76%
Value 0.76%
Small to Mid Cap 1.02%
International Equity 1.14%
Intermediate Fixed-Income 0.40%
Short-Intermediate Fixed-Income 0.40%
Mortgage Securities 0.59%
U.S. Government Money 0.25%
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
GROWTH FUND
- -----------
MONEY MANAGER Chicago Equity Partners Corp., 180 N. LaSalle Street, Suite 413,
Chicago, IL 60697
Chicago Equity Partners utilizes a team approach to managing portfolios. David
Johnsen is the Senior Portfolio Manager responsible for the day-to-day
management of the Fund. David has been with Chicago Equity Partners and its
predecessors for over 23 years. Chicago Equity Partners expects to complete a
transaction that will cause a change in the ownership of the company, which is
expected to close prior to May 30, 2000. After the closing, Chicago Equity
Partners Corp. will become Chicago Equity Partners LLC. Management of the new
company will be unchanged.
For the first five calendar quarters of management of the Growth Fund by Chicago
Equity Partners, they will earn a management fee of 0.20% that consists of a
basic fee of 0.10% and a portfolio management fee of 0.10%.
Prior to Chicago Equity Partners, Geewax, Terker & Company was the money manager
of the Growth Fund. The former money manager managed the Fund from July 27, 1997
until March 15, 2000. Geewax Terker earned a management fee calculated and paid
quarterly that consisted of a basic fee and a performance fee. This is the same
fee structure that Chicago Equity Partners will earn once they have completed
five complete calendar quarters. Beginning with the sixth calendar quarter of
management by Chicago Equity Partners, the basic fee will be equal to an annual
rate of 0.10 % of the Growth Fund's average daily net assets. The performance
fee for any quarter depends on the percentage amount by which the Growth Fund's
performance exceeds or trails that of the S&P 500/BARRA Growth Index during the
applicable measurement period based on the following schedule:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Average Annualized Performance Total
Differential vs. Annual Annual
Basic Fee Benchmark Index Performance Fee Fee
--------- --------------- --------------- ---
<S> <C> <C> <C>
0.10% Greater Than or Equal to 2.00% 0.22% 0.32%
Greater Than or Equal to 1.00% and Less Than 2.00% 0.20% 0.30%
Greater Than or Equal to 0.50% and Less Than 1.00% 0.15% 0.25%
Greater Than or Equal to 0.00% and Less Than 0.50% 0.10% 0.20%
Greater Than or Equal to -0.50% and Less Than 0.00% 0.05% 0.15%
Less Than -0.50% 0.00% 0.10%
- -------------------------------------------------------------------------------------------------
</TABLE>
During the period from the sixth calendar quarter through the 13th calendar
quarter of Chicago Equity Partners' management of the Growth Fund, the
applicable measurement period will be the entire period since the commencement
of their management of the Growth Fund with the exception of the quarter
immediately preceding the date of calculation.
Commencing with the 14th quarter of Chicago Equity Partners' management of the
Growth Fund, the applicable measurement period will consist of the 12 most
recent calendar quarters, except for the quarter immediately preceding the date
of calculation.
Under the performance fee formula, Chicago Equity Partners will receive a
performance fee if the Growth Fund's performance either exceeds the S&P
500/BARRA Growth Index, or trails the S&P 500/BARRA Growth Index by no more than
0.50%. Because the performance fee is based on the performance of the Growth
Fund relative to its benchmark Index, Chicago Equity Partners may receive a
performance fee even if the Growth Fund's and the Index's total returns are
negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
VALUE FUND
- ----------
MONEY MANAGER Martingale Asset Management, L.P., 222 Berkeley Street, Boston,
MA 02116
William E. Jacques, Chief Investment Officer since co-founding Martingale in
1987, is primarily responsible for the investment decisions for the Value Fund.
Samuel Nathans, Senior Portfolio Manager, is primarily responsible for the
day-to-day management of the Value Fund. Mr. Nathans joined Martingale in 1999.
Before joining Martingale, Mr. Nathans was the Portfolio Manager and Director of
Research for the AIG Equity Market Neutral Fund, a quantitative long/short hedge
fund administered by the American International Group, Inc. Before AIG, Mr.
Nathans served as Vice President for Quantitative Research at M.D. Sass Investor
Services, Inc. Mr. Nathans was Director of Trading and Developmental Research at
Saje Asset Management prior to his service at M.D. Sass.
Martingale earns a management fee calculated and paid quarterly that consists of
a basic fee and a performance fee. The basic fee is equal to an annual rate of
0.10 % of the Fund's average daily net assets. The performance fee for any
quarter depends on the percentage amount by which the Value Fund's performance
exceeds, or trails that of the S&P 500/BARRA Value Index during the applicable
measurement period based on the following schedule:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Average Annualized Performance Total
Differential vs. Annual Annual
Basic Fee Benchmark Index Performance Fee Fee
--------- --------------- --------------- ---
<S> <C> <C> <C>
0.10% Greater Than or Equal to 2.00% 0.22% 0.32%
Greater Than or Equal to 1.00% and Less Than 2.00% 0.20% 0.30%
Greater Than or Equal to 0.50% and Less Than 1.00% 0.15% 0.25%
Greater Than or Equal to 0.00% and Less Than 0.50% 0.10% 0.20%
Greater Than or Equal to -0.50% and Less Than 0.00% 0.05% 0.15%
Less Than -0.50% 0.00% 0.10%
- ------------------------------------------------------------------------------------------------------
</TABLE>
As of the 14th quarter (1st quarter 1996) of Martingale's management of the
Value Fund, the applicable measurement period consists of the 12 most recent
calendar quarters, excluding the quarter immediately preceding the date of
calculation.
Under the performance fee formula, Martingale will receive a performance fee if
the Value Fund's performance either exceeds the S&P 500/BARRA Value Index, or
trails the S&P 500/BARRA Value Index by no more than 0.50%. Because the
performance fee is based on the performance of the Value Fund relative to its
benchmark Index, Martingale may receive a performance fee even if the Value
Fund's and the Index's total returns are negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
SMALL TO MID CAP FUND
- ---------------------
MONEY MANAGER Symphony Asset Management LLC, 555 California Street, San
Francisco, CA 94104
Praveen K. Gottipalli is primarily responsible for the day-to-day management and
investment decisions for the Small to Mid Cap Fund; he is assisted by David
Wang. Mr. Gottipalli has been Director of Investments with Symphony and its
predecessor entities since March 1994. From 1985 to 1994, he was with BARRA,
Inc., where he was Director of the Active Strategies Group. Since May 1994, Mr.
Wang has been a portfolio manager with Symphony Asset Management, Inc., which
owns 50% of Symphony Asset Management LLC. From 1993 to 1994, Mr. Wang was a
Programmer-Analyst with BARRA, Inc.
Symphony earns a management fee calculated and paid quarterly that consists of a
performance fee. The performance fee for any quarter depends on the percentage
amount by which the Small to Mid Cap Fund's performance exceeds, or trails that
of the Wilshire 4500 Index during the applicable measurement period based on the
following schedule:
- --------------------------------------------------------------------------------
Average Annualized
Percentage Differential Annualized
vs. Wilshire 4500 Index Performance Fee
----------------------- ----------------
Greater Than or Equal to 3.00% 0.42%
Greater Than or Equal to 2.00% and Less Than 3.00% 0.35%
Greater Than or Equal to 1.00% and Less Than 2.00% 0.30%
Greater Than or Equal to 0.50% and Less Than 1.00% 0.25%
Greater Than or Equal to 0.00% and Less Than 0.50% 0.20%
Greater Than or Equal to -0.50% and Less Than 0.00% 0.15%
Greater Than or Equal to -1.00% and Less Than -0.50% 0.10%
Greater Than or Equal to -1.50% and Less Than -1.00% 0.05%
Less Than -1.50% 0.00%
- --------------------------------------------------------------------------------
As of the 14th quarter (1st quarter 1999) of Symphony's management of the Small
to Mid Cap Fund, the applicable measurement period consists of the 12 most
recent calendar quarters, excluding the quarter immediately preceding the date
of calculation.
Under the performance fee formula, Symphony will receive a performance fee if
the Small to Mid Cap Fund's performance either exceeds the Wilshire 4500 Index,
or trails the Wilshire 4500 Index by no more than 1.50%. Because the performance
fee is based on the performance of the Small to Mid Cap Fund relative to its
benchmark Index, Symphony may receive a performance fee even if the Small to Mid
Cap Fund's and the Index's total returns are negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
MONEY MANAGER Nicholas-Applegate Capital Management, 600 West Broadway, 29th
Floor, San Diego, CA 92101
Catherine Somhegyi, Lawrence S. Speidell and Loretta J. Morris are primarily
responsible for making the day-to-day management and investment decisions for
the International Equity Fund. Ms. Somhegyi, Chief Investment Officer, Global
Equity Management, joined Nicholas-Applegate in 1987. Mr. Speidell, Partner and
Director of Research, joined Nicholas-Applegate in 1994. From 1983 to 1994, Mr.
Speidell was a portfolio manager for Batterymarch Financial Management. Ms.
Morris, Partner and Portfolio Manager, International, joined Nicholas-Applegate
in 1990.
On August 19, 1999, the Board of Directors of Accessor Funds, amended the Money
Manager Agreement with Nicholas-Applegate, to change the schedule of fees
payable to the Money Manager, effective September 1, 1999. Prior to the change,
the Money Manager received a basic fee at the annual rate of 0.20% of the
International Equity Fund's average daily net assets; there was no limit on the
maximum amount of the basic fee. After the change, the basic fee was limited to
a maximum fee of $400,000 annually. In substance, when the International Equity
Fund's assets exceed $200,000,000 the basic fee is never more than $400,000
annually.
Nicholas-Applegate earns a management fee calculated and paid quarterly that
consists of a basic fee and a performance fee. The basic fee is equal to an
annual rate of 0.20% of the Fund's average daily net assets up to a maximum of
$400,000 annualized. The performance fee for any quarter depends on the
percentage amount by which the International Equity Fund's performance exceeds
or trails that of the MSCI EAFE+EMF Index during the applicable measurement
period based on the following schedule:
- --------------------------------------------------------------------------------
Average Annualized Performance
Differential vs. Annual
Benchmark Index Performance Fee
--------------- ---------------
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% 0.00%
- --------------------------------------------------------------------------------
Example: If Nicholas-Applegate is outperforming the Index by more than 4% per
year, then the following table shows the annualized total fee at various asset
levels:
- --------------------------------------------------------------------------------
Asset Level New Old
Total Annual Fee Total Annual Fee
- --------------------------------------------------------------------------------
$150 million 0.20% + 0.40% = 0.60% 0.20% + 0.40% = 0.60%
$200 million $400,000 (or 0.20%) + 0.40% = 0.60% 0.20% + 0.40% = 0.60%
$250 million $400,000 (or 0.16%) + 0.40% = 0.56% 0.20% + 0.40% = 0.60%
$300 million $400,000 (or 0.13%) + 0.40% = 0.53% 0.20% + 0.40% = 0.60%
$350 million $400,000 (or 0.11%) + 0.40% = 0.51% 0.20% + 0.40% = 0.60%
$400 million $400,000 (or 0.10%) + 0.40% = 0.50% 0.20% + 0.40% = 0.60%
- --------------------------------------------------------------------------------
As of the 14th quarter (2nd quarter 1998) of Nicholas-Applegate's management of
the International Equity Fund, the applicable measurement period consists of the
12 most recent calendar quarters, excluding the quarter immediately preceding
the date of calculation.
Under the performance fee formula, Nicholas-Applegate will receive a performance
fee if the International Equity Fund's performance either exceeds the MSCI EAFE
+ EMF Index, or trails the MSCI EAFE + EMF Index by no more than 2.00%. Because
the performance fee is based on the performance of the International Equity Fund
relative to its benchmark Index, Nicholas-Applegate may receive a performance
fee even if the International Equity Fund's and the Index's total returns are
negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
INTERMEDIATE FIXED-INCOME FUND
SHORT-INTERMEDIATE FIXED-INCOME FUND
- ------------------------------------
MONEY MANAGER Cypress Asset Management, 26607 Carmel Center Place, Carmel,
CA 93923
Mr. Xavier Urpi, President and Chief Investment Officer, is primarily
responsible for the day-to-day management and investment decisions and is
assisted by Ms. Rosemary Brooks, Manager of Operations. 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. Previously, Ms. Brooks was owner of Brooks Finance, and a
registered representative with H.D. Vest from June 1994 to July 1997.
Cypress earns a management fee from each Fund calculated and paid quarterly that
consists of a basic fee and a performance fee, calculated and paid quarterly.
The performance fee for any quarter depends on the percentage amount by which
each Fund's performance exceeds that of its respective Benchmark Index, the
Lehman Brothers Government/Corporate Index (Intermediate Fixed-Income) and the
Lehman Brothers Government/Corporate 1-5 Year Index (Short-Intermediate
Fixed-Income) during the applicable measurement period based on the following
schedule:
- --------------------------------------------------------------------------------
Average Annualized
Performance Total
Basic Differential vs. Annual Annual
Fee Benchmark Index Performance Fee Fee
- ------- ---------------- ---------------- ------
0.02% Greater Than 0.70% 0.15% 0.17%
Greater Than 0.50% and Less Than 0.05% plus 1/2
or Equal to 0.70% (P-0.50%)* Up to 0.17%
Greater Than or Equal to 0.35%
and Less Than or Equal to 0.50% 0.05% 0.07%
Less Than 0.35% 0.00% 0.02%
- -------------------------------------------------------------------------------
*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 measurement period from the sixth calendar quarter (1st quarter 2000)
through the 13th calendar quarter (4th quarter 2001) of Cypress' management of
each Fund, will be the entire period since the commencement of Cypress'
management of each Fund, excluding the quarter immediately preceding the date of
calculation. Commencing with the 14th quarter (1st quarter 2002) of Cypress'
management of each Fund, the applicable measurement period will consist of the
12 most recent calendar quarters, excluding the quarter immediately preceding
the date of calculation.
Under the performance fee formula, Cypress will receive a performance fee if
either Intermediate Fixed-Income Fund's or Short-Intermediate Fixed-Income
Fund's performance equals or exceeds the Lehman Brothers Government/Corporate
Index or the Lehman Brother Government/Corporate 1-5 Year Index, respectively,
by at least 0.35%. Because the performance fee is based on the performance of
the Intermediate Fixed-Income Fund and the Short-Intermediate Fixed-Income Fund
relative to their respective benchmark Index, Cypress may receive a performance
fee even if a Fund's and the Index's total returns are negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
- --------------------
MONEY MANAGER Financial Management Advisors, Inc., 1900 Avenue of the Stars,
Suite 900, Los Angeles, CA 90067
FMA uses a team approach. Kenneth D. Malamed and Steven S. Michaels are
primarily responsible for the day-to-day management of the Fund. Mr. Malamed,
President and Chief Investment Officer, founded FMA in 1985. In 1992, the
assets, operations and client base of FMA were acquired by Wertheim Schroder
Investment Services, Inc. (later renamed Schroder Wertheim Investment Services,
Inc.), where Ken Malamed served as Managing Director, Director of Fixed-Income
and Chairman of the Credit Committee. In November 1995, Mr. Malamed terminated
his association with Schroder Wertheim. In December of 1995, he re-established
FMA and continued on with a portion of the investment advisory business. Mr.
Michaels, Senior Vice President and Managing Director of High Yield Fixed
Income, joined FMA in 1991. He was Senior High Yield Credit Analyst at Schroder
Wertheim Investment Services, Inc. from 1992 to 1995. He continued on with Mr.
Malamed in January 1996 at the re-established FMA.
For the first five complete calendar quarters of management, FMA will earn a
management fee equal to an annual rate of 0.15% that consists of a basic fee
equal to an annual rate of 0.07% and a portfolio management fee equal to an
annual rate of 0.08%. The management fee is calculated and paid quarterly.
Beginning with the sixth complete calendar quarter of management, FMA will earn
the basic fee described above and a performance fee, calculated and paid
quarterly. The performance fee for any quarter depends on the percentage amount
by which the Fund's performance exceeds or trails that of its benchmark index,
the Lehman Brothers U.S. Corporate High Yield Index, during the applicable
measurement period based on the following schedule:
- --------------------------------------------------------------------------------
Average
Annualized Performance Annual Total
Differential Performance Annual
Basic Fee vs. Benchmark Index Fee Fee
- --------- --------------------- ------ ------
0.07% Greater than 2.00% 0.22% 0.29%
Greater than 1.50% and Less than or equal to 2.00% 0.20% 0.27%
Greater than 1.00% and Less than or equal to 1.50% 0.16% 0.23%
Greater than 0.50% and Less than or equal to 1.00% 0.12% 0.19%
Greater than -0.50% and Less than or equal to 0.50% 0.08% 0.15%
Greater than -1.00% and Less than or equal to -0.50% 0.04% 0.11%
Less than or equal to -1.00% 0.00% 0.07%
- --------------------------------------------------------------------------------
The measurement period consists of the 12 most recent calendar quarters,
excluding the quarter immediately preceding the date of calculation.
Under the performance fee formula, FMA will receive a performance fee if the
High Yield Bond Fund's performance either exceeds the Lehman Brothers U.S.
Corporate High Yield Index or trails the Lehman Brothers U.S. Corporate High
Yield Index by no more than 1.00%. Because the performance fee is based on the
performance of the High Yield Bond Fund relative to its benchmark Index, FMA may
receive a performance fee even if the High Yield Bond Fund's and the Index's
total returns are negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND
- ------------------------
MONEY MANAGER BlackRock Financial Management, Inc., 345 Park Avenue, New
York, NY 10154
BlackRock's Investment Strategy Group has primary responsibility for setting the
broad investment strategy and for overseeing the ongoing management of all
client portfolios. Mr. Andrew J. Phillips, Managing Director, is primarily
responsible for the day-to-day management and investment decisions for the
Mortgage Securities Fund. Mr. Phillips' primary responsibility is the management
of the firm's investment activities in fixed-rate mortgage securities, including
pass-throughs and CMOs. He directs the development of investment strategy and
coordinates execution for all client portfolios. Prior to joining BlackRock in
1991, Mr. Phillips was a portfolio manager at Metropolitan Life Insurance
Company.
The Mortgage Securities Fund pays BlackRock a management fee that consists of a
basic fee and a performance fee. The management fee is calculated and paid
quarterly. The basic fee is equal to an annual rate of 0.07 % of the Fund's
average daily net assets. The performance fee for any quarter depends on the
percentage amount by which the Mortgage Securities Fund's performance exceeds or
trails that of the Lehman Brothers Mortgage-Backed Securities Index during the
applicable measurement period based on the following schedule:
- --------------------------------------------------------------------------------
Average Annualized
Performance Total
Differential vs. Annual Annual
Basic Fee Benchmark Index Performance Fee Fee
--------- --------------- --------------- -----
0.07% Greater Than or Equal To 2.00% 0.18% 0.25%
Greater Than or Equal To 0.50%
and Less Than 2.00% 0.16% 0.23%
Greater Than or Equal To 0.25%
and Less Than 0.50% 0.12% 0.19%
Greater Than or Equal To -0.25%
and Less Than 0.25% 0.08% 0.15%
Greater Than -0.50% and
Less Than -0.25% 0.04% 0.11%
Greater Than or Equal To -0.50% 0.00% 0.07%
- --------------------------------------------------------------------------------
The measurement period consists of the 12 most recent calendar quarters,
excluding the quarter immediately preceding the date of calculation.
Under the performance fee formula, BlackRock will receive a performance fee if
the Mortgage Securities Fund's performance either exceeds the Lehman Brothers
Mortgage-Backed Securities Index, or trails the Lehman Brothers Mortgage-Backed
Securities Index by no more than 0.50%. Because the performance fee is based on
the performance of the Mortgage Securities Fund relative to its benchmark Index,
BlackRock may receive a performance fee even if the Mortgage Securities Fund's
and the Index's total returns are negative.
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
- --------------------------
MANAGER Accessor Capital Management LP, 1420 Fifth Avenue, Suite 3600, Seattle,
WA 98101
Accessor Capital directly invests the assets of the U.S. Government Money Fund.
Accessor Capital receives no additional fee beyond its management fee, as
previously described, for this service.
<PAGE>
================================================================================
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
WHERE TO PURCHASE
- -----------------
[graphic] Direct. Investors may purchase Advisor Class Shares directly from
Accessor Funds for no sales charge or commission.
[graphic] Financial Intermediaries. Advisor Class Shares may be purchased
through financial intermediaries, such as banks, broker-dealers, registered
investment advisers and providers of fund supermarkets. In certain cases, a Fund
will be deemed to have received a purchase or redemption when it is received by
the financial intermediary. The order will be priced at the next calculated NAV.
These financial intermediaries may also charge transaction, administrative or
other fees to shareholders, and may impose other limitations on buying, selling
or transferring shares, which are not described in this Prospectus. Some
features of the Advisor Class Shares, such as investment minimums, redemption
fees and certain trading restrictions, may be modified or waived by financial
intermediaries. Shareholders should contact their financial intermediary for
information on fees and restrictions.
- --------------------------------------------------------------------------------
HOW TO PURCHASE
- ---------------
Purchase orders are accepted on each business day that the New York Stock
Exchange is open and must be received in proper form prior to the close of the
New York Stock Exchange, normally 4:00 p.m. Eastern time. If Accessor Capital
receives a purchase order for shares of U.S. Government Money Fund on any
business day and the invested monies are wired before 9:00 a.m. Pacific time,
the investor will be entitled to receive that day's dividend. Otherwise,
Accessor Capital must receive payment for shares by 12:00 p.m. Eastern time on
the business day following the purchase request. All purchases must be made in
U.S. dollars. Purchases may be made any of the following ways:
[Graphic] By Check. Checks made payable to "Accessor Funds, Inc." and drawn on a
U.S. bank should be mailed with the completed application or with the account
number and name of Fund noted on the check to:
Accessor Funds, Inc.
P. 0. Box 1748
Seattle, WA 98111-1748
[Graphic] By Federal Funds Wire. Wire instructions are described on the account
application.
[Graphic] By Telephone. Shareholders with aggregate account balances of at least
$1 million may purchase Advisor Class Shares by telephone at 1-800-759-3504. To
prevent unauthorized transactions, Accessor Funds may use reasonable procedures
to verify telephone requests.
[Graphic] By Purchases In Kind. Under some circumstances, the Funds may accept
securities as payment for Advisor Class Shares. Such securities would be valued
the same way the Funds' securities are valued (see "Valuation of Securities".)
Please see "Additional Purchase and Redemption Information" in the Statement of
Additional Information for further information.
================================================================================
Advisor Class Shares may not be purchased on days when the NYSE is closed for
trading: New Year's Day, Martin Luther King, Jr., Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
================================================================================
<PAGE>
================================================================================
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
IRAs/ROTH IRAs
- --------------
Investors may purchase Advisor Class Shares through an Individual or Roth
Retirement Custodial Account Plan. An IRA or Roth IRA account with an aggregate
balance of less than $10,000 across all Funds on December 31 of any year will be
assessed a $25.00 fee. Copies of an IRA or Roth IRA Plan may be obtained from
Accessor Capital by calling (800) 759-3504.
================================================================================
INVESTMENT MINIMUMS
- ------------------------------------- ------------------------------------------
REGULAR ACCOUNTS RETIREMENT ACCOUNTS
- --------------------------------------------------------------------------------
Initial Investment Initial Investment
- --------------------------------------------------------------------------------
One Fund only: $5,000 Traditional IRA/ $2,000 aggregated
Multiple Funds: $10,000 aggregated Roth IRA: among the Funds
among the Funds
Additional Investment(s) Additional Investment(s)
- --------------------------------------------------------------------------------
One Fund only: $1,000 Traditional IRA/ $2,000 aggregated
Multiple Funds: $2,000 aggregated Roth IRA: among the Funds
among the Funds
- --------------------------------------------------------------------------------
Accessor Funds may accept smaller purchase amounts or reject any purchase order
it believes may disrupt the management of the Funds
- --------------------------------------------------------------------------------
SHARE PRICING
- -------------
Investors purchase Advisor Class Shares of a Fund at its net asset value per
share ("NAV"). The NAV is calculated by adding the value of Fund assets
attributable to Advisor Class Shares, subtracting Fund liabilities attributable
to the class, and dividing by the number of outstanding Advisor Class Shares.
The NAV is calculated each day that the New York Stock Exchange ("NYSE") is open
for business. The Funds generally calculate their NAV at the close of regular
trading on the NYSE, generally 4:00 p.m. Eastern time. Shares are purchased at
the NAV that is next calculated after purchase requests are received by the
Funds.
- --------------------------------------------------------------------------------
MARKET TIMING
- -------------
Short-term or excessive trading into and out of a Fund may harm performance by
disrupting portfolio management strategies and by increasing expenses. A Fund
may temporarily or permanently terminate the exchange privilege of any investor
who makes more than four exchanges out of a Fund per calendar year. Moreover, a
Fund may reject any purchase orders, including exchanges, particularly from
market timers or investors who, in Accessor Capital's opinion, have a pattern of
short-term or excessive trading or whose trading has been or may be disruptive
to that Fund. For these purposes, Accessor Capital may consider an investor's
trading history in that Fund or other Funds, and accounts under common ownership
or control.
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
- --------------------
For additional information about purchasing shares of the Accessor Funds, please
contact us at (800) 759-3504.
<PAGE>
================================================================================
EXCHANGING FUND SHARES
- --------------------------------------------------------------------------------
As a shareholder, you have the privilege of exchanging shares of the Funds for
shares of other Accessor Funds. Advisor Class Shares may be exchanged for shares
of any other Fund on days when the NYSE is open for business, as long as
shareholders meet the normal investment requirements of the other Fund. The
request must be received in proper form by the Fund or certain financial
intermediaries prior to the close of the NYSE, normally 4:00 p.m. Eastern time.
Shares will be exchanged at the next NAV calculated after Accessor Capital
receives the exchange request in proper form. The Fund may temporarily or
permanently terminate the exchange privilege of any investor who makes more than
four exchanges out of the Fund per calendar year. Shareholders should read the
prospectus of any other Fund into which they are considering exchanging.
- --------------------------------------------------------------------------------
EXCHANGES THROUGH ACCESSOR FUNDS
- --------------------------------
Accessor Funds does not currently charge fees on exchanges directly through it.
This exchange privilege may be modified or terminated at any time by Accessor
Funds upon 60 days notice to shareholders. Exchanges may be made any of the
following ways:
[graphic] By Mail. Share exchange instructions may be mailed to:
Accessor Funds, Inc.
P. O. Box 1748
Seattle, WA 98111-1748.
[graphic] By Fax. Instructions may be faxed to Accessor Funds at (206) 224-4274.
An exchange of shares from a Fund involves a redemption of those shares and will
be treated as a sale for tax purposes.
- --------------------------------------------------------------------------------
EXCHANGES THROUGH FINANCIAL INTERMEDIARIES
- ------------------------------------------
You should contact your financial intermediary directly to make exchanges. Your
financial intermediary may charge additional fees for these transactions.
<PAGE>
================================================================================
REDEEMING FUND SHARES
- --------------------------------------------------------------------------------
Investors may request to redeem Advisor Class Shares on any day that the NYSE is
open for business. The request must be received in proper form by the Fund or
certain financial intermediaries prior to the close of the NYSE, normally 4:00
p.m. Eastern time. Shares will be redeemed at the next NAV calculated after
Accessor Capital receives the redemption request in proper form. Payment will
ordinarily be made within seven days of the request by wire-transfer to a
shareholder's domestic commercial bank account. Shares may be redeemed from
Accessor Funds any of the following ways:
[graphic] By Mail. Redemption requests may be mailed to:
Accessor Funds, Inc.
P. 0. Box 1748
Seattle, WA 98111-1748.
[graphic] By Fax. Redemption requests may be faxed to Accessor Capital at (206)
224-4274.
[graphic] By Telephone. Shareholders with aggregate account balances of at least
$1 million may request redemption of shares by telephone at (800) 759-3504. To
prevent unauthorized transactions, Accessor Funds may use reasonable procedures
to verify telephone requests.
Shareholders may request that payment be made by check to the shareholders of
record at the address of record. Such requests must be in writing and signed by
all shareholders of record. Shareholders may also request that a redemption be
made payable to someone other than the shareholder of record or be sent to an
address other than the address of record. Such requests must be made in writing,
be signed by all shareholders of record, and accompanied by a signature
guarantee. The Transfer Agent may charge a $10.00 processing fee for each
redemption check. Shares also may be redeemed through financial intermediaries
from whom shares were purchased. Financial intermediaries may charge a fee for
this service.
Large redemptions may disrupt the management and performance of the Funds. Each
Fund reserves the right to delay delivery of your redemption proceeds -- up to
seven days -- if the Fund determines that the redemption amount will disrupt its
operation or performance. If you redeem more than $250,000 worth of a Fund's
shares within any 90-day period, the Fund reserves the right the pay part or all
of the redemption proceeds above $250,000 in kind, i.e., in securities, rather
than cash. If payment is made in kind, you may incur brokerage commissions if
you elect to sell the securities, or market risk if you elect to hold them.
[graphic] Systematic Withdrawal Plan. Shareholders may request an automatic,
monthly, quarterly or annual redemption of shares under the Systematic
Withdrawal Plan (minimum monthly amount is $500). Applications for this plan may
be obtained from Accessor Funds and must be received by Accessor Funds at least
ten calendar days before the first scheduled withdrawal date. Systematic
Withdrawals may be discontinued at any time by a shareholder or Accessor Funds.
[graphic] Low Account Balances. Accessor Funds may redeem any account with a
balance of less than $500 per Fund or less than $2,000 in aggregate across the
Funds if the shareholder is not part of an Automatic Investment Plan.
Shareholders will be notified in writing when they have a low balance and will
have 60 days to purchase additional shares to increase the balance to the
required minimum. Shares will not be redeemed if an account drops below the
minimum due to market fluctuations.
In the event of an emergency as determined by the SEC, Accessor Funds may
suspend the right of redemption or postpone payments to shareholders. If the
Board of Directors determines a redemption payment may harm the remaining
shareholders of a Fund, the Fund may pay a redemption in whole or in part by a
distribution in kind of securities from the Fund.
================================================================================
HELP BOX:
Redemption requests for shares that were purchased by check will be honored at
the next NAV calculated after receipt of the redemption request. However,
redemption proceeds will not be transmitted until the check used for the
investment has cleared.
================================================================================
<PAGE>
================================================================================
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
[Graphic] Dividends. Each Fund intends to annually distribute as dividends to
its shareholders substantially all of its net investment income. The Board of
Directors presently intends to declare dividends on the following schedule:
- --------------------------------------------------------------------------------
FUND DECLARED PAYABLE
- --------------------------------------------------------------------------------
Growth Quarterly, on last First business day
Value business day of following end of calendar
Small to Mid Cap quarter*. quarter.
International Annually, third to Second to last business day
last business day of calendar year.
of calendar year.
Intermediate Fixed-Income Monthly, on last First business day of
Short-Intermediate Fixed- business day of of following month.
Income month*.
Mortgage Securities
U.S. Government Money Daily First business day
of following month.
- --------------------------------------------------------------------------------
*Except, that in December the dividend is declared on the second or third to
last business day and paid the next day for operational convenience.
- --------------------------------------------------------------------------------
[graphic] Other Distributions. The Board of Directors intends to distribute to
each Fund's shareholders substantially all of its net realized long- and
short-term capital gains and net realized gains from foreign currency
transactions (if any) annually, generally in mid-December. A Fund may need to
make additional distributions at year-end to avoid federal income or excise
taxes.
[graphic] Automatic Reinvestment of Dividends and other Distributions. All
dividends and other distributions on Advisor Class Shares of a Fund will be
automatically reinvested in additional Advisor Class Shares of that Fund unless
a shareholder elects to receive them in cash. Shareholders may alternatively
choose to invest dividends or other distributions in Advisor Class Shares of any
other Fund.
================================================================================
VALUATION OF SECURITIES
- --------------------------------------------------------------------------------
The Funds generally value their securities using market quotations. However,
short-term debt securities maturing in less than 60 days are valued using
amortized cost, and securities for which market quotations are not readily
available are valued at fair value. Because foreign securities markets are open
on different days from U.S. markets, there may be instances when the NAV of a
Fund that invests in foreign securities changes on days when shareholders are
not able to buy or sell shares. If a security's value has been materially
affected by events occurring after the close of the exchange or market on which
the security is principally traded (for example, a foreign exchange or market),
that security may be valued by another method that the Board of Director's
believes accurately reflects fair value.
<PAGE>
================================================================================
TAXATION
- --------------------------------------------------------------------------------
Dividends and other distributions that shareholders receive from a Fund, whether
received in cash or reinvested in additional shares of the Fund, are subject to
federal income tax and may also be subject to state and local tax. Generally,
dividends and distributions of net short-term capital gains and gains from
certain foreign currency transactions are taxable as ordinary income, while
distributions of other gains are taxable as long-term capital gains (generally,
at the rate of 20% for non-corporate shareholders). The rate of tax to a
shareholder on distributions from a Fund of capital gains ordinarily depends on
the length of time the Fund held the securities that generated the gain, not the
length of time the shareholder owned his or her shares.
Certain dividends and other distributions declared by a Fund in October,
November, or December of any year are taxable to shareholders as though received
on December 31 of that year if paid to them during the following January.
Accordingly, those distributions will be taxed to shareholders for the year in
which that December 31 falls.
An exchange of a Fund's shares for shares of another Fund will be treated as a
sale of the Fund's shares, and any gain on the transaction will be subject to
federal income tax.
The International Equity Fund receives dividends and interest on securities of
foreign issuers that may be subject to withholding taxes by foreign governments,
and gains from the disposition of those securities also may be subject thereto,
which may reduce the Fund's total return. If the amount of taxes withheld by
foreign governments is material, the Fund may elect to enable shareholders to
claim a foreign tax credit regarding those taxes.
After the conclusion of each calendar year, shareholders will receive
information regarding the taxability of dividends and other distributions paid
by the Funds during the preceding year. Funds may be required to withhold and
remit to the U.S. Treasury 31% of all dividends, capital gain distributions, and
redemption proceeds payable to individuals and certain other non-corporate
shareholders who have not provided the Fund with a correct taxpayer
identification number. Shareholders should consult a tax adviser for further
information regarding the federal, state, and local tax consequences of an
investment in Advisor Class Shares.
The foregoing is only a brief summary of certain federal income tax consequences
of investing in the Funds. Please see the Statement of Additional Information
for a further discussion.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
GROWTH FUND
- -----------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
FOR A SHARE OUTSTANDING ADVISOR CLASS SHARES
THROUGHOUT THE PERIOD 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 28.88 $ 21.57 $ 19.51 $ 17.99 $ 14.37
NET INVESTMENT INCOME (LOSS) (0.06) 0.04 0.13 0.19 0.15
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 7.51 9.91 6.31 3.35 4.76
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 7.45 9.95 6.44 3.54 4.91
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT
INCOME 0.00 (0.03) (0.13) (0.19) (0.15)
DISTRIBUTIONS FROM CAPITAL GAINS (1.24) (2.61) (4.25) (1.83) (1.14)
DISTRIBUTIONS IN EXCESS OF CAPITAL GAINS (0.01) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.25) (2.64) (4.38) (2.02) (1.29)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 35.08 $ 28.88 $ 21.57 $ 19.51 $ 17.99
=========================================================================================================================
TOTAL RETURN(1) 25.87% 46.65% 33.24% 19.83% 34.32%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $339,590 $157,799 $ 87,907 $ 60,586 $ 48,532
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.97% 0.92% 0.93% 1.13% 1.26%
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS (0.21)% 0.16% 0.56% 0.97% 0.97%
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 96.55% 112.42% 131.75% 81.79% 99.73%
</TABLE>
(1) 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 Fund.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
VALUE FUND
- ----------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
FOR A SHARE OUTSTANDING ADVISOR CLASS SHARES
THROUGHOUT THE PERIOD 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.04 $ 20.88 $ 17.75 $ 15.91 $ 13.01
NET INVESTMENT INCOME 0.18 0.24 0.26 0.24 0.33
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 1.25 2.45 5.54 3.51 3.96
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.43 2.69 5.80 3.75 4.29
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT
INCOME (0.18) (0.24) (0.26) (0.24) (0.33)
DISTRIBUTIONS FROM CAPITAL GAINS (1.59) (2.12) (2.41) (1.67) (1.06)
DISTRIBUTIONS IN EXCESS OF CAPITAL GAINS 0.00 (0.17) 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.77) (2.53) (2.67) (1.91) (1.39)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.70 $ 21.04 $ 20.88 $ 17.75 $ 15.91
======================================================================================================================
TOTAL RETURN(1) 6.87% 12.89% 32.94% 23.94% 33.25%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $149,183 $114,728 $ 81,127 $ 36,367 $ 24,915
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.97% 1.03% 1.05% 1.21% 1.40%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 0.86% 1.06% 1.32% 1.43% 2.18%
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 167.70% 104.85% 68.14% 93.54% 100.88%
</TABLE>
(1) 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
lastday 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 Fund.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SMALL TO MID CAP FUND
- ---------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
FOR A SHARE OUTSTANDING ADVISOR CLASS SHARES
THROUGHOUT THE PERIOD 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 23.53 $ 21.82 $ 18.82 $ 17.60 $ 14.08
NET INVESTMENT INCOME (LOSS) (0.10) (0.05) 0.00 0.07 0.06
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 6.46 3.50 6.75 4.22 4.42
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 6.36 3.45 6.75 4.29 4.48
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT
INCOME 0.00 0.00 0.00 (0.07) (0.06)
DISTRIBUTIONS FROM CAPITAL GAINS (2.50) (1.74) (3.73) (3.00) (0.90)
DISTRIBUTION IN EXCESS OF NET INVESTMENT
INCOME 0.00 0.00 (0.02) 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.50) (1.74) (3.75) (3.07) (0.96)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.39 $ 23.53 $ 21.82 $ 18.82 $ 17.60
=========================================================================================================================
TOTAL RETURN(1) 27.26% 15.98% 36.14% 24.85% 31.98%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $447,665 $260,792 $125,221 $ 65,479 $ 49,803
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.25% 1.22% 1.15% 1.17% 1.31%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (0.47)% (0.22)% 0.00% 0.37% 0.41%
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 133.14% 110.07% 129.98% 113.44% 84.26%
</TABLE>
(1) Total return is calculated assuming a purchase of shares at net asset valu
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 Fund.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
FOR A SHARE OUTSTANDING ADVISOR CLASS SHARES
THROUGHOUT THE PERIOD 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.90 $ 14.83 $ 13.83 $ 12.55 $ 11.67
NET INVESTMENT INCOME (LOSS) 0.02 (0.03) (0.02) (0.06) 0.05
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 8.17 2.41 1.54 1.80 0.83
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 8.19 2.38 1.52 1.74 0.88
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM CAPITAL GAINS (3.57) (0.31) (0.50) (0.44) 0.00
DISTRIBUTIONS IN EXCESS OF CAPITAL GAINS 0.00 0.00 (0.02) (0.02) 0.00
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (3.57) (0.31) (0.52) (0.46) 0.00
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.52 $ 16.90 $ 14.83 $ 13.83 $ 12.55
======================================================================================================================
TOTAL RETURN(1) 48.93% 16.07% 10.96% 13.78% 7.63%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $236,869 $149,391 $151,441 $ 73,019 $ 39,102
Ratio of Expenses to average net assets:
AFTER ACCESSOR CAPITAL FEE WAIVERS 1.37% 1.59% 1.55% 1.52% 1.83%
BEFORE ACCESSOR CAPITAL FEE WAIVERS 1.37% 1.59% 1.55% 1.52% 1.93%
Ratio of net investment income(loss)to
average net assets:
AFTER ACCESSOR CAPITAL FEE WAIVERS 0.04% (0.24)% (0.20)% (0.26)% 0.10%
BEFORE ACCESSOR CAPITAL FEE WAIVERS 0.04% (0.24)% (0.20)% (0.26)% 0.00%
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 251.23% 196.37% 196.66% 157.66% 84.85%
</TABLE>
(1) 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 Fund.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
INTERMEDIATE FIXED-INCOME FUND
- ------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
FOR A SHARE OUTSTANDING ADVISOR CLASS SHARES
THROUGHOUT THE PERIOD 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.47 $ 12.19 $ 11.90 $ 12.29 $ 11.04
NET INVESTMENT INCOME 0.68 0.67 0.71 0.67 0.71
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (1.12) 0.32 0.29 (0.39) 1.25
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.44) 0.99 1.00 0.28 1.96
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.68) (0.67) (0.71) (0.67) (0.71)
DISTRIBUTIONS FROM CAPITAL GAINS (0.05) (0.04) 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.73) (0.71) (0.71) (0.67) (0.71)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.30 $ 12.47 $ 12.19 $ 11.90 $ 12.29
==========================================================================================================================
TOTAL RETURN(1) (3.58)% 8.38% 8.62% 2.56% 18.26%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 56,895 $ 48,489 $ 55,197 $ 52,248 $ 36,878
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.68% 0.79% 0.84% 0.88% 0.96%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 5.89% 5.46% 5.88% 5.79% 6.07%
- --------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 60.40% 113.00% 84.35% 94.69% 187.62%
</TABLE>
(1) 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 respectiv
epayment dates of each Fund.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE FIXED-INCOME FUND
- ------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
FOR A SHARE OUTSTANDING ADVISOR CLASS SHARES
THROUGHOUT THE PERIOD 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.33 $ 12.27 $ 12.16 $ 12.32 $ 11.62
NET INVESTMENT INCOME 0.63 0.68 0.64 0.59 0.60
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (0.49) 0.14 0.11 (0.16) 0.70
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.14 0.82 0.75 0.43 1.30
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.63) (0.63) (0.64) (0.59) (0.60)
DISTRIBUTIONS FROM CAPITAL GAINS (0.01) (0.13) 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.64) (0.76) (0.64) (0.59) (0.60)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.83 $ 12.33 $ 12.27 $ 12.16 $ 12.32
=========================================================================================================================
TOTAL RETURN(1) 1.22% 6.87% 6.33% 3.63% 11.42%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 50,200 $ 42,454 $ 40,942 $ 36,701 $ 35,272
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.70% 0.82% 0.86% 0.93% 0.94%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 5.32% 5.12% 5.20% 4.89% 4.99%
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 45.89% 69.64% 53.30% 31.12% 41.93%
</TABLE>
(1) 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 Fund.
*Annualized
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND
- ------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
FOR A SHARE OUTSTANDING ADVISOR CLASS SHARES
THROUGHOUT THE PERIOD 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.59 $ 12.60 $ 12.23 $ 12.38 $ 11.36
NET INVESTMENT INCOME 0.73 0.70 0.72 0.73 0.76
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (0.58) 0.09 0.42 (0.15) 1.02
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.15 0.79 1.14 0.58 1.78
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.73) (0.70) (0.72) (0.73) (0.76)
DISTRIBUTIONS FROM CAPITAL GAINS (0.03) (0.10) (0.05) 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.76) (0.80) (0.77) (0.73) (0.76)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.98 $ 12.59 $ 12.60 $ 12.23 $ 12.38
=========================================================================================================================
TOTAL RETURN(1) 1.19% 6.43% 9.53% 4.95% 16.03%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $127,307 $128,788 $109,747 $ 73,862 $ 49,830
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.89% 0.88% 0.84% 0.95% 1.03%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 5.91% 5.59% 5.93% 6.08% 6.41%
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 273.95% 278.18% 211.66% 356.23% 422.56%
</TABLE>
(1) 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 Fund.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
- --------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
FOR A SHARE OUTSTANDING ADVISOR CLASS SHARES
THROUGHOUT THE PERIOD 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
NET INVESTMENT INCOME 0.05 0.05 0.05 0.05 0.05
DISTRIBUTIONS FROM NET INVESTMENT
INCOME (0.05) (0.05) (0.05) (0.05) (0.05)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==========================================================================================================================
TOTAL RETURN(1) 4.72% 5.00% 5.07% 4.78% 5.33%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $380,620 $153,148 $ 50,910 $ 61,672 $ 41,882
Ratio of expenses to average net assets:
AFTER ACCESSOR CAPITAL FEE WAIVERS 0.48% 0.53% 0.54% 0.59% 0.53%
BEFORE ACCESSOR CAPITAL FEE WAIVERS 0.48% 0.53% 0.54% 0.59% 0.78%
Ratio of net investment income to average net assets:
AFTER ACCESSOR CAPITAL FEE WAIVERS 4.66% 4.83% 4.96% 4.73% 5.14%
BEFORE ACCESSOR CAPITAL FEE WAIVERS 4.66% 4.83% 4.96% 4.73% 4.89%
</TABLE>
(1) 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 Fund.
<PAGE>
================================================================================
APPENDIX A
- --------------------------------------------------------------------------------
The following information has been supplied by the respective preparer of the
index or has been obtained from other publicly available information.
- --------------------------------------------------------------------------------
STANDARD & POOR'S 500 INDEX*
- ----------------------------
The purpose of 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: 376 Industrials, 41 Utilities, 11
Transportation and 71 Financial. Since some industries are characterized by
companies of relatively small stock capitalization, the index does not comprise
the 500 exchange listed companies. The S&P membership currently consists of 423
NYSE, 74 NASDAQ and 2 AMEX traded companies.
Component stocks are chosen solely with the aim of achieving a distribution by
broad industry groupings for market size, liquidity and that are representative
of the U.S. economy. 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 Standard & Poor's 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.
- --------------------------------------------------------------------------------
*"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 FUND AND VALUE FUND ARE
NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S.
- --------------------------------------------------------------------------------
S&P500/BARRA GROWTH INDEX
S&P500/BARRA VALUE INDEX
- ------------------------
BARRA, in collaboration with Standard and Poor's, has constructed the
S&P500/BARRA Growth Index (the "Growth Index") and S&P500/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
Technology and Health Care than the S&P 500.
As of December 31, 1999 there were 393 companies in the Value Index and 106
companies in the Growth Index.
<PAGE>
================================================================================
APPENDIX A
- --------------------------------------------------------------------------------
WILSHIRE 4500 INDEX*
- --------------------
While the S&P 500 includes the preponderance of large market capitalization
stocks, it excludes most of the medium- and small-size companies that comprise
the remaining 24% 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 NYSE and American Stock Exchange as well
as on the Nasdaq Stock 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
7,000 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.
- --------------------------------------------------------------------------------
*"WILSHIRE 4500" AND "WILSHIRE 5000" ARE REGISTERED TRADEMARKS OF WILSHIRE
ASSOCIATES. THE SMALL TO MID CAP FUND IS NOT SPONSORED, ENDORSED, SOLD OR
PROMOTED BY WILSHIRE ASSOCIATES.
- --------------------------------------------------------------------------------
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE + EMF INDEX*
- ------------------------------------------------------
The MSCI EAFE + EMF Index is a market-capitalization-weighted index composed of
companies representative of the market structure of 45 Developed and Emerging
Market countries. The index is calculated without dividends or with gross
dividends reinvested, in both U.S. dollars and local currencies.
The MSCI EAFE Index is a market-capitalization-weighted index composed of
companies representative of the market structure of 20 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 25
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 December 31, 1999, the MSCI EAFE + EMF Index consisted of 1,793 companies
traded on stock markets in 45 countries. The weighting of the MSCI EAFE + EMF
Index by country was as follows:
Developed Markets: Australia 2.22%, Austria 0.20%, Belgium 0.81%, Denmark 0.71%,
Finland 2.69%, France 9.26%, Germany 9.42%, Hong Kong 2.11%, Ireland 0.38%,
Italy 3.82%, Japan 24.76%, Netherlands 4.73%, New Zealand 0.14%, Norway 0.34%,
Portugal 0.41%, Singapore 0.96%, Spain 2.43%, Sweden 2.43%, Switzerland 5.13%,
United Kingdom 17.30%.
<PAGE>
================================================================================
APPENDIX A
- --------------------------------------------------------------------------------
Emerging Markets: Argentina 0.21%, Brazil Free 0.98%, Chile 0.35%, China Free
0.04%, Colombia 0.03%, Czech Republic 0.06%, Greece 0.64%, Hungary 0.12%, India
0.74%, Indonesia Free 0.17%, Israel 0.41%, Jordan 0.01%, Korea 1.37%, Mexico
Free 1.15%, Pakistan 0.03%, Peru 0.07%, Philippines Free 0.12%, Poland 0.12%,
Russia 0.24%, South Africa 1.06%, Sri Lanka 0.00%, Taiwan Free 1.08%, Thailand
Free 0.30%, Turkey 0.40%, Venezuela 0.06%.
Unlike other broad-based indices, the number of stocks included in MSCI EAFE +
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 + 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 + EMF Index was equal to 100.0 on January 1, 1988. As of December 31,
1999 the current value of the MSCI EAFE + EMF Index was 231.2.
- --------------------------------------------------------------------------------
*"EAFE" IS A REGISTERED TRADEMARK OF MORGAN STANLEY CAPITAL INTERNATIONAL. THE
INTERNATIONAL FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MORGAN
STANLEY CAPITAL INTERNATIONAL.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS *
GOVERNMENT/CORPORATE INDEX
GOVERNMENT/CORPORATE 1-5 YEAR INDEX
U.S. CORPORATE HIGH YIELD INDEX
MORTGAGE-BACKED SECURITIES INDEX
- --------------------------------
The Lehman Brothers Bond Indices include fixed-rate debt issues rated investment
grade (Baa3) or higher by Moody's Investor Service ("Moody's"). For issues not
rated by Moody's, the equivalent Standard & Poor's ("S&P") rating is used, and
for those not rated by S&P, the equivalent Fitch Investors Service, Inc. rating
is used. These indices also include fixed-rate debt securities issued by the
U.S. Government, its agencies or instrumentalities, which are generally not
rated but have an implied rating greater than AAA. 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 (public
obligations of the United States Treasury, that have remaining maturities of
more than one year, 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 or foreign debt guaranteed by the
U.S. Government).
The Corporate Bond Index includes 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 Government/Corporate 1-5 Year 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 U.S. Corporate High Yield Index covers the universe of fixed-rate,
noninvestment grade debt issues rated Ba1 or lower by Moody's. If no Moody's
rating is available, bonds must be rated BB+ or lower by S&P, and if no S&P
rating is available, bonds must be rated below investment grade by Fitch
Investor's Service. A small number of unrated bonds is included in the index; to
be eligible they must have previously held a high yield rating or have been
associated with a high yield issuer, and must trade accordingly. All bonds
included in the High Yield Index must be dollar-denominated and nonconvertible
and have at least one year remaining to maturity and an outstanding par value of
at least $100 million. Yankee and global bonds (SEC registered) or issuers in
non-emerging countries are included as well as issue zeroes and step-up coupon
structures.
The Mortgage-Backed Securities Index covers 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).
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THE INTERMEDIATE FIXED-INCOME FUND, THE SHORT-INTERMEDIATE FIXED-INCOME FUND,
THE HIGH YIELD BOND FUND AND THE MORTGAGE SECURITIES FUND ARE NOT SPONSORED,
ENDORSED, SOLD OR PROMOTED BY LEHMAN BROTHERS.
- --------------------------------------------------------------------------------
<PAGE>
[Back Cover]
SHAREHOLDER REPORTS. Accessor Funds publishes Annual and Semi-Annual Reports,
which contain information about each Fund's recent performance, including:
[BULLET] Management's discussion about recent market conditions, economic
trends and Fund strategies that affected their performance over
the recent period
[BULLET] Fund performance data and financial statements
[BULLET] Fund holdings
STATEMENT OF ADDITIONAL INFORMATION ("SAI"). The SAI contains more detailed
information about Accessor Funds and each Fund. The SAI is incorporated by
reference into this Prospectus, making it legally part of this Prospectus.
Free copies of Accessor Funds' Annual Report, Semi-Annual Report, SAI and other
information are available through your financial intermediary or from:
ACCESSOR CAPITAL MANAGEMENT LP
1420 Fifth Avenue, Suite 3600
Seattle, Washington 98101
(800) 759-3504
(206) 224-7420
www.accessor.com
You may obtain copies of documents from the SEC, upon payment of duplicating
fees, or view documents at the SEC's Public Reference Room in Washington, D.C.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-6009
202-942-8090
e-mail: [email protected]
www.sec.gov
Accessor(R) is a registered trademark of Accessor Capital Management LP.
SEC file number: 811-06337.
<PAGE>
[GRAPHIC] INVESTOR CLASS SHARES
ACCESSOR(R)FUNDS, INC. Prospectus April 29, 2000
Equity Funds
Growth Fund
Value Fund
Small to Mid Cap Fund
International Equity Fund
Fixed-Income Funds
Intermediate Fixed-Income Fund
Short-Intermediate Fixed-Income Fund
High Yield Bond Fund
Mortgage Securities Fund
U.S. Government Money Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
[LOGO] ACCESSOR
<PAGE>
THE ACCESSOR FUNDS
[Graphic] A family of nine mutual funds (each a "Fund"), each with two classes
of shares. This prospectus describes the Investor Class Shares of the Funds.
[Graphic] A variety of equity and fixed-income mutual funds.
[Graphic] When used together, designed to help investors realize the benefits of
asset allocation and diversification.
[Graphic] Managed and administered by Accessor Capital Management LP ("Accessor
Capital").
[Graphic] Sub-advised by Money Managers ("Money Managers") who are selected and
supervised by Accessor Capital (other than the U.S. Government Money Fund which
is advised directly by Accessor Capital).
================================================================================
DIVERSIFICATION is the spreading of risk among a group of investment assets.
Within a portfolio of investments, it means reducing the risk of any individual
security by holding securities from a variety of companies. In a broader
context, diversification means investing among a variety of security types to
reduce the importance of any one type or class of security.
ASSET ALLOCATION is a logical extension of the principle of diversification. It
is a method of mixing different types of investments (for example, stocks and
bonds) in an effort to enhance returns and reduce risks.
[Graphic]
Diversification and asset allocation do not, however, guarantee investment
results.
<PAGE>
TABLE OF CONTENTS
THE FUNDS
Fund Summaries........................................................1
Performance..........................................................10
Equity Funds' Expenses...............................................14
Fixed-Income Funds' Expenses.........................................15
Equity Funds' Objectives and Strategies..............................16
Equity Funds' Securities and Risks...................................18
Fixed-Income Funds' Objectives and Strategies........................20
Fixed-Income Funds' Securities and Risks.............................24
Management, Organization and Capital Structure.......................27
SHAREHOLDER INFORMATION
Purchasing Fund Shares...............................................35
Exchanging Fund Shares...............................................37
Redeeming Fund Shares................................................38
Dividends and Distributions..........................................39
Valuation of Securities..............................................39
Taxation.............................................................40
Financial Highlights.................................................41
APPENDIX A
Description of Fund Indices..........................................49
<PAGE>
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[GRAPHIC] GROWTH FUND
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE The Growth Fund seeks capital growth through investing
primarily in equity securities with greater than average growth characteristics
selected from the Standard & Poor's 500 Composite Stock Price Index ("S&P 500").
PRINCIPLE STRATEGIES The Fund invests primarily in stocks of companies chosen
from the S&P 500 that Chicago Equity Partners Corp. ("Chicago Equity Partners"),
the Fund's Money Manager, believes will outperform peer companies, while
maintaining an overall risk level similar to that of the benchmark. The Money
Manager attempts to exceed the performance of the S&P 500/BARRA Growth Index
over a cycle of five years.
Chicago Equity Partners uses a disciplined structured investment approach and
quantitative analytical techniques designed to identify stocks with the highest
probability of outperforming their peers coupled with a portfolio construction
process designed to keep the overall portfolio risk characteristics similar to
that of the benchmark.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Stock Market Volatility. Stock markets are volatile
and can decline significantly in response to adverse issuer, political,
regulatory, market or economic developments.
Company Risk. The value of an individual security or particular type of security
can be more volatile than the market as a whole and can perform differently than
the market as a whole. Growth stocks are often more sensitive to economic and
market swings than other types of stocks because market prices tend to reflect
future expectations.
Sector Risk. Different parts of the market can react differently to these
developments. For example, large cap stocks can react differently than small cap
stocks, and "growth" stocks can react differently than "value" stocks. Issuer,
political or economic developments can affect a single issuer, issuers within an
industry or economic sector or geographic region, or the market as a whole.
================================================================================
SPECIAL NOTE
Accessor Funds' domestic equity funds are designed so that investments in the
S&P 500 Index are covered equally by investments in the Accessor Growth and
Accessor Value Funds. The Accessor Small to Mid Cap Fund is primarily designed
to invest in domestic stocks outside the S&P 500 Index.
================================================================================
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] VALUE FUND
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE The Value Fund seeks generation of current income and
capital growth by investing primarily in income- producing equity securities
selected from the S&P 500.
PRINCIPLE STRATEGIES The Fund's Money Manager, Martingale Asset Management, L.P.
("Martingale"), analyzes fundamental information about companies such as their
assets, earnings and growth to identify undervalued stocks. The Money Manager
attempts to exceed the total return performance of the S&P 500/BARRA Value Index
over a cycle of five years.
Martingale focuses primarily on stocks issued by:
[graphic] Companies with low price to earnings and/or price to book ratios
[graphic] Companies with improving growth of earnings and/or growth of
dividends
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Stock Market Volatility. Stock markets are volatile
and can decline significantly in response to adverse issuer, political,
regulatory, market or economic developments.
Company Risk. The value of an individual security or particular type of security
can be more volatile than the market as a whole and can perform differently than
the market as a whole. Value stocks tend to be issued by larger, more
established companies, and may underperform in periods of general market
strength. Value stocks contained in the S&P 500 have generated less current
income in recent years than they have in earlier periods.
Sector Risk. Different parts of the market can react differently to these
developments. For example, large cap stocks can react differently than small cap
stocks, and "growth" stocks can react differently than "value" stocks. Issuer,
political or economic developments can affect a single issuer, issuers within an
industry or economic sector or geographic region, or the market as a whole.
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] SMALL TO MID CAP FUND
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE The Small to Mid Cap Fund seeks capital growth through
investing primarily in equity securities of small to medium capitalization
issuers.
PRINCIPLE STRATEGIES The Fund invests at least 65% of its total assets in the
stocks of small and medium capitalization companies that are expected to
experience higher than average growth of earnings or stock price. The Fund will
maintain an average market capitalization similar to the average market
capitalization of the Wilshire 4500 Index, and will attempt to have a roughly
similar distribution of stocks by market capitalization as the Wilshire 4500
Index.
Symphony Asset Management LLC ("Symphony"), the Fund's Money Manager, uses a
quantitative approach to analyze earnings forecasts, price movements and other
factors to identify growth stocks with attractive fundamentals relative to
price. The Money Manager attempts to exceed the performance of the Wilshire 4500
Index over a cycle of five years.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Stock Market Volatility. Stock markets are volatile
and can decline significantly in response to adverse issuer, political,
regulatory, market or economic developments.
Company Risk. The value of an individual security or particular type of security
can be more volatile than the market as a whole and can perform differently than
the value of the market as a whole. Small and medium capitalization companies
often have greater volatility, lower trading volume and less liquidity than
larger capitalization companies.
Sector Risk. Different parts of the market can react differently to these
developments. For example, large cap stocks can react differently than small cap
stocks, and "growth" stocks can react differently than "value" stocks. Issuer,
political or economic developments can affect a single issuer, issuers within an
industry or economic sector or geographic region, or the market as a whole.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the market capitalization range of the Wilshire 4500 Index
was $36,180 to $86,143,000,000 and the median (average) cap of the index was
$123,000,000, which will vary from month to month.
================================================================================
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] INTERNATIONAL EQUITY FUND
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE The International Equity Fund 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.
PRINCIPLE STRATEGIES The Fund will invest at least 65 % of its total assets in
the stocks of companies domiciled in Europe and the Pacific Rim. The Fund
normally intends to maintain investments in at least three different countries
outside the United States.
The investment approach of Nicholas-Applegate Capital Management
("Nicholas-Applegate"), the Fund's Money Manager, reflects a focus on individual
security selection. Nicholas-Applegate uses fundamental qualitative and
quantitative analysis to seek companies that are industry leaders and in the
process of positive change to construct a portfolio that generally parallels the
countries comprising the Morgan Stanley Capital International ("MSCI") EAFE(R) +
EMF Index. The firm's bottom-up approach drives the portfolio toward issues
demonstrating positive fundamental change, evidence of sustainability and
timeliness. The Money Manager attempts to exceed the total return of the MSCI
EAFE + EMF Index. See Appendix A for a list of countries included in the MSCI
EAFE+EMF Index.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Stock Market Volatility. Stock markets are volatile
and can decline significantly in response to adverse issuer, political,
regulatory, market or economic developments.
Company Risk. The value of an individual security or particular type of security
can be more volatile than the market as a whole and can perform differently than
the value of the market as a whole.
Sector Risk. Different parts of the market can react differently to these
developments. For example, large cap stocks can react differently than small cap
stocks, and "growth" stocks can react differently than "value" stocks. Issuer,
political or economic developments can affect a single issuer, issuers within an
industry or economic sector or geographic region, or the market as a whole.
Foreign Exposure. Foreign markets, particularly emerging markets, can be more
volatile than the U.S. market due to increased risks of adverse issuer,
political, regulatory, market or economic developments and can perform
differently than the U.S. market.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the market capitalization range of the MSCI EAFE+EMF Index
was $5,000,000 to $252,102,000,000 and the median (average) cap of the index was
$1,081,000,000, which will vary from time to time.
================================================================================
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] INTERMEDIATE FIXED-INCOME FUND
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE The Intermediate Fixed-Income Fund 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 (the "LBGC Index").
PRINCIPLE STRATEGIES The Fund primarily invests in investment grade debt
securities or debt securities unrated but of similar quality, but may invest up
to 20% of the net assets of the Fund in securities rated BBB by Standard &
Poor's Corporation ("S&P") or Baa by Moody's Investors Service, Inc.
("Moody's"), and up to 6% of the net assets of the Fund in securities rated BB
by S&P or Ba by Moody's or debt securities unrated but of similar quality.
Cypress Asset Management ("Cypress"), the Fund's Money Manager, uses
quantitative analyses and risk control methods to ensure that the Fund's overall
risk and duration characteristics are consistent with the LBGC Index. Cypress
seeks to enhance the Fund's returns by systematically overweighting its
investments in the corporate sector as compared to the index.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Bond Market Volatility. Individual securities are
expected to fluctuate in response to issuer, general economic and market
changes. An individual security or category of securities may, however,
fluctuate more or less than the market as a whole.
Interest Rate Risk. Increases in interest rates can cause the price of a debt
security to decrease. Debt securities with longer maturities tend to be more
sensitive to interest rates than bonds with shorter maturities.
Issuer Risk. Changes in the financial condition of an issuer, changes in
specific economic or political conditions that affect a particular issuer, and
changes in general economic or political conditions can adversely affect the
credit quality or value of an issuer's securities.
Credit Risk. Credit risk is the possibility that an issuer will fail to make
timely payments of interest or principal. Some issuers may not make payments on
debt securities held by a Fund, causing a loss. Or, an issuer may suffer adverse
changes in its financial condition that could lower the credit quality of a
security, leading to greater volatility in the price of the security and in
shares of a Fund. A change in the quality rating of a bond or other security can
also affect the security's liquidity and make it more difficult for a Fund to
sell. Lower quality debt securities and comparable unrated debt securities in
which a Fund may invest are more susceptible to these problems than higher
quality obligations.
Lower Rated Debt Securities. Debt securities rated lower than BBB by S&P or
lower than Baa by Moody's are commonly referred to as "junk bonds." Lower rated
debt securities and comparable unrated debt securities have speculative
characteristics and are subject to greater risks than higher rated securities.
================================================================================
DURATION
Duration, one of the fundamental tools used by money managers in security
selection, is a measure of the price sensitivity of a debt security or a
portfolio of debt securities to relative changes in interest rates. For
instance, a duration of "three" means that a portfolio's or security's price
would be expected to decrease by approximately 3% with a 1% increase in interest
rates.
================================================================================
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] SHORT-INTERMEDIATE FIXED-INCOME FUND
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE The Short-Intermediate Fixed-Income Fund 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 Government/Corporate 1-5 Year Index (the
"LBGC1-5 Index").
PRINCIPLE STRATEGIES The Fund primarily invests in investment grade debt
securities or debt securities unrated but of similar quality, but may invest up
to 20% of the net assets of the Fund in securities rated BBB by S&P or Baa by
Moody's and up to 6% of the net assets of the Fund in securities rated BB by S&P
or Ba by Moody's or debt securities unrated but of similar quality. Cypress, the
Fund's Money Manager, uses quantitative analyses and risk control methods to
ensure that the Fund's overall risk and duration characteristics are consistent
with the LBGC1-5 Index. Cypress seeks to enhance the Fund's returns by
systematically overweighting its investments in the corporate sector as compared
to the index.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Bond Market Volatility. Individual securities are
expected to fluctuate in response to issuer, general economic and market
changes. An individual security or category of securities may, however,
fluctuate more or less than the market as a whole.
Interest Rate Risk. Increases in interest rates can cause the price of a debt
security to decrease. Debt securities with longer maturities tend to be more
sensitive to interest rates than bonds with shorter maturities.
Issuer Risk. Changes in the financial condition of an issuer, changes in
specific economic or political conditions that affect a particular issuer, and
changes in general economic or political conditions can adversely affect the
credit quality or value of an issuer's securities.
Credit Risk. Credit risk is the possibility that an issuer will fail to make
timely payments of interest or principal. Some issuers may not make payments on
debt securities held by a Fund, causing a loss. Or, an issuer may suffer adverse
changes in its financial condition that could lower the credit quality of a
security, leading to greater volatility in the price of the security and in
shares of a Fund. A change in the quality rating of a bond or other security can
also affect the security's liquidity and make it more difficult for a Fund to
sell. Lower quality debt securities and comparable unrated debt securities in
which a Fund may invest are more susceptible to these problems than higher
quality obligations.
Lower Rated Debt Securities. Debt securities rated lower than BBB by S&P or
lower than Baa by Moody's are commonly referred to as "junk bonds." Lower rated
debt securities and comparable unrated debt securities have speculative
characteristics and are subject to greater risks than higher rated securities.
================================================================================
DURATION
Duration, one of the fundamental tools used by money managers in security
selection, is a measure of the price sensitivity of a debt security or a
portfolio of debt securities to relative changes in interest rates. For
instance, a duration of "three" means that a portfolio's or security's price
would be expected to decrease by approximately 3% with a 1% increase in interest
rates.
================================================================================
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] HIGH YIELD BOND FUND
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE The High Yield Bond Fund seeks high current income by
investing primarily in lower-rated, high-yield corporate debt securities.
PRINCIPLE STRATEGIES The Fund invests primarily in lower-rated, high-yield
corporate debt securities commonly referred to as "junk bonds." Under normal
conditions, at least 65% of the Fund's total assets will be invested in debt
securities rated lower than Baa by Moody's or lower than BBB by S&P, or
securities judged to be of equivalent quality by the Money Manager. The Fund
will normally maintain 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 U.S. Corporate High Yield Index.
Financial Management Advisors, Inc. ("FMA"), the Fund's Money Manager, selects
debt securities on a company-by-company basis, emphasizing fundamental research
and a long-term investment horizon. Their analysis focuses on the nature of a
company's business, its strategy, and the quality of its management. Based on
this analysis, the Money Manager looks primarily for companies whose prospects
are stable or improving, and whose bonds offer an attractive yield. Companies
with improving prospects are normally more attractive in the opinion of the
Money Manager because they offer better assurance of debt repayment.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Bond Market Volatility. Individual securities are
expected to fluctuate in response to issuer, general economic and market
changes. An individual security or category of securities may, however,
fluctuate more or less than the market as a whole.
Interest Rate Risk. Increases in interest rates can cause the price of a debt
security to decrease. Debt securities with longer maturities tend to be more
sensitive to interest rates than bonds with shorter maturities.
Issuer Risk. Changes in the financial condition of an issuer, changes in
specific economic or political conditions that affect a particular issuer, and
changes in general economic or political conditions can adversely affect the
credit quality or value of an issuer's securities. Lower quality debt securities
can be more sensitive to these factors. Lower quality debt securities can be
difficult to resell and issuers may fail to pay principal and interest when due
causing the Fund to incur losses and reducing the Fund's return.
Credit Risk. Credit risk is the possibility that an issuer will fail to make
timely payments of interest or principal. Some issuers may not make payments on
debt securities held by a Fund, causing a loss. Or, an issuer may suffer adverse
changes in its financial condition that could lower the credit quality of a
security, leading to greater volatility in the price of the security and in
shares of a Fund. A change in the quality rating of a bond or other security can
also affect the security's liquidity and make it more difficult for a Fund to
sell. Lower quality debt securities and comparable unrated debt securities in
which a Fund may invest are more susceptible to these problems than higher
quality obligations. Because of its investments in junk bonds, the High Yield
Bond Fund is subject to substantial credit risk. Credit quality in the
high-yield bond market can change suddenly and unexpectedly, and even
recently-issued credit ratings may not fully reflect the actual risks of a
particular high-yield bond.
Lower Rated Debt Securities. Debt securities rated lower than BBB by S&P or
lower than Baa by Moody's are commonly referred to as "junk bonds." Lower rated
debt securities and comparable unrated debt securities have speculative
characteristics and are subject to greater risks than higher rated securities.
================================================================================
DURATION
Duration, one of the fundamental tools used by money managers in security
selection, is a measure of the price sensitivity of a debt security or a
portfolio of debt securities to relative changes in interest rates. For
instance, a duration of "three" means that a portfolio's or security's price
would be expected to decrease by approximately 3% with a 1% increase in interest
rates.
================================================================================
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[GRAPHIC] MORTGAGE SECURITIES FUND
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE The Mortgage Securities Fund 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").
PRINCIPLE STRATEGIES BlackRock Financial Management, Inc. ("BlackRock"), the
Fund's Money Manager, uses quantitative risk control methods to ensure that the
Fund's overall risk and duration characteristics are consistent with the LBM
Index. BlackRock's investment philosophy and process centers around four key
principles:
[graphic] controlled duration (controlling sensitivity to interest rates);
[graphic] relative value sector rotation and security selection (analyzing
a sector's and a security's impact on the overall portfolio);
[graphic] rigorous quantitative analysis to security valuation
(mathematically analyzing a security's value); and
[graphic] quality credit analysis (analyzing a security's credit quality).
BlackRock's Investment Strategy Committee determines the firm's broad investment
strategy based on macroeconomics (for example, interest rate trends) and market
trends, as well as input from Risk Management and Credit Committee
professionals. Fund managers then implement this strategy by selecting the
sectors and securities which offer the greatest relative value within investment
guidelines.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Bond Market Volatility. Individual securities are
expected to fluctuate in response to issuer, general economic and market
changes. An individual security or category of securities may, however,
fluctuate more or less than the market as a whole.
Interest Rate Risk. Increases in interest rates can cause the price of a debt
security to decrease. The market value of mortgage related securities can and
will fluctuate as interest rates and market conditions change. Fixed-rate
mortgages can decline in value during periods of rising interest rates.
Prepayment Risk. The ability of an issuer of a debt security to repay principal
prior to a security's maturity can cause greater price volatility if interest
rates change. For example, if interest rates are dropping and an issuer pays off
an obligation or a bond before maturity, the Fund may have to reinvest at a
lower interest rate.
Issuer Risks. Changes in the financial conditions of an
issuer, changes in specific economic or political conditions that affect a
particular issuer, and changes in general economic or political conditions can
adversely affect the credit quality or value of an issuer's securities.
================================================================================
DURATION
Duration, one of the fundamental tools used by money managers in security
selection, is a measure of the price sensitivity of a debt security or a
portfolio of debt securities to relative changes in interest rates. For
instance, a duration of "three" means that a portfolio's or security's price
would be expected to decrease by approximately 3% with a 1% increase in interest
rates.
================================================================================
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] U.S. GOVERNMENT MONEY FUND
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE The U.S. Government Money Fund 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.
PRINCIPLE STRATEGIES Accessor Capital directly invests the assets of the Fund.
Accessor Capital uses quantitative analysis to maximize the Fund's yield. The
Fund follows industry standard requirements concerning the quality, maturity and
diversification of its investments. The Fund seeks to maintain an average
maturity of 90 days or less, while maintaining liquidity and maximizing current
yield.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS Interest Rate Risk. The Fund's yield will vary and is
expected to react to changes in short-term interest rates.
Inflation Risk. Over time, the real value of the Fund's yield may be eroded by
inflation.
Stable Net Asset Value. Although the U.S. Government Money Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
PERFORMANCE
- --------------------------------------------------------------------------------
The following tables illustrate changes (and therefore, the risk elements) in
the performance of Advisor Class Shares of the Funds from year to year and
compare the performance of Advisor Class Shares to the performance of a market
index over time. The performance does not reflect certain expenses of Investor
Class Shares, which, if reflected, would result in lower performance for the
periods shown. As with all mutual funds, how the Funds have performed in the
past is not an indication of how they will perform in the future.
Note: Performance figures for the High Yield Bond Fund will not be available
until May 1, 2001, when the Fund has one year of performance.
- --------------------------------------------------------------------------------
GROWTH FUND
- -----------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1993 14.21% Fund 25.87% 31.68% 25.03%
1994 3.99 S&P 500/BARRA
1995 34.32 Growth Index(1) 28.25% 33.64% 23.87%**
1996 19.83 *8/24/92 inception date
1997 33.24 **Index measured from 9/1/92
1998 46.65
1999 25.87
As of 12/31 each year
Best Quarter: Q 4 `98 27.65%
Worst Quarter: Q 3 `98 -7.07%
- --------------------------------------------------------------------------------
(1) THE S&P 500 IS AN UNMANAGED INDEX OF 500 COMMON STOCKS CHOSEN TO REFLECT THE
INDUSTRIES IN THE U.S. ECONOMY. THE S&P 500/BARRA GROWTH INDEX IS AN UNMANAGED
INDEX OF GROWTH STOCKS IN THE S&P 500. LARGE CAPITALIZATION GROWTH STOCKS ARE
THE STOCKS WITHIN THE S&P 500 THAT GENERALLY HAVE HIGH EXPECTED EARNINGS GROWTH
AND HIGHER THAN AVERAGE PRICE-TO-BOOK RATIOS.
- --------------------------------------------------------------------------------
VALUE FUND
- ----------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1993 14.69 Fund 6.87% 21.51% 16.91%
1994 -1.93 S&P 500/BARRA
1995 33.25 Value Index(1) 12.72% 22.93% 18.49%**
1996 23.94 *8/24/92 inception date
1997 32.94 **Index measured from 9/1/92
1998 12.89
1999 6.87
As of 12/31 each year
Best Quarter: Q 4 `98 18.96%
Worst Quarter: Q 3 `98 -15.24%
- --------------------------------------------------------------------------------
(1) THE S&P 500/BARRA VALUE INDEX IS AN UNMANAGED INDEX OF VALUE STOCKS IN THE
S&P 500. LARGE CAPITALIZATION VALUE STOCKS ARE THE STOCKS WITHIN THE S&P 500
THAT GENERALLY ARE PRICED BELOW THE MARKET AVERAGE BASED ON EARNINGS AND LOWER
THAN AVERAGE PRICE-TO-BOOK RATIOS.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
PERFORMANCE
- --------------------------------------------------------------------------------
SMALL TO MID CAP FUND
- ---------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1993 14.39 Fund 27.26% 27.06% 21.21%
1994 -4.07 Wilshire-4500
1995 31.98 Index(1) 35.49% 23.68% 19.37%**
1996 24.85 Small to Mid Cap
1997 36.14 Composite Index(2) 35.49% 23.56% 20.13%**
1998 15.98 *8/24/92 inception date
1999 15.98 **Index measured from 9/1/92
1999 27.26
As of 12/31 each year
Best Quarter: Q4 `98 24.23%
Worst Quarter: Q3 `98 -18.56%
- --------------------------------------------------------------------------------
(1) THE WILSHIRE 4500 INDEX IS AN UNMANAGED INDEX OF STOCKS OF MEDIUM AND SMALL
CAPITALIZATION COMPANIES NOT IN THE S&P 500.
(2) THE SMALL TO MID CAP COMPOSITE INDEX IS A HYPOTHETICAL INDEX CONSTRUCTED BY
ACCESSOR CAPITAL, WHICH COMBINES THE BARRA INSTITUTIONAL SMALL INDEX AND THE
WILSHIRE 4500 INDEX. THE COMPOSITE IS INTENDED TO PROVIDE A BENCHMARK FOR
COMPARISON THAT REFLECTS THE DIFFERENT INVESTMENT POLICIES THAT THE FUND HAS
FOLLOWED IN THE PAST. IN AUGUST 1995, SHAREHOLDERS APPROVED CHANGES TO THE
FUND'S INVESTMENT POLICIES TO CHANGE THE FUND FROM A SMALL CAP FUND TO A SMALL
TO MEDIUM CAP FUND. ACCORDINGLY, PRIOR TO OCTOBER 1995, THE BARRA INDEX IS USED.
STARTING OCTOBER 1995, THE WILSHIRE INDEX IS USED.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1995 7.63 Fund 48.93% 18.62% 17.05%
1996 13.78 MSCI EAFE + EMF
1997 10.96 Index(1) 30.32% 12.15% 10.62%**
1998 16.07 International
1999 48.93 Composite Index(2) 30.32% 12.47% 11.11%**
As of 12/31 each year *10/3/94 inception date
**Index measured from 11/01/94
Best Quarter: Q4 `99 30.20%
Worst Quarter: Q3 `98 -13.36%
- --------------------------------------------------------------------------------
(1) THE MSCI EAFE + EMF INDEX IS AN UNMANAGED INDEX OF 45 DEVELOPED (EXCLUDING
THE UNITED STATES AND CANADA) AND EMERGING MARKET COUNTRIES, INCLUDING JAPAN,
THE UNITED KINGDOM, GERMANY AND FRANCE.
(2) THE INTERNATIONAL COMPOSITE INDEX IS A HYPOTHETICAL INDEX CONSTRUCTED BY
ACCESSOR CAPITAL, WHICH COMBINES THE MSCI EAFE INDEX AND THE MSCI EAFE+EMF
INDEX. THE COMPOSITE IS INTENDED TO PROVIDE A BENCHMARK FOR COMPARISON THAT
REFLECTS THE DIFFERENT INVESTMENT POLICIES THAT THE FUND HAS FOLLOWED IN THE
PAST. PRIOR TO MAY 1996, THE FUND DID NOT INVEST IN EMERGING MARKET SECURITIES.
BEGINNING IN MAY 1996, THE FUND WAS PERMITTED TO DO SO. ACCORDINGLY, PRIOR TO
MAY 1996, THE MSCI EAFE INDEX IS USED. STARTING IN MAY 1996, THE MSCI EAFE+EMF
INDEX IS USED.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
PERFORMANCE
- --------------------------------------------------------------------------------
INTERMEDIATE FIXED-INCOME FUND
- ------------------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1993 9.53 Fund -3.58% 6.60% 5.42%
1994 -5.24 Lehman Govt/
1995 18.26 Corp Index(1) -2.15% 7.60% 6.45%**
1996 2.56 *6/15/92 inception date
1997 8.62 **Index measured from 7/1/92
1998 8.38
1999 -3.58
As of 12/31 each year
Best Quarter: Q 2 `95 6.13%
Worst Quarter: Q 1 `94 -3.53%
- --------------------------------------------------------------------------------
(1)THE LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX IS AN UNMANAGED INDEX OF
FIXED-RATE GOVERNMENT AND CORPORATE BONDS RATED INVESTMENT GRADE OR HIGHER.
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE FIXED-INCOME FUND
- ------------------------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ -------
1993 5.63 Fund 1.22% 5.84% 4.90%
1994 -1.42 Lehman Govt/
1995 11.42 Corp1-5 Yr Index(1) 2.10% 6.83% 5.97%**
1996 3.63 *5/18/92 inception date
1997 6.33 **Index measured from 6/1/92
1998 6.87
1999 1.22
As of 12/31 each year
Best Quarter: Q 1 `95 3.58%
Worst Quarter: Q 1 `94 -1.34%
- --------------------------------------------------------------------------------
(1) THE LEHMAN BROTHERS GOVERNMENT/CORPORATE 1-5 YEAR INDEX IS AN UNMANAGED
INDEX OF FIXED-RATE GOVERNMENT AND CORPORATE BONDS RATED INVESTMENT GRADE OR
HIGHER, ALL WITH MATURITIES OF ONE TO FIVE YEARS.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
PERFORMANCE
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND
- ------------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ --------
1993 7.26 Fund 1.19% 7.51% 6.14%
1994 -1.65 Lehman
1995 16.03 Mortgage-Backed
1996 4.95 Securities Index(1) 1.85% 7.98% 6.56%**
1997 9.53 *5/18/92 inception date
1998 6.43 **Index measured from 6/1/92
1999 1.19
As of 12/31 each year
Best Quarter: Q 1'95 5.11%
Worst Quarter: Q 1 `94 -1.21%
- --------------------------------------------------------------------------------
(1) THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX IS AN UNMANAGED INDEX
OF 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").
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
- --------------------------
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ --------
1993 2.81 Fund 4.72% 4.98% 4.37%
1994 3.70 Salomon Brothers
1995 5.33 U.S. 3 Mo.
1996 4.78 T-bill Index(1) 4.74% 5.21% 4.65%**
1997 5.07 * 4/9/92 inception date
1998 5.00 **Index measured from 5/1/92
1999 4.72
As of 12/31 each year
Best Quarter: Q 2 `95 1.37%
Worst Quarter: Q 2 `93 0.66%
- --------------------------------------------------------------------------------
(1) THE SALOMON BROTHERS U.S. 3 MONTH T-BILL INDEX IS DESIGNED TO MEASURE THE
RETURN OF THE 3 MONTH TREASURY BILLS.
THE U.S. GOVERNMENT MONEY FUND'S 7-DAY EFFECTIVE YIELD ON 12/31/99 WAS 5.10%.
FOR THE FUND'S CURRENT YIELD, CALL TOLL-FREE (800) 759-3504.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
EQUITY FUNDS' EXPENSES
- --------------------------------------------------------------------------------
The following tables describe the fees and expenses that you may pay if you buy
and hold Investor Class Shares of the Equity Funds. Except where noted, the
tables reflect historical fees and expenses of the Funds.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
GROWTH(2) VALUE(2) SMALL TO INTERNATIONAL
MID CAP(2) EQUITY(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES(1)(2) (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge Imposed none none none none
on Purchases (as a percent of offering price)
Maximum Sales Charge Imposed none none none none
on Reinvested Dividends
Maximum Deferred Sales Charge none none none none
Redemption Fee(3) none none none none
- ----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees(4) 0.66%(5) 0.58% 1.02% 1.12%(6)
Distribution and Service (12b-1) Fee 0.25 0.25 0.25 0.25
Other Expenses 0.22 0.21 0.23 0.23
Administrative Services Fees(7) 0.25 0.25 0.25 0.25
Total Other Expenses 0.47 0.46 0.48 0.48
---- ---- ---- ----
Total Annual Fund Operating Expenses 1.38 1.29 1.75 1.85
==== ==== ==== ====
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) SHARES OF THE FUNDS ARE EXPECTED TO BE SOLD PRIMARILY THROUGH FINANCIAL
INTERMEDIARIES THAT MAY CHARGE SHAREHOLDERS A FEE. THESE FEES ARE NOT
INCLUDED IN THE TABLES.
(2) AN ANNUAL MAINTENANCE FEE OF $25.00 MAY BE CHARGED BY ACCESSOR CAPITAL, AS
THE TRANSFER AGENT TO EACH IRA WITH AN AGGREGATE BALANCE OF LESS THAN
$10,000 ON DECEMBER 31 OF EACH YEAR.
(3) THE TRANSFER AGENT MAY CHARGE A PROCESSING FEE OF $10.00 FOR EACH CHECK
REDEMPTION REQUEST.
(4) MANAGEMENT FEES CONSIST OF THE MANAGEMENT FEE PAID TO ACCESSOR CAPITAL AND
THE FEES PAID TO THE MONEY MANAGERS OF THE FUNDS.
(5) MANAGEMENT FEES ARE RESTATED TO REFLECT THE CHANGE IN THE MONEY MANAGER OF
THE GROWTH FUND.
(6) MANAGEMENT FEES ARE RESTATED TO REFLECT THE BASE FEE CAP BY THE MONEY
MANAGER OF THE INTERNATIONAL EQUITY FUND.
(7) PURSUANT TO AN ADMINISTRATIVE SERVICES PLAN, ACCESSOR FUNDS MAY PAY
FINANCIAL INTERMEDIARIES WHO HAVE ENTERED INTO ARRANGEMENTS WITH ACCESSOR
FUNDS 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 FUNDS.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE:
- ----------------
The Example shows what an investor in Investor Class Shares of a Fund could pay
over time. The Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Investor Class Shares of a Fund
for the time periods indicated and then redeem all of your shares by wire at the
end of those periods. The Example does not include the effect of the $10 fee for
check redemption requests. The Example also assumes that your investment has a
5% rate of return each year and that the Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
================================================================================
Fund One Year Three Years Five Years 10 Years
Growth $141 $438 $757 $1660
Value 131 407 705 1551
Small to Mid Cap 178 551 949 2062
International Equity 188 582 1001 2169
================================================================================
<PAGE>
================================================================================
FIXED-INCOME FUNDS' EXPENSES
- --------------------------------------------------------------------------------
The following tables describe the fees and expenses that you may pay if you buy
and hold Investor Class Shares of the Fixed-Income Funds. Except where noted,
the tables reflect historical fees and expenses of the Funds.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INT SHORT HIGH U.S.
FIXED(2) INT-FIXED(2) YIELD(2)(3) MORTGAGE(2) GOVT(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER FEES(1)(2) (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge Imposed none none none none none
on Purchases (as a percent of offering price)
Maximum Sales Charge Imposed none none none none none
on Reinvested Dividends
Maximum Deferred Sales Charge none none none none none
Redemption Fee(4) none none none none none
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES DEDUCTED FROM FUND ASSETS)
Management Fees (5) 0.38% 0.38% 0.51% 0.59% 0.25%
Distribution and Service (12b-1) Fee 0.25 0.25 0.25 0.25 0.25
Other Expenses 0.28 0.30 0.45 0.30 0.23
Administrative Services Fees(6) 0.25 0.25 0.25 0.25 0.25
Total Other Expenses 0.53 0.55 0.70 0.55 0.48
----- ----- ----- ---- -----
Total Annual Fund Operating Expenses 1.16 1.18 1.46 1.39 0.98
===== ===== ===== ===== =====
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------
(1) SHARES OF THE FUNDS ARE EXPECTED TO BE SOLD PRIMARILY THROUGH FINANCIAL
INTERMEDIARIES THAT MAY CHARGE SHAREHOLDERS A FEE. THESE FEES ARE NOT
INCLUDED IN THE TABLES.
(2) AN ANNUAL MAINTENANCE FEE OF $25.00 MAY BE CHARGED BY ACCESSOR CAPITAL, AS
THE TRANSFER AGENT TO EACH IRA WITH AN AGGREGATE BALANCE OF LESS THAN
$10,000 ON DECEMBER 31 OF EACH YEAR.
(3) BECAUSE HIGH YIELD BOND FUND COMMENCED OPERATIONS ON MAY 1, 2000, ANNUAL
FUND OPERATING EXPENSES ARE ESTIMATED.
(4) THE TRANSFER AGENT MAY CHARGE A PROCESSING FEE OF $10.00 FOR EACH CHECK
REDEMPTION REQUEST.
(5) MANAGEMENT FEES CONSIST OF THE MANAGEMENT FEE PAID TO ACCESSOR CAPITAL AND
THE FEES PAID TO THE MONEY MANAGERS OF THE FUNDS. ACCESSOR CAPITAL RECEIVES
ONLY THE MANAGEMENT FEE AND NOT A MONEY MANAGER FEE FOR THE U. S.
GOVERNMENT MONEY FUND THAT IT MANAGES DIRECTLY.
(6) PURSUANT TO AN ADMINISTRATIVE SERVICES PLAN, ACCESSOR FUNDS MAY PAY
FINANCIAL INTERMEDIARIES WHO HAVE ENTERED INTO ARRANGEMENTS WITH ACCESSOR
FUNDS 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 FUNDS.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE:
- ----------------
The Example shows what an investor in Investor Class Shares of a Fund could pay
over time. The Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Investor Class Shares of a Fund
for the time periods indicated and then redeem all of your shares by wire at the
end of those periods. This Example does not include the effect of the $10 fee
for check redemption requests. The Example also assumes that your investment has
a 5% rate of return each year and that the Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
================================================================================
Fund One Year Three Years Five Years 10 Years
Intermediate Fixed-Income $118 $368 $638 $1409
Short-Intermediate Fixed-Income 120 375 649 1432
High Yield Bond 149 462 N/A N/A
Mortgage Securities 142 440 761 1669
U.S. Government Money 100 312 542 1201
================================================================================
<PAGE>
================================================================================
EQUITY FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
GROWTH FUND
- -----------
INVESTMENT OBJECTIVE The Growth Fund seeks capital growth through investing
primarily in equity securities with greater than average growth characteristics
selected from the S&P 500.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its 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 exceed the total return performance of the S&P 500/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.
OTHER INVESTMENT STRATEGIES The Fund may be invested in common stocks of foreign
issuers with large market capitalizations whose securities have greater than
average growth characteristics. The Fund may engage in various portfolio
strategies (for example, options) to reduce certain risks of its investments and
may thereby enhance income, but not for speculation.
- --------------------------------------------------------------------------------
VALUE FUND
- ----------
INVESTMENT OBJECTIVE The Value Fund seeks generation of current income and
capital growth by investing primarily in income-producing equity securities
selected from the S&P 500.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its objective by
investing principally in common and preferred stocks, convertible securities,
and rights and warrants of companies 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 exceed the
total return performance of the S&P 500/BARRA Value Index over a market cycle of
five years. Value stocks contained in the S&P 500 have generated less current
income in recent years than they have in earlier periods.
OTHER INVESTMENT STRATEGIES The Fund may be invested in equity securities of
foreign issuers with large market capitalizations. The Fund may engage in
various portfolio strategies (for example, options) to reduce certain risks of
its investments and to enhance income, but not for speculation.
- --------------------------------------------------------------------------------
SMALL TO MID CAP FUND
- ---------------------
INVESTMENT OBJECTIVE The Small to Mid Cap Fund seeks capital growth through
investing primarily in equity securities of small to medium capitalization
issuers.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its objective by
investing at least 65% of the value of its total assets in stocks of small and
medium capitalization issuers. The Fund will attempt to maintain an average
market capitalization similar to the average market capitalization of the
Wilshire 4500 Index, and will attempt to have a roughly similar distribution of
stocks by market capitalization as the Wilshire 4500 Index. Generally, small
capitalization issuers are issuers that have a capitalization of $1 billion or
less at the time of investment and medium capitalization issuers have a
capitalization ranging from $1 billion to $10 billion at the time of investment.
The Money Manager will attempt to 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. The Fund invests principally in common and
preferred stocks, securities convertible into common stocks, and rights and
warrants of such issuers.
<PAGE>
================================================================================
EQUITY FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
OTHER INVESTMENT STRATEGIES The Fund may invest up to 20% of its net assets in
common stocks of foreign issuers with small to medium market capitalizations.
The Fund may engage in various portfolio strategies (for example, options) to
reduce certain risks of its investments and may thereby enhance income, but not
for speculation.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the market capitalization range of the Wilshire 4500 Index
was $36,180 to $86,143,000,000 and the median (average) cap of the index was
$123,000,000, which will vary from month to month.
================================================================================
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
INVESTMENT OBJECTIVE The International Equity Fund 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.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its objective by
investing at least 65% of its total assets principally in stocks 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, New Zealand and Singapore). The Fund intends to
maintain investments in at least three different countries outside the United
States. The Money Manager will attempt to exceed the net yield (after
withholding taxes) of the MSCI EAFE + EMF Index. The Fund's Money Manager
reflects a focus on individual security selection. Nicholas-Applegate uses
fundamental qualitative and quantitative analysis to seek companies that are
industry leaders and in the process of positive change to construct a portfolio
that generally parallels the countries comprising the Morgan Stanley Capital
International ("MSCI") EAFE + EMF Index. The firm's bottom-up approach drives
the portfolio toward issues demonstrating positive fundamental change, evidence
of sustainability and timeliness. The Money Manager attempts to exceed the total
return of the MSCI EAFE(R) + EMF Index.
OTHER INVESTMENT STRATEGIES The Fund 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") See Appendix A for a full list of the countries. The Fund
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 that derive, or are expected to derive, a significant portion
of their revenues from their foreign operations. The Fund may engage in various
portfolio strategies (for example, options) to reduce certain risks of its
investments and may thereby enhance income, but not for speculation.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the market capitalization range of the MSCI EAFE+EMF Index
was $5,000,000 to $252,102,000,000 to and the median (average) cap of the index
was $1,081,000,000, which will vary from time to time.
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
EQUITY FUNDS' SECURITIES AND RISKS
- --------------------------------------------------------------------------------
This section describes the security types for and risks of investing in the
Growth, Value, Small to Mid Cap, and International Equity Funds, Accessor Funds'
"Equity Funds."
Many factors affect each Fund's performance. A Fund's share price changes daily
based on changes in financial markets and interest rates and in response to
other economic, political or financial developments. A Fund's reaction to these
developments will be affected by the financial condition, industry and economic
sector, and geographic location of an issuer, and the Fund's level of investment
in the securities of that issuer. When you sell your shares of a Fund, they
could be worth more or less than what you paid for them.
In response to market, economic, political or other conditions, each Fund's
Money Manager may temporarily use a different investment strategy for defensive
purposes. If a Money Manager does so, different factors could affect a Fund's
performance and the Fund may not achieve its investment objective. Each Fund is
actively managed. Frequent trading of portfolio securities will result in
increased expenses for the Funds and may result in increased taxable
distributions to shareholders. Each Fund's investment objective stated in the
Equity Funds' Objectives and Strategies section is fundamental and may not be
changed without shareholder approval.
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY TYPES
- ------------------------
[Graphic] EQUITY SECURITIES represent an ownership interest, or the right to
acquire an ownership interest, in an issuer. Different types of equity
securities provide different voting and dividend rights and priority in the
event of the bankruptcy of the issuer. Equity securities include common stocks,
preferred stocks, convertible securities and warrants.
- --------------------------------------------------------------------------------
OTHER SECURITY TYPES
- --------------------
[Graphic] DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must repay the
amount borrowed at the maturity of the security. Some debt securities, such as
zero coupon bonds, do not pay current interest but are sold at a discount from
their face values. Debt securities include corporate debt securities, including
convertible bonds, government securities, and mortgage and other asset-backed
securities.
[Graphic] OPTIONS, FUTURES AND OTHER DERIVATIVES The Funds may use techniques
such as buying and selling options or futures contracts in an attempt to change
the Funds' exposure to security prices, currency values, or other factors that
affect the value of the Funds' portfolios.
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
- ---------------
[Graphic] Stock Market Volatility. Stock values fluctuate in response to issuer,
political, market and economic developments. In the short term, stock prices can
fluctuate dramatically in response to these developments. Securities that
undergo an initial public offering may trade at a premium in the secondary
markets. However, there is no guarantee that a Fund will have the ability to
participate in such offerings on an ongoing basis.
[Graphic] Company Risk. Changes in the financial condition of an issuer, changes
in specific economic or political conditions that affect a particular type of
issuer, and changes in general economic or political conditions can affect the
credit quality or value of an issuer's securities. The value of securities of
smaller capitalization issuers can be more volatile than that of larger issuers.
[Graphic] Sector Risk. Different parts of the market can react differently to
these developments. For example, large cap stocks can react differently than
small cap stocks, and "growth" stocks can react differently than "value" stocks.
Issuer, political or economic developments can affect a single issuer, issuers
within an industry or economic sector or geographic region, or the market as a
whole.
<PAGE>
================================================================================
EQUITY FUNDS' SECURITIES AND RISKS
- --------------------------------------------------------------------------------
[Graphic] Foreign Exposure. Foreign exposure is a principal risk for the
International Equity Fund, which concentrates its investments in foreign
securities, and may also be a risk for the other Equity Funds. Foreign
securities, foreign currencies and securities issued by U.S. entities with
substantial foreign operations can involve additional risks relating to
political, economic or regulatory conditions in foreign countries. These risks
include fluctuations in foreign currencies; withholding or other taxes; trading,
settlement, custodial and other operational risks; and the less stringent
investor protection and disclosure standards of some foreign markets.
Investing in emerging markets involves risks in addition to and greater than
those generally associated with investing in more developed foreign markets. The
extent of foreign development, political stability, market depth, infrastructure
and capitalization and regulatory oversight are generally less than in more
developed markets. Emerging market economies can be subject to greater social,
economic regulatory and political uncertainties. All of these factors can make
foreign investments, especially those in emerging markets, more volatile and
potentially less liquid than U.S. investments. In addition, foreign markets can
perform differently than the U.S. market.
- --------------------------------------------------------------------------------
OTHER RISKS
- -----------
[Graphic] Interest Rate Changes. The stock market is dependent on general
economic conditions. Changes in interest rates can affect the performance of the
stock market.
<PAGE>
================================================================================
FIXED-INCOME FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
INTERMEDIATE FIXED-INCOME FUND
- ------------------------------
INVESTMENT OBJECTIVE The Intermediate Fixed-Income Fund 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 (the "LBGC Index") or another relevant index approved
by the Board of Directors.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the LBGC Index duration was 5.45, although that duration
will vary in the future
================================================================================
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund 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 Fund invests principally in debt securities
with durations of between three and ten years and rated A or higher by S&P, or
by Moody's at the time of purchase. The Fund may invest up to 20% of its net
assets in securities rated BBB by S&P or Baa by Moody's and up to 6% of its net
assets in securities rated BB by S&P or Ba by Moody's. The Money Manager may
also invest in debt securities not rated by S&P or Moody's if the Money Manager
or Accessor Capital determines the securities to be of comparable quality to
rated securities at the time of purchase. The Fund may invest in the following
debt securities: 1) corporate bonds, 2) U.S. government and agency bonds, and 3)
mortgage asset backed securities.
Investment selections will be based on fundamental economic, market and other
factors leading to variation by sector, maturity, quality and other criteria
appropriate to meet the Fund's objective. The Fund may purchase lower quality
debt securities when the Money Manager views the issuer's credit as stable or
improving, and the difference in the yield offered by investment grade and below
investment grade securities is large enough to compensate for the increased
risks associated with investing in lower rated securities. The Money Manager
will attempt to exceed the total return performance of the LBGC Index.
OTHER INVESTMENT STRATEGIES The Fund may be invested in debt securities of
foreign issuers if the Money Manager or Accessor Capital determines the
securities to be of comparable quality to securities rated A or higher at the
time of purchase. The Money Manager will also seek to enhance returns through
the use of certain trading strategies such as purchasing odd lot securities. The
Fund 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.
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE FIXED-INCOME FUND
- ------------------------------------
INVESTMENT OBJECTIVE The Short-Intermediate Fixed-Income Fund 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 Government/Corporate 1-5 Year Index (the
"LBGC 1-5 Index") or another relevant index approved by the Board of Directors.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the LBGC 1-5 Index duration was 2.34, although that
duration will vary in the future.
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
FIXED-INCOME FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund 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 Fund invests principally in
debt securities with durations between one and five years and rated A or higher
by S&P, or by Moody's at the time of purchase. The Fund may invest up to 20% of
its net assets in securities rated BBB by S&P or Baa by Moody's and up to 6% of
its net assets in securities rated BB by S&P or Ba by Moody's. The Money Manager
may also invest in debt securities not rated by S&P or Moody's if the Money
Manager or Accessor Capital determines the securities to be of comparable
quality to rated securities at the time of purchase. The Fund may invest in the
following debt securities: 1) corporate bonds, 2) U.S. government and agency
bonds, and 3) mortgage asset backed securities.
Investment selections will be based on fundamental economic, market and other
factors leading to variation by sector, maturity, quality and other criteria
appropriate to meet the Fund's objective. The Fund may purchase lower quality
debt securities when the Money Manager views the issuer's credit as stable or
improving, and the difference in the yield offered by investment grade and below
investment grade securities is large enough to compensate for the increased
risks associated with investing in lower rated securities. The Money Manager
will attempt to exceed the total return performance of the LBGC1-5 Index.
OTHER INVESTMENT STRATEGIES The Fund may be invested in debt securities of
foreign issuers if the Money Manager or Accessor Capital determines the
securities to be of comparable quality to securities rated A or higher at the
time of purchase. The Money Manager will also seek to enhance returns through
the use of certain trading strategies such as purchasing odd lot securities. The
Fund 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.
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
- --------------------
INVESTMENT OBJECTIVE The Fund seeks high current income by investing primarily
in lower-rated, high-yield corporate debt securities.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the Lehman Brothers U.S. Corporate High Yield Index
duration was 4.95, although that duration will vary in the future.
================================================================================
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its objective by
investing primarily in a diversified portfolio of lower-rated, high-yield
corporate debt securities, commonly referred to as "junk bonds." Under normal
conditions the Fund will invest at least 65% of its total assets in high-yield
corporate debt securities rated lower than Baa by Moody's or lower than BBB by
S&P or unrated securities judged to be of equivalent quality by the Money
Manager. The Fund will not invest in securities that, at the time of initial
investment, are rated higher than Baa+ or lower than B3 by Moody's or higher
than BBB+ or lower than CCC- by S&P.
The Fund will maintain 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 U.S. Corporate High Yield Index or another relevant index
approved by the Board of Directors.
Investment selections will be based on fundamental economic, market and other
factors leading to variation by sector, maturity, quality and such other
criteria appropriate to meet the Fund's objective. The Money Manager will
attempt to exceed the total return performance of the Lehman Brothers U.S.
Corporate High Yield Index.
<PAGE>
================================================================================
FIXED-INCOME FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
OTHER INVESTMENT STRATEGIES The Fund may also invest in bonds of foreign issuers
provided that the Fund will not invest in foreign bonds that are rated lower
than Baa by Moody's or lower than BBB by S&P or unrated securities judged to be
of equivalent quality by the Money Manager. The Fund will not invest in
securities that, at the time of initial investment, are rated higher than Baa+
or lower than B3 by Moody's or higher than BBB+ or lower than CCC- by S&P, or in
unrated securities that the Money Manager or Accessor Capital determines to be
of comparable quality. The Fund may also invest in preferred stocks, convertible
securities, and non-income producing high-yield bonds, such as zero coupon bonds
that pay interest only at maturity, or payment-in-kind bonds, which pay interest
in the form of additional securities. The Fund 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 attempt to
enhance income, but not for speculation.
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND
- ------------------------
INVESTMENT OBJECTIVE The Mortgage Securities Fund 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.
================================================================================
SPECIAL NOTE
As of March 31, 2000, the LBM Index duration was 4.29, although that duration
will vary in the future.
================================================================================
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to achieve its objective by
investing at least 65% and generally more than 80% of its total assets in
mortgage related securities. The Fund invests principally in mortgage related
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and will only invest in non-U.S. Government mortgage related
securities rated A or higher by S&P or Moody's or determined to be of equivalent
quality by the Money Manager or Accessor Capital at the time of purchase.
Investment selections will be based on fundamental economic, market and other
factors leading to variation by sector, maturity, quality and such other
criteria appropriate to meet the Fund's objective. The Money Manager will
attempt to exceed the total return performance of the LBM Index.
OTHER INVESTMENT STRATEGIES The Fund 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.
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
- --------------------------
INVESTMENT OBJECTIVE The U.S. Government Money Fund 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.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES The Fund follows industry guidelines concerning
the quality and maturity of its investments. The dollar-weighted average
portfolio maturity of the Fund will not exceed 90 days. The Fund seeks to
achieve its objective by investing at least 65% and generally more than 80% of
the Fund's total assets in fixed-income securities.
<PAGE>
================================================================================
FIXED-INCOME FUNDS' OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The U.S. Government Money Fund seeks to maintain a stable share par value of
$1.00 per share, although there is no assurance that it will be able to do so.
It is possible to lose money by investing in the U.S. Government Money Fund.
Other Investment Strategies The Fund may enter into repurchase agreements
collateralized by U.S. Government or agency securities.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
FIXED-INCOME FUNDS' SECURITIES AND RISKS
- --------------------------------------------------------------------------------
This section describes the security types for and the risks of investing in the
Intermediate Fixed-Income, Short-Intermediate Fixed-Income, High Yield Bond,
Mortgage Securities, and U.S. Government Money Fund, Accessor Funds'
"Fixed-Income Funds."
Many factors affect each Fund's performance. A Fund's yield and (except the U.S.
Government Money Fund's) share price changes daily based on changes in the
financial markets, and interest rates and in response to other economic,
political or financial developments. A Fund's reaction to these developments
will be affected by the financial condition, industry and economic sector, and
geographic location of an issuer, and the Fund's level of investment in the
securities of that issuer. A Fund's reaction to these developments will also be
affected by the types, durations, and maturities of the securities in which the
Fund invests. When you sell your shares of a Fund, they could be worth more or
less than what you paid for them.
In response to market, economic, political or other conditions, each Fund's
Money Manager may temporarily use a different investment strategy for defensive
purposes, including investing in short-term and money market instruments. If a
Money Manager does so, different factors could affect a Fund's performance and
the Fund may not achieve its investment objective. Each Fund is actively
managed. Frequent trading of portfolio securities will result in increased
expenses for the Funds and may result in increased taxable distributions to
shareholders. Each Fund's investment objective stated in the Fixed-Income Funds'
Objectives and Strategies section is fundamental and may not be changed without
shareholder approval.
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY TYPES
- ------------------------
[Graphic] DEBT SECURITIES are used by issuers to borrow money. The issuer
usually pays a fixed, variable or floating rate of interest, and must repay the
amount borrowed at the maturity of the security. Some debt securities, such as
zero coupon bonds, do not pay current interest but are sold at a discount from
their face values. Debt securities include corporate debt securities including
convertible bonds, government securities, and mortgage and other asset-backed
securities.
[Graphic] HIGH-YIELD CORPORATE DEBT SECURITIES are a principal security type for
the High Yield Bond Fund and also may be purchased by the Intermediate and
Short-Intermediate Fixed-Income Funds. High-yield corporate debt securities are
often issued as a result of corporate restructurings - such as leveraged
buyouts, mergers, acquisitions, or other similar events. They also may be issued
by less creditworthy or by highly leveraged companies, which are generally less
able than more financially stable firms to make scheduled payments of interest
and principal. These types of securities are considered speculative by the major
rating agencies and rated lower than BBB by S&P or lower than Baa by Moody's.
[Graphic] MORTGAGE RELATED SECURITIES are a principal security type for the
Mortgage Securities Fund and may also be purchased by the Intermediate,
Short-Intermediate Fixed-Income and High Yield Bond Funds. Mortgage-related
securities are interests in pools of mortgages. Payment of principal or interest
generally depends on the cash flows generated by the underlying mortgages.
Mortgage securities may be U.S. Government securities or issued by a bank or
other financial institution.
[Graphic] U.S. GOVERNMENT SECURITIES are a principal security type for the U.S.
Government Money Fund and may also be purchased by the other fixed-income Funds.
U.S. Government Securities are high-quality securities issued or guaranteed by
the U.S. Treasury or by an agency or instrumentality of the U.S. Government.
U.S. Government securities may be backed by the full faith and credit of the
U.S. Treasury, the right to borrow from the U.S. Treasury, or the agency or
instrumentality issuing or guaranteeing the security.
[Graphic] MONEY MARKET SECURITIES are a principal security type for the U.S.
Government Money Fund and may also be purchased by the other fixed-income Funds.
Money Market Securities are high-quality, short-term debt securities that pay a
fixed, variable or floating interest rate. Securities are often specifically
structured so that they are eligible investments for a money market fund. For
example, in order to satisfy the maturity restrictions for a money market fund,
some money market securities have demand or put features which have the effect
of shortening the security's maturity.
<PAGE>
================================================================================
FIXED-INCOME FUNDS' SECURITIES AND RISKS
- --------------------------------------------------------------------------------
OTHER SECURITY TYPES
- --------------------
[Graphic] EQUITY SECURITIES such as common stock and preferred stock, represent
an equity or ownership interest in an issuer. Certain types of equity
securities, such as warrants, are sometimes attached to or acquired in
connection with debt securities. Preferred stocks pay dividends at a specified
rate and have precedence over common stock as to the payment of dividends.
[Graphic] REPURCHASE AGREEMENTS are an agreement to buy a security at one price
and a simultaneous agreement to sell it back at an agreed upon price.
[Graphic] OPTIONS, FUTURES AND OTHER DERIVATIVES The Funds may use techniques
such as buying and selling options or futures contracts in an attempt to change
the Funds' exposure to security prices, currency values, or other factors that
affect the value of the Funds' portfolios.
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
- ---------------
[Graphic] Bond Market Volatility. Individual securities are expected to
fluctuate in response to issuer, general economic and market changes. An
individual security or category of securities may, however, fluctuate more or
less than the market as a whole.
[Graphic] Issuer Risk. Changes in the financial condition of an issuer, changes
in specific economic or political conditions that affect a particular type of
issuer, and changes in general economic or political conditions can adversely
affect the credit quality or value of an issuer's securities. The value of an
individual security or category of securities may be more volatile than the debt
market as a whole. Entities providing credit support or a maturity-shortening
structure are also affected by these types of changes. Any of a Fund's holdings
could have its credit downgraded or could default, which could affect the Fund's
performance.
[Graphic] Credit Risk. Credit risk is a principal risk for the High Yield Bond
Fund, which concentrates its investments in securities with lower credit
quality, and for the Intermediate and Short-Intermediate Fixed-Income Funds.
Credit risk is the possibility that an issuer will fail to make timely payments
of interest or principal. Some issuers may not make payments on debt securities
held by a Fund, causing a loss. Or, an issuer may suffer adverse changes in its
financial condition that could lower the credit quality of a security, leading
to greater volatility in the price of the security and in shares of a Fund. A
change in the quality rating of a bond or other security can also affect the
security's liquidity and make it more difficult for a Fund to sell. Lower
quality debt securities and comparable unrated debt securities are more
susceptible to these problems than higher quality obligations.
Because of its concentration in investments in junk bonds, the High Yield Bond
Fund is subject to substantial credit risk. Credit quality in the high-yield
bond market can change suddenly and unexpectedly, and even recently issued
credit ratings may not fully reflect the actual risks of a particular high-yield
bond. The Funds' Money Managers will not rely solely on ratings issued by
established credit rating agencies, but will utilize these ratings in
conjunction with its own independent and ongoing credit analysis.
[Graphic] Lower Rated Debt Securities. Lower rated debt securities are a
principal risk for the High Yield Bond Fund, which concentrates its investments
in lower rated debt securities, and are also a risk for the Intermediate and
Short-Intermediate Fixed-Income Funds. Debt securities rated lower than BBB by
S&P or lower than Baa by Moody's are commonly referred to as "junk bonds." Lower
rated debt securities and comparable unrated debt securities have speculative
characteristics and are subject to greater risks than higher rated securities.
These risks include the possibility of default on principal or interest payments
and bankruptcy of the issuer. During periods of deteriorating economic or
financial conditions, the ability of issuers of lower rated debt securities to
service their debt, meet projected goals or obtain additional financing may be
impaired. In addition, the market for lower rated debt securities has in the
past been more volatile and less liquid than the market for higher rated debt
securities. These risks could adversely affect the Funds that invest in these
debt securities.
<PAGE>
================================================================================
FIXED-INCOME FUNDS' SECURITIES AND RISKS
- --------------------------------------------------------------------------------
[Graphic] Interest Rate Risk. Debt and money market securities have varying
levels of sensitivity to changes in interest rates. In general, the price of a
debt or money market security falls when interest rates rise and rises when
interest rates fall. Securities with longer durations generally are more
sensitive to interest rate changes. In other words, the longer the duration of a
security, the greater the impact a change in interest rates is likely to have on
the security's price. In addition, short-term securities tend to react to
changes in short-term interest rates, and long-term securities tend to react to
changes in long-term interest rates. When interest rates fall, the U.S.
Government Money Fund's yield will generally fall as well.
[Graphic] Prepayment Risk. Prepayment risk is a principal risk for the Mortgage
Securities Fund, which concentrates its investments in mortgage securities, and
may also be a risk for the other Fixed-Income Funds. Many types of debt
securities, including mortgage securities, are subject to prepayment risk.
Prepayment occurs when the issuer of a security can repay principal prior to the
security's maturity. For example, if interest rates are dropping and an issuer
pays off an obligation or a bond before maturity, the Fund may have to reinvest
at a lower interest rate. Securities subject to prepayment generally offer less
potential for gains during periods of declining interest rates and similar or
greater potential for loss in periods of rising interest rates. In addition, the
potential impact of prepayment features on the price of a debt security can be
difficult to predict and result in greater volatility. Prepayments on assets
underlying mortgage or other asset backed securities held by a Fund can
adversely affect those securities' yield and price.
[Graphic] Inflation Risk. The real value of the U.S. Government Money Fund's
yield may be eroded by inflation over time. The U.S. Government Money Fund may
under perform the bond and equity markets over time.
- --------------------------------------------------------------------------------
OTHER RISKS
- -----------
[Graphic] Stock Market Volatility. The value of equity securities fluctuates in
response to issuer, political, market and economic developments.
[Graphic] Foreign Exposure. Foreign securities, such as debt securities of
foreign issuers, can involve additional risks relating to political, economic,
or regulatory conditions in foreign countries. All of these factors can make
investing in foreign securities more volatile and less liquid than U.S.
investments.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
MANAGER AND ADMINISTRATOR Accessor Capital Management LP, 1420 Fifth Avenue,
Suite 3600, Seattle, WA 98101
Each Fund is a portfolio of Accessor Funds, Inc. ("Accessor Funds"), a Maryland
corporation. Accessor Capital develops the investment programs for the Funds,
selects the Money Managers for the Funds, and monitors the performance of the
Money Managers. In addition, Accessor Capital invests the assets of the U.S.
Government Money Fund. J. Anthony Whatley, III, is the Executive Director of
Accessor Capital. Ravindra A. Deo, Vice President and Chief Investment Officer
of Accessor Capital, is primarily responsible for the day-to-day management of
the Funds either directly or through interaction with each Fund's Money Manager.
Mr. Deo is also responsible for managing the liquidity reserves of each Fund.
The Securities and Exchange Commission issued an exemptive order that allows
Accessor Funds to change a Fund's Money Manager without shareholder approval, as
long as, among other things, the Board of Directors has approved the change in
Money Manager and Accessor Funds has notified the shareholders of the affected
Fund within 60 days of the change.
Each Fund pays Accessor Capital an annual management fee for providing
management and administration services equal to the following percentage of each
Fund's average daily net assets:
- --------------------------------------------------------------------------------
MANAGEMENT FEE TO ACCESSOR CAPITAL
FUND (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- --------------------------------------------------------------------------------
Growth 0.45%
Value 0.45%
Small to Mid Cap 0.60%
International Equity 0.55%
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
High Yield Bond 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
- --------------------------------------------------------------------------------
Each Fund has also hired Accessor Capital to provide transfer agent, registrar,
dividend disbursing agent and certain other services to the Funds. For providing
these services, Accessor Capital receives (i) a fee equal to 0.13% of the
average daily net assets of each Fund and (ii) a transaction fee of $.50 per
transaction.
On the following pages is information on each Fund's Money Manager and a
description of how each Money Manager is compensated for the services it
provides.
Each Fund paid the following management fees in fiscal year 1999 (reflected as a
percentage of average net assets) to Accessor Capital and/or the Fund's Money
Manager:
- --------------------------------------------------------------------------------
TOTAL MANAGEMENT FEES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
FUND FOR FISCAL YEAR 1999
- --------------------------------------------------------------------------------
Growth 0.76%
Value 0.76%
Small to Mid Cap 1.02%
International Equity 1.14%
Intermediate Fixed-Income 0.40%
Short-Intermediate Fixed-Income 0.40%
Mortgage Securities 0.59%
U.S. Government Money 0.25%
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
GROWTH FUND
- -----------
MONEY MANAGER Chicago Equity Partners Corp., 180 N. LaSalle Street, Suite 413,
Chicago, IL 60697
Chicago Equity Partners utilizes a team approach to managing portfolios. David
Johnsen is the Senior Portfolio Manager responsible for the day-to-day
management of the Fund. David has been with Chicago Equity Partners and its
predecessors for over 23 years. Chicago Equity Partners expects to complete a
transaction that will cause a change in the ownership of the company, which is
expected to close prior to May 30, 2000. After the closing, Chicago Equity
Partners Corp. will become Chicago Equity Partners LLC. Management of the new
company will be unchanged.
For the first five calendar quarters of management of the Growth Fund by Chicago
Equity Partners, they will earn a management fee of 0.20% that consists of a
basic fee of 0.10% and a portfolio management fee of 0.10%.
Prior to Chicago Equity Partners, Geewax, Terker & Company was the money manager
of the Growth Fund. The former money manager managed the Fund from July 27, 1997
until March 15, 2000. Geewax Terker earned a management fee calculated and paid
quarterly that consisted of a basic fee and a performance fee. This is the same
fee structure that Chicago Equity Partners will earn once they have completed
five complete calendar quarters. Beginning with the sixth calendar quarter of
management by Chicago Equity Partners, the basic fee will be equal to an annual
rate of 0.10 % of the Growth Fund's average daily net assets. The performance
fee for any quarter depends on the percentage amount by which the Growth Fund's
performance exceeds or trails that of the S&P 500/BARRA Growth Index during the
applicable measurement period based on the following schedule:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Average Annualized Performance Total
Differential vs. Annual Annual
Basic Fee Benchmark Index Performance Fee Fee
--------- --------------- --------------- ---
<S> <C> <C> <C>
0.10% Greater Than or Equal to 2.00% 0.22% 0.32%
Greater Than or Equal to 1.00% and Less Than 2.00% 0.20% 0.30%
Greater Than or Equal to 0.50% and Less Than 1.00% 0.15% 0.25%
Greater Than or Equal to 0.00% and Less Than 0.50% 0.10% 0.20%
Greater Than or Equal to -0.50% and Less Than 0.00% 0.05% 0.15%
Less Than -0.50% 0.00% 0.10%
- -------------------------------------------------------------------------------------------------
</TABLE>
During the period from the sixth calendar quarter through the 13th calendar
quarter of Chicago Equity Partners' management of the Growth Fund, the
applicable measurement period will be the entire period since the commencement
of their management of the Growth Fund with the exception of the quarter
immediately preceding the date of calculation. Commencing with the 14th quarter
of Chicago Equity Partners' management of the Growth Fund, the applicable
measurement period will consist of the 12 most recent calendar quarters, except
for the quarter immediately preceding the date of calculation.
Under the performance fee formula, Chicago Equity Partners will receive a
performance fee if the Growth Fund's performance either exceeds the S&P
500/BARRA Growth Index, or trails the S&P 500/BARRA Growth Index by no more than
0.50%. Because the performance fee is based on the performance of the Growth
Fund relative to its benchmark Index, Chicago Equity Partners may receive a
performance fee even if the Growth Fund's and the Index's total returns are
negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
VALUE FUND
- ----------
MONEY MANAGER Martingale Asset Management, L.P., 222 Berkeley Street, Boston,
MA 02116
William E. Jacques, Chief Investment Officer since co-founding Martingale in
1987, is primarily responsible for the investment decisions for the Value Fund.
Samuel Nathans, Senior Portfolio Manager, is primarily responsible for the
day-to-day management of the Value Fund. Mr. Nathans joined Martingale in 1999.
Before joining Martingale, Mr. Nathans was the Portfolio Manager and Director of
Research for the AIG Equity Market Neutral Fund, a quantitative long/short hedge
fund administered by the American International Group, Inc. Before AIG, Mr.
Nathans served as Vice President for Quantitative Research at M.D. Sass Investor
Services, Inc. Mr. Nathans was Director of Trading and Developmental Research at
Saje Asset Management prior to his service at M.D. Sass.
Martingale earns a management fee calculated and paid quarterly that consists of
a basic fee and a performance fee. The basic fee is equal to an annual rate of
0.10 % of the Fund's average daily net assets. The performance fee for any
quarter depends on the percentage amount by which the Value Fund's performance
exceeds, or trails that of the S&P 500/BARRA Value Index during the applicable
measurement period based on the following schedule:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Average Annualized Performance Total
Differential vs. Annual Annual
Basic Fee Benchmark Index Performance Fee Fee
--------- --------------- --------------- ---
<S> <C> <C> <C>
0.10% Greater Than or Equal to 2.00% 0.22% 0.32%
Greater Than or Equal to 1.00% and Less Than 2.00% 0.20% 0.30%
Greater Than or Equal to 0.50% and Less Than 1.00% 0.15% 0.25%
Greater Than or Equal to 0.00% and Less Than 0.50% 0.10% 0.20%
Greater Than or Equal to -0.50% and Less Than 0.00% 0.05% 0.15%
Less Than -0.50% 0.00% 0.10%
- ------------------------------------------------------------------------------------------------------
</TABLE>
As of the 14th quarter (1st quarter 1996) of Martingale's management of the
Value Fund, the applicable measurement period consists of the 12 most recent
calendar quarters, excluding the quarter immediately preceding the date of
calculation.
Under the performance fee formula, Martingale will receive a performance fee if
the Value Fund's performance either exceeds the S&P 500/BARRA Value Index, or
trails the S&P 500/BARRA Value Index by no more than 0.50%. Because the
performance fee is based on the performance of the Value Fund relative to its
benchmark Index, Martingale may receive a performance fee even if the Value
Fund's and the Index's total returns are negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
SMALL TO MID CAP FUND
- ---------------------
MONEY MANAGER Symphony Asset Management LLC, 555 California Street, San
Francisco, CA 94104
Praveen K. Gottipalli is primarily responsible for the day-to-day management and
investment decisions for the Small to Mid Cap Fund; he is assisted by David
Wang. Mr. Gottipalli has been Director of Investments with Symphony and its
predecessor entities since March 1994. From 1985 to 1994, he was with BARRA,
Inc., where he was Director of the Active Strategies Group. Since May 1994, Mr.
Wang has been a portfolio manager with Symphony Asset Management, Inc., which
owns 50% of Symphony Asset Management LLC. From 1993 to 1994, Mr. Wang was a
Programmer-Analyst with BARRA, Inc.
Symphony earns a management fee calculated and paid quarterly that consists of a
performance fee. The performance fee for any quarter depends on the percentage
amount by which the Small to Mid Cap Fund's performance exceeds, or trails that
of the Wilshire 4500 Index during the applicable measurement period based on the
following schedule:
- --------------------------------------------------------------------------------
Average Annualized
Percentage Differential Annualized
vs. Wilshire 4500 Index Performance Fee
----------------------- ----------------
Greater Than or Equal to 3.00% 0.42%
Greater Than or Equal to 2.00% and Less Than 3.00% 0.35%
Greater Than or Equal to 1.00% and Less Than 2.00% 0.30%
Greater Than or Equal to 0.50% and Less Than 1.00% 0.25%
Greater Than or Equal to 0.00% and Less Than 0.50% 0.20%
Greater Than or Equal to -0.50% and Less Than 0.00% 0.15%
Greater Than or Equal to -1.00% and Less Than -0.50% 0.10%
Greater Than or Equal to -1.50% and Less Than -1.00% 0.05%
Less Than -1.50% 0.00%
- --------------------------------------------------------------------------------
As of the 14th quarter (1st quarter 1999) of Symphony's management of the Small
to Mid Cap Fund, the applicable measurement period consists of the 12 most
recent calendar quarters, excluding the quarter immediately preceding the date
of calculation.
Under the performance fee formula, Symphony will receive a performance fee if
the Small to Mid Cap Fund's performance either exceeds the Wilshire 4500 Index,
or trails the Wilshire 4500 Index by no more than 1.50%. Because the performance
fee is based on the performance of the Small to Mid Cap Fund relative to its
benchmark Index, Symphony may receive a performance fee even if the Small to Mid
Cap Fund's and the Index's total returns are negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
MONEY MANAGER Nicholas-Applegate Capital Management, 600 West Broadway, 29th
Floor, San Diego, CA 92101
Catherine Somhegyi, Lawrence S. Speidell and Loretta J. Morris are primarily
responsible for making the day-to-day management and investment decisions for
the International Equity Fund. Ms. Somhegyi, Chief Investment Officer, Global
Equity Management, joined Nicholas-Applegate in 1987. Mr. Speidell, Partner and
Director of Research, joined Nicholas-Applegate in 1994. From 1983 to 1994, Mr.
Speidell was a portfolio manager for Batterymarch Financial Management. Ms.
Morris, Partner and Portfolio Manager, International, joined Nicholas-Applegate
in 1990.
On August 19, 1999, the Board of Directors of Accessor Funds, amended the Money
Manager Agreement with Nicholas-Applegate, to change the schedule of fees
payable to the Money Manager, effective September 1, 1999. Prior to the change,
the Money Manager received a basic fee at the annual rate of 0.20% of the
International Equity Fund's average daily net assets; there was no limit on the
maximum amount of the basic fee. After the change, the basic fee was limited to
a maximum fee of $400,000 annually. In substance, when the International Equity
Fund's assets exceed $200,000,000 the basic fee is never more than $400,000
annually.
Nicholas-Applegate earns a management fee calculated and paid quarterly that
consists of a basic fee and a performance fee. The basic fee is equal to an
annual rate of 0.20% of the Fund's average daily net assets up to a maximum of
$400,000 annualized. The performance fee for any quarter depends on the
percentage amount by which the International Equity Fund's performance exceeds
or trails that of the MSCI EAFE+EMF Index during the applicable measurement
period based on the following schedule:
- --------------------------------------------------------------------------------
Average Annualized Performance
Differential vs. Annual
Benchmark Index Performance Fee
--------------- ---------------
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% 0.00%
- --------------------------------------------------------------------------------
Example: If Nicholas-Applegate is outperforming the Index by more than 4% per
year, then the following table shows the annualized total fee at various asset
levels:
- --------------------------------------------------------------------------------
Asset Level New Old
Total Annual Fee Total Annual Fee
- --------------------------------------------------------------------------------
$150 million 0.20% + 0.40% = 0.60% 0.20% + 0.40% = 0.60%
$200 million $400,000 (or 0.20%) + 0.40% = 0.60% 0.20% + 0.40% = 0.60%
$250 million $400,000 (or 0.16%) + 0.40% = 0.56% 0.20% + 0.40% = 0.60%
$300 million $400,000 (or 0.13%) + 0.40% = 0.53% 0.20% + 0.40% = 0.60%
$350 million $400,000 (or 0.11%) + 0.40% = 0.51% 0.20% + 0.40% = 0.60%
$400 million $400,000 (or 0.10%) + 0.40% = 0.50% 0.20% + 0.40% = 0.60%
- --------------------------------------------------------------------------------
As of the 14th quarter (2nd quarter 1998) of Nicholas-Applegate's management of
the International Equity Fund, the applicable measurement period consists of the
12 most recent calendar quarters, excluding the quarter immediately preceding
the date of calculation.
Under the performance fee formula, Nicholas-Applegate will receive a performance
fee if the International Equity Fund's performance either exceeds the MSCI EAFE
+ EMF Index, or trails the MSCI EAFE + EMF Index by no more than 2.00%. Because
the performance fee is based on the performance of the International Equity Fund
relative to its benchmark Index, Nicholas-Applegate may receive a performance
fee even if the International Equity Fund's and the Index's total returns are
negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
INTERMEDIATE FIXED-INCOME FUND
SHORT-INTERMEDIATE FIXED-INCOME FUND
- ------------------------------------
MONEY MANAGER Cypress Asset Management, 26607 Carmel Center Place, Carmel,
CA 93923
Mr. Xavier Urpi, President and Chief Investment Officer, is primarily
responsible for the day-to-day management and investment decisions and is
assisted by Ms. Rosemary Brooks, Manager of Operations. 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. Previously, Ms. Brooks was owner of Brooks Finance, and a
registered representative with H.D. Vest from June 1994 to July 1997.
Cypress earns a management fee from each Fund calculated and paid quarterly that
consists of a basic fee and a performance fee, calculated and paid quarterly.
The performance fee for any quarter depends on the percentage amount by which
each Fund's performance exceeds that of its respective Benchmark Index, the
Lehman Brothers Government/Corporate Index (Intermediate Fixed-Income) and the
Lehman Brothers Government/Corporate 1-5 Year Index (Short-Intermediate
Fixed-Income) during the applicable measurement period based on the following
schedule:
- --------------------------------------------------------------------------------
Average Annualized
Performance Total
Basic Differential vs. Annual Annual
Fee Benchmark Index Performance Fee Fee
- ------- ---------------- ---------------- ------
0.02% Greater Than 0.70% 0.15% 0.17%
Greater Than 0.50% and Less Than 0.05% plus 1/2
or Equal to 0.70% (P-0.50%)* Up to 0.17%
Greater Than or Equal to 0.35%
and Less Than or Equal to 0.50% 0.05% 0.07%
Less Than 0.35% 0.00% 0.02%
- -------------------------------------------------------------------------------
*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 measurement period from the sixth calendar quarter (1st quarter 2000)
through the 13th calendar quarter (4th quarter 2001) of Cypress' management of
each Fund, will be the entire period since the commencement of Cypress'
management of each Fund, excluding the quarter immediately preceding the date of
calculation. Commencing with the 14th quarter (1st quarter 2002) of Cypress'
management of each Fund, the applicable measurement period will consist of the
12 most recent calendar quarters, excluding the quarter immediately preceding
the date of calculation.
Under the performance fee formula, Cypress will receive a performance fee if
either Intermediate Fixed-Income Fund's or Short-Intermediate Fixed-Income
Fund's performance equals or exceeds the Lehman Brothers Government/Corporate
Index or the Lehman Brother Government/Corporate 1-5 Year Index, respectively,
by at least 0.35%. Because the performance fee is based on the performance of
the Intermediate Fixed-Income Fund and the Short-Intermediate Fixed-Income Fund
relative to their respective benchmark Index, Cypress may receive a performance
fee even if a Fund's and the Index's total returns are negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
- --------------------
MONEY MANAGER Financial Management Advisors, Inc., 1900 Avenue of the Stars,
Suite 900, Los Angeles, CA 90067
FMA uses a team approach. Kenneth D. Malamed and Steven S. Michaels are
primarily responsible for the day-to-day management of the Fund. Mr. Malamed,
President and Chief Investment Officer, founded FMA in 1985. In 1992, the
assets, operations and client base of FMA were acquired by Wertheim Schroder
Investment Services, Inc. (later renamed Schroder Wertheim Investment Services,
Inc.), where Ken Malamed served as Managing Director, Director of Fixed-Income
and Chairman of the Credit Committee. In November 1995, Mr. Malamed terminated
his association with Schroder Wertheim. In December of 1995, he re-established
FMA and continued on with a portion of the investment advisory business. Mr.
Michaels, Senior Vice President and Managing Director of High Yield Fixed
Income, joined FMA in 1991. He was Senior High Yield Credit Analyst at Schroder
Wertheim Investment Services, Inc. from 1992 to 1995. He continued on with Mr.
Malamed in January 1996 at the re-established FMA.
For the first five complete calendar quarters of management, FMA will earn a
management fee equal to an annual rate of 0.15% that consists of a basic fee
equal to an annual rate of 0.07% and a portfolio management fee equal to an
annual rate of 0.08%. The management fee is calculated and paid quarterly.
Beginning with the sixth complete calendar quarter of management, FMA will earn
the basic fee described above and a performance fee, calculated and paid
quarterly. The performance fee for any quarter depends on the percentage amount
by which the Fund's performance exceeds or trails that of its benchmark index,
the Lehman Brothers U.S. Corporate High Yield Index, during the applicable
measurement period based on the following schedule:
- --------------------------------------------------------------------------------
Average
Annualized Performance Annual Total
Differential Performance Annual
Basic Fee vs. Benchmark Index Fee Fee
- --------- --------------------- ------ ------
0.07% Greater than 2.00% 0.22% 0.29%
Greater than 1.50% and Less than or equal to 2.00% 0.20% 0.27%
Greater than 1.00% and Less than or equal to 1.50% 0.16% 0.23%
Greater than 0.50% and Less than or equal to 1.00% 0.12% 0.19%
Greater than -0.50% and Less than or equal to 0.50% 0.08% 0.15%
Greater than -1.00% and Less than or equal to -0.50% 0.04% 0.11%
Less than or equal to -1.00% 0.00% 0.07%
- --------------------------------------------------------------------------------
The measurement period consists of the 12 most recent calendar quarters,
excluding the quarter immediately preceding the date of calculation.
Under the performance fee formula, FMA will receive a performance fee if the
High Yield Bond Fund's performance either exceeds the Lehman Brothers U.S.
Corporate High Yield Index or trails the Lehman Brothers U.S. Corporate High
Yield Index by no more than 1.00%. Because the performance fee is based on the
performance of the High Yield Bond Fund relative to its benchmark Index, FMA may
receive a performance fee even if the High Yield Bond Fund's and the Index's
total returns are negative.
<PAGE>
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND
- ------------------------
MONEY MANAGER BlackRock Financial Management, Inc., 345 Park Avenue, New
York, NY 10154
BlackRock's Investment Strategy Group has primary responsibility for setting the
broad investment strategy and for overseeing the ongoing management of all
client portfolios. Mr. Andrew J. Phillips, Managing Director, is primarily
responsible for the day-to-day management and investment decisions for the
Mortgage Securities Fund. Mr. Phillips' primary responsibility is the management
of the firm's investment activities in fixed-rate mortgage securities, including
pass-throughs and CMOs. He directs the development of investment strategy and
coordinates execution for all client portfolios. Prior to joining BlackRock in
1991, Mr. Phillips was a portfolio manager at Metropolitan Life Insurance
Company.
The Mortgage Securities Fund pays BlackRock a management fee that consists of a
basic fee and a performance fee. The management fee is calculated and paid
quarterly. The basic fee is equal to an annual rate of 0.07 % of the Fund's
average daily net assets. The performance fee for any quarter depends on the
percentage amount by which the Mortgage Securities Fund's performance exceeds or
trails that of the Lehman Brothers Mortgage-Backed Securities Index during the
applicable measurement period based on the following schedule:
- --------------------------------------------------------------------------------
Average Annualized
Performance Total
Differential vs. Annual Annual
Basic Fee Benchmark Index Performance Fee Fee
--------- --------------- --------------- -----
0.07% Greater Than or Equal To 2.00% 0.18% 0.25%
Greater Than or Equal To 0.50%
and Less Than 2.00% 0.16% 0.23%
Greater Than or Equal To 0.25%
and Less Than 0.50% 0.12% 0.19%
Greater Than or Equal To -0.25%
and Less Than 0.25% 0.08% 0.15%
Greater Than -0.50% and
Less Than -0.25% 0.04% 0.11%
Greater Than or Equal To -0.50% 0.00% 0.07%
- --------------------------------------------------------------------------------
The measurement period consists of the 12 most recent calendar quarters,
excluding the quarter immediately preceding the date of calculation.
Under the performance fee formula, BlackRock will receive a performance fee if
the Mortgage Securities Fund's performance either exceeds the Lehman Brothers
Mortgage-Backed Securities Index, or trails the Lehman Brothers Mortgage-Backed
Securities Index by no more than 0.50%. Because the performance fee is based on
the performance of the Mortgage Securities Fund relative to its benchmark Index,
BlackRock may receive a performance fee even if the Mortgage Securities Fund's
and the Index's total returns are negative.
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
- --------------------------
MANAGER Accessor Capital Management LP, 1420 Fifth Avenue, Suite 3600, Seattle,
WA 98101
Accessor Capital directly invests the assets of the U.S. Government Money Fund.
Accessor Capital receives no additional fee beyond its management fee, as
previously described, for this service.
<PAGE>
================================================================================
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
WHERE TO PURCHASE
- -----------------
[Graphic] Financial Intermediaries. Investor Class Shares are usually purchased
through financial intermediaries, such as banks, broker-dealers, registered
investment advisers and providers of fund supermarkets, who may receive a
payment from Accessor Funds for distribution and services and/or administrative
services. In certain cases, a Fund will be deemed to have received a purchase or
redemption when it is received by the financial intermediary. The order will be
priced at the next calculated NAV. These financial intermediaries may also
charge transaction, administrative or other fees to shareholders, and may impose
other limitations on buying, selling or transferring shares, which are not
described in this Prospectus. Some features of the Investor Class Shares, such
as investment minimums, redemption fees and certain trading restrictions, may be
modified or waived by financial intermediaries. Shareholders should contact
their financial intermediary for information on fees and restrictions.
[Graphic] Direct. Investors may purchase Investor Class Shares directly from
Accessor Funds for no sales charge or commission.
- --------------------------------------------------------------------------------
HOW TO PURCHASE
- ---------------
Purchase orders are accepted on each business day that the New York Stock
Exchange is open and must be received in proper form prior to the close of the
New York Stock Exchange, normally 4:00 p.m. Eastern time. If Accessor Capital
receives a purchase order for shares of U.S. Government Money Fund on any
business day and the invested monies are wired before 9:00 a.m. Pacific time,
the investor will be entitled to receive that day's dividend. Otherwise,
Accessor Capital must receive payment for shares by 12:00 p.m. Eastern time on
the business day following the purchase request. All purchases must be made in
U.S. dollars. Purchases may be made any of the following ways:
[Graphic] By Check. Checks made payable to "Accessor Funds, Inc." and drawn on a
U.S. bank should be mailed with the completed application or with the account
number and name of Fund noted on the check to:
Accessor Funds, Inc.
P. 0. Box 1748
Seattle, WA 98111-1748
[Graphic] By Federal Funds Wire. Wire instructions are described on the account
application.
[Graphic] By Telephone. Shareholders with aggregate account balances of at least
$1 million may purchase Investor Class Shares by telephone at 1-800-759-3504. To
prevent unauthorized transactions, Accessor Funds may use reasonable procedures
to verify telephone requests.
[Graphic] By Purchases In Kind. Under some circumstances, the Funds may accept
securities as payment for Investor Class Shares. Such securities would be valued
the same way the Funds' securities are valued (see "Valuation of Securities".)
Please see "Additional Purchase and Redemption Information" in the Statement of
Additional Information for further information.
================================================================================
HELP BOX:
Investor Class Shares may not be purchased on days when the NYSE is closed for
trading: New Year's Day, Martin Luther King, Jr., Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
================================================================================
<PAGE>
================================================================================
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
IRAs/ROTH IRAs
- --------------
Investors may purchase Investor Class Shares through an Individual or Roth
Retirement Custodial Account Plan. An IRA or Roth IRA account with an aggregate
balance of less than $10,000 across all Funds on December 31 of any year will be
assessed a $25.00 fee. Copies of an IRA or Roth IRA Plan may be obtained from
Accessor Capital by calling (800) 759-3504.
================================================================================
INVESTMENT MINIMUMS
- ------------------------------------- ------------------------------------------
REGULAR ACCOUNTS RETIREMENT ACCOUNTS
- --------------------------------------------------------------------------------
Initial Investment Initial Investment
- --------------------------------------------------------------------------------
One Fund only: $5,000 Traditional IRA/ $2,000 aggregated
Multiple Funds: $10,000 aggregated Roth IRA: among the Funds
among the Funds
Additional Investment(s) Additional Investment(s)
- --------------------------------------------------------------------------------
One Fund only: $1,000 Traditional IRA/ $2,000 aggregated
Multiple Funds: $2,000 aggregated Roth IRA: among the Funds
among the Funds
- --------------------------------------------------------------------------------
Accessor Funds may accept smaller purchase amounts or reject any purchase order
it believes may disrupt the management of the Funds
- --------------------------------------------------------------------------------
SHARE PRICING
- -------------
Investors purchase Investor Class Shares of a Fund at its net asset value per
share ("NAV"). The NAV is calculated by adding the value of Fund assets
attributable to Investor Class Shares, subtracting Fund liabilities attributable
to the class, and dividing by the number of outstanding Investor Class Shares.
The NAV is calculated each day that the New York Stock Exchange ("NYSE") is open
for business. The Funds generally calculate their NAV at the close of regular
trading on the NYSE, generally 4:00 p.m. Eastern time. Shares are purchased at
the NAV that is next calculated after purchase requests are received by the
Funds.
- --------------------------------------------------------------------------------
MARKET TIMING
- -------------
Short-term or excessive trading into and out of a Fund may harm performance by
disrupting portfolio management strategies and by increasing expenses. A Fund
may temporarily or permanently terminate the exchange privilege of any investor
who makes more than four exchanges out of a Fund per calendar year. Moreover, a
Fund may reject any purchase orders, including exchanges, particularly from
market timers or investors who, in Accessor Capital's opinion, have a pattern of
short-term or excessive trading or whose trading has been or may be disruptive
to that Fund. For these purposes, Accessor Capital may consider an investor's
trading history in that Fund or other Funds, and accounts under common ownership
or control.
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
- --------------------
For additional information about purchasing shares of the Accessor Funds, please
contact us at (800) 759-3504.
<PAGE>
================================================================================
EXCHANGING FUND SHARES
- --------------------------------------------------------------------------------
As a shareholder, you have the privilege of exchanging shares of the Funds for
shares of other Accessor Funds. Investor Class Shares may be exchanged for
shares of any other Fund on days when the NYSE is open for business, as long as
shareholders meet the normal investment requirements of the other Fund. The
request must be received in proper form by the Fund or certain financial
intermediaries prior to the close of the NYSE, normally 4:00 p.m. Eastern time.
Shares will be exchanged at the next NAV calculated after Accessor Capital
receives the exchange request in proper form. The Fund may temporarily or
permanently terminate the exchange privilege of any investor who makes more than
four exchanges out of the Fund per calendar year. Shareholders should read the
prospectus of any other Fund into which they are considering exchanging.
- --------------------------------------------------------------------------------
EXCHANGES THROUGH ACCESSOR FUNDS
- --------------------------------
Accessor Funds does not currently charge fees on exchanges directly through it.
This exchange privilege may be modified or terminated at any time by Accessor
Funds upon 60 days notice to shareholders. Exchanges may be made any of the
following ways:
[graphic] By Mail. Share exchange instructions may be mailed to:
Accessor Funds, Inc.
P. O. Box 1748
Seattle, WA 98111-1748.
[graphic] By Fax. Instructions may be faxed to Accessor Funds at (206) 224-4274.
An exchange of shares from a Fund involves a redemption of those shares and will
be treated as a sale for tax purposes.
- --------------------------------------------------------------------------------
EXCHANGES THROUGH FINANCIAL INTERMEDIARIES
- ------------------------------------------
You should contact your financial intermediary directly to make exchanges. Your
financial intermediary may charge additional fees for these transactions.
<PAGE>
================================================================================
REDEEMING FUND SHARES
- --------------------------------------------------------------------------------
Investors may request to redeem Investor Class Shares on any day that the NYSE
is open for business. The request must be received in proper form by the Fund or
certain financial intermediaries prior to the close of the NYSE, normally 4:00
p.m. Eastern time. Shares will be redeemed at the next NAV calculated after
Accessor Capital receives the redemption request in proper form. Payment will
ordinarily be made within seven days of the request by wire-transfer to a
shareholder's domestic commercial bank account. Shares may be redeemed from
Accessor Funds any of the following ways:
[graphic] By Mail. Redemption requests may be mailed to:
Accessor Funds, Inc.
P. 0. Box 1748
Seattle, WA 98111-1748.
[graphic] By Fax. Redemption requests may be faxed to Accessor Capital at (206)
224-4274.
[graphic] By Telephone. Shareholders with aggregate account balances of at least
$1 million may request redemption of shares by telephone at (800) 759-3504. To
prevent unauthorized transactions, Accessor Funds may use reasonable procedures
to verify telephone requests.
Shareholders may request that payment be made by check to the shareholders of
record at the address of record. Such requests must be in writing and signed by
all shareholders of record. Shareholders may also request that a redemption be
made payable to someone other than the shareholder of record or be sent to an
address other than the address of record. Such requests must be made in writing,
be signed by all shareholders of record, and accompanied by a signature
guarantee. The Transfer Agent may charge a $10.00 processing fee for each
redemption check. Shares also may be redeemed through financial intermediaries
from whom shares were purchased. Financial intermediaries may charge a fee for
this service.
Large redemptions may disrupt the management and performance of the Funds. Each
Fund reserves the right to delay delivery of your redemption proceeds -- up to
seven days -- if the Fund determines that the redemption amount will disrupt its
operation or performance. If you redeem more than $250,000 worth of a Fund's
shares within any 90-day period, the Fund reserves the right the pay part or all
of the redemption proceeds above $250,000 in kind, i.e., in securities, rather
than cash. If payment is made in kind, you may incur brokerage commissions if
you elect to sell the securities, or market risk if you elect to hold them.
[graphic] Systematic Withdrawal Plan. Shareholders may request an automatic,
monthly, quarterly or annual redemption of shares under the Systematic
Withdrawal Plan (minimum monthly amount is $500). Applications for this plan may
be obtained from Accessor Funds and must be received by Accessor Funds at least
ten calendar days before the first scheduled withdrawal date. Systematic
Withdrawals may be discontinued at any time by a shareholder or Accessor Funds.
[graphic] Low Account Balances. Accessor Funds may redeem any account with a
balance of less than $500 per Fund or less than $2,000 in aggregate across the
Funds if the shareholder is not part of an Automatic Investment Plan.
Shareholders will be notified in writing when they have a low balance and will
have 60 days to purchase additional shares to increase the balance to the
required minimum. Shares will not be redeemed if an account drops below the
minimum due to market fluctuations.
In the event of an emergency as determined by the SEC, Accessor Funds may
suspend the right of redemption or postpone payments to shareholders. If the
Board of Directors determines a redemption payment may harm the remaining
shareholders of a Fund, the Fund may pay a redemption in whole or in part by a
distribution in kind of securities from the Fund.
================================================================================
HELP BOX:
Redemption requests for shares that were purchased by check will be honored at
the next NAV calculated after receipt of the redemption request. However,
redemption proceeds will not be transmitted until the check used for the
investment has cleared.
================================================================================
<PAGE>
================================================================================
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
[Graphic] Dividends. Each Fund intends to annually distribute as dividends to
its shareholders substantially all of its net investment income. The Board of
Directors presently intends to declare dividends on the following schedule:
- --------------------------------------------------------------------------------
FUND DECLARED PAYABLE
- --------------------------------------------------------------------------------
Growth Quarterly, on last First business day
Value business day of following end of calendar
Small to Mid Cap quarter*. quarter.
International Annually, third to Second to last business day
last business day of calendar year.
of calendar year.
Intermediate Fixed-Income Monthly, on last First business day of
Short-Intermediate Fixed- business day of of following month.
Income month*.
Mortgage Securities
U.S. Government Money Daily First business day
of following month.
- --------------------------------------------------------------------------------
*Except, that in December the dividend is declared on the second or third to
last business day and paid the next day for operational convenience.
- --------------------------------------------------------------------------------
[graphic] Other Distributions. The Board of Directors intends to distribute to
each Fund's shareholders substantially all of its net realized long- and
short-term capital gains and net realized gains from foreign currency
transactions (if any) annually, generally in mid-December. A Fund may need to
make additional distributions at year-end to avoid federal income or excise
taxes.
[graphic] Automatic Reinvestment of Dividends and other Distributions. All
dividends and other distributions on Investor Class Shares of a Fund will be
automatically reinvested in additional Investor Class Shares of that Fund unless
a shareholder elects to receive them in cash. Shareholders may alternatively
choose to invest dividends or other distributions in Investor Class Shares of
any other Fund.
================================================================================
VALUATION OF SECURITIES
- --------------------------------------------------------------------------------
The Funds generally value their securities using market quotations. However,
short-term debt securities maturing in less than 60 days are valued using
amortized cost, and securities for which market quotations are not readily
available are valued at fair value. Because foreign securities markets are open
on different days from U.S. markets, there may be instances when the NAV of a
Fund that invests in foreign securities changes on days when shareholders are
not able to buy or sell shares. If a security's value has been materially
affected by events occurring after the close of the exchange or market on which
the security is principally traded (for example, a foreign exchange or market),
that security may be valued by another method that the Board of Director's
believes accurately reflects fair value.
<PAGE>
================================================================================
TAXATION
- --------------------------------------------------------------------------------
Dividends and other distributions that shareholders receive from a Fund, whether
received in cash or reinvested in additional shares of the Fund, are subject to
federal income tax and may also be subject to state and local tax. Generally,
dividends and distributions of net short-term capital gains and gains from
certain foreign currency transactions are taxable as ordinary income, while
distributions of other gains are taxable as long-term capital gains (generally,
at the rate of 20% for non-corporate shareholders). The rate of tax to a
shareholder on distributions from a Fund of capital gains ordinarily depends on
the length of time the Fund held the securities that generated the gain, not the
length of time the shareholder owned his or her shares.
Certain dividends and other distributions declared by a Fund in October,
November, or December of any year are taxable to shareholders as though received
on December 31 of that year if paid to them during the following January.
Accordingly, those distributions will be taxed to shareholders for the year in
which that December 31 falls.
An exchange of a Fund's shares for shares of another Fund will be treated as a
sale of the Fund's shares, and any gain on the transaction will be subject to
federal income tax.
The International Equity Fund receives dividends and interest on securities of
foreign issuers that may be subject to withholding taxes by foreign governments,
and gains from the disposition of those securities also may be subject thereto,
which may reduce the Fund's total return. If the amount of taxes withheld by
foreign governments is material, the Fund may elect to enable shareholders to
claim a foreign tax credit regarding those taxes.
After the conclusion of each calendar year, shareholders will receive
information regarding the taxability of dividends and other distributions paid
by the Funds during the preceding year. Funds may be required to withhold and
remit to the U.S. Treasury 31% of all dividends, capital gain distributions, and
redemption proceeds payable to individuals and certain other non-corporate
shareholders who have not provided the Fund with a correct taxpayer
identification number. Shareholders should consult a tax adviser for further
information regarding the federal, state, and local tax consequences of an
investment in Advisor Class Shares.
The foregoing is only a brief summary of certain federal income tax consequences
of investing in the Funds. Please see the Statement of Additional Information
for a further discussion.
================================================================================
DISTRIBUTION AND SERVICE ARRANGEMENTS
and ADMINISTRATIVE SERVICES ARRANGEMENTS
- --------------------------------------------------------------------------------
Accessor Funds has adopted a Distribution and Service Plan that allows the
Investor Class Shares of the Funds to pay distribution fees and/or services fees
to financial intermediaries for sales and distribution-related activities and/or
providing non-distribution related shareholder services. The fee under the
Distribution and Service Plan will not exceed 0.25% in the aggregate annually.
Accessor Funds has also adopted an Administrative Services Plan which allows the
Investor Class Shares of the Fund to pay financial intermediaries for
non-distribution related administrative services provided to shareholders. The
administrative services fees will not exceed 0.25% annually.
Because 12b-1 fees and administrative services fees are paid out of the Fund's
assets on an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
GROWTH FUND
- -----------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past5 years. Separate tables are provided and
reflect financial results for each of a Fund's Advisor and Investor Class
Shares. Certain information reflects financial results for a single Fund share.
The total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
ADVISOR CLASS SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 28.88 $ 21.57 $ 19.51 $ 17.99 $ 14.37
NET INVESTMENT INCOME (LOSS) (0.06) 0.04 0.13 0.19 0.15
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 7.51 9.91 6.31 3.35 4.76
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 7.45 9.95 6.44 3.54 4.91
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT
INCOME 0.00 (0.03) (0.13) (0.19) (0.15)
DISTRIBUTIONS FROM CAPITAL GAINS (1.24) (2.61) (4.25) (1.83) (1.14)
DISTRIBUTIONS IN EXCESS OF CAPITAL GAINS (0.01) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.25) (2.64) (4.38) (2.02) (1.29)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 35.08 $ 28.88 $ 21.57 $ 19.51 $ 17.99
=========================================================================================================================
TOTAL RETURN(2) 25.87% 46.65% 33.24% 19.83% 34.32%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $339,590 $157,799 $ 87,907 $ 60,586 $ 48,532
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.97% 0.92% 0.93% 1.13% 1.26%
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS (0.21)% 0.16% 0.56% 0.97% 0.97%
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 96.55% 112.42% 131.75% 81.79% 99.73%
=========================================================================================================================
INVESTOR CLASS SHARES(1) 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 28.82 $ 26.38
NET INVESTMENT LOSS (0.16) (0.05)
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 7.41 4.52
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 7.25 4.47
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT
INCOME 0.00 0.00
DISTRIBUTIONS FROM CAPITAL GAINS (1.24) (2.03)
DISTRIBUTIONS IN EXCESS OF CAPITAL GAINS (0.01) --
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.25) (2.03)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 34.82 $ 28.82
=========================================================================================================================
TOTAL RETURN(2) 25.23% 16.96%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 44,479 $ 22,077
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.47% 1.41%*
RATIO OF NET INVESTMENT LOSS TO
AVERAGE NET ASSETS (0.71)% (0.40)%*
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 96.55% 112.42%
</TABLE>
(1) Class commenced operations on July 1, 1998.
(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 Fund.
*Annualized
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
VALUE FUND
- ----------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past5 years. Separate tables are provided and
reflect financial results for each of a Fund's Advisor and Investor Class
Shares. Certain information reflects financial results for a single Fund share.
The total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
ADVISOR CLASS SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.04 $ 20.88 $ 17.75 $ 15.91 $ 13.01
NET INVESTMENT INCOME 0.18 0.24 0.26 0.24 0.33
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 1.25 2.45 5.54 3.51 3.96
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.43 2.69 5.80 3.75 4.29
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT
INCOME (0.18) (0.24) (0.26) (0.24) (0.33)
DISTRIBUTIONS FROM CAPITAL GAINS (1.59) (2.12) (2.41) (1.67) (1.06)
DISTRIBUTIONS IN EXCESS OF CAPITAL GAINS 0.00 (0.17) 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.77) (2.53) (2.67) (1.91) (1.39)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.70 $ 21.04 $ 20.88 $ 17.75 $ 15.91
======================================================================================================================
TOTAL RETURN(2) 6.87% 12.89% 32.94% 23.94% 33.25%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $149,183 $114,728 $ 81,127 $ 36,367 $ 24,915
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.97% 1.03% 1.05% 1.21% 1.40%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 0.86% 1.06% 1.32% 1.43% 2.18%
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 167.70% 104.85% 68.14% 93.54% 100.88%
======================================================================================================================
INVESTOR CLASS SHARES(1) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.04 $ 23.41
NET INVESTMENT INCOME 0.07 0.05
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 1.25 (0.31)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.32 (0.26)
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT
INCOME (0.07) (0.06)
DISTRIBUTIONS FROM CAPITAL GAINS (1.59) (1.90)
DISTRIBUTIONS IN EXCESS OF CAPITAL GAINS 0.00 (0.15)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.66) (2.11)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.70 $ 21.04
======================================================================================================================
TOTAL RETURN(2) 6.35% (1.09)%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 26,267 $ 12,987
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.47% 1.55%*
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 0.36% 0.44%*
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 167.70% 104.85%
</TABLE>
(1) Class commenced operations on July 1, 1998.
(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
lastday 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 Fund.
*Annualized
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SMALL TO MID CAP FUND
- ---------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past5 years. Separate tables are provided and
reflect financial results for each of a Fund's Advisor and Investor Class
Shares. Certain information reflects financial results for a single Fund share.
The total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
ADVISOR CLASS SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 23.53 $ 21.82 $ 18.82 $ 17.60 $ 14.08
NET INVESTMENT INCOME (LOSS) (0.10) (0.05) 0.00 0.07 0.06
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 6.46 3.50 6.75 4.22 4.42
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 6.36 3.45 6.75 4.29 4.48
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT
INCOME 0.00 0.00 0.00 (0.07) (0.06)
DISTRIBUTIONS FROM CAPITAL GAINS (2.50) (1.74) (3.73) (3.00) (0.90)
DISTRIBUTION IN EXCESS OF NET INVESTMENT
INCOME 0.00 0.00 (0.02) 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.50) (1.74) (3.75) (3.07) (0.96)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.39 $ 23.53 $ 21.82 $ 18.82 $ 17.60
=========================================================================================================================
TOTAL RETURN(2) 27.26% 15.98% 36.14% 24.85% 31.98%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $447,665 $260,792 $125,221 $ 65,479 $ 49,803
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.25% 1.22% 1.15% 1.17% 1.31%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (0.47)% (0.22)% 0.00% 0.37% 0.41%
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 133.14% 110.07% 129.98% 113.44% 84.26%
=========================================================================================================================
INVESTOR CLASS SHARES(1) 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 23.47 $ 24.44
NET INVESTMENT LOSS (0.12) (0.09)
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 6.31 0.86
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 6.19 0.77
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.00 0.00
DISTRIBUTIONS FROM CAPITAL GAINS (2.50) (1.74)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.50) (1.74)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.16 $ 23.47
=========================================================================================================================
TOTAL RETURN(2) 26.60% 3.32%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 47,398 $ 19,367
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.75% 1.77%*
RATIO OF NET INVESTMENT LOSS TO
AVERAGE NET ASSETS (0.97)% (0.84)%*
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 133.14% 110.07%
</TABLE>
(1) Class commenced operations on June 24, 1998
(2) Total return is calculated assuming a purchase of shares at net asset valu
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 Fund.
*Annualized
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past5 years. Separate tables are provided and
reflect financial results for each of a Fund's Advisor and Investor Class
Shares. Certain information reflects financial results for a single Fund share.
The total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
ADVISOR CLASS SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.90 $ 14.83 $ 13.83 $ 12.55 $ 11.67
NET INVESTMENT INCOME (LOSS) 0.02 (0.03) (0.02) (0.06) 0.05
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 8.17 2.41 1.54 1.80 0.83
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 8.19 2.38 1.52 1.74 0.88
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM CAPITAL GAINS (3.57) (0.31) (0.50) (0.44) 0.00
DISTRIBUTIONS IN EXCESS OF CAPITAL GAINS 0.00 0.00 (0.02) (0.02) 0.00
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (3.57) (0.31) (0.52) (0.46) 0.00
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.52 $ 16.90 $ 14.83 $ 13.83 $ 12.55
======================================================================================================================
TOTAL RETURN(2) 48.93% 16.07% 10.96% 13.78% 7.63%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $236,869 $149,391 $151,441 $ 73,019 $ 39,102
Ratio of Expenses to average net assets:
AFTER ACCESSOR CAPITAL FEE WAIVERS 1.37% 1.59% 1.55% 1.52% 1.83%
BEFORE ACCESSOR CAPITAL FEE WAIVERS 1.37% 1.59% 1.55% 1.52% 1.93%
Ratio of net investment income(loss)to
average net assets:
AFTER ACCESSOR CAPITAL FEE WAIVERS 0.04% (0.24)% (0.20)% (0.26)% 0.10%
BEFORE ACCESSOR CAPITAL FEE WAIVERS 0.04% (0.24)% (0.20)% (0.26)% 0.00%
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 251.23% 196.37% 196.66% 157.66% 84.85%
=========================================================================================================================
INVESTOR CLASS SHARES(1) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.85 $ 17.88
NET INVESTMENT LOSS (0.08) (0.06)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 8.13 (0.66)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 8.05 (0.72)
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM CAPITAL GAINS (3.57) (0.31)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (3.57) (0.31)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.33 $ 16.85
======================================================================================================================
TOTAL RETURN(2) 48.23% (4.01)%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 38,647 $ 18,963
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.87% 2.05%*
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (0.46)% (0.68)%*
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 251.23% 196.37%
</TABLE>
(1) Class commenced operations on July 6, 1998.
(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 Fund.
*Annualized.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
INTERMEDIATE FIXED-INCOME FUND
- ------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past5 years. Separate tables are provided and
reflect financial results for each of a Fund's Advisor and Investor Class
Shares. Certain information reflects financial results for a single Fund share.
The total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
ADVISOR CLASS SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.47 $ 12.19 $ 11.90 $ 12.29 $ 11.04
NET INVESTMENT INCOME 0.68 0.67 0.71 0.67 0.71
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (1.12) 0.32 0.29 (0.39) 1.25
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.44) 0.99 1.00 0.28 1.96
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.68) (0.67) (0.71) (0.67) (0.71)
DISTRIBUTIONS FROM CAPITAL GAINS (0.05) (0.04) 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.73) (0.71) (0.71) (0.67) (0.71)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.30 $ 12.47 $ 12.19 $ 11.90 $ 12.29
==========================================================================================================================
TOTAL RETURN(2) (3.58)% 8.38% 8.62% 2.56% 18.26%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 56,895 $ 48,489 $ 55,197 $ 52,248 $ 36,878
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.68% 0.79% 0.84% 0.88% 0.96%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 5.89% 5.46% 5.88% 5.79% 6.07%
- --------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 60.40% 113.00% 84.35% 94.69% 187.62%
=========================================================================================================================
INVESTOR CLASS SHARES(1) 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.47 $ 12.29
NET INVESTMENT INCOME 0.63 0.28
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (1.12) 0.24
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.49) 0.52
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.63) (0.30)
DISTRIBUTIONS FROM CAPITAL GAINS (0.05) (0.04)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.68) (0.34)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.30 $ 12.47
==========================================================================================================================
TOTAL RETURN(2) (4.05)% 4.29%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 10,907 $ 9,146
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.18% 1.27%*
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 5.39% 4.75%*
- --------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 60.40% 113.00%
</TABLE>
(1) Class commenced operations on July 14, 1998.
(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 respectiv
epayment dates of each Fund.
*Annualized
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE FIXED-INCOME FUND
- ------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past5 years. Separate tables are provided and
reflect financial results for each of a Fund's Advisor and Investor Class
Shares. Certain information reflects financial results for a single Fund share.
The total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
ADVISOR CLASS SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.33 $ 12.27 $ 12.16 $ 12.32 $ 11.62
NET INVESTMENT INCOME 0.63 0.68 0.64 0.59 0.60
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (0.49) 0.14 0.11 (0.16) 0.70
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.14 0.82 0.75 0.43 1.30
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.63) (0.63) (0.64) (0.59) (0.60)
DISTRIBUTIONS FROM CAPITAL GAINS (0.01) (0.13) 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.64) (0.76) (0.64) (0.59) (0.60)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.83 $ 12.33 $ 12.27 $ 12.16 $ 12.32
=========================================================================================================================
TOTAL RETURN(2) 1.22% 6.87% 6.33% 3.63% 11.42%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 50,200 $ 42,454 $ 40,942 $ 36,701 $ 35,272
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.70% 0.82% 0.86% 0.93% 0.94%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 5.32% 5.12% 5.20% 4.89% 4.99%
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 45.89% 69.64% 53.30% 31.12% 41.93%
=========================================================================================================================
INVESTOR CLASS SHARES(1) 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.33 $ 12.32
NET INVESTMENT INCOME 0.58 0.27
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (0.49) 0.17
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.09 0.44
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.58) (0.30)
DISTRIBUTIONS FROM CAPITAL GAINS (0.01) (0.13)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.59) (0.43)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.83 $ 12.33
=========================================================================================================================
TOTAL RETURN(2) 0.70% 3.55%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 10,439 $ 6,255
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.20% 1.31%*
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 4.82% 4.57%*
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 45.89% 69.64%
</TABLE>
(1) Class commenced operations on July 14, 1998.
(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 Fund.
*Annualized
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND
- ------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past5 years. Separate tables are provided and
reflect financial results for each of a Fund's Advisor and Investor Class
Shares. Certain information reflects financial results for a single Fund share.
The total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
ADVISOR CLASS SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.59 $ 12.60 $ 12.23 $ 12.38 $ 11.36
NET INVESTMENT INCOME 0.73 0.70 0.72 0.73 0.76
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (0.58) 0.09 0.42 (0.15) 1.02
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.15 0.79 1.14 0.58 1.78
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.73) (0.70) (0.72) (0.73) (0.76)
DISTRIBUTIONS FROM CAPITAL GAINS (0.03) (0.10) (0.05) 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.76) (0.80) (0.77) (0.73) (0.76)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.98 $ 12.59 $ 12.60 $ 12.23 $ 12.38
=========================================================================================================================
TOTAL RETURN(2) 1.19% 6.43% 9.53% 4.95% 16.03%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $127,307 $128,788 $109,747 $ 73,862 $ 49,830
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.89% 0.88% 0.84% 0.95% 1.03%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 5.91% 5.59% 5.93% 6.08% 6.41%
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 273.95% 278.18% 211.66% 356.23% 422.56%
=========================================================================================================================
INVESTOR CLASS SHARES(1) 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.59 $ 12.67
NET INVESTMENT INCOME 0.66 0.31
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (0.58) 0.01
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.08 0.32
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.66) (0.33)
DISTRIBUTIONS FROM CAPITAL GAINS (0.03) (0.07)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.69) (0.40)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.98 $ 12.59
=========================================================================================================================
TOTAL RETURN(2) 0.69% 2.46%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 26,802 $ 17,369
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.39% 1.41%*
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 5.41% 5.09%*
- -------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 273.95% 278.18%
</TABLE>
(1) Class commenced operations on July 10, 1998.
(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 Fund.
*Annualized
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
- --------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past5 years. Separate tables are provided and
reflect financial results for each of a Fund's Advisor and Investor Class
Shares. Certain information reflects financial results for a single Fund share.
The total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
ADVISOR CLASS SHARES 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
NET INVESTMENT INCOME 0.05 0.05 0.05 0.05 0.05
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.05) (0.05) (0.05) (0.05) (0.05)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==========================================================================================================================
TOTAL RETURN(2) 4.72% 5.00% 5.07% 4.78% 5.33%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $380,620 $153,148 $ 50,910 $ 61,672 $ 41,882
Ratio of expenses to average net assets:
AFTER ACCESSOR CAPITAL FEE WAIVERS 0.48% 0.53% 0.54% 0.59% 0.53%
BEFORE ACCESSOR CAPITAL FEE WAIVERS 0.48% 0.53% 0.54% 0.59% 0.78%
Ratio of net investment income to average net assets:
AFTER ACCESSOR CAPITAL FEE WAIVERS 4.66% 4.83% 4.96% 4.73% 5.14%
BEFORE ACCESSOR CAPITAL FEE WAIVERS 4.66% 4.83% 4.96% 4.73% 4.89%
==========================================================================================================================
INVESTOR CLASS SHARES(1) 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
NET INVESTMENT INCOME 0.04 0.02
DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.04) (0.02)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
==========================================================================================================================
TOTAL RETURN(2) 4.20% 1.83%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 8,034 $ 5,071
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.98% 1.03%*
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 4.16% 4.40%*
</TABLE>
(1) Class commenced operations on July 29, 1998.
(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 Fund.
* Annualized.
<PAGE>
================================================================================
APPENDIX A
- --------------------------------------------------------------------------------
The following information has been supplied by the respective preparer of the
index or has been obtained from other publicly available information.
- --------------------------------------------------------------------------------
STANDARD & POOR'S 500 INDEX*
- ----------------------------
The purpose of 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: 376 Industrials, 41 Utilities, 11
Transportation and 71 Financial. Since some industries are characterized by
companies of relatively small stock capitalization, the index does not comprise
the 500 exchange listed companies. The S&P membership currently consists of 423
NYSE, 74 NASDAQ and 2 AMEX traded companies.
Component stocks are chosen solely with the aim of achieving a distribution by
broad industry groupings for market size, liquidity and that are representative
of the U.S. economy. 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 Standard & Poor's 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.
- --------------------------------------------------------------------------------
*"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 FUND AND VALUE FUND ARE
NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S.
- --------------------------------------------------------------------------------
S&P500/BARRA GROWTH INDEX
S&P500/BARRA VALUE INDEX
- ------------------------
BARRA, in collaboration with Standard and Poor's, has constructed the
S&P500/BARRA Growth Index (the "Growth Index") and S&P500/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
Technology and Health Care than the S&P 500.
As of December 31, 1999 there were 393 companies in the Value Index and 106
companies in the Growth Index.
<PAGE>
================================================================================
APPENDIX A
- --------------------------------------------------------------------------------
WILSHIRE 4500 INDEX*
- --------------------
While the S&P 500 includes the preponderance of large market capitalization
stocks, it excludes most of the medium- and small-size companies that comprise
the remaining 24% 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 NYSE and American Stock Exchange as well
as on the Nasdaq Stock 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
7,000 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.
- --------------------------------------------------------------------------------
*"WILSHIRE 4500" AND "WILSHIRE 5000" ARE REGISTERED TRADEMARKS OF WILSHIRE
ASSOCIATES. THE SMALL TO MID CAP FUND IS NOT SPONSORED, ENDORSED, SOLD OR
PROMOTED BY WILSHIRE ASSOCIATES.
- --------------------------------------------------------------------------------
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE + EMF INDEX*
- ------------------------------------------------------
The MSCI EAFE + EMF Index is a market-capitalization-weighted index composed of
companies representative of the market structure of 45 Developed and Emerging
Market countries. The index is calculated without dividends or with gross
dividends reinvested, in both U.S. dollars and local currencies.
The MSCI EAFE Index is a market-capitalization-weighted index composed of
companies representative of the market structure of 20 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 25
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 December 31, 1999, the MSCI EAFE + EMF Index consisted of 1,793 companies
traded on stock markets in 45 countries. The weighting of the MSCI EAFE + EMF
Index by country was as follows:
Developed Markets: Australia 2.22%, Austria 0.20%, Belgium 0.81%, Denmark 0.71%,
Finland 2.69%, France 9.26%, Germany 9.42%, Hong Kong 2.11%, Ireland 0.38%,
Italy 3.82%, Japan 24.76%, Netherlands 4.73%, New Zealand 0.14%, Norway 0.34%,
Portugal 0.41%, Singapore 0.96%, Spain 2.43%, Sweden 2.43%, Switzerland 5.13%,
United Kingdom 17.30%.
<PAGE>
================================================================================
APPENDIX A
- --------------------------------------------------------------------------------
Emerging Markets: Argentina 0.21%, Brazil Free 0.98%, Chile 0.35%, China Free
0.04%, Colombia 0.03%, Czech Republic 0.06%, Greece 0.64%, Hungary 0.12%, India
0.74%, Indonesia Free 0.17%, Israel 0.41%, Jordan 0.01%, Korea 1.37%, Mexico
Free 1.15%, Pakistan 0.03%, Peru 0.07%, Philippines Free 0.12%, Poland 0.12%,
Russia 0.24%, South Africa 1.06%, Sri Lanka 0.00%, Taiwan Free 1.08%, Thailand
Free 0.30%, Turkey 0.40%, Venezuela 0.06%.
Unlike other broad-based indices, the number of stocks included in MSCI EAFE +
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 + 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 + EMF Index was equal to 100.0 on January 1, 1988. As of December 31,
1999 the current value of the MSCI EAFE + EMF Index was 231.2.
- --------------------------------------------------------------------------------
*"EAFE" IS A REGISTERED TRADEMARK OF MORGAN STANLEY CAPITAL INTERNATIONAL. THE
INTERNATIONAL FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MORGAN
STANLEY CAPITAL INTERNATIONAL.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS *
GOVERNMENT/CORPORATE INDEX
GOVERNMENT/CORPORATE 1-5 YEAR INDEX
U.S. CORPORATE HIGH YIELD INDEX
MORTGAGE-BACKED SECURITIES INDEX
- --------------------------------
The Lehman Brothers Bond Indices include fixed-rate debt issues rated investment
grade (Baa3) or higher by Moody's Investor Service ("Moody's"). For issues not
rated by Moody's, the equivalent Standard & Poor's ("S&P") rating is used, and
for those not rated by S&P, the equivalent Fitch Investors Service, Inc. rating
is used. These indices also include fixed-rate debt securities issued by the
U.S. Government, its agencies or instrumentalities, which are generally not
rated but have an implied rating greater than AAA. 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 (public
obligations of the United States Treasury, that have remaining maturities of
more than one year, 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 or foreign debt guaranteed by the
U.S. Government).
The Corporate Bond Index includes 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 Government/Corporate 1-5 Year 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 U.S. Corporate High Yield Index covers the universe of fixed-rate,
noninvestment grade debt issues rated Ba1 or lower by Moody's. If no Moody's
rating is available, bonds must be rated BB+ or lower by S&P; and if no S&P
rating is available, bonds must be rated below investment grade by Fitch
Investor's Service. A small number of unrated bonds is included in the index; to
be eligible they must have previously held a high yield rating or have been
associated with a high yield issuer, and must trade accordingly. All bonds
included in the High Yield Index must be dollar-denominated and nonconvertible
and have at least one year remaining to maturity and an outstanding par value of
at least $100 million. Yankee and global bonds (SEC registered) or issuers in
non-emerging countries are included as well as issue zeroes and step-up coupon
structures.
The Mortgage-Backed Securities Index covers 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).
- --------------------------------------------------------------------------------
THE INTERMEDIATE FIXED-INCOME FUND, THE SHORT-INTERMEDIATE FIXED-INCOME FUND,
THE HIGH YIELD BOND FUND AND THE MORTGAGE SECURITIES FUND ARE NOT SPONSORED,
ENDORSED, SOLD OR PROMOTED BY LEHMAN BROTHERS.
- --------------------------------------------------------------------------------
<PAGE>
[Back Cover]
SHAREHOLDER REPORTS. Accessor Funds publishes Annual and Semi-Annual Reports,
which contain information about each Fund's recent performance, including:
[BULLET] Management's discussion about recent market conditions, economic
trends and Fund strategies that affected their performance over
the recent period
[BULLET] Fund performance data and financial statements
[BULLET] Fund holdings
STATEMENT OF ADDITIONAL INFORMATION ("SAI"). The SAI contains more detailed
information about Accessor Funds and each Fund. The SAI is incorporated by
reference into this Prospectus, making it legally part of this Prospectus.
Free copies of Accessor Funds' Annual Report, Semi-Annual Report, SAI and other
information are available through your financial intermediary or from:
ACCESSOR CAPITAL MANAGEMENT LP
1420 Fifth Avenue, Suite 3600
Seattle, Washington 98101
(800) 759-3504
(206) 224-7420
www.accessor.com
You may obtain copies of documents from the SEC, upon payment of duplicating
fees, or view documents at the SEC's Public Reference Room in Washington, D.C.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-6009
202-942-8090
e-mail: [email protected]
www.sec.gov
Accessor(R) is a registered trademark of Accessor Capital Management LP.
SEC file number: 811-06337.
<PAGE>
[graphic] ADVISOR CLASS SHARES
ACCESSOR(R) FUNDS, INC. April 29, 2000
U.S. GOVERNMENT MONEY FUND Prospectus
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
[LOGO] ACCESSOR
<PAGE>
TABLE OF CONTENTS
The Fund
FUND SUMMARY.............................................................4
PERFORMANCE..............................................................4
EXPENSES.................................................................5
OBJECTIVE AND STRATEGIES.................................................6
PRINCIPAL SECURITIES AND RISKS...........................................6
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE...........................7
Shareholder Information
PURCHASING FUND SHARES...................................................8
Exchanging Fund Shares..................................................10
Redeeming Fund Shares...................................................11
Dividends and Distributions.............................................12
Valuation of Securities.................................................12
Taxation................................................................12
FINANCIAL HIGHLIGHTS....................................................13
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC] U.S. GOVERNMENT MONEY FUND
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE & PRINCIPLE STRATEGIES The U.S. Government Money Fund 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.
PRICIPAL STRATEGIES Accessor Capital directly invests the assets of the Fund.
Accessor Capital uses quantitative analysis to maximize the Fund's yield. The
Fund follows industry standard requirements concerning the quality and
diversification of its investments. The Fund seeks to maintain an average
maturity of 90 days or less, while maintaining liquidity and maximizing current
yield.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS
INTEREST RATE RISK. The Fund's yield will vary and is expected to react to
changes in short-term interest rates.
INFLATION RISK. Over time, the real value of the Fund's yield may be eroded by
inflation.
STABLE NET ASSET VALUE. Although the U.S. Government Money Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
- --------------------------------------------------------------------------------
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money by investing in the Fund.
- --------------------------------------------------------------------------------
================================================================================
PERFORMANCE
- --------------------------------------------------------------------------------
The following table illustrates changes (and therefore the risk elements) in the
performance of Advisor Class Shares of the U.S. Government Money Fund from year
to year and compares the performance of Advisor Class Shares to the performance
of a market index over time. As with all mutual funds, how the U.S. Government
Money Fund has performed in the past is not an indication of how it will perform
in the future.
[Bar Chart] YEAR BY YEAR AVERAGE ANNUAL TOTAL RETURN
TOTAL RETURN AS OF 12/31/99
[Data Points] Life of
1 Yr 5 Yr Fund*
----- ------ --------
1993 2.81 Fund 4.72% 4.98% 4.37%
1994 3.70 Salomon Brothers
1995 5.33 U.S. 3 Mo.
1996 4.78 T-bill Index(1) 4.74% 5.21% 4.65%**
1997 5.07 * 4/9/92 inception date
1998 5.00 **Index measured from 5/1/92
1999 4.72
As of 12/31 each year
Best Quarter: Q 2 `95 1.37%
Worst Quarter: Q 2 `93 0.66%
- --------------------------------------------------------------------------------
(1) THE SALOMON BROTHERS U.S. 3 MONTH T-BILL INDEX IS DESIGNED TO MEASURE THE
RETURN OF THE 3 MONTH TREASURY BILLS.
THE U.S. GOVERNMENT MONEY FUND'S 7-DAY EFFECTIVE YIELD ON 12/31/99 WAS 5.10%.
FOR THE FUND'S CURRENT YIELD, CALL TOLL-FREE (800) 759-3504.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
EXPENSES
- --------------------------------------------------------------------------------
The following tables describe the fees and expenses that you may pay if you buy
and hold Advisor Class Shares of the U.S. Government Money Fund. Except where
noted, the tables reflect historical fees and expenses of the Fund.
================================================================================
U.S. GOVERNMENT
MONEY FUND(2)
- --------------------------------------------------------------------------------
SHAREHOLDER FEES(1),(2)
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends None
Maximum Deferred Sales Charge None
Redemption Fee(3) None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES DEDUCTED FROM FUND ASSETS)
Management Fees 0.25%
Distribution and Service (12b-1) Fee None
Other Expenses 0.23
----
Total Annual Fund Operating Expenses 0.48
====
- --------------------------------------------------------------------------------
- ----------
(1) Shares of the Fund are expected to be sold primarily through financial
intermediaries that may charge shareholders a fee. These fees are not
included in the table.
(2) An annual maintenance fee of $25.00 may be charged by Accessor Capital, as
the Transfer Agent to each IRA with an aggregate balance of less than
$10,000 on December 31 of each year.
(3) The Transfer Agent may charge a processing fee of $10.00 for each check
redemption request.
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
- ---------------
The Example shows what an investor in the Advisor Class Shares of the Fund could
pay over time. It is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Advisor Class Shares of the
Fund for the time periods indicated and then redeem all of your shares by wire
at the end of those periods. This Example does not include the effect of the $10
fee for check redemption requests. The Example also assumes that your investment
has a 5% rate of return each year and that the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
================================================================================
Fund One Year Three Years Five Years 10 Years
- ---- -------- ----------- ---------- --------
U.S. Government Money 59.00 154.00 269.00 604.00
================================================================================
<PAGE>
================================================================================
OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE. The U.S. Government Money fund 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.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES. The Fund follows industry guidelines concerning
the quality and maturity of its investments. The dollar-weighted average
portfolio maturity of the Fund will not exceed 90 days. The Fund seeks to
achieve its objective by investing at least 65% and generally more than 80% of
the Fund's total assets in fixed-income securities.
The U.S. Government Money Fund seeks to maintain a stable share par value of
$1.00 per share, although there is no assurance that it will be able to do so.
It is possible to lose money by investing in the U.S. Government Money Fund.
OTHER INVESTMENT STRATEGIES. The Fund may enter into repurchase agreements
collateralized by U.S. Government or agency securities.
================================================================================
SECURITIES AND RISKS
- --------------------------------------------------------------------------------
Many factors affect the Fund's performance. The Fund's yield changes daily based
on changes in financial markets, interest rates and in response to other
economic, political or financial developments. The Fund's reaction to these
developments will be affected by the financial condition and economic sector of
an issuer, and the Fund's level of investment in the securities of that issuer.
The Fund's investment objective stated above is fundamental and may not be
changed without shareholder approval.
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY TYPES
- ------------------------
[graphic] U.S. GOVERNMENT SECURITIES are high-quality securities issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the U.S.
Government. U.S. Government securities may be backed by the full faith and
credit of the U.S. Treasury, the right to borrow from the U.S. Treasury, or the
agency or instrumentality issuing or guaranteeing the security.
[graphic] MONEY MARKET SECURITIES are high-quality, short-term debt securities
that pay a fixed, variable or floating interest rate. Securities are often
specifically structured so that they are eligible investments for a money market
fund. For example, in order to satisfy the maturity restrictions for a money
market fund, some money market securities have demand or put features that have
the effect of shortening the security's maturity.
- --------------------------------------------------------------------------------
OTHER SECURITY TYPES
- --------------------
[graphic] REPURCHASE AGREEMENTS are an agreement to buy a security at one price
and a simultaneous agreement to sell it back at an agreed upon price.
<PAGE>
================================================================================
SECURITIES AND RISKS
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
- ---------------
[GRAPHIC] INTEREST RATE RISK. When interest rates fall, the U.S. Government
Money Fund's yield will generally fall as well. When interest rates fall, your
rate will fall but, unlike other fixed-income securities, in the U.S. Government
Money Fund there will be no corresponding increase in price. When rates go up,
if the movement is very sharp, the principal value of the share may fall below
$1.00.
[Graphic] INFLATION RISK. The real value of the U.S. Government Money Market
Fund's yield may be eroded by inflation over time. The Fund may underperform the
bond and equity markets over time.
[Graphic] STABLE NET ASSET. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in
the Fund.
- --------------------------------------------------------------------------------
OTHER RISKS
- -----------
[GRAPHIC] CREDIT RISK. The U.S. Government Money Fund invests in repurchase
agreements, agencies and government securities. The risk of a credit rating
downgrade or default of U.S. Government securities is considered remote.
Agencies are not backed by the full faith and credit of the U.S. Government but
are considered just below U.S. Government securities in credit worthiness.
Repurchase agreements are corporate debt, but are 102% collateralized by agency
and/or government paper.
[Graphic] REPURCHASE AGREEMENTS. 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 Fund
if the other party to the repurchase agreement becomes bankrupt or otherwise
fails to deliver the securities.
================================================================================
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
MANAGER AND ADMINISTRATOR Accessor Capital Management LP, 1420 Fifth Avenue,
Suite 3600, Seattle, WA 98101,
The Fund is one of eight portfolios of Accessor Funds, Inc. ("Accessor Funds"),
a Maryland corporation. Accessor Capital develops the investment programs for
the Funds, selects the Money Managers for the other Funds, and monitors the
performance of the Money Managers. The Fund pays Accessor Capital an annual
management fee of 0.25% as a percentage of the Fund's average daily net assets
for providing management and administration services. In addition Accessor
Capital provides transfer agent, registrar, dividend disbursing agent and
certain other services to the Fund. For providing these services, Accessor
Capital receives (i) a fee equal to 0.13% of the average daily net assets of the
Fund and (ii) a transaction fee of $.50 per transaction.
J. Anthony Whatley, III, is the Executive Director of Accessor Capital. Ravindra
A. Deo, Vice President and Chief Investment Officer of Accessor Capital, is
primarily responsible for the day-to-day management of the Fund. Accessor
Capital directly invests the assets of the U.S. Government Money Fund. Accessor
Capital receives no additional fee beyond its management fee for this service.
The Fund paid 0.25% of the average net assets of the Fund to Accessor Capital
for management fees in fiscal year 1999.
<PAGE>
================================================================================
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
WHERE TO PURCHASE
- -----------------
[GRAPHIC] DIRECT. Investors may purchase Advisor Class shares directly from
Accessor Funds for no sales charge or commission.
[GRAPHIC] FINANCIAL INTERMEDIARIES. Advisor Class shares may be purchased
through financial intermediaries, such as banks, broker-dealers, registered
investment advisers and providers of fund supermarkets. In certain cases, the
Fund will be deemed to have received a purchase or redemption when it is
received by the financial intermediary. The order will be priced at the next
calculated NAV. These financial intermediaries may charge transaction,
administrative or other fees to shareholders and may impose other limitations on
buying, selling or transferring shares that are not described in this
Prospectus. Some features of the Advisor Class shares, such as investment
minimums, redemption fees and certain trading restrictions, may be modified or
waived by financial intermediaries. Shareholders should contact their financial
intermediary for information on fees and restrictions.
- --------------------------------------------------------------------------------
HOW TO PURCHASE
- ---------------
Purchase orders are accepted on each business day that the New York Stock
Exchange is open and must be received in proper form prior to the close of the
New York Stock Exchange, normally 4:00 p.m. Eastern time. If Accessor Capital
receives a purchase order for shares of U.S. Government Money Fund on any
business day and the invested monies are wired before 9:00 a.m., Pacific time,
the investor will be entitled to receive that day's dividend. Otherwise,
Accessor Capital must receive payment for shares by 12:00 p.m. Eastern time on
the business day following the purchase request. All purchases must be made in
U.S. dollars. Purchases may be made any of the following ways:
[Graphic] BY CHECK. Checks made payable to "Accessor Funds, Inc." and drawn on a
U.S. bank should be mailed with the completed application or with the account
number and name of the Fund noted on the check to:
Accessor Funds, Inc.
P. 0. Box 1748
Seattle, WA 98111-1748
[Graphic] BY FEDERAL FUNDS WIRE. Wire instructions are described on the account
application.
[Graphic] BY TELEPHONE. Shareholders with aggregate account balances of at least
$1 million may purchase Advisor Class shares by telephone at 1-800-759-3504. To
prevent unauthorized transactions, the Accessor Funds may use reasonable
procedures to verify telephone requests.
[Graphic] BY PURCHASES IN KIND. Under some circumstances, the Fund may accept
securities as payment for Advisor Class shares. Such securities would be valued
the same way the Fund's securities are valued. (See "Valuation of Securities".)
Please see "Additional Purchase and Redemption Information" in the Statement of
Additional Information for further information.
================================================================================
HELP BOX:
Advisor Class shares may not be purchased on days when the NYSE is closed for
trading: New Year's Day, Martin Luther King, Jr., Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
================================================================================
<PAGE>
================================================================================
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
IRAS/ROTH IRAS
- ---------------
Investors may purchase Advisor Class shares through an Individual or Roth
Retirement Custodial Account Plan. An IRA or Roth IRA account with an aggregate
balance of less than $10,000 across all Funds on December 31 of any year will be
assessed a $25.00 fee. Copies of an IRA or Roth IRA Plan may be obtained from
Accessor Capital by calling (800) 759-3504.
================================================================================
INVESTMENT MINIMUMS
- ------------------------------------- ------------------------------------------
REGULAR ACCOUNTS RETIREMENT ACCOUNTS
- --------------------------------------------------------------------------------
Initial Investment Initial Investment
- --------------------------------------------------------------------------------
One Fund only: $5,000 Traditional IRA/ $2,000 aggregated
Multiple Funds: $10,000 aggregated Roth IRA: among the Funds
among the Funds
Additional Investment(s) Additional Investment(s)
- --------------------------------------------------------------------------------
One Fund only: $1,000 Traditional IRA/ $2,000 aggregated
Multiple Funds: $2,000 aggregated Roth IRA: among the Funds
among the Funds
- --------------------------------------------------------------------------------
Accessor Funds may accept smaller purchase amounts or reject any purchase order
it believes may disrupt the management of the Funds
- --------------------------------------------------------------------------------
SHARE PRICING
- -------------
Investors purchase Advisor Class Shares of the Fund at its net asset value per
share ("NAV"). The NAV is calculated by adding the value of Fund assets
attributable to Advisor Class Shares, subtracting Fund liabilities attributable
to the class, and dividing by the number of outstanding Advisor Class Shares.
The NAV is calculated each day that the New York Stock Exchange ("NYSE") is open
for business. The Fund generally calculates its NAV at the close of regular
trading on the NYSE, generally 4:00 p.m. Eastern time. Shares are purchased at
the next NAV calculated after purchase requests are received by the Fund.
- --------------------------------------------------------------------------------
MARKET TIMING
- -------------
Short-term or excessive trading into and out of the Fund may harm performance by
disrupting portfolio management strategies and by increasing expenses. A Fund
may temporarily or permanently terminate the exchange privilege of any investor
who makes more than four exchanges out of the Fund per calendar year. Moreover,
the Fund may reject any purchase orders, including exchanges, particularly from
market timers or investors who, in Accessor Capital's opinion, have a pattern of
short-term or excessive trading or whose trading has been or may be disruptive
to the Fund. For these purposes, Accessor Capital may consider an investor's
trading history in the Fund or other Accessor Funds, and accounts under common
ownership or control.
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
- --------------------
For additional information about purchasing shares of Accessor Funds, please
contact us at (800) 759-3504.
<PAGE>
================================================================================
EXCHANGING FUND SHARES
- --------------------------------------------------------------------------------
As a shareholder, you have the privilege of exchanging shares of the Fund for
shares of other Accessor Funds. Advisor Class Shares may be exchanged for shares
of any other Fund on days when the NYSE is open for business, so long as
shareholders meet the normal investment requirements of the other Fund. The
request must be received in proper form by Accessor Funds or certain financial
intermediaries prior to the close of the NYSE, normally 4:00 p.m. Eastern time.
Shares will be exchanged at the next NAV calculated after Accessor Capital
receives the exchange request in proper form. The Fund may temporarily or
permanently terminate the exchange privilege of any investor who makes more than
four exchanges out of the Fund per calendar year. Shareholders should read the
prospectus of any other Fund into which they are considering exchanging.
- --------------------------------------------------------------------------------
EXCHANGES THROUGH ACCESSOR FUNDS.
- ---------------------------------
Accessor Funds does not currently charge fees on exchanges directly through it.
This exchange privilege may be modified or terminated at any time by Accessor
Funds upon 60 days notice to shareholders. Exchanges may be made any of the
following ways:
[GRAPHIC] BY MAIL. Share exchange instructions may be mailed to:
Accessor Funds
P. O. Box 1748
Seattle, WA 98111-1748
[GRAPHIC] BY FAX. Share exchange instructions may be faxed to Accessor Funds at
(206) 224-4274.
AN EXCHANGE OF SHARES FROM A FUND INVOLVES A REDEMPTION OF THOSE SHARES AND WILL
BE TREATED AS A SALE FOR TAX PURPOSES.
- --------------------------------------------------------------------------------
EXCHANGES THROUGH FINANCIAL INTERMEDIARIES
- ------------------------------------------
You should contact your financial intermediary directly to make exchanges. Your
financial intermediary may charge additional fees for these transactions.
<PAGE>
================================================================================
REDEEMING FUND SHARES
- --------------------------------------------------------------------------------
Investors may request to redeem Advisor Class Shares on any day that the NYSE is
open for business. The request must be received in proper form by the Fund or
certain financial intermediaries prior to the close of the NYSE, normally 4:00
p.m. Eastern time. Shares will be redeemed at the next NAV calculated after
Accessor Capital receives the redemption request in proper form. Payment will
ordinarily be made within seven days of the request by wire-transfer to a
shareholder's domestic commercial bank account. Shares may be redeemed from
Accessor Funds any of the following ways:
[GRAPHIC] BY MAIL. Redemption requests may be mailed to:
Accessor Funds
P. 0. Box 1748
Seattle, WA 98111-1748
[GRAPHIC] BY FAX. Redemption requests may be faxed to Accessor Funds at (206)
224-4274.
[GRAPHIC] BY TELEPHONE. Shareholders with aggregate account balances of at least
$1 million may request redemption of shares by telephone at (800) 759-3504. To
prevent unauthorized transactions, Funds may use reasonable procedures to verify
telephone requests.
Shareholders may request that payment be made by check to the shareholders of
record at the address of record. Such requests must be in writing and signed by
all shareholders of record. Shareholders may also request that a redemption be
made payable to someone other than the shareholder of record or be sent to an
address other than the address of record. Such requests must be made in writing,
be signed by all shareholders of record, and accompanied by a signature
guarantee. The Transfer Agent may charge a $10.00 processing fee for each
redemption check. Shares also may be redeemed through financial intermediaries
from whom shares were purchased. Financial intermediaries may charge a fee for
this service.
Large redemptions may disrupt the management and performance of the Fund. The
Fund reserves the right to delay delivery of your redemption proceeds -- up to
seven days -- if the Fund determines that the redemption amount will disrupt its
operation or performance. If you redeem more than $250,000 worth of a Fund's
shares within any 90-day period, the Fund reserves the right the pay part or all
of the redemption proceeds above $250,000 in kind, i.e., in securities, rather
than cash. If payment is made in kind, you may incur brokerage commissions if
you elect to sell the securities, or market risk if you elect to hold them.
[GRAPHIC] SYSTEMATIC WITHDRAWAL PLAN. Shareholders may request an automatic,
monthly, quarterly or annual redemption of shares under the Systematic
Withdrawal Plan (minimum monthly amount is $500). Applications for this plan may
be obtained from Accessor Funds and must be received by Accessor Funds at least
ten calendar days before the first scheduled withdrawal date. Systematic
Withdrawals may be discontinued at any time by a shareholder or Accessor Funds.
[GRAPHIC] LOW ACCOUNT BALANCES. Accessor Funds may redeem any account with a
balance of less than $500 per Fund or less than $2,000 in aggregate across all
the Funds in the Accessor Funds complex, if the shareholder is not part of an
Automatic Investment Plan. Shareholders will be notified in writing when they
have a low balance and will have 60 days to purchase additional shares. Shares
will not be redeemed if an account drops below the minimum due to market
fluctuations.
In the event of an emergency as determined by Accessor Funds, it may suspend the
right of redemption or postpone payments to shareholders. If the Board of
Directors determines a redemption payment may harm the remaining shareholders of
a Fund, it may pay a redemption in whole or in part by a distribution in kind of
securities from the Fund.
================================================================================
HELP BOX:
Redemption requests for shares that were purchased by check will be honored at
the next NAV calculated after receipt of the redemption request. However,
redemption proceeds will not be transmitted until the check used for the
investment has cleared.
================================================================================
<PAGE>
================================================================================
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
[GRAPHIC] DIVIDENDS. The Fund intends to annually distribute as dividends to its
shareholders substantially all of its net investment income. The Board of
Directors presently intends to declare dividends for the Fund daily and
distribute them on the first business day of the following month.
[GRAPHIC] OTHER DISTRIBUTIONS. The Board of Directors intends to distribute to
the Fund's shareholders any capital gains annually, generally in mid-December. A
Fund may need to make additional distributions at year-end to avoid federal
income or excise taxes.
[GRAPHIC] AUTOMATIC REINVESTMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. All
dividends and other distributions on Advisor Class Shares will be automatically
reinvested in additional Advisor Class Shares unless a shareholder elects to
receive them in cash.
================================================================================
VALUATION OF SECURITIES
- --------------------------------------------------------------------------------
The Fund generally values its securities using amortized cost, and securities
for which market quotations are not readily available are valued at fair value.
If a security's value has been materially affected by events occurring after the
close of the exchange or market on which the security is principally traded,
that security may be valued by another method that the Board of Director's
believes accurately reflects fair value.
================================================================================
TAXATION
- --------------------------------------------------------------------------------
Dividends and other distributions that shareholders receive from the Fund,
whether received in cash or reinvested in additional shares of the Fund, are
subject to federal income tax and may also be subject to state and local tax.
Generally, dividends and distributions of net short-term capital gains are
taxable as ordinary income, while distributions of other gains are taxable as
long-term capital gains (generally, at the rate of 20% or less for non-corporate
shareholders).
Certain dividends and other distributions declared by the Fund in October,
November, or December of any year are taxable to shareholders as though received
on December 31 of that year if paid to them during the following January.
Accordingly, those distributions will be taxed to shareholders for the year in
which that December 31 falls.
An exchange of the Fund's shares for shares of another Fund of will be treated
as a sale of the Fund's shares, and any gain on the transaction will be subject
to federal income tax.
After the conclusion of each calendar year, shareholders will receive
information regarding the taxability of dividends and other distributions paid
by the Fund during the preceding year. The Fund may be required to withhold and
remit to the U.S. Treasury 31% of all dividends, capital gain distributions, and
redemption proceeds payable to individuals and certain other non-corporate
shareholders who have not provided the Fund with a correct taxpayer
identification number. Shareholders should consult a tax adviser for further
information regarding the federal, state, and local tax consequences of an
investment in Advisor Class Shares.
The foregoing is only a brief summary of certain federal income tax consequences
of investing in the Funds. Please see the Statement of Additional Information
for further discussion.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
- --------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
=========================================================================================================================
FOR A SHARE OUTSTANDING ADVISOR CLASS SHARES
THROUGHOUT THE PERIOD 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
NET INVESTMENT INCOME 0.05 0.05 0.05 0.05 0.05
DISTRIBUTIONS FROM NET INVESTMENT
INCOME (0.05) (0.05) (0.05) (0.05) (0.05)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==========================================================================================================================
TOTAL RETURN(1) 4.72% 5.00% 5.07% 4.78% 5.33%
NET ASSETS, END OF PERIOD (IN THOUSANDS) $380,620 $153,148 $ 50,910 $ 61,672 $ 41,882
Ratio of expenses to average net assets:
AFTER ACCESSOR CAPITAL FEE WAIVERS 0.48% 0.53% 0.54% 0.59% 0.53%
BEFORE ACCESSOR CAPITAL FEE WAIVERS 0.48% 0.53% 0.54% 0.59% 0.78%
Ratio of net investment income to average net assets:
AFTER ACCESSOR CAPITAL FEE WAIVERS 4.66% 4.83% 4.96% 4.73% 5.14%
BEFORE ACCESSOR CAPITAL FEE WAIVERS 4.66% 4.83% 4.96% 4.73% 4.89%
</TABLE>
(1) 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 Fund.
<PAGE>
[Back Cover]
SHAREHOLDER REPORTS. Accessor Funds publishes Annual and Semi-Annual Reports,
which contain information about the Fund's recent performance, including:
[bullet] Fund performance data and financial statements
[bullet] Fund holdings
STATEMENT OF ADDITIONAL INFORMATION ("SAI"). The SAI contains more detailed
information about Accessor Funds and each Fund. The SAI is incorporated by
reference into this Prospectus, making it legally part of this Prospectus.
Free copies of Accessor Fund's Annual Report, SAI, and other information are
available through your financial intermediary or from:
ACCESSOR CAPITAL MANAGEMENT LP
1420 Fifth Street, Suite 3600
Seattle, Washington 98101
800-759-3504
206-224-7420
www.accessor.com
You may obtain copies of documents from the SEC, upon payment of duplicating
fees, or view documents at the SEC's Public Reference Room in Washington, D.C.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-6009
202-942-8090
e-mail: [email protected]
www.sec.gov
Accessor(R) is a registered trademark of Accessor Capital Management LP.
SEC file number: 811-06337.
<PAGE>
ACCESSOR(R) FUNDS, INC.
1420 Fifth Avenue, Suite 3600
Seattle, WA 98101
(206) 224-7420/(800) 759-3504
www.accessor.com
Statement of Additional Information
Dated April 29, 2000
ACCESSOR(R) FUNDS, INC. ("Accessor Funds") is a multi-managed, no-load, open-end
management investment company, known as a mutual fund. Accessor Funds currently
consists of nine diversified investment portfolios (individually, a "Fund" and
collectively, the "Funds"), each with its own investment objective and policies.
The nine Funds are the Growth, Value, Small to Mid Cap Funds (the "Domestic
Equity Funds") and International Equity Fund (collectively with the Domestic
Equity Funds, the "Equity Funds") and the Intermediate Fixed-Income,
Short-Intermediate Fixed-Income, High Yield Bond and Mortgage Securities Funds
(the "Bond Funds") and U.S. Government Money Fund (collectively with the Bond
Funds, the "Fixed-Income Funds"). Each Fund offers two classes of shares, the
Advisor Class Shares and the Investor Class Shares, which are offered through
two prospectuses: the Advisor Class Shares Prospectus and the Investor Class
Shares Prospectus, each dated April 29, 2000 (collectively, the "Prospectuses").
In addition, Advisor Class Shares of the U.S. Government Money Fund are also
offered through a solo Prospectus. A copy of the applicable Prospectus may be
obtained free of charge by writing to or calling 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.
Information from the Annual Report to Shareholders for the fiscal year ended
December 31, 1999 is incorporated by reference into this Statement of Additional
Information. For a free copy of the Annual Report, call 1-800-759-3504.
Accessor Funds currently includes the following Funds:
GROWTH FUND -- seeks capital growth through investing primarily in equity
securities with greater than average growth characteristics selected from the
500 U.S. issuers that make up the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500").
VALUE FUND -- seeks generation of current income and capital growth by investing
primarily in income-producing equity securities selected from the 500 U.S.
issuers that make up the S&P 500.
SMALL TO MID CAP FUND -- seeks capital growth through investing primarily in
equity securities of small to medium capitalization issuers.
INTERNATIONAL EQUITY FUND -- 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 FUND -- 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 Accessor Funds' Board of Directors
(the "Board of Directors").
SHORT-INTERMEDIATE FIXED-INCOME FUND -- 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.
HIGH YIELD BOND FUND -- seeks high current income by investing primarily in
lower-rated, high-yield corporate debt securities.
MORTGAGE SECURITIES FUND -- 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 or another
relevant index approved by the Board of Directors.
U.S. GOVERNMENT MONEY FUND -- 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.
<PAGE>
Table of Contents
GENERAL INFORMATION AND HISTORY................................................4
INVESTMENT RESTRICTIONS, POLICIES AND RISK.....................................4
MANAGEMENT OF THE FUNDS.......................................................25
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................27
INVESTMENT ADVISORY AND OTHER SERVICES........................................31
VALUATION.....................................................................46
PORTFOLIO TRANSACTION POLICIES................................................47
PERFORMANCE INFORMATION.......................................................49
CODE OF ETHICS................................................................53
TAX INFORMATION...............................................................53
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................58
FINANCIAL STATEMENTS..........................................................61
<PAGE>
GENERAL INFORMATION AND HISTORY
Accessor Funds was incorporated in Maryland on June 10, 1991. Accessor
Funds is authorized to issue nine billion shares of common stock, $.001 par
value per share, and is currently divided into nine Funds. Each Fund offers 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 Accessor Funds, 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 Accessor Funds under
certain circumstances. All shares of a Fund 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 Fund is
entitled to its portion of all of the Fund's assets after all debts and expenses
of the Fund have been paid. The Funds' shares do not have cumulative voting
rights for the election of Directors. Pursuant to Accessor Funds' 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.
Accessor Capital Management LP ("Accessor Capital"), a Washington limited
partnership, is the manager and administrator of Accessor Funds, pursuant to a
Management Agreement with Accessor Funds. Accessor Capital is also Accessor
Funds' transfer agent, registrar, dividend disbursing agent and provides record
keeping, administrative and compliance services pursuant to its Transfer Agency
and Administrative Agreement ("Transfer Agency Agreement") with Accessor Funds.
INVESTMENT RESTRICTIONS, POLICIES AND RISK
Each Fund'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 Fund. As defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act"), a
majority of the outstanding voting securities of a Fund 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. Other policies may be changed without the
approval of shareholders. This section of the Statement of Additional
Information describes the Funds' investment restrictions, and other policies and
restrictions.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
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Each Fund is subject to the following "fundamental" investment
restrictions. Unless otherwise noted, these restrictions apply at the time an
investment is made. No Fund 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
Fund's total assets, more than 5% of the Fund's total assets would then be
invested in securities of a single issuer, or (ii) 25% or more of the Fund'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 Fund 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 Fund's
total assets would then be invested in securities of a single issuer, or (b) 25%
or more of the Fund'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 Fund 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 Fund's borrowings falls below 300%, the Fund 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 Fund
may purchase interests in real estate limited partnerships. The U.S. Government
Money Fund may not buy or sell commodities or commodity contracts, or real
estate or interests in real estate, except that the Fund 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 Fund) and except
through the lending of its portfolio securities as described below under
"Investment Policies--Securities Lending."
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 Fund 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 Fund 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 Fund'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 Fund 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 Fund may not purchase warrants.
Non-Fundamental Investment Restrictions
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The following are each Fund's non-fundamental investment restrictions.
These restrictions may be modified or eliminated without shareholder approval.
1. Subject to the limitation on investing not more than 15% of a Fund's net
assets in illiquid securities, no Fund 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 Fund will not
invest more than 10% of its net assets in illiquid securities (including
repurchase agreements maturing in more than seven days).
2. Each Fund's entry into reverse repurchase agreements and dollar rolls,
together with its other borrowings, is limited to 5% of its net assets.
3. Each Fund may invest up to 5% of its net assets in publicly traded real
estate investment trusts ("REITs").
4. Not more than 25% of a Fund's net assets (determined at the time of the
short sale) may be subject to short sales against-the-box.
5. Each Fund (except for the U.S. Government Money Fund) may invest up to
5% of its net assets in rights and warrants of issuers that meet its investment
objective and policies. Rights or warrants acquired as a result of ownership of
other instruments shall not be subject to this limitation.
6. Each Fund may invest up to 15% of its net assets in illiquid securities;
provided, however, the U.S. Government Money Fund may invest up to 10% of its
net assets in illiquid securities.
7. The International Fund will not enter into forward contracts on a
regular basis or continuous basis if it 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 it would be obligated to deliver
an amount of foreign currency in excess of the value of its portfolio securities
or other assets denominated in that currency.
8. The Bond Funds and the International Fund may invest up to 5% of their
net assets in inverse floaters.
9. No Fund will invest more than 5% of its net assets in privately issued
STRIPS.
10. A 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.
11. Consistent with applicable regulatory requirements, each Fund, 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, 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 Fund's net assets, currently 33-1/3%. The Fund 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.
12. The U. S. Government Money Fund utilizes the amortized cost method of
valuation in accordance with regulations issued by the Securities and Exchange
Commission (the "SEC"). Accordingly, the U. S. Government Money Fund will limit
its Fund 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.
13. Each Fund (other than the U.S. Government Money Fund) is authorized to
invest its cash reserves (funds awaiting investment in the specific types of
securities to be acquired by a Fund or cash to provide for payment of the Fund's
expenses or to permit the Fund to meet redemption requests). Under normal
circumstances, no more than 20% of a Fund's net assets will be comprised of cash
or cash equivalents, as discussed below. Each Fund may hold cash reserves in an
unlimited amount or invest in short-term and money market instruments for
temporary defensive purposes when its Money Manager believes that a more
conservative approach is desirable. The Funds (other than the U.S. Government
Money Fund) also may create equity or fixed-income exposure for cash reserves
through the use of options or futures contracts in accordance with their
investment objectives to minimize the impact of cash balances. This will enable
the Funds to hold cash while receiving a return on the cash that is similar to
holding equity or fixed-income securities. Each Fund (other than the U. S.
Government Money Fund) 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 Fund 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 Funds 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 Fund's Money
Manager, under the supervision of Accessor Capital and the Board of
Directors, or Accessor Capital, 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 Fund's Money Manager, if
applicable, or Accessor Capital under the general supervision of the Board of
Directors. The purchase by the Fund 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 Fund, Accessor Capital 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. Accessor Capital monitors, and the
Board of Directors reviews on a quarterly basis, the credit quality of
securities purchased for the Fund. If commercial paper or another corporate
obligation held by a Fund is assigned a lower rating or ceases to be rated, the
Money Manager under the supervision of Accessor Capital and the Board of
Directors, or Accessor Capital, as applicable, will promptly reassess whether
that security presents minimal credit risks and whether the Fund should continue
to hold the security in its portfolio. If a portfolio security no longer
presents minimal credit risks or is in default, the Fund will dispose of the
security as soon as reasonably practicable unless Accessor Capital and the Board
of Directors determine that to do so is not in the best interests of the Fund
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.
14. The Growth, Value, Small to Mid Cap, International Equity, Mortgage
Securities, and U.S. Government Money Funds will not 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 Accessor Capital or a Money Manager to be of a
lesser credit quality than those designations. The Funds will sell securities
that they have purchased in a prudent and orderly fashion when ratings drop
below these minimum ratings.
15. The Intermediate Fixed-Income Fund and Short-Intermediate Fixed-Income
Fund will not invest more than 20% of the assets of these Funds in securities
rated BBB by S&P or Baa Moody's or determined to be of equivalent quality by the
Money Manager or Accessor Capital at the time of purchase or more than 6% of the
assets of these Funds in securities rated BB by S&P or Ba Moody's or determined
to be of equivalent quality by the Money Manager or Accessor Capital at the time
of purchase.
16. The High Yield Bond Fund will not invest in fixed-income securities,
including convertible securities, rated higher than BBB or lower than CCC- by
S&P or higher than Baa or lower than B3 by Moody's, or in unrated securities
judged by Accessor Capital or the Money Manager to be of an equivalent credit
quality. The Fund will sell securities that it has purchased in a prudent and
orderly fashion.
INVESTMENT POLICIES AND RISK CONSIDERATIONS
Asset-Backed Securities. The Funds 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, similar to the
mortgage pass-through structures described above or in a pay-through structure
similar to the collateralized mortgage structure.
Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage
Investment Conduits ("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. The Bond Funds 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.
A REMIC must elect to be, and must qualify for 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. The Bond Funds do not intend
to invest in residual interests. 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 and qualify for REMIC status, it will be taxed at the entity level as a
corporation.
Corporate Obligations. Corporate debt obligations 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.
Duration. Duration is used by the Money Managers of the Bond Funds 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.
A Fund'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 Fund's net asset value (the "NAV") 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).
Foreign Currency Transactions. The International Equity Fund (the
"International Fund") may enter into foreign currency transactions. The value of
the assets of the International Fund as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and it may incur costs in connection with
conversions between various currencies. The International Fund 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 ("forward contracts").
The International Fund 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 ("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. A forward contract generally has no deposit requirements and no
commissions are charged for such trades.
The International Fund may enter into forward contracts when the Money
Manager determines that the best interests of the International Fund will be
served, such as 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 Fund may not use forward contracts to generate income, although
the use of such contracts may incidentally generate income. When the
International Fund 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 Fund 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 that might result from a possible
change in the relationship between the U.S. dollar and such foreign currency.
There is no limitation on the value of forward contracts into which the
International Fund may enter. When effecting forward foreign currency contracts,
cash or liquid assets of the International Fund 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 Fund's records at the trade date and maintained until the
transaction is settled.
When the 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 Fund'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. 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 Fund's Custodian will segregate cash, equity or
debt securities in an amount not less than the value of the International Fund's
total assets committed to forward 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 Fund 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 Fund
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 Fund is obligated to deliver.
This method of protecting the value of the International Fund'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 that 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.
Foreign Securities. The Funds (with the exception of the Mortgage
Securities Fund and the U.S. Government Money Fund) 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 that 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 Fund's
securities denominated in that currency. Such changes also will affect the
Fund's income and distributions to shareholders. In addition, although the Fund
will receive income in such currencies, the Fund 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 Fund's income has been accrued and translated
into U.S. dollars, the Fund could be required to liquidate portfolio securities
to make such distributions, particularly when the amount of income the Fund is
required to distribute is not immediately reduced by the decline in such
security. Similarly, if an exchange rate declines between the time the Fund
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.
Forward Commitments. A Fund may make contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") consistent with the Fund's ability to manage its investment
portfolio and meet redemption requests. The Fund 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 Fund 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 Fund'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.
Futures Contracts. Each Fund (other than the U.S. Government Money Fund) is
permitted to enter into financial futures contracts, stock index futures
contracts and related options thereon ("futures contracts") in accordance with
its investment objective. The International Fund 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. 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 Fund is required to deposit in a
segregated account with Accessor Funds' 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. Subsequent daily payments are made between the Fund 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
Fund 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
Fund 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 Fund 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 Fund may purchase a
long position in a stock index futures contract.
The Funds (other that the U.S. Government Money Fund) 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 Funds 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 Fund to repurchase the futures contract at
a lower price to close out the position.
Financial futures contracts may be used by the Bond Funds 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 Fund's portfolio would decline, but the
futures contract value decreases, partly offsetting the loss in value of the
fixed-income security by enabling the Fund to repurchase the futures contract at
a lower price to close out the position.
The Funds 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 Fund to be unable to close out the futures contract and
thereby affecting a Fund's hedging strategy.
Illiquid Securities. Illiquid securities are securities that are 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.
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 Funds or the International Fund 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 Accessor Capital and the Money
Managers for the Funds 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 NAV per
share.
Investing in 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 Funds. The value of the investments made
by the Funds 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 Funds 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 Funds in a manner that will
minimize the exposure to such risks, there can be no assurance that adverse
political changes will not cause the Funds to suffer a loss of interest or
principal on any of its holdings. The Funds will treat investments that are
subject to repatriation restrictions of more than seven (7) days as illiquid
securities.
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
Funds are uninvested and no return is earned thereon. Inability to dispose of
securities due to settlement problems could result in losses to the Funds due to
subsequent declines in value of securities or, if the Funds 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 Funds 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 Funds 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 Fund 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.
Limitations on Futures and Options Transactions. Accessor Funds on behalf
of each Fund has filed a notice of eligibility for exclusion from the definition
of the term "commodity pool operator" with the Commodity Futures Trading
Commission ("CFTC") and the National Futures Association, which regulate trading
in the futures markets. Pursuant to Section 4.5 of the regulations under the
Commodity Exchange Act, the notice of eligibility includes the following
representations:
(a) Each 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 a 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) A 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.
Lower-Rated Debt Securities. Debt securities rated lower than BBB by S&P or
Baa by Moody's are commonly referred to as "junk bonds". Lower rated debt
securities and comparable unrated debt securities have speculative
characteristics and are subject to greater risks than higher rated securities.
These risks include the possibility of default on principal or interest payments
and bankruptcy of the issuer. During periods of deteriorating economic or
financial conditions, the ability of issuers of lower rated debt securities to
service their debt, meet projected goals or obtain additional financing may be
impaired. In addition, the market for lower rated debt securities has in the
past been more volatile and less liquid than the market for higher rated debt
securities. These risks could adversely affect the Funds that invest in these
debts securities.
The widespread expansion of government, consumer and corporate debt within
the economy has made the corporate sector, especially cyclically sensitive
industries, more vulnerable to economic downturns or increased interest rates.
Because lower-rated debt securities involve issuers with weaker credit
fundamentals (such as debt-to-equity ratios, interest charge coverage, earnings
history and the like), an economic downturn, or increases in interest rates,
could severely disrupt the market for lower-rated debt securities and adversely
affect the value of outstanding debt securities and the ability of the issuers
to repay principal and interest.
Lower-rated debt securities possess speculative characteristics and are
subject to greater market fluctuations and risk of lost income and principal
than higher-rated debt securities for a variety of reasons. The markets for and
prices of lower-rated debt securities have been found to be less sensitive to
interest rate changes than higher-rated investments, but more sensitive to
adverse economic changes or individual corporate developments. Also, during an
economic downturn or substantial period of rising interest rates, highly
leveraged issuers may experience financial stress which would adversely affect
their ability to service their principal and interest payment obligations, to
meet projected business goals and to obtain additional financing. If the issuer
of a debt security owned by a Fund defaulted, the Fund could incur additional
expenses in seeking recovery with no guaranty of recovery. In addition, periods
of economic uncertainty and changes can be expected to result in increased
volatility of market prices of lower-rated debt securities and a Fund's NAV.
Lower-rated debt securities also present risks based on payment expectations.
For example, lower-rated debt securities may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund would have to replace the security with a lower yielding
security, resulting in a decreased return for investors. Conversely, a
lower-rated debt security's value will decrease in a rising interest rate
market, as will the value of a Fund's assets.
In addition, to the extent that there is no established retail secondary
market, there may be thin trading of lower-rated debt securities, and this may
have an impact on the ability to both value accurately lower-rated debt
securities and a Fund's assets, and to dispose of the debt securities. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of lower-rated debt securities,
especially in a thinly traded market.
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 Bond Funds 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). 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 Fund).
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.
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 Fund 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 Funds' 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.
The Bond Funds 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 Funds 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 Funds 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 Fund 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 Funds 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 Accessor Capital
and the Money Managers for these Funds 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 NAV per share.
Municipal Securities. The Funds 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.
Options. The Funds' (other than the U.S. Government Money Fund) may
purchase put and call options and write (sell) "covered" put and "covered" call
options. The Domestic Equity Funds 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 Funds 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
Fund may purchase and write options on currencies. Currency options may be
either listed on an exchange or traded OTC. 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 Fund 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 Fund may trade options on
international stocks or international stock indices in a manner similar to that
described above. The Bond Funds may purchase and write options on U.S.
Government securities. The Bond Funds 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 Funds
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.
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
Fund owns the optioned securities or the Fund maintains in a segregated account
with Accessor Funds' 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 Fund owns an offsetting call option. When a
Fund 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 Fund 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 Fund
deposits with Accessor Funds' 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 Funds 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 the Nasdaq Stock Market. 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 Funds. 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 Funds would lose the premium
paid for the option as well as any anticipated benefit of the transaction.
Consequently, the Funds 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 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 in
"Illiquid Securities."
The Funds 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 Fund exceed 25% of its net assets other than OTC
options and assets used as cover for written OTC options. Furthermore, the Funds
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 Fund'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 Fund 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 Fund 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 that provides a
secondary market for an option of the same series. Although the Funds 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 Fund 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 Fund 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 Funds intend to purchase and sell only those options that are
cleared by clearinghouses whose facilities are considered to be adequate to
handle the volume of options transactions.
Privately-Issued STRIP Securities. The Funds 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.
Real Estate-Related Securities. Publicly traded REITs generally engage in
acquisition, development, marketing, operating and long-term ownership of real
property. A publicly traded REIT meeting certain asset-income and distribution
requirements will generally not be subject to federal taxation on income
distributed to its shareholders.
Repurchase Agreements. A repurchase agreement is an agreement under which a
Fund purchases a fixed-income security, generally a security issued by the U.S.
Government or an agency thereof, a banker's acceptance or a certificate of
deposit, from a commercial bank, or broker or dealer, and simultaneously agrees
to sell the security back to the original seller at an agreed upon price and
date (normally, the next business day). The securities purchased by the Fund
will have a total value in excess of the value of the repurchase agreement and
will be held by Fifth Third Bank, the Funds' custodian (the "Custodian"), either
physically or in a book-entry system, until repurchased. Repurchase agreements
will at all times be fully collateralized by U.S. Government securities or other
collateral, such as cash, in an amount at least equal to the repurchase price,
including accrued interest earned on the underlying securities, and the
securities held as collateral will be valued daily, and as the value of the
securities declines, the Fund will require additional collateral. If the party
agreeing to repurchase should default and if the value of the collateral
securing the repurchase agreements declines below the repurchase price, the Fund
may incur a loss. 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 Fund if the
counterparty to the repurchase agreement becomes bankrupt or otherwise fails to
deliver securities. Repurchase agreements assist a Fund in being invested fully
while retaining "overnight" flexibility in pursuit of investments of a
longer-term nature. Each Fund will limit repurchase agreement transactions to
counterparties who meet creditworthiness standards approved by the Board of
Directors, which include 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. See "Investment Restrictions, Policies and Risk
Considerations - Illiquid Securities."
Reverse Repurchase Agreements and Dollar Rolls. Each Fund may enter into
reverse repurchase agreements. A reverse repurchase agreement has the
characteristics of borrowing and is a transaction whereby a Fund sells and
simultaneously agrees to repurchase a portfolio security to a bank or a
broker-dealer in return for a percentage of the portfolio security's market
value. The Fund retains the right to receive interest and principal payments. At
the agreed upon future date, the Fund repurchases the security by paying an
agreed upon purchase price plus interest. The Bond Funds may also enter into
dollar rolls in which the Funds 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 Funds forego principal and interest paid on the securities.
The Funds 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 Fund enters into reverse repurchase agreements or dollar
rolls, the Fund will establish or maintain a segregated account with a custodian
approved by the Board of Directors, containing cash or liquid assets having an
aggregate value, measured on a daily basis, at least equal in value to the
repurchase price including any accrued interest. 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 Fund has sold
but is obligated to repurchase. In the event the counterparty to a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund'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 Funds for purposes of the percentage limitations applicable to borrowings.
Rights and Warrants. Warrants are instruments that 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. 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."
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 Funds 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
Funds 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 Funds 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.
Rule 144A Securities. Each Fund may purchase securities that are not
registered under the Securities Act, but that can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the Securities Act
("Rule 144A Securities"). In addition to an adequate trading market, the Board
will also consider factors such as trading activity, availability of reliable
price information and other relevant information in determining whether a Rule
144A Security is liquid. This investment practice could have the effect of
increasing the level of illiquidity in the Funds to the extent that qualified
institutional buyers become uninterested for a time in purchasing Rule 144A
Securities. The Board will carefully monitor any investments by the Fund in Rule
144A Securities.
Rule 144A securities may involve a high degree of business and financial
risk and may result in substantial losses. These securities may be less liquid
than publicly traded securities, and a Fund may take longer to liquidate these
positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the price
realized from these sales could be less than those originally paid by a Fund.
Further, companies whose securities are not publicly traded may not be subject
to the disclosure and other investor protection requirements that would be
applicable if their securities were publicly traded.
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).
Accessor Capital 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 Funds, however, could affect adversely the marketability of such Funds'
securities and, consequently, the Funds might be unable to dispose of such
securities promptly or at favorable prices. Accessor Capital will monitor the
liquidity of such restricted securities under the supervision of the Board of
Directors.
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 Accessor Capital 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).
Securities Lending. Consistent with applicable regulatory requirements,
each Fund, 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, 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 Fund's net assets, currently 33-1/3%. Such loans
must be callable at any time by the Fund and at all times be secured by cash,
U.S. Government securities, irrevocable letters of credit or such other
equivalent collateral that is at least equal to the market value, determined
daily, of the loaned securities. The Fund 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 Fund will be
invested in any securities in which the Fund is authorized to invest. The
advantage of such loans is that the Fund 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 that will be invested in
short-term obligations.
A loan may be terminated by the borrower on one business day's notice or by
the Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund 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 and under the general
supervision of the Board of Directors, as monitored by Accessor Capital and the
lending agent. On termination of the loan, the borrower is required to return
the securities to the Fund, and any gain or loss in the market price during the
loan would be borne by the Fund.
Since voting or consent rights which accompany loaned securities pass to
the borrower, the Fund 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 Fund's investment in the
securities which are the subject of the loan. The Fund 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.
Short Sales Against-the-Box. Short sales against-the-box are short sales of
securities that a Fund owns or has the right to obtain (equivalent in kind and
amount to the securities sold short). Each Fund (other than the U.S. Government
Money Fund) may make such sales or maintain a short position, provided that at
all times when a short position is open, the Fund sets aside in a segregated
custodial account while the short sales remains outstanding 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.
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 Fund 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 Fund may leave the Fund
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.
Temporary Defensive Policies. If, in the opinion of Accessor Capital and/or
the Money Manager, as applicable, market or economic conditions warrant, the
Funds may adopt a temporary defensive strategy.
During these times, the average dollar weighted duration of the
Intermediate Fixed-Income Fund may fall below three years, or rise to as high as
fifteen years and the Short-Intermediate Fixed-Income Fund may fall below one
year, or rise to as high as fifteen years. In such event, the Funds will be
subject to greater or less risk depending on whether average dollar weighted
duration is increased or decreased. At any time that these Funds' average dollar
weighted duration is increased, the Funds are subject to greater risk, since at
higher durations a Fund's asset value is more significantly impacted by changes
in prevailing interest rates than at lower durations. Likewise, when the Fund's
average dollar weighted duration is decreased, the Fund is subject to less risk,
since at lower durations a Fund's asset value is less significantly impacted by
changes in prevailing interest rates than at higher durations. When Accessor
Capital and/or the Money Manager determines that a temporary defensive strategy
is no longer needed, investments will be reallocated to return the Funds to
their designated average dollar weighted duration.
U.S. Government Securities. The types of U.S. Government obligations in
which the Funds 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). In the case of
securities not backed by the full faith and credit of the United States, the
Fund 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. 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 Funds may purchase U.S. Government obligations on
a forward commitment basis.
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 Fund 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 Funds 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 Fund to invest fluctuating amounts, which may change
daily without penalty, pursuant to direct arrangements between the Fund, 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 Fund'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 that 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 Fund may invest. The
Money Manager of a Fund will consider on an ongoing basis the creditworthiness
of the issuers of the floating and variable rate demand obligations held by the
Fund.
Zero-Coupon Securities. A zero-coupon security has no cash-coupon payments.
Instead, the issuer sells the security at a substantial discount from its
maturity value. The interest equivalent received by the investor from holding
this security to maturity is the difference between the maturity value and the
purchase price. Zero-coupon securities are more volatile than cash pay
securities. The Fund accrues income on these securities prior to the receipt of
cash payments. The Fund intends to distribute substantially all of its income to
its shareholders to qualify for pass-through treatment under the tax laws and
may, therefore, need to use its cash reserves to satisfy distribution
requirements.
<PAGE>
MANAGEMENT OF THE FUNDS
The Board of Directors is responsible for overseeing generally the
operation of Accessor Funds. The officers are responsible for the day-to-day
management and administration of Accessor Funds' operations.
<TABLE>
<CAPTION>
Name and Position with Principal Occupations
Address Age the Fund During Past Five Years
<S> <C> <C> <C>
*J. Anthony Whatley, III** 57 Director, President and Executive Director, Accessor Capital
1420 Fifth Avenue Principal Executive Officer Management LP since April 1991;
Seattle, WA President, Accessor Capital Management
Associates, Inc. since April 1991;
President, Northwest Advisors, Inc.
since 1990.
George G. Cobean, III 62 Director Partner, Martinson, Cobean &
1607 South 341st Place Associates, P.S. (certified public
Federal Way, WA accountants) since 1973.
Geoffrey C. Cross 60 Director President, Geoffrey C. Cross P.S.,
252 Broadway Inc., (general practice of law) since
Tacoma, WA 1970.
Ravindra A. Deo 37 Vice President, Director and Vice President, Northwest
1420 Fifth Avenue Treasurer and Advisors, Inc. since July 1993; Vice
Seattle, WA Principal Financial President and Chief Investment Officer,
and Accounting Officer Accessor Capital Management LP since
January 1992.
Linda V. Whatley** 42 Vice President and Treasurer of Northwest Advisors, Inc.
1420 Fifth Avenue Assistant Secretary since July 1993; Vice President,
Seattle, WA Accessor Capital Management LP since
April 1991; Secretary since April 1991
and Director and Treasurer since June
1992 of Bennington Capital Management
Associates, Inc.
Robert J. Harper 56 Vice President Director and Vice President, Northwest
1420 Fifth Avenue Advisers, Inc. since November 1995;
Seattle, WA Director of Sales and Client Service,
Accessor Capital Management LP since
October 1993.
Christine J. Stansbery 48 Secretary Secretary, Northwest Advisors, Inc.
1420 Fifth Avenue since May, 1999; Assistant Vice
Seattle, WA President-Compliance since January 1997,
Regulatory Manager from March 1996 to
December 1996, Legal Assistant from
March 1993 to March 1996 at Accessor
Capital Management LP.
</TABLE>
- ----------
*"Interested Person" by virtue of his employment by and/or indirect interest in
Accessor Capital.
** J. Anthony Whatley, III and Linda V. Whatley are husband and wife.
- --------------------------------------------------------------------------------
The following table shows the compensation paid by the eight operating
Funds of Accessor Funds to the Directors during the fiscal year ended December
31, 1999:
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Retirement Estimated Total Compensation
Aggregate Benefits Accrued as part Annual from Company Paid
Compensation of Company Expenses Benefits upon to Board Members
Director from Accessor Funds Retirement
<S> <C> <C> <C> <C>
J. Anthony Whatley III None None None None
George G. Cobean III $17,000 None None $17,000
Geoffrey C. Cross $17,000 None None $17,000
</TABLE>
Directors who are not "interested persons" of Accessor Funds are paid fees
of $3,000 per meeting plus out-of-pocket costs associated with attending Board
meetings. Directors employed by Accessor Capital have agreed that, if their
employment with Accessor Capital is terminated for any reason, and a majority of
the remaining Directors of Accessor Funds so request, they will be deemed to
have resigned from the Board of Directors at the same time their employment with
Accessor Capital terminates. Accessor Fund's officers and employees are paid by
Accessor Capital and receive no compensation from Accessor Funds.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 14, 2000, the following persons were the owners, of record or
beneficially, of 5% or more of the shares of the Funds as set forth below:
<TABLE>
Growth Fund
<CAPTION>
Advisor Class Investor Class
Owner Owner
<S> <C> <C> <C>
Charles Schwab & Company 12.40% Zions First National Bank 57.43%
101 Montgomery St. One South Main Street
San Francisco, CA 94104 Salt Lake City, UT 84130
One Valley Bank NA 8.20% The Trust Company of Sterne Agee & Leach 17.35
P.O. Box 1793 800 Shades Creek Parkway
Charleston, WV 25326 Birmingham, AL 35209
Zions First National Bank 7.77% Resources Trust Company 9.83%
One South Main Street P.O. Box 3865
Salt Lake City, UT 84130 Englewood, CO 80155-3865
First Interstate Bank 7.55% First Interstate Bank 5.39%
P.O. Box 30918 P.O. Box 30918
Billings, MT 59116 Billings, MT 59116
Eastern Bank & Trust Co. 7.02%
225 Essex Street
Salem, MA 01970
Value Fund
Advisor Class Investor Class
Owner Owner
First Interstate Bank 14.18% Zions First National Bank 42.61%
P.O. Box 30918 One South Main Street
Billings, MT 59116 Salt Lake City, UT 84130
One Valley Bank NA 12.66% The Trust Company of Sterne Agee & Leach 21.91%
P.O. Box 1793 800 Shades Creek Parkway
Charleston, WV 25326 Birmingham, AL 35209
Charles Schwab & Company 10.89% First Commonwealth Trust Company 22.83%
101 Montgomery St. 614 Philadelphia Street
San Francisco, CA 94104 Indiana, PA 15701
Eastern Bank & Trust Co. 10.26% First Interstate Bank 9.10%
225 Essex Street P.O. Box 30918
Salem, MA 01970 Billings, MT 59116
Resource Trust Company 9.57%
900 2nd Ave. South, Suite 300
Minneapolis, MN 59116
Zions First National Bank 6.31%
One South Main Street
Salt Lake City, UT 84130
Small to Mid Cap Fund
Advisor Class Investor Class
Owner Owner
Charles Schwab & Company 18.03% Zions First National Bank 47.29%
101 Montgomery St. One South Main Street
San Francisco, CA 94104 Salt Lake City, UT 84130
One Valley Bank NA 8.20% The Trust Company of Sterne Agee & Leach 24.69%
P.O. Box 1793 800 Shades Creek Parkway
Charleston, WV 25326 Birmingham, AL 35209
Regions Bank 7.04% First Commonwealth Trust Company 16.25%
P.O. Box 1793 614 Philadelphia Street
Charleston, WV 25326 Indiana, PA 15701
Community First National Bank 5.44%
520 Main Street
Fargo, ND 58124
International Equity Fund
Advisor Class Investor Class
Owner Owner
Fleet National Bank 17.29% Zions First National Bank 82.61%
P.O. Box 9280 One South Main Street
Rochester, NY 14692 Salt Lake City, UT 84130
Regions Bank 15.67% The Trust Company of Sterne Agee & Leach 12.01%
P.O. Box 1793 800 Shades Creek Parkway
Charleston, WV 25326 Birmingham, AL 35209
One Valley Bank NA 12.98%
P.O. Box 1793
Charleston, VE 25326
Zions First National Bank 7.32%
One South Main Street
Salt Lake City, UT 84130
Community First National Bank 5.34%
520 Main Street
Fargo, ND 58124
Intermediate Fixed-Income Fund
Advisor Class Investor Class
Owner Owner
Community First National Bank 24.33% Zions First National Bank 42.54%
520 Main Street One South Main Street
Fargo, ND 58124 Salt Lake City, UT 84130
Zions First National Bank 11.10% The Trust Company of Sterne Agee & Leach 39.67%
One South Main Street 800 Shades Creek Parkway
Salt Lake City, UT 84130 Birmingham, AL 35209
First Interstate Bank 10.75% First Interstate Bank 14.70%
P.O. Box 30918 P.O. Box 30918
Billings, MT 59116 Billings, MT 59116
Eastern Bank & Trust Co. 10.72%
225 Essex Street
Salem, MA 01970
The Trust Company of Sterne Agee & Leach 6.86%
800 Shades Creek Parkway
Birmingham, AL 35209
West Coast Trust 5.18%
P.O. Box 1012
Salem, OR 97308
Short-Intermediate Fixed-Income Fund
Advisor Class Investor Class
Owner Owner
One Valley Bank NA 27.03% Zions First National Bank 63.33%
P.O. Box 1793 One South Main Street
Charleston, WV 25326 Salt Lake City, UT 84130
Zions First National Bank 31.97% First Interstate Bank 18.53%
One South Main Street P.O. Box 30918
Salt Lake City, UT 84130 Billings, MT 59116
First Interstate Bank 9.38% The Trust Company of Sterne Agee & Leach 13.13%
P.O. Box 30918 800 Shades Creek Parkway
Billings, MT 59116 Birmingham, AL 35209
GreatBanc Trust Company 7.56%
105 East Galena Blvd.
Aurora, IL 60505
The Trust Company of Sterne Agee & Leach 6.12%
800 Shades Creek Parkway
Birmingham, AL 35209
Mortgage Securities Fund
Advisor Class Investor Class
Owner Owner
Zions First National Bank 41.15% Zions First National Bank 75.79%
One South Main Street One South Main Street
Salt Lake City, UT 84130 Salt Lake City, UT 84130
One Valley Bank NA 15.99% The Trust Company of Sterne Agee & Leach 14.90%
P.O. Box 1793 800 Shades Creek Parkway
Charleston, WV 25326 Birmingham, AL 35209
First Interstate Bank 5.77% First Interstate Bank 5.94%
P.O. Box 30918 P.O. Box 30918
Billings, MT 59116 Billings, MT 59116
Community First National Bank 5.73%
520 Main Street
Fargo, ND 58124
U.S. Government Money Fund
Advisor Class Investor Class
Owner Owner
Zions First National Bank 88.86% Zions First National Bank 85.70%
One South Main Street One South Main Street
Salt Lake City, UT 84130 Salt Lake City, UT 84130
One Valley Bank NA 5.14% The Trust Company of Sterne Agee & Leach 11.23%
P.O. Box 1793 800 Shades Creek Parkway
Charleston, WV 25326 Birmingham, AL 35209
</TABLE>
As of April 14, 2000, none of the Directors and officers of Accessor Funds,
as a group, beneficially owned more than 1% of the shares of each Fund.
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
Accessor Funds and, in general, determine certain corporate or other matters
submitted to the shareholders for approval, such as a change in the Funds'
investment policies, all of which may adversely affect the NAV of a Fund. As
with any mutual fund, certain shareholders of a Fund could control the results
of voting in certain instances. For example, a vote by certain majority
shareholders changing the Fund'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 Funds' day-to-day operations are performed by separate business
organizations under contract to Accessor Funds. The principal service providers
are:
Manager, Administrator, Transfer Agent, Accessor Capital
Registrar and Dividend Disbursing Agent Management LP
Custodian and Fund Accounting Agent Fifth Third Bank
Money Managers Seven professional
discretionary
investment
management
organizations and
Accessor Capital
Management LP
Manager, Administrator, Transfer Agent, Registrar and Dividend Disbursing
Agent. Accessor Capital is the manager and administrator of Accessor Funds,
pursuant to a Management Agreement with Accessor Funds. Accessor Capital
provides or oversees the provision of all general management, administration,
investment advisory and portfolio management services for Accessor Funds.
Accessor Capital provides Accessor Funds with office space and equipment, and
the personnel necessary to operate and administer each Fund's 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.
Accessor Capital also develops the investment programs for the Funds, selects
Money Managers (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 the Funds and assets
invested in the Funds' liquidity reserves, or other assets not assigned to a
Money Manager. Accessor Capital currently invests all the assets of the U.S.
Government Money Fund. Accessor Capital also acts as the Transfer Agent,
Registrar and Dividend Disbursing Agent for Accessor Funds and provides certain
administrative and compliance services to Accessor Funds.
Under the Management Agreement, Accessor Capital has agreed not to withdraw
from Accessor Funds the use of Accessor Funds' name. In addition, Accessor
Capital may not grant the use of a name similar to that of Accessor Funds to
another investment company or business enterprise without, among other things,
first obtaining the approval of Accessor Funds' shareholders.
A Management Agreement containing the same provisions as the initial
contract but also providing for payment to Accessor Capital by the Funds of a
management fee was approved by the Board of Directors including all of the
Directors who are not "interested persons" of Accessor Funds and who have no
direct or indirect financial interest in the Management Agreement on June 17,
1992, by the shareholders of the Growth Fund, Value Fund (formerly referred to
as Value and Income Portfolio), Small to Mid Cap Fund (formerly referred to as
the Small Cap Portfolio) and International Equity Fund on June 17, 1992, and by
the shareholders of the Short-Intermediate Fixed-Income Fund, Intermediate
Fixed-Income Fund, Mortgage Securities Fund and U.S. Government Money Fund on
August 3, 1992 and the sole shareholder of the High Yield Bond Fund on May 1,
2000. The Management Agreement has been renewed by the Board of Directors
including all of the Directors who are not "interested persons" of Accessor
Funds and who have no direct or indirect financial interest in the Management
Agreement each year, most recently on May 28, 1997, May 20, 1998 and May 7,
1999.
The general partners of Accessor Capital are Northwest Advisors, Inc.,
Accessor Capital Management Associates, Inc. and Accessor Capital Management
Investment Corp., all of which are Washington corporations. The sole limited
partner of Accessor Capital Management LP is Zions Investment Management, Inc.,
a wholly-owned subsidiary of Zions First National Bank, N.A. The managing
general partner of Accessor Capital Management, LP is Accessor Capital
Management Associates, Inc., which is controlled by J. Anthony Whatley, III. The
mailing address of Accessor Capital is 1420 Fifth Avenue, Suite 3600, Seattle,
Washington 98101.
Accessor Capital's Fees. The schedule below shows fees payable to Accessor
Capital as manager and administrator of Accessor Funds, pursuant to a Management
Agreement between Accessor Capital and Accessor Funds. Each Fund pays Accessor
Capital a fee equal on an annual basis to the following percentage of the Fund's
average daily net assets.
MANAGEMENT FEE SCHEDULE FOR PAYMENTS TO ACCESSOR CAPITAL
Management Fee (as a
percentage of average
Fund daily net assets)
Growth 0.45%
Value 0.45%
Small to Mid Cap 0.60%
International Equity 0.55%
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
High Yield Bond 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
MANAGEMENT FEES PAID TO ACCESSOR CAPITAL
For the period ended December 31 Accessor Capital has received the
following fees under its Management Agreement with each Fund:
<TABLE>
<CAPTION>
Fund 1997 1998 1999
<S> <C> <C> <C>
Growth $367,893 $549,085 $1,310,281
Value $278,827 $517,550 $705,469
Small to Mid Cap $692,048 $1,212,941 $2,297,839
International Equity $649,695 $923,305 $1,114,306
Intermediate Fixed-Income $177,340 $188,648 $225,487
Short-Intermediate Fixed-Income $145,308 $169,201 $199,249
Mortgage Securities $326,347 $490,887 $580,614
U.S. Government Money $139,972 $175,047 $722,217
</TABLE>
Accessor Capital provides transfer agent, registrar and dividend disbursing
agent services to each Fund pursuant to a Transfer Agency Agreement between
Accessor Capital and Accessor Funds. Sub-transfer agent and compliance services
previously provided by Accessor Capital under the Sub-Administration Agreement
are provided to the Funds under the Transfer Agency Agreement. Accessor Capital
also provides certain administrative and recordkeeping services under the
Transfer Agency Agreement. For providing these services, Accessor Capital
receives (i) a fee equal to 0.13% of the average daily net assets of each Fund
of Accessor Funds, and (ii) a transaction fee of $0.50 per transaction. Accessor
Capital is also reimbursed by Accessor Funds for certain out-of-pocket expenses
including postage, taxes, wire transfer fees, stationery and telephone expenses.
The table below contains the fees paid to Accessor Capital for the fiscal years
ended December 31.
TRANSFER AGENT FEES PAID TO ACCESSOR CAPITAL
<TABLE>
<CAPTION>
Fund 1997 1998* 1999
<S> <C> <C> <C>
Growth $102,701 $165,221 $386,033
Value $78,723 $152,446 $209,546
Small to Mid Cap $142,852 $266,187 $506,349
International Equity $145,429 $218,581 $268,040
Intermediate Fixed-Income $62,731 $69,981 $84,973
Short-Intermediate Fixed-Income $51,705 $62,513 $74,826
Mortgage Securities $113,090 $179,824 $215,051
U.S. Government Money $69,929 $91,888 $378,323
</TABLE>
- -------------------
*The Transfer Agent Agreement was 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, ("Fifth Third") a banking company
organized under the laws of the State of Ohio, has acted as Custodian of the
Funds' assets since October, 1996, and through an agreement between Fifth Third
and Accessor Funds 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 each Fund and is authorized to deposit securities
in securities depositories or to use the services of sub-custodians. Fifth Third
is paid by the Funds an annual fee and also is reimbursed by Accessor Funds for
certain out-of-pocket expenses including postage, taxes, wires, stationery and
telephone. Fifth Third acts as Custodian for investors of the Funds with respect
to the individual retirement accounts ("IRA Accounts"). Fifth Third also
provides basic recordkeeping required by each of the Funds for regulatory and
financial reporting purposes. Fifth Third is paid by the Funds an annual fee
plus specified transactions costs per Fund for these services, and is reimbursed
by Accessor Funds for certain out-of-pocket expenses including postage, taxes,
wires, stationery and telephone.
Independent Auditors. Deloitte & Touche LLP, Two World Financial Center,
New York, New York, 10281, serves as each Fund's independent auditor and in that
capacity audits the Funds' annual financial statements.
Fund Counsel. Kirkpatrick & Lockhart LLP, 75 State Street, Boston,
Massachusetts 02109.
Money Managers. Currently, Accessor Capital invests all of the assets of
the U.S. Government Money Fund. Each other Fund of Accessor Funds currently has
one Money Manager investing all or part of its assets. Accessor Capital may also
invest each Fund's liquidity reserves, and all or any portion of the Fund's
other assets not assigned to a Money Manager.
The Money Managers selected by Accessor Capital have no affiliation with or
relationship to Accessor Funds or Accessor Capital other than as discretionary
managers for each Fund's assets. In addition, some Money Managers and their
affiliates may effect brokerage transactions for the Funds. See "Fund
Transaction Policies--Brokerage Allocations."
Revised Money Manager Agreements for the Growth, Value, Intermediate Fixed
Income, Short-Intermediate Fixed-Income and Mortgage Securities Funds 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 Accessor Funds 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 Fund 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
Fund 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 25, 1998 and renewed for the forthcoming year.
An Amended Agreement was approved by the Board of Directors on August 19, 1999,
effective September 1, 1999.
A new Money Manager Agreement for the Mortgage Securities Fund 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 Accessor Funds
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 Fund 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 24, 1999, and renewed for the forthcoming
year.
A new Money Manager Agreement for the Small to Mid Cap Fund 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 Accessor Funds 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 Fund 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 March 23, 1998, and renewed for the
forthcoming year. A new Money Manager Agreement for the Small to Mid Cap Fund in
connection with the modification of the fee structure for the Money Manager was
approved by the shareholders of the Small to Mid Cap Fund at a Special Meeting
of Shareholders held on April 30, 1998. The new Money Manager Agreement was
among Accessor Funds, Accessor Capital and Symphony Asset Management LLC
("Symphony LLC") and was effective as of July 1, 1998, for a period of one year.
Following the initial one-year period the Money Manager Agreement is reviewed
annually by the Board of Directors, most recently at a meeting on May 7, 1999.
A new Money Manager Agreement for the Value Fund 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 Accessor Funds and who have no direct or indirect
interest in the Money Manager Agreement, on June 15, 1995, and by the
shareholders of the Value Fund 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 25, 1998, and
renewed for the forthcoming year.
A Money Manager Agreement effective July 21, 1997, for the Growth Fund 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 Accessor Funds 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. A Money Manager Agreement for the Growth Fund was approved
by the Board of Directors on September 8, 1999.
On February 4, 2000, the Board of Directors approved a new Money Manager
Agreement, effective March 16, 2000, for the Growth Fund in connection with a
change in Money Manager to Chicago Equity Partners Corp. at a special meeting of
the Board of Directors called for that purpose, including all the Directors who
are not "interested persons" of Accessor Funds and who have no direct or
indirect interest in the Money Manager Agreement. The Money Manager Agreement
following the initial two-year period will be reviewed annually by the Board of
Directors. As the result of a change of control of the ownership of Chicago
Equity Partners Corp., which is expected to close no later than May 30, 2000,
Chicago Equity Partners Corp. will become Chicago Equity Partners LLC. The Board
of Directors is expected to approve an identical Money Manager Agreement with
Chicago Equity Partners LLC.
The Money Manager Agreements for the Intermediate Fixed-Income Fund and
Short-Intermediate Fixed-Income Fund were terminated by the Board of Directors
on February 19, 1998, effective May 1, 1998. Accessor Capital invested all of
the assets of the Intermediate Fixed-Income and Short-Intermediate Fixed-Income
Funds 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 Funds in connection with a change in Money
Managers to Cypress Asset Management 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 Accessor Funds 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.
A Money Manager Agreement among Accessor Capital, Accessor Funds on behalf
of the High Yield Bond Fund and Financial Management Advisors, effective May 1,
2000, 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 Accessor Funds and who have no direct or indirect
interest in the Money Manager Agreement, on February 4, 2000. The Money Manager
has no affiliation with or relationship to Accessor Funds or Accessor Capital
other than as discretionary manager for the High Yield Bond Fund's assets. The
Money Manager Agreement following the initial two-year period will be reviewed
annually by the Board of Directors.
Listed below are the Money Managers selected by Accessor Capital to invest
each Fund's assets:
A change in control of the ownership of Chicago Equity Partners Corporation
("Chicago Equity Partners"), a Delaware Corporation and wholly owned subsidiary
of Bank of America, is expected to close no later than May 30, 2000. Until the
transaction closes, Chicago Equity Partners is the Money Manager for the Growth
Fund. Once the transaction closes, the new entity, Chicago Equity Partners, LLC,
("Chicago Equity LLC") a Delaware LLC operating as a Registered Investment
Advisor under the Investment Advisers Act of 1940, will be the Money Manager of
the Growth Fund. Chicago Equity LLC will be owned by James D. Miller (20%),
Patrick C. Lynch (20%), Robert H. Kramer (20%), David C. Coughenour (20%), and
David R. Johnsen (20%), all officers and employees of Chicago Equity LLC. The
personnel involved in the management of Chicago Equity Partners and Chicago
Equity LLC will be the same. The Money Manager expects to maintain a
well-diversified portfolio of stocks in the Growth Fund, holding market
representation in all major economic sectors. The Money Manager uses a
disciplined, structured investment process to identify stocks that have a higher
probability of outperforming peer companies. These stocks tend to have strong
earnings growth and trade at reasonable multiple as compared to their peers.
Once the highest ranked stocks are identified, the Money Manager builds
portfolios that resemble the benchmark in terms of major risk components like
industry and sector weight and market capitalization. Until March 15, 2000,
Geewax, Terker & Company ("Geewax Terker"), a Pennsylvania general partnership
whose general partners are John J. Geewax and Bruce Terker, was the Money
Manager for the Growth Fund. As of December 31, 1999, Chicago Equity Partners
managed assets of approximately $9.9 billion. Following the close of the
transaction, Chicago Equity LLC expects to manage $7.5 billion.
Martingale Asset Management, L.P. ("Martingale") is the Money Manager for the
Value Fund. Martingale is a Delaware limited partnership, which consists of two
general partners, Martingale Asset Management Corporation ("MAMC"), a
Massachusetts corporation and CMMAM, LLC , and seven limited partners. CMMAM, a
Delaware limited liability corporation, is owned 33% by Commerzbank AG
("Commerzbank"), 1% by Commerz US Holding, Inc., a Delaware corporation (a
wholly-owned subsidiary of Commerzbank) and 66% by Montgomery Asset Management,
LLC, a Delaware limited liability corporation that is owned 86.02% by
Commerzbank. 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 that 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 that 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, 1999, Martingale managed
assets of approximately $ 1.4 billion.
Symphony Asset Management LLC ("Symphony") is the Money Manager of the Small to
Mid Cap Fund. Symphony is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"),
Symphony is organized as a California limited liability company and owned 50% by
Symphony Asset Management Inc. ("Symphony Inc.") and 50% by Maestro LLC, a
California limited liability company. Symphony Inc., the Money Manager of the
Small to Mid Cap Fund from September 15, 1995 until June 30, 1998, is registered
as an investment adviser under the Investment Advisers Act. Symphony Inc. is a
wholly-owned subsidiary of BARRA, Inc. ("BARRA"), a California corporation,
which is registered as an investment adviser with the SEC 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. Maestro LLC is
owned by Jeffrey L. Skelton, Neil L. Rudolph, Praveen K. Gottipalli and Michael
J. Henman, each of who hold management roles with Symphony LLC.
Symphony is an investment management firm dedicated to exploiting information
inefficiencies in global financial markets.Symphony has developed an approach to
investing that combines the qualities of both systematic and traditional
investment management. Symphony's process begins with a factor-return-based
valuation model identifying securities that are relatively under- or
over-valued. Symphony's factor model is the product of a decade of work by
BARRA's active strategies group. As of December 31, 1999, Symphony managed
assets of approximately $ 3.1 million.
Nicholas-Applegate Capital Management ("Nicholas-Applegate") is the Money
Manager for the International Fund. Nicholas-Applegate is a registered
investment adviser whose sole general partner is Nicholas-Applegate Capital
Management Holdings, L.P., a California limited partnership whose sole general
partner is Nicholas-Applegate Capital Management Holdings, Inc., a California
corporation owned 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. As of December 31, 1999, Nicholas-Applegate
managed assets of approximately $ 403 billion.
BlackRock Financial Management, Inc. ("BlackRock") is the Money Manager of the
Mortgage Securities Fund. On September 30, 1999, BlackRock, a Delaware
corporation, completed its initial public offering. Fourteen percent of the
company's stock is now held by the public, while employees own 16% and PNC
Financial Services Group, Inc. ("PNC") retains 70%. PNC is wholly owned by PNC
Bank, N.A., which 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. Funds 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. BlackRock's Investment Strategy
Group has primary responsibility for setting the broad investment strategy and
for overseeing the ongoing management of all client portfolios. Mr. Andrew J.
Phillips, Managing Director, is primarily responsible for the day-to-day
management and investment decisions for the Mortgage Securities Fund. Together
with its affiliates, BlackRock serves as investment adviser to fixed income,
equity and liquidity investors in the United States and overseas through funds
and institutional accounts with combined total assets at December 31, 1999, of
approximately $ 165billion.
Cypress Asset Management ("Cypress"), a California corporation and registered
investment advisor with the SEC and the State of California, is the Money
Manager of the Intermediate Fixed-Income Fund and Short-Intermediate
Fixed-Income Fund. Cypress is a California corporation, owned by Mr. Xavier
Urpi, President and Chief Executive Officer. The Money Manager's strategy for
both the Intermediate Fixed-Income Fund and Short-Intermediate Fixed-Income Fund
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
December 31, 1999, Cypress managed assets of approximately $ 533 million.
Financial Management Advisers, Inc. ("FMA"), a California corporation, was
founded in 1985. FMA is a registered investment adviser with the Securities and
Exchange Commission and has filed the appropriate Notice with the State of
California. FMA is owned 94% by Kenneth and Sandra Malamed and 6% owned by
employees of FMA. FMA's high yield fixed income investment strategy seeks as its
primary objective high current yield by investing primarily in lower-ranked,
high-yield corporate debt securities, commonly referred to as "junk bonds".
Because FMA views high-yield bonds as "stocks with a coupon", FMA's high yield
investment analysis combines input from both the equity and fixed-income
sectors. FMA looks at fundamental research prepared by its team of fixed income
and equity analysts, spreadsheets on company specifics prepared by FMA and
information from other available sources. In addition, the Fund will be
diversified across industries. FMA begins its investment process with a
traditional top-downanalysis, using a team approach. On a monthly basis, FMA
determines what it believes to be the main drivers of the economy, and
consequently, which sectors of the economy should be weighted more heavily in
the Fund. FMA then compares the sector allocations of the Fund to the Lehman
Brothers U.S. Corporate High Yield Index to determine whether the Fund is
consistent with FMA's investment policy and what sectors should be targeted for
new research. In selecting individual issues, FMA emphasizes bottom-up
fundamental analysis, including the examination of industry position, cash flow
characteristics, asset protection, liquidity, management quality and covenants.
FMA also considers the enterprise value compared with the total debt burden.
Assets under management as of 12/31/99 were approximately $1.6 billion.
MONEY MANAGERS' FEES
The Money Managers have received the following fees pursuant to their Money
Manager Agreements, for the past three fiscal years ended December 31:
<TABLE>
<CAPTION>
Fund Money Manager 1997 1998 1999
<S> <C> <C> <C> <C>
Growth(1) Geewax, Terker $84,965 $244,362 $895,908
State Street $72,872 N/A N/A
Value Martingale $180,881 $367,420 $486,633
Small to Mid Cap Symphony $369,071 $758,733 $1,608,476
International Equity Nicholas-Applegate $660,458 $1,007,245 $1,191,635
Intermediate Fixed-Income(2) Cypress N/A $6,298 $25,118
Smith Barney $73,891 $27,434 N/A
Short-Intermediate Fixed-Income(3) Cypress N/A $5,494 $22,139
Bankers Trust $60,545 $22,094 N/A
Mortgage Securities BlackRock $188,413 $313,614 $370,950
U.S. Government Money Accessor Capital(4) $0 $0 $0
</TABLE>
- -----------
(1) Until July 21, 1997, State Street Bank and Trust Company was the Money
Manager for the Growth Fund and received fees until that date. Beginning on
July 22, 1997, Geewax, Terker & Company became the Money Manager for the
Growth Fund and received pro-rated fees from that date.
(2) Until April 30, 1998, Smith Barney was the Money Manager for the
Intermediate Fixed-Income Fund and received fees until that date. Beginning
on May 1, 1998, Accessor Capital invested the assets of the Intermediate
Fixed-Income Fund. No Money Manager fees were paid to Accessor Capital.
Effective September 21, 1998, Cypress Asset Management was appointed as
Money Manager for the Intermediate Fixed-Income Fund.
(3) Until April 30, 1998, Bankers Trust was the Money Manager for the
Short-Intermediate Fixed-Income Fund and received fees until that date.
Beginning on May 1, 1998, Accessor Capital invested the assets of the
Short-Intermediate Fixed-Income Fund. No Money Manager fees were paid to
Accessor Capital. Effective September 21, 1998, Cypress Asset Management
was appointed a Money Manager for the Short-Intermediate Fund.
(4) Accessor Capital does not receive a Money Manager fee.
- --------------------------------------------------------------------------------
Money Manager Fees. The fees paid to the Money Manager of a Fund are paid
pursuant to a Money Manager Agreement among Accessor Funds on behalf of the
individual Fund, Accessor Capital and the Money Manager. The fees are based on a
percentage of the assets of the Fund and the performance of the Fund compared to
a benchmark index after a specific number of complete calendar quarters of
management by the Money Manager. Each Fund seeks to invest so that its
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 of the Prospectuses for a description
of the Benchmark Indices.
For the first five complete calendar quarters managed by a Money Manager of
each Fund (except the U.S. Government Money Fund and Small to Mid Cap Fund),
such Fund will pay its respective Money Manager on a monthly basis based on the
average daily net assets of the Fund managed by such Money Manager, as set forth
in their respective Money Manager Agreements. With the exception of the Growth
Fund whose Money Manager commenced operations on March 16, 2000, and the High
Yield Bond Fund whose Money Manager commenced operations on May 1, 2000, the
Money Managers for the Value, Small to Mid Cap, International Equity,
Intermediate Fixed-Income, Short-Intermediate Fixed-Income and Mortgage
Securities Funds have completed five calendar quarters. During the first five
calendar quarters of management, the Money Manager Fee has two components, the
Basic Fee and Fund Management Fee. The Money Manager for the Growth Fund will
earn an annual fee of 0.20%, which includes a 0.10% Basic Fee and a 0.10%
portfolio management fee. The Money Manager for the High Yield Bond Fund will
earn an annual fee of 0.07% Basic Fee and a 0.08% portfolio management fee.
Commencing with the sixth calendar quarter of management by a Money Manager
of an operating Fund, such Fund will pay its Money Manager based on a percentage
of the assets of the Fund and the performance of the Fund compared to a
benchmark index pursuant to the "Money Manager Fee Schedule From A Money
Manager's Sixth Calendar Quarter Forward." The Money Manager's Fee commencing
with the sixth quarter consists of two components, the "Basic Fee" and
"Performance Fee," with the exception of the Small to Mid Cap Fund, which does
not pay a Basic Fee to the Money Manager.
MONEY MANAGER FEE SCHEDULE FROM A MANAGER'S
SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
<TABLE>
<CAPTION>
Average Annualized
Basic Performance Differential Annualized
Fund Fee vs. The Applicable Index Performance Fee
<S> <C> <C> <C>
Growth 0.10% greater than or equal to 2.00% 0.22%
Value 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% 0.00%
Small to Mid Cap N/A 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%
International Equity 0.20%(1) 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% 0.00%
Intermediate Fixed-Income 0.02% greater than 0.70% 0.15%
and Short-Intermediate greater than 0.50% and less than or equal to 0.70% 0.05% plus 1/2 (P-0.50%)(2)
Fixed-Income greater than or equal to 0.35% and less than or equal to 0.50% 0.05%
less than 0.35% 0.00%
High Yield Bond 0.07% greater than 2.00% 0.22%
greater than 1.50% and less than or equal to 2.00% 0.20%
greater than 1.00% and less than or equal to 1.50% 0.16%
greater than 0.50% and less than or equal to 1.00% 0.12%
greater than -0.50% and less than or equal to 0.50% 0.08%
greater than -1.00% and less than or equal to -0.50% 0.04%
less than or equal to -1.00% 0.00%
Mortgage Securities 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%
less than -0.50% 0.00%
</TABLE>
- -------------
(1) *The basic fee is equal to an annual rate of 0.20% of the International
Equity Fund's average daily net assets up to a maximum of $400,000
annualized.
(2) 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 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). During times Accessor Capital
invests the assets of any Fund, it uses the same benchmark indices that a Money
Manager would use. A description of each benchmark index is contained in
Appendix A of the Prospectuses. For example, as long as the Growth or Value or
the Mortgage Securities Funds' 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 Small to Mid Cap Fund's performance either
exceeds the index, or trails the index by no more than 1.50%, a Performance Fee
will be paid to the Money Manager. As long as the International Fund'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 Fund managed by it
(the "Account"), which excludes assets held by Accessor Capital for
circumstances such as redemptions or other administrative purposes.
BENCHMARK INDICES
Fund Index
Growth S&P/BARRA Growth Index
Value S&P/BARRA Value Index
Small to Mid Cap Wilshire 4500
International Equity Morgan Stanley Capital International
EAFE(R)+ EMF Index(1)
Intermediate Fixed-Income Lehman Brothers Government/Corporate Index
Short-Intermediate Fixed-Income Lehman Brothers Government/Corporate 1-5
Year Index
High Yield Bond Lehman Brothers U.S. Corporate High Yield
Index
Mortgage Securities Lehman Brothers Mortgage-Backed Securities
Index
- -------------
(1) Through the close of business on April 30, 1996, the benchmark index used
for the International Fund 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.
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 Accessor Capital in the same manner that the total return
performance of the Fund's index is calculated, which is not the same method used
for calculating the Fund's performance for advertising purposes as described
under "Calculation of Fund 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
Fund 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 (except Small to Mid Cap) and Bond Funds applies whenever a Money
Manager's performance exceeds the index by 2.00% (3.00% for Small to Mid Cap) or
more, the Money Managers for those Funds could receive a maximum Performance Fee
even if the performance of the Account is negative. Also, because the maximum
Performance Fee for the International Fund applies whenever a Money Manager's
performance exceeds the index by 4.00% or more, the Money Manager for the
International Fund 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.
Section 205 of the Investment Advisers Act requires that any performance
fee paid by a registered investment company must be based on the asset value of
the fund averaged over a specified period and increasing and decreasing
proportionately with the investment performance of the fund over a specified
period in relation to the investment record of an appropriate index of
securities prices. The staff of the SEC has suggested that the Funds'
performance fees may not be proportionate as required by Section 205. The Board
of Directors of the Funds has considered the staff's views and believes that the
performance fees are in the best interests of fund shareholders and are
proportionate under Section 205 as interpreted in the staff's own "no action"
letters. Nevertheless, the Board may determine that the Funds should seek their
own "no-action" letter in response to the staff's comments. There is no
guarantee that the Funds will receive "no-action" assurances from the staff
concerning performance fees, and therefore the fees may change in the future.
Money Manager Fees - Intermediate Fixed-Income Fund and Short-Intermediate
Fixed-Income Fund. Beginning on September 21, 1998, the Intermediate
Fixed-Income Fund and Short-Intermediate Fixed-Income Fund were managed by
Cypress. In accordance with the exemptive order and interpretations of the SEC,
at any time the Manager replaces a Money Manger, 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 Fund and the
Short-Intermediate Fixed-Income Fund, 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 Funds 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.
Money Manager Fees - International Equity Fund. On August 19, 1999, the
Board of Directors of Accessor Funds amended the Money Manager Agreement with
Nicholas-Applegate, to change the schedule of fees payable to the Money Manager,
effective September 1, 1999. Prior to the change, the Money Manager received a
basic fee at the annual rate of 0.20% the International Equity Fund's average
daily net assets; there was no limit on the maximum amount of the basic fee.
After the change, the basic fee was limited to a maximum fee of $400,000
annually. In substance, when the International Equity Fund's assets exceed
$200,000,000, the basic fee is never more than $400,000 annually.
FUND EXPENSES
Accessor Funds pay all of its expenses other than those expressly assumed
by Accessor Capital. Accessor Funds' 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 Fund Accounting agent; (d) expenses of obtaining
quotations for calculating the value of the Funds' assets; (e) expenses of
obtaining Fund activity reports and analyses for each Fund; (f) expenses of
maintaining each Fund's tax records; (g) salaries and other compensation of any
of Accessor Funds' executive officers and employees, if any, who are not
officers, directors, shareholders or employees of Accessor Capital or any of its
partners; (h) taxes levied against the Funds; (i) brokerage fees and commissions
in connection with the purchase and sale of portfolio securities for the Funds;
(j) costs, including the interest expense, of borrowing money; (k) costs and/or
fees incident to meetings of the Funds, the preparation and mailings of
prospectuses and reports of the Funds to their shareholders, the filing of
reports with regulatory bodies, the maintenance of Accessor Funds' 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 Funds' shares for sale; (m) costs of printing
stock certificates representing shares of the Funds; (n) Directors' fees and
expenses of Directors who are not officers, employees or shareholders of
Accessor Capital 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 Accessor
Funds 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
and 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 Accessor Funds' Multi-Class Plan (as defined below)
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 a
Fund's assets. The Funds are also responsible for paying a management fee to
Accessor Capital. Additionally, the Funds pay a Basic Fee and Fund Management
Fee in the first five quarters of investment operations to the applicable Money
Managers, and a Basic Fee and/or Performance Fee in the sixth quarter of
investment operations to the applicable Money Managers, as described below.
Certain expenses attributable to particular Funds are charged to those Funds,
and other expenses are allocated among the Funds 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.
MULTI-CLASS STRUCTURE
On February 19, 1998, the Board of Directors of Accessor Funds, adopted a
Rule 18f-3 Plan and established two classes of shares for the Funds, the Advisor
Class and the Investor Class. The initial shares of Accessor Funds were
redesignated as Advisor Class Shares. The Board of Directors of Accessor Funds,
including a majority of the non-interested Directors (as defined in the
Investment Company Act), voted in person at the Board meeting on February 15,
2000, to adopt an Amended Rule 18f-3 Plan (the "Amended Multi-Class Plan")
pursuant to Rule 18f-3 under the Investment Company Act. The Directors
determined that the Amended Multi-Class Plan is in the best interests of each
class individually and Accessor Funds as a whole.
Under the Amended Multi-Class Plan, shares of each class of each Fund
represent an equal pro rata interest in such Fund 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 Amended Multi-Class Plan, Accessor Funds, on behalf of
each Fund's Investor Class Shares, has adopted a Distribution and Service Plan
and an Administrative Services Plan, each as described below. Pursuant to the
appropriate plan, Accessor Funds 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 and
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 Accessor Funds
and may be offered by Service Organizations to their clients or customers, which
may impose additional transaction or account fees. Accessor Capital 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
Accessor Capital will compensate the Service Organizations from its revenue.
As described in the Amended Multi-Class Plan, Accessor Funds has not
adopted a Distribution and Service Plan or Administrative Services Plan for the
Advisor Class Shares. Advisor Class Shares shall be offered by Accessor Funds at
NAV with no distribution, shareholder or administrative service fees paid by the
Advisor Class Shares of the Funds. Advisor Class Shares are offered directly
from Accessor Funds 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. Accessor Funds, on behalf of
the Advisor Class Shares, pays no compensation to Service Organizations and
receives none of the fees or transaction charges. Accessor Capital 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 Accessor Capital will compensate the Service Organizations
from its revenue.
Distribution and Service Plan. Accessor Funds has adopted a Distribution
and Service Plan (the "Distribution and Service Plan") under Rule 12b-1 ("Rule
12b-1") of the Investment Company Act with respect to the Investor Class Shares
of each Fund. Under the terms of the Distribution and Service Plan, Accessor
Funds is permitted, out of the assets attributable to the Investor Class Shares
of each Fund (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, 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 Accessor Funds
to prospective holders of Investor Class Shares; (d) costs involved in
preparing, printing and distributing sales literature pertaining to Accessor
Funds and (e) costs involved in obtaining whatever information, analyses and
reports with respect to marketing and promotional activities that Accessor Funds
may, from time to time, deem advisable (the "Distribution Services"). Pursuant
to the Distribution and Service Plan, each Fund may also make payments to
Service Organizations who provide non-distribution related services, including
but not limited to: personal and/or account maintenance services. 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 Accessor Funds may
reasonably request to the extent the Service Organizations are permitted to do
so under applicable statutes, rules and regulations.
Subject to the limitations of applicable law and regulations, including
rules of NASD, the payments made directly to third parties for such distribution
and service related costs or expenses, shall be up to but not exceed 0.25% of
the average daily net assets of the Funds attributable to the Investor Class
Shares. In the event the Distribution and Service 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 Accessor Funds
under the Distribution and Service Plan may also enter into an Administrative
Services Agreement with regard to its Investor Class Shares, which will not be
subject to the terms of the Distribution and Service Plan.
The Distribution and Service Plan may be terminated with respect to
Accessor Funds 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 and Service Plan (the "Qualified Directors") or by the vote of a
majority of the outstanding voting securities of the relevant class of Accessor
Funds. Any change in the Distribution and Service Plan that would materially
increase the cost to the class of shares of Accessor Funds to which the
Distribution Service Plan relates requires approval of the affected class of
shareholders of Accessor Funds. The Distribution and Service Plan requires the
Board to review and approve the Distribution and Service Plan annually and, at
least quarterly, to receive and review written reports of the amounts expended
under the Distribution and Service Plan and the purposes for which such
expenditures were made. The Distribution and Service Plan may be terminated at
any time upon a vote of the Qualified Directors.
Administrative Services Plan. Accessor Funds has adopted an Administrative
Services Plan whereby Accessor Funds is authorized to enter into Administrative
Service Agreements on behalf of the Investor Class Shares of the Funds (the
"Agreements"), the form of which has been approved by the Board of Directors of
Accessor Funds (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 Fund 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 Fund (the "Administrative Services Fee")
beneficially owned by the clients of the Service Organizations. Provided,
however, that no Fund shall directly or indirectly pay any distribution related
amounts that will be allocated under Accessor Funds' Distribution and Service
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
Accessor Funds, 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 Fund 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 Fund
necessary for such services; (vi) if required by law, forwarding shareholder
communications from the Fund (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 a Fund 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 and Service Plan and the
Administrative Services Plan will provide benefits to Accessor Funds. 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 and Service 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 Accessor Funds and (ii) those Directors who are not "interested
persons" of Accessor Funds (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 and Distribution and Service 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 and Service Plan provides that expenses payable under the
plan shall be accrued and paid monthly, subject to the 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 or service related expenses.
VALUATION
The NAV per share of each class is calculated 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 Accessor Capital are open for
business. Non-business days for 2000 will be New Year's Day, Martin Luther King
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Most equity securities for which the
primary market is the United States are valued at last sale price or, if no sale
has occurred, at the closing bid price. Most equity securities for which the
primary market is outside the United States are valued using the official
closing price or the last sale price in the principal market in which they are
traded. If the last sale price (on the local exchange) is unavailable, the last
evaluated quote or closing bid price normally is used.
Fixed-income securities and other assets for which market quotations are
readily available may be valued at market values determined by such securities'
most recent bid prices (sales prices if the principal market is an exchange) in
the principal market in which they normally are traded, as furnished by
recognized dealers in such securities or assets. Or, fixed-income securities and
convertible securities may be valued on the basis of information furnished by a
pricing service that uses a valuation matrix that incorporates both
dealer-supplied valuations and electronic data processing techniques.
The International Fund's portfolio securities trade primarily on foreign
exchanges which may trade on Saturdays and on days that the Fund does not offer
or redeem shares. The trading of portfolio securities on foreign exchanges on
such days may significantly increase or decrease the NAV of the Fund's shares
when the shareholder is not able to purchase or redeem Fund shares.
Each Fund's liabilities are allocated among its classes. The total of such
liabilities allocated to a class plus that classes distribution and/or servicing
fees and any other expenses specially allocated to that class are then deducted
from the classes proportionate interest in the Fund's assets, and the resulting
amount for each class is divided by the number of shares of that class
outstanding to produce the classes "NAV" per share. Generally, for Funds that
pay income dividends, those dividends are expected to differ over time by
approximately the amount of the expense accrual differential between a
particular Fund's classes.
Under certain circumstances, the per share NAV of the Investor Class Shares
of the Funds may be lower than the per share NAV 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 Funds that pay income
dividends, those dividends are expected to differ over time by approximately the
amount of the expense accrual differential between the classes.
FUND TRANSACTION POLICIES
Generally, securities are purchased for the Funds (other than the U.S.
Government Money Fund) for investment income and/or capital appreciation and not
for short-term trading profits. However, the Funds 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 Fund 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.
Fund Turnover Rate. The portfolio turnover rate for each Fund 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 Fund 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 a "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 Accessor Capital, that in executing portfolio
transactions and selecting brokers or dealers, the principal objective is to
seek the best net price and execution for the Funds. 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 Accessor Capital 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 Funds. 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). Accessor Capital 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
Accessor Funds. In certain instances, Accessor Capital 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, Accessor Capital 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 Accessor Capital or the Money Managers through brokerage commissions
generated by transactions of the Funds, while the portions of the costs
attributable to non-research usage of such products or services is paid by
Accessor Capital 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 Accessor Capital or the Money Managers
allocation of the costs of such benefits and services between those that
primarily benefit Accessor Capital or the Money Managers and those that
primarily benefit Accessor Funds.
As a general matter, each 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. Accessor Capital 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
Accessor Capital or the Money Manager exercises investment discretion.
In addition, if requested by Accessor Funds, Accessor Capital, 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 Accessor Funds or Accessor Capital so
long as the Money Manager or Accessor Capital believes in good faith that the
broker can be expected to obtain the best price on a particular transaction and
Accessor Funds determines that the commission cost is reasonable in relation to
the total quality and reliability of the brokerage and research services made
available to Accessor Funds, or to Accessor Capital for the benefit of Accessor
Funds 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.
Subject to the "best execution" obligation described above, Accessor Capital may
also, if requested by a Fund, direct all or a portion of a Fund's transactions
to brokers who pay a portion of that Fund's expenses.
Accessor Capital does not expect the Funds ordinarily to effect a
significant portion of the Funds' total brokerage business with brokers
affiliated with Accessor Capital or their Money Managers. However, a Money
Manager may effect portfolio transactions for the Fund 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
Funds 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 Funds. Certain services received by Accessor Capital 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 Fund 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 Fixed-Income Funds generally do not pay brokerage commissions.
BROKERAGE COMMISSIONS PAID BY EQUITY FUNDS
FOR THE FISCAL YEAR ENDED DECEMBER 31
Fund 1997 1998 1999
Growth $149,706(1) $135,787 $281,848(2)
Value $119,157(3) $328,259(4) $666,746(5)
Small to Mid Cap $239,300 $385,130 $609,310
International Equity $1,465,433(6) $1,602,429(7) $2,472,846(8)
- ------------
(1) Of this amount, $256 was paid to an affiliated broker (Smith Barney, Inc.)
and $40,897 was directed by Accessor Capital or the Money Manager to pay
for research products or services, as described in Brokerage Allocations,
above.
(2) Of this amount, $39,320 was directed by Accessor Funds as part of a
brokerage recapture program.
(3) Of this amount $118,527 was directed by Accessor Capital or the Money
Manager to pay for research products or services, as described in Brokerage
Allocations, above.
(4) Of this amount $306,230.43 was directed by Accessor Capital or the Money
Manager to pay for research products or services, as described in Brokerage
Allocations, above.
(5) Of this amount, $191,511 was directed by Accessor Capital or the Money
Manager to pay for research products or services, as described in Brokerage
Allocations, above, and $97,991 was directed by Accessor Funds as part of a
brokerage recapture program.
(6) Of this amount,$3,077 was paid to affiliated brokers (Salomon Brothers,
Inc. and Smith Barney Inc.) and $14,579 was directed by Accessor Capital or
the Money Manager to pay for research products or services, as described in
Brokerage Allocations, above.
(7) Of this amount, $16,870.57 was paid to an affiliated broker (Salomon
Brothers, Inc.) and $27,122.32 was directed by Accessor Capital or the
Money Manager to pay for research products or services, as described in
Brokerage Allocations, above.
(8) Of this amount, $159,811 was directed by Accessor Capital or the Money
Manager to pay for research products or services, as described in Brokerage
Allocations, above, and $231,681 was directed by Accessor Funds as part of
a brokerage recapture program.
CALCULATION OF FUND PERFORMANCE
Information about a Fund's performance is based on that Fund'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 Funds may be included in advertisements or reports to shareholders
or prospective investors. Quotations of yield for a Fund 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 the Funds may be included in advertisements or other
written material. When a Fund's total return is advertised, it will be
calculated for the past year, the past five years, and the past ten years (or if
the Fund has been offered for a period shorter than one, five or ten years, that
period will be substituted) since the establishment of the Fund. Any fees
charged by Service Organizations directly to their customers in connection with
investments in the Funds are not reflected in the Fund's total return and such
fees, if charged, will reduce the actual return received by customers on their
investment.
The Funds may advertise their performance in terms of total return, which
is computed by finding the 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 Funds may also include in advertisements data comparing
performance with the performance of 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, Fund
performance may be compared to well-known unmanaged indices of market
performance or other appropriate indices of investment securities or with data
developed by Accessor Funds or Accessor Capital derived from such indices.
Unmanaged indices (i.e., other than Lipper) generally do not reflect deductions
for administrative and management costs and expenses. Fund performance may also
be compared, on a relative basis, to other Funds of Accessor Funds. This
relative comparison, which may be based upon historical Fund performance, may be
presented numerically, graphically or in text. Fund performance may also be
combined or blended with other Accessor Funds, and that combined or blended
performance may be compared to the same Benchmark Indices to which individual
Funds are compared. In addition, Accessor Funds may from time to time compare
the expense ratio of the Funds 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
Funds may discuss relevant economic and market conditions affecting Accessor
Funds. In addition, Accessor Funds, Accessor Capital 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. Accessor Funds may also describe the general biography,
work experience and/or investment philosophy or style of the Money Managers of
the Accessor Funds and may include quotations attributable to the Money Managers
describing approaches taken in managing each Accessor Funds' investments,
research methodology underlying stock selection or each Accessor Funds'
investment objective. The Accessor Funds 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.
CALCULATION OF FUND PERFORMANCE INFORMATION
Yield and Total Return Quotations. The Funds (other than the U.S.
Government Money Fund) 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 Funds, 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 Fund
are reinvested at the price stated in the Prospectuses on the reinvestment dates
during the period, and includes all recurring fees.
Each Fund's (Except U.S. Government Money Fund and the High Yield Bond
Fund) average annual total returns for periods ended December 31, 1999,
calculated using the above method, are set forth in the tables below:
Advisor Class
Fund 1 Year 5 Years Life of Fund*
Growth 25.87% 31.68% 25.03%
Value 6.87 21.51 16.91
Small to Mid Cap 27.26 27.06 21.21
International Equity 48.93 18.62 17.05
Intermediate Fixed-Income -3.58 6.60 5.42
Short-Intermediate Fixed-Income 1.22 5.84 4.90
Mortgage Securities 1.19 7.51 6.14
- -----------------------------------------
*Advisor Class Shares of the Funds commenced operations on the following dates,
Growth - 08/24/92; Value - 08/24/92; Small to Mid-Cap - 08/24/92; International
- -10/03/94; Intermediate Fixed-Income - 06/15/92; Short-Intermediate Fixed-Income
- - 05/18/92; Mortgage Securities - 05/18/92.
Investor Class
Fund 1 Year Life of Fund**
Growth 25.23% 28.94%
Value 6.35 3.43
Small to Mid Cap 26.60 19.31
International Equity 48.23 26.75
Intermediate Fixed-Income -4.05 0.04
Short-Intermediate Fixed-Income 0.70 2.90
Mortgage Securities 0.69 2.14
- ---------------
**Investor Class Shares of the Funds commenced operations on the following
dates: Growth - 07/01/98; Value- 07/01/98; Small to Mid-Cap - 06/24/98;
International - 07/06/98; Intermediate Fixed-Income - 07/14/98;
Short-Intermediate Fixed-Income - 07/14/98; Mortgage Securities - 07/10/98.
Yields are computed by using standardized methods of calculation required
by the SEC. Yields for the Fixed-Income Funds 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/cd+1)6-1]
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the period
that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of the
period.
The annualized yields for the Fixed-Income Funds (except for the High Yield Bond
Fund), calculated using the above method based on the 30-day period ended on
December 31, 1999, are as follows:
Advisor Class
Fund 30 Day Yield
Intermediate Fixed-Income 7.36%
Short-Intermediate Fixed-Income 6.41
Mortgage Securities 6.17
Investor Class
Fund 30 Day Yield
Intermediate Fixed-Income 6.85%
Short-Intermediate Fixed-Income 5.90
Mortgage Securities 5.67
The U.S. Government Money Fund computes its current annualized and compound
effective yields using standardized methods required by the SEC. The annualized
yield for this Fund 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 Fund'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 yields for the U.S. Government Money Fund as of December 31,
1999 are as follows:
Advisor Class
7-day Compounded
Annualized Yield Effective Yield
4.84% 5.10%
Investor Class
7-day Compounded
Annualized Yield Effective Yield
4.34% 4.58%
Current distribution information for the Investor Class Shares of a Fund
will be based on distributions for a specified period (i.e., total dividends
from net investment income), divided by the NAV 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
Fund 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
Accessor Funds, on behalf of the Funds, has adopted a Code of Ethics, which
establishes standards by which certain covered persons of Accessor Funds must
abide relating to personal securities trading conduct. Under the Code of Ethics,
covered persons (who include, among others, directors and officers of Accessor
Funds and employees of Accessor Funds and Accessor Capital), are generally
prohibited from engaging in personal securities transactions with certain
exceptions as set forth in the Code of Ethics. The Code of Ethics also contains
provisions relating to the reporting of any personal securities transactions,
and requires that covered persons shall place the interests of shareholders of
Accessor Funds before their own.
TAX INFORMATION
TAXATION OF THE FUNDS -- GENERAL
Each Fund, which is treated as a separate entity for federal income tax
purposes, has elected to be, and intends to remain qualified for treatment as a
regulated investment company under the Code ("RIC"). That treatment relieves a
Fund, but not its shareholders, from paying federal income tax on any investment
company taxable income (consisting of net investment income and the excess of
net short-term capital gain over net long-term capital loss) and net capital
gain (i.e., the excess of net long-term capital gain over net short-term capital
loss), if any, that are distributed to its shareholders.
To qualify for treatment as a RIC, a Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income ("Distribution Requirement") and must meet several additional
requirements. For each Fund, these requirements include the following: (1) at
least 90% of the Fund'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 securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in securities or those currencies ("Income
Requirement"); (2) at the close of each quarter of the Fund'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 RICs and other
securities, with these other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Fund's total assets and
that does not represent more than 10% of the issuer's outstanding voting
securities; and (3) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or securities of other RICs) of any one
issuer or in two or more issuers that the Fund controls and that are engaged in
similar trades or businesses.
If any Fund failed to qualify for treatment as a RIC for any taxable year,
(1) it would be taxed as an ordinary corporation on the full amount of its
taxable income for that year without being able to deduct the distributions it
makes to its shareholders and (2) the shareholders would treat all those
distributions, including distributions of net capital gain, as dividends (that
is, ordinary income) to the extent of the Fund's earnings and profits. In
addition, the Fund could be required to recognize unrealized gains, pay
substantial taxes and interest and make substantial distributions before
requalifying for RIC treatment.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year at least
98% of the sum of its ordinary income for that year and 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 a Fund in
October, November or December of any calendar year and payable to shareholders
of record on a date in one of those months will be deemed to have been paid by
the Fund and received by the shareholders on December 31 of that year if the
dividends are paid during the following January. Each Fund intends to make
sufficient distributions to avoid the Excise Tax.
The dividend declaration for each Fund other than the High Yield Bond Fund is
disclosed in the prospectus. The Board of Directors presently intends to declare
dividends for the High Yield Bond Fund generally on the last business day of
each month, to be payable on the first business day of the following month,
except in December, when for operational convenience the dividend is declared on
the second or third to last business day of the year and paid the following day.
TAXATION OF THE SHAREHOLDERS
All dividends out of investment company taxable income will be taxable as
ordinary income to shareholders, whether received in cash or reinvested in
additional Fund shares. Distributions of net capital gain by a Fund will be
taxable to its shareholders as long-term capital gains (i.e., as gain from
assets held for more than one year at the time of disposition), regardless of
the length of time the shareholders have held their Fund shares. The maximum tax
rate on that gain for non-corporate taxpayers generally is 20%. A lower rate of
18% will apply after December 31, 2000, for assets that are held for more than
five years and are acquired after that date (unless the taxpayer elects to treat
an asset held on that date as having been sold for its fair market value on
January 1, 2001). In the case of a non-corporate taxpayer whose ordinary income
is taxed at a 15% rate, the 20% and 18% rates are reduced to 10% and 8%,
respectively. A corporation's net capital gain is taxed at the same rate as its
ordinary income.
Any loss realized by a shareholder on a sale (redemption) or exchange of
shares of a Fund will be disallowed to the extent the shareholder purchases
other shares of that Fund, regardless of class, within 30 days before or after
the disposition.
A portion of the dividends from each Fund's investment company taxable
income, whether paid in cash or reinvested in additional Fund shares, may be
eligible for the dividends-received deduction allowed to corporations. The
eligible portion may not exceed the aggregate dividends the Fund receives from
domestic corporations; capital gain distributions thus are not eligible for the
deduction. Dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
federal alternative minimum tax. Corporate shareholders should consult their tax
advisers regarding other requirements applicable to the dividends-received
deduction.
Any distribution paid shortly after a purchase of Fund shares by an
investor will reduce the NAV of those shares by the distribution amount. While
such a distribution is in effect a return of capital, it is nevertheless subject
to federal income tax. This result may be magnified with respect to a Fund that
pays dividends only once a year, such as the International Fund. Therefore,
prior to purchasing shares of any Fund, an investor should carefully consider
the impact of distributions that are expected to be or have been announced.
HEDGING STRATEGIES
The use of hedging strategies, such as writing (selling) and purchasing
options and futures contracts and entering into forward contracts, involves
complex rules that will determine for income tax purposes the amount, character
and timing of recognition of the gains and losses a Fund realizes in connection
therewith. Gain from the disposition of foreign currencies (except certain gains
that may be excluded by future regulations), and gains from options, futures and
forward contracts derived by a Fund with respect to its business of investing in
securities or foreign currencies, will be treated as qualifying income under the
Income Requirement.
To the extent a Fund recognizes income from a "conversion transaction," as
defined in section 1258 of the Code, all or part of the gain from the
disposition or other termination of a position held as part of the conversion
transaction may be recharacterized as ordinary income. A conversion transaction
generally consists of two or more positions taken with regard to the same or
similar property, where (1) substantially all of the taxpayer's return is
attributable to the time value of its net investment in the transaction and (2)
the transaction satisfies any of the following criteria: (a) 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; (b) the transaction is a straddle, within the meaning of section
1092 of the Code (see below); (c) 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 (d) the transaction is described as a conversion transaction in future
regulations.
Certain futures, foreign currency contracts and non-equity options in which
a Fund may invest may be subject to section 1256 of the Code ("section 1256
contracts"). Any section 1256 contracts a Fund holds at the end of its taxable
year, other than contracts with respect to which the Fund has made a "mixed
straddle" election, must be "marked-to-market" (that is, treated as having been
sold at that time for their fair market value) for federal income tax purposes,
with the result that unrealized gains or losses will be treated as though they
were realized. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net realized gain or loss from any actual sales of section
1256 contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 1256
contracts also may be marked-to-market for purposes of the Excise Tax. These
rules may operate to increase the amount that a Fund must distribute to satisfy
the Distribution Requirement (i.e., with respect to the portion treated as
short-term capital gain), which will be taxable to the shareholders as ordinary
income, and to increase the net capital gain a Fund recognizes, without in
either case increasing the cash available to the Fund. A Fund may elect to
exclude certain transactions from the operation of section 1256, although doing
so may have the effect of increasing the relative proportion of net short-term
capital gain (taxable as ordinary income) and thus increasing the amount of
dividends that must be distributed.
Under Code section 1092, offsetting positions in any actively traded
security, option, futures or forward contract entered into or held by a Fund may
constitute a "straddle." Straddles are subject to certain rules that may affect
the amount, character and timing of a Fund's gains and losses with respect to
positions of the straddle by requiring, among other things, that (1) loss
realized on disposition of one position of a straddle be deferred to the extent
of any unrealized gain in an offsetting position until the latter position is
disposed of, (2) the Fund's holding period in certain straddle positions not
begin until the straddle is terminated (possibly resulting in gain being treated
as short-term rather than long-term capital gain) and (3) losses recognized with
respect to certain straddle positions, that otherwise would constitute
short-term capital losses, be treated as long-term capital losses. Applicable
regulations also provide certain "wash sale" rules, which apply to transactions
where a position is sold at a loss and a new offsetting position is acquired
within a prescribed period, and "short sale" rules applicable to straddles.
Different elections are available to each Fund, which may mitigate the effects
of the straddle rules, particularly with respect to "mixed straddles" (i.e., a
straddle of which at least one, but not all, positions are section 1256
contracts).
When a covered call option written (sold) by a Fund expires, the Fund will
realize a short-term capital gain equal to the amount of the premium it received
for writing the option. When a Fund terminates its obligations under such an
option by entering into a closing transaction, it will realize a short-term
capital gain (or loss), depending on whether the cost of the closing transaction
is less (or more) than the premium it received when it wrote the option. When a
covered call option written by a Fund is exercised, the Fund will be treated as
having sold the underlying security, producing long-term or short-term capital
gain or loss, depending on the holding period of the underlying security and
whether the sum of the option price received on the exercise plus the premium
received when it wrote the option is more or less than the basis of the
underlying security.
If a Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, futures or forward contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that it will recognize gain at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
a futures or forward contract entered into by a Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale. The foregoing will not apply, however, to any
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end of
that year and the Fund holds the appreciated financial position unhedged for 60
days after that closing (i.e., at no time during that 60-day period is the
Fund's risk of loss regarding that position reduced by reason of certain
specified transactions with respect to substantially similar or related
property, such as having an option to sell, being contractually obligated to
sell, making a short sale or granting an option to buy substantially identical
stock or securities).
FOREIGN SECURITIES AND TRANSACTIONS
A Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is any foreign corporation (with certain exceptions) that, in
general, meets either of the following tests: (1) at least 75% of its gross
income is passive or (2) an average of at least 50% of its assets produce, or
are held for the production of, passive income. Under certain circumstances, a
Fund will be subject to federal income tax on a portion of any "excess
distribution" received on the stock of a PFIC or of any gain on disposition of
the stock (collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a dividend to its shareholders. The balance of
the PFIC income will be included in a Fund's investment company taxable income
and, accordingly, will not be taxable to it to the extent it distributes that
income to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain -- which
the Fund likely would have to distribute to satisfy the Distribution Requirement
and avoid imposition of the Excise Tax -- even if the Fund did not receive those
earnings and gain from the QEF. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Each Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of the stock over a
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, a Fund also would be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included in income by the
Fund for prior taxable years under the election (and under regulations proposed
in 1992 that provided a similar election with respect to the stock of certain
PFICs). A Fund's adjusted basis in each PFIC's stock subject to the election
would be adjusted to reflect the amounts of income included and deductions taken
thereunder.
Gains or losses (1) from the disposition of foreign currencies, including
forward contracts, (2) on the disposition of each foreign-currency-denominated
debt security that are attributable to fluctuations in the value of the foreign
currency between the dates of acquisition and disposition of the security and
(3) that are attributable to exchange rate fluctuations between the time a Fund
accrues interest, dividends or other receivables, or accrues expenses or other
liabilities, denominated in a foreign currency and the time the Fund actually
collects the receivables or pays the liabilities generally are treated as
ordinary income or ordinary loss. These gains, referred to under the Code as
"section 988" gains or losses, increase or decrease the amount of a Fund's
investment company taxable income available to be distributed to its
shareholders as ordinary income, rather than increasing or decreasing the amount
of its net capital gain. If section 988 losses exceed other investment company
taxable income during a taxable year, a Fund would not be able to distribute any
dividends, and any distributions made during that year before the losses were
realized would be recharacterized as a return of capital to shareholders, rather
than as a dividend, thereby reducing each shareholder's basis in his or her Fund
shares.
FOREIGN TAXES (INTERNATIONAL FUND ONLY)
Dividends and interest received and gains realized by the International
Fund on foreign securities may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce the yield and/or total return on its investments. Tax conventions between
certain countries and the United States may reduce or eliminate foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. It is impossible to determine in
advance the effective rate of foreign tax to which the International Fund will
be subject, because the amount of the International Fund's assets to be invested
in various countries is not known.
If more than 50% of the value of the International Fund's total assets at
the close of any taxable year consists of securities of foreign corporations, it
will be eligible to, and may, file an election with the Internal Revenue Service
that would enable its shareholders, in effect, to benefit from any foreign tax
credit or deduction available with respect to any foreign taxes it paid.
Pursuant to the election, the International Fund would treat those taxes as
dividends paid to its shareholders and each shareholder (1) would be required to
include in gross income, and treat as paid by the shareholder, the shareholder's
proportionate share of those taxes, (2) would be required to treat that share of
those taxes and of any dividend paid by the International Fund that represents
income from foreign or U.S. possessions sources as the shareholder's own income
from those sources, and (3) could either deduct the foreign taxes deemed paid by
the shareholder in computing taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against the shareholder's
federal income tax. If the International Fund makes this election, it will
report to its shareholders shortly after each taxable year their respective
shares of the foreign taxes it paid and its income from sources within foreign
countries and U.S. possessions. Individuals who have no more than $300 ($600 for
married persons filing jointly) of creditable foreign taxes included on Forms
1099 and all of whose foreign source income is "qualified passive income" may
elect each year to be exempt from the extremely complicated foreign tax credit
limitation, in which event they would be able to claim a foreign tax credit
without having to file the detailed Form 1116 that otherwise is required.
Shareholders will not be entitled to credit or deduct their allocable
portions of foreign taxes imposed on the International Fund if they have not
held their shares therein for 16 days or more during the 30-day period beginning
15 days before the ex-distribution date for those shares. The minimum holding
period will be extended if the shareholder's risk of loss with respect to those
shares is reduced by reason of holding an offsetting position. 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 taxes in
determining their U.S. income tax liability unless the dividends paid to them by
the International Fund are effectively connected with a U.S. trade or business.
FOREIGN SHAREHOLDERS
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
Funds.
STATE AND LOCAL TAXES
Depending on the extent of a Fund's activities in states and localities in
which it office is maintained, in which its agents are located or in which it is
otherwise deemed to be conducting business, it may be subject to the tax laws of
those states or localities. Furthermore, the state and local income tax
treatment of a Fund and its shareholders with respect to distributions by the
Fund may differ from the federal income tax treatment thereof. Distributions to
shareholders may be subject to other state and local taxes as well. Prospective
investors are advised to consult with their own tax advisors regarding the state
and local income and other tax treatment of an investment in a Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Advisor Class Shares of the Funds may be purchased directly from the Funds
with no sales charge or commission. Investors may also purchase Advisor Class
Shares or Investor Class Shares of the Funds from intermediaries, such as a
broker-dealer, bank or other financial institutions. 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 Funds. Shares of the Funds will be sold at the NAV 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. NAV is determined as set
forth above under "Valuation." All purchases must be made in U.S. dollars.
Orders are accepted on each business day. If Accessor Capital receives a
purchase order for shares of the U.S. Government Money Fund and investment
monies are wired prior to 9:00 a.m. Pacific time, the shareholder will be
entitled to receive that day's dividend. Neither the Funds 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 Fund shares must be received
by Accessor Capital prior to close of the New York Stock Exchange, normally 4:00
p.m. Eastern time, on the day shares of those Funds are offered and orders
accepted, or the orders will not be accepted and invested in the particular Fund
until the next day on which shares of that Fund are offered. Payment must be
received by 12:00 p.m. Eastern time on the next business day. Shares may be
bought or sold through financial intermediaries who are authorized to receive
purchase and redemption orders on behalf of the Funds. These financial
intermediaries are authorized to designate their agents and affiliates to
receive these orders, and a Fund will be deemed to have received a purchase or
redemption order when the order is received by the financial intermediary. The
order will be priced at the NAV next computed after the order is received.
Each Fund reserves the right to suspend the offering of shares for a period
of time. The Funds also reserve the right to reject any specific purchase order,
including certain purchases by exchange. Purchase orders may be refused if, in
Accessor Capital's opinion, they would disrupt management of a Fund. A Fund also
reserves the right to refuse exchange purchases by any person or group if, in
Accessor Capital's judgment, a Fund would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
Investor Class Shares are expected to be available through industry
recognized service providers of fund supermarkets or similar programs ("Service
Organizations") that 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. Therefore, a client or customer
should contract the Service Organization acting on their behalf concerning the
fees (if any) charged in connection with a purchase or redemption of Investor
Class Shares. 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 a Fund in accordance with their agreements with clients or
customers.
For non-distribution related administration, subaccounting, transfer agency
and/or other services, a Fund may pay Service Organizations and certain record
keeping organizations with whom they have entered into agreements pursuant to
the Distribution and Service Plan and/or the 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.
Shares may be redeemed on any business day at the NAV 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
Accessor Capital receives a redemption request in good order from a shareholder
of the U.S. Government Money Fund 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 Fund who elect this option should be
aware that their account will not be credited with the daily dividend on that
day. 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.
The Funds may accept certain types of securities in lieu of wired funds as
consideration for Fund shares. Under no circumstances will a Fund accept any
securities in consideration of the Fund's shares the holding or acquisition of
which would conflict with the Fund's investment objective, policies and
restrictions or which Accessor Capital or the applicable Money Manager believes
should not be included in the applicable Fund's portfolio on an indefinite
basis. Securities will not be accepted in exchange for Fund 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 the Nasdaq Stock
Market. Securities accepted in consideration for a Fund's shares will be valued
in the same manner as the Fund's portfolio securities in connection with its
determination of NAV. A transfer of securities to a Fund in consideration for
Fund 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 Fund's shares should consult their tax advisers as to the
federal, state and local tax consequences of such transfers.
Telephone Transactions. A shareholder of Accessor Funds with an aggregate
account balance of $1 million or more may request purchases, redemptions or
exchanges of shares of a Fund 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, Accessor Funds 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 Fund, all of which must match
Accessor Funds' records; requiring that a service representative of Accessor
Capital, 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 Accessor Funds 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. Accessor Funds may implement other
procedures from time to time. If reasonable procedures are not implemented,
Accessor Funds may be liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, neither Accessor Funds, the Fund nor Accessor
Capital will be responsible for authenticity of redemption or exchange
instructions received by telephone.
Market Timing Policy. The Funds are intended to be long-term investment
vehicles and are not designed to provide investors with a means of speculation
on short-term market movements. A pattern of frequent purchases and exchanges
can be disruptive to efficient portfolio management and, consequently, can be
detrimental to a Fund's performance and to its shareholders. Accordingly, if a
Fund's management determines that an investor is engaged in excessive trading,
the Fund, with or without prior notice, may temporarily or permanently terminate
the availability of Fund exchanges, or reject in whole or part any purchase or
exchange request, with respect to such investor's account. Such investors also
may be barred from purchasing other Funds in the Accessor Family of Funds.
Generally, an investor who makes more than four exchanges out of a Fund during
any calendar month or who makes exchanges that appear to coincide with an active
market-timing strategy may be deemed to be engaged in excessive trading.
Accounts under common ownership or control will be considered as one account for
purposes of determining a pattern of excessive trading. In addition, a Fund may
refuse or restrict purchase or exchange requests by any person or group if, in
the judgment of the Fund's management, the Fund would be unable to invest the
money effectively in accordance with its investment objective and policies or
could otherwise be adversely affected or if the Fund receives or anticipates
receiving simultaneous orders that may significantly affect the Fund (e.g.,
amounts equal to $250,000). If an exchange request is refused, the Fund will
take no other action with respect to the shares until it receives further
instructions from the investor. A Fund may delay forwarding redemption proceeds
for up to seven days if the investor redeeming shares is engaged in excessive
trading or if the amount of the redemption request otherwise would be disruptive
to efficient portfolio management or would adversely affect the Fund. The Funds'
policy on excessive trading applies to investors who invest in a Fund directly
or through financial intermediaries, but does not apply to a Systematic
Withdrawal Plan described in the Funds' Prospectus.
During times of drastic economic or market conditions, the Fund may suspend
exchange privileges temporarily without notice and treat exchange requests based
on their separate components - redemption orders with a simultaneous request to
purchase the other Fund's shares. In such a case, the redemption request would
be processed at the Fund's next determined NAV but the purchase order would be
effective only at the NAV next determined after the Fund being purchased
receives the proceeds of the redemption, which may result in the purchase being
delayed.
FINANCIAL STATEMENTS
Accessor Funds' audited financial statements for the fiscal year ended
December 31, 1999, are contained in the Annual Report to Shareholders for the
fiscal year ended December 31, 1999, which is incorporated herein by this
reference and, unless previously provided, will be delivered together herewith.
<PAGE>
APPENDIX A
RATINGS OF DEBT INSTRUMENTS
Corporate Bond Ratings
Moody's Investors Service ("Moody's")
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing. Note: Moody's applies numerical modifiers 1, 2,
and 3 in each generic rating classification from Aa through Caa. The modifier 1
indicates that the obligation ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates a ranking in the lower end of that generic rating category.
Standard & Poor's Corporation ("S&P")
AAA
An obligor rated 'AAA' has EXTREMELY STRONG capacity to meet its financial
commitments. 'AAA' is the highest Issuer Credit Rating assigned by Standard &
Poor's.
AA
An obligor rated 'AA' has VERY STRONG capacity to meet its financial
commitments. It differs from the highest rated obligors only in small degree.
A
An obligor rated 'A' has STRONG capacity to meet its financial commitments but
is somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than obligors in higher-rated categories.
BBB
An obligor rated 'BBB' has ADEQUATE capacity to meet its financial commitments.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitments.
Obligors rated 'BB', 'B', 'CCC', and 'CC' are regarded as having significant
speculative characteristics. 'BB' indicates the least degree of speculation and
'CC' the highest. While such obligors will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB
An obligor rated 'BB' is LESS VULNERABLE in the near term than other lower-rated
obligors. However, it faces major ongoing uncertainties and exposure to adverse
business, financial, or economic conditions that could lead to the obligor's
inadequate capacity to meet its financial commitments.
B
An obligor rated 'B' is MORE VULNERABLE than the obligors rated 'BB', but the
obligor currently has the capacity to meet its financial commitments. Adverse
business, financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitments.
CCC
An obligor rated 'CCC' is CURRENTLY VULNERABLE, and is dependent upon favorable
business, financial, and economic conditions to meet its financial commitments.
CC
An obligor rated 'CC' is CURRENTLY HIGHLY-VULNERABLE.
Plus (+) or minus (-):
Ratings from 'AA' to 'CCC' may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
R
An obligor rated 'R' is under regulatory supervision owing to its financial
condition. During the pendency of the regulatory supervision the regulators may
have the power to favor one class of obligations over others or pay some
obligations and not others. Please see Standard & Poor's issue credit ratings
for a more detailed description of the effects of regulatory supervision on
specific issues or classes of obligations.
SD and D
An obligor rated 'SD' (Selective Default) or 'D' has failed to pay one or more
of its financial obligations (rated or unrated) when it came due. A 'D' rating
is assigned when Standard & Poor's believes that the default will be a general
default and that the obligor will fail to pay all or substantially all of its
obligations as they come due. An 'SD' rating is assigned when Standard & Poor's
believes that the obligor has selectively defaulted on a specific issue or class
of obligations but it will continue to meet its payment obligations on other
issues or classes of obligations in a timely manner. Please see Standard &
Poor's issue credit ratings for a more detailed description of the effects of a
default on specific issues or classes of obligations.
N.R.
An issuer designated N.R. is not rated.
Public Information Ratings
Ratings with a 'pi' subscript are based on an analysis of an issuer's
published financial information, as well as additional information in the public
domain. They do not, however, reflect in-depth meetings with an issuer's
management and are therefore based on less comprehensive information than
ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed
annually based on a new year's financial statements, but may be reviewed on an
interim basis if a major event that may affect an issuer's credit quality
occurs. Ratings with a 'pi' subscript are not modified with '+' or '-'
designations. Outlooks are not being provided for ratings with a 'pi' subscript,
nor are they subject to potential CreditWatch listings.
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.
o Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
o Source of Payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
SP-1 - This designation denotes strong or very strong capacity to pay
interest and repay principal. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) sign designation.
SP-2 - This designation denotes satisfactory capacity to pay interest and
repay principal.
Commercial paper rated A by S&P has the following characteristics:
liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated A or better. The issuer has access to at least two additional channels
of borrowing. Basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances. Typically, the issuer's industry is well
established and the issuer has a strong position within the industry. The
reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determine whether the issuer's commercial paper is
rated A-1, A-2 or A-3.
A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2 - This designation indicates the capacity for timely payment on issues
with this designation is strong. However, the relative degree of safety is not
as high as for issues designated A-1.
A-3 - This designation indicates a satisfactory capacity for timely
payment. Obligations carrying this designation are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations.
<PAGE>
APPENDIX B
CALCULATION OF PERFORMANCE FEES
Accessor Capital 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." Accessor Capital and the Board of
Directors believe that the Funds' 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 each Fund's shareholders.
For purposes of calculating the performance differential versus the
applicable index, the investment performance of each Fund (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 Fund (or Account)
during such day and (ii) the value of the Fund'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 a Fund (or Account) are averaged over
the same period as the investment performance of the Fund (or Account) and the
investment record of the applicable index are computed.
<PAGE>
PART C
OTHER INFORMATION
Item 23 Exhibits
(a)(1) Restated Articles of Incorporation of Accessor Funds, Inc.,
("Registrant") dated August 19, 1999 are incorporated by
reference to Exhibit No. (a)(1) to Post-Effective Amendment
No. 16 to the Registration Statement on Form N-1A filed
February 14, 2000 (File No. 33-41245).
(a)(2) Amendment to Articles of Incorporation dated February 4,
2000 is incorporated by reference to Exhibit No. (a)(2) to
Post-Effective Amendment No. 16 to the Registration
Statement on Form N-1A filed February 14, 2000 (File No.
33-41245).
(b) By-Laws of the Registrant, as Amended, are incorporated by
reference to Exhibit No. (b) to Post-Effective Amendment No.
15 to the Registration Statement on Form N-1A filed May 1,
1999 (File No. 33-41245).
(c) Not applicable.
(d)(1) Management Agreement with Bennington Capital Management L.P.
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).
(d)(2) First Amendment to Management Agreement between the
Registrant and 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).
(d)(3) Second Amendment to the Management Agreement between the
Registrant and Bennington Capital Management L.P., dated May
29, 1996, incorporated by reference to Exhibit No. (d)(3) to
the Post-Effective Amendment No. 15 to the Registration
Statement on Form N-1A filed on May 1, 1999 (File No.
33-41245).
(d)(4) Third Amendment to Management Agreement among Registrant and
Accessor Capital Management LP effective April 29, 2000, is
filed herein as Exhibit (d)(1).
(d)(5) Money Manager Agreement among the Registrant on behalf of
Value Fund, 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 Held August 15, 1995, and filed on July 17,
1995 (File No. 33-41245).
(d)(6) Money Manager Agreement among the Registrant on behalf of
Mortgage Securities Fund, Bennington Capital Management L.P.
and BlackRock Financial Management, Inc. 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).
(d)(7) Money Manager Agreement among the Registrant on behalf of
Growth Fund, Accessor Capital Management LP and Chicago
Equity Partners Corp. effective March 16, 2000, is filed
herein as Exhibit (d)(2).
(d)(8) Money Manager Agreement among the Registrant on behalf of
the Growth Fund, Accessor Capital Management LP and Chicago
Equity Partners LLC effective May 1, 2000, is filed herein
as Exhibit (d)(3).
(d)(9) Revised Money Manager Agreement among the Registrant on
behalf of International Equity Fund, Bennington Capital
Management L. P. and Nicholas-Applegate Capital Management
is incorporated by reference to Exhibit (d)(2) to
Post-Effective Amendment No. 16 to the Registration
Statement on Form N-1A filed February 14, 2000 (File No.
33-41245).
(d)(10) Money Manager Agreement among the Registrant on behalf of
the Small Cap Fund, Bennington Capital Management L.P. and
Symphony Asset Management, Inc. Incorporated by reference to
Exhibit B to Proxy Statement For Special Meeting of
Shareholder Held April 30, 1998, and filed on March 30, 1998
(File No. 33-41245).
(d)(11) Money Manager Agreement among the Registrant on behalf of
Intermediate Fixed-Income Fund, Bennington Capital
Management L.P. and Cypress Asset Management is incorporated
by reference to Exhibit (d)(9) to Post-Effective Amendment
No. 15 to the Registration Statement on Form N-1A filed May
1, 1999 (File No. 33-41245).
(d)(12) Money Manager Agreement among the Registrant on behalf of
Short-Intermediate Fixed-Income Fund, Bennington Capital
Management L.P. and Cypress Asset Management is incorporated
by reference to Exhibit (d)(10) to Post-Effective Amendment
No. 15 to the Registration Statement on Form N-1A filed May
1, 1999 (File No. 33-41245).
(d)(13) Money Manager Agreement among the Registrant on behalf of
the High Yield Bond Fund, Accessor Capital Management LP and
Financial Management Advisers, Inc. effective May 1, 2000,
is filed herein as Exhibit (d)(4).
(e) Not applicable.
(f) Not applicable.
(g)(1) IRA Custodian 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. (File No.
33-41245).
(g)(2) Custodian 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).
(g)(3) First Amendment to Custody Agreement with Fifth Third Bank
dated November 14, 1997. Incorporated by reference to
Exhibit (8)(f) to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A filed on April 29, 1998
(File No. 33-41245).
(g)(4) Second Amendment to Custody Agreement with Fifth Third Bank
dated February 19, 1998. Incorporated by reference to
Exhibit (8)(g) to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A filed on April 29, 1998
(File No. 33-41245).
(h)(1) 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).
(h)(2) Amended Appendix C dated February 19, 1998, to Transfer
Agency and Administrative Agreement among the Registrant and
Bennington dated December 1, 1995. Incorporated by reference
by Exhibit (h)(1)(D) to Post-Effective Amendment No. 13 to
the Registration Statement on Form N-1A, filed on April 29,
1998 (File No. 33-41245).
(h)(3) 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).
(h)(4) Amended Exhibits A and B to Fund Accounting and Services
Agreement with Fifth Third Bank and Accessor Capital
Management LP effective April 29, 2000, is filed herein as
Exhibit (h)(1).
(i) Opinion and consent of Kirkpatrick & Lockhart LLP is filed
herein as Exhibit (i).
(j) Consent of Deloitte & Touche LLC is filed herein as Exhibit
(j).
(k) Not applicable.
(l) 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).
(m)(1) Amended and Restated Distribution and Service Plan for
Investor Class Shares dated February 14, 2000, is filed
herein as Exhibit (m)(1).
(m)(2) Form of Dealer and Service Agreement, is filed herein as
Exhibit (m)(2).
(n)(1) Amended and Restated Rule 18f-3 Plan dated February 14,
2000, is filed herein as Exhibit (n).
(n)(2) Administrative Services Plan. Incorporated by reference to
Exhibit No. (15)(h) to Post-Effective Amendment No. 13 to
the Registration Statement on Form N-1A filed on April 29,
1998 (File No. 33-41245).
(n)(3) Form of Administrative Services Agreement. Incorporated by
reference to Exhibit No. (15)(h)(1) to Post-Effective
Amendment No. 13 to the Registration Statement on Form N-1A
filed on April 29, 1998 (File No. 33-41245).
(o) Not Applicable.
(p)(1) Code of Ethics of Accessor Funds, Inc. is filed herein
as Exhibit (p)(1).
(p)(2) Code of Ethics of Chicago Equity Partners Corp., Money
Manager of the Growth Fund, is filed herein as Exhibit
(p)(2).
(p)(3) Code of Ethics of Chicago Equity Partners LLC, Money Manager
of the Growth Fund, is filed herein as Exhibit (p)(3).
(p)(4) Code of Ethics of Martingale Asset Management LP, Money
Manager of the Value Fund, is filed herein as Exhibit
(p)(4).
(p)(5) Code of Ethics of Symphony Asset Management LLC, Money
Manager of the Small to Mid Cap Fund, is filed herein as
Exhibit (p)(5).
(p)(6) Code of Ethics of Nicholas-Applegate Capital Management,
Money Manager of the International Equity Fund, is filed
herein as Exhibit (p)(6).
(p)(7) Code of Ethics of Cypress Asset Management, Money Manager of
the Intermediate Fixed-Income Fund and Short-Intermediate
Fixed-Income Fund, is filed herein as Exhibit (p)(7).
(p)(8) Code of Ethics of Financial Management Advisers, Inc., Money
Manager of the High Yield Bond Fund, is filed herein as
Exhibit (p)(8).
(p)(9) Code of Ethics of BlackRock, Inc., Money Manager of the
Mortgage Securities Fund, is filed herein as Exhibit (p)(9).
Item 24. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 25. 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. 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 filed and incorporated herein limit the liability of Accessor
Capital Management L. P. ("Accessor") 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 26. Business and Other Connections of Investment Adviser
See Registrant's Prospectuses sections "Summary and "Management
Organization and Capital Structure of the Portfolios", and the Statement of
Additional Information section "Management of the Fund".
Item 27. Principal Underwriters
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts and records required to be maintained by section 31(a) of the 1940
Act and Rules 31a-1 to 31a-3 thereunder are maintained in the following
locations:
Manager, Administrator Custodian and
and Transfer Agent Fund Accounting Agent
Accessor Capital Management LP Fifth Third Bank
1420 Fifth Avenue, Suite 3600 38 Fountain Square Plaza
Seattle, WA 98101 Cincinnati, OH 45263
Money Managers Custodian of IRA Accounts
See Section of the prospectuses The Fifth Third Bank
entitled "Management Organization 38 Fountain Square Plaza
and Capital Structure" for names and Cincinnati, OH 45263
addresses
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Accessor Funds, Inc. certifies that it meets all of the
requirements for effectiveness of this registration statement under Rule 485(b)
and has duly caused this Post-Effective Amendment to the Registration Statement
to be signed on its behalf by the undersigned, duly authorized, on the City of
Seattle, and the State of Washington on the 28th day of April, 2000.
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. 17 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 President, Principal 4/28/2000
- ---------------------------- Executive Officer
J. Anthony Whatley III and Director
/s/George G. Cobean III Director 4/28/2000
- -----------------------
George G. Cobean III
/s/Geoffrey C. Cross Director 4/28/2000
- --------------------
Geoffrey C. Cross
/s/Ravindra A. Deo Principal Financial 4/28/2000
- ------------------ and Accounting Officer
Ravindra A. Deo
THIRD AMENDMENT TO THE
MANAGEMENT AGREEMENT BETWEEN
ACCESSOR FUNDS, INC. AND ACCESSOR CAPITAL MANAGEMENT LP
(formerly Bennington Capital Management L.P.)
This THIRD AMENDMENT TO THE MANAGEMENT AGREEMENT (the "Agreement"), is
entered into effective April 29, 2000, by and between ACCESSOR FUNDS, INC., a
Maryland corporation ("Accessor Funds") and ACCESSOR CAPITAL MANAGEMENT LP, a
Washington limited partnership, formerly Accessor Capital Management, a
Washington general partnership ("Accessor Capital").
BACKGROUND
A. Accessor Funds and Accessor Capital entered into a Management Agreement
on June 17, 1992 wherein Accessor Funds employed Accessor Capital to manage the
investment and reinvestment of Accessor Funds' assets, to act as a discretionary
money manager to certain of the Funds and to administer the Fund's business and
administrative operations. Pursuant to Section 6 of the Agreement, Accessor
Capital is compensated for its services on a percentage of the average daily net
assets of the Funds of Accessor Funds.
B. On February 4, 2000, the Board of Directors of Accessor Funds approved
the filing of a post-effective amendment to the registration statement of
Accessor Funds to open a new fund, the High Yield Bond Fund, which is expected
to be effective and begin operations on April 29, 2000.
C. Accessor Funds and Accessor Capital each wish to amend the Agreement to
add the High Yield Bond Fund.
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:
1. The first paragraph of Section 6 of the Agreement is hereby amended and
shall now read as follows:
The Manager shall receive annual fees from each Fund for providing the
services and furnishing the facilities pursuant to this Agreement in the
following amounts:
Management Fee (as a
percentage of average
Fund daily net assets)
-----------------------------------------------------------------
Growth 0.45%
Value 0.45%
Small to Mid Cap 0.60%
International Equity 0.55%
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
High Yield Bond 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
IN WITNESS WHEREOF, the parties have entered into this Third Amendment to the
Agreement as of the day and year first above set forth.
ACCESSOR FUNDS, INC.
By:/s/Ravindra A. Deo
Ravindra A. Deo
Vice President and Principal Financial
and Accounting Officer
Date:
ACCESSOR CAPITAL MANAGEMENT LP
By: Accessor Management Associates, Inc.
Its Managing General Partner
By:/s/J. Anthony Whatley III
J. Anthony Whatley III
President
Date:
MONEY MANAGER AGREEMENT
Effective Date: March 15, 2000
Termination Date: Two years
after Effective Date
Fund and Account: Approximately 90% of the
GROWTH FUND
Chicago Equity Partners Corporation
231 South LaSalle Street
Chicago, Illinois 60697
Re: Accessor Funds, Inc. Money Manager Agreement
Gentlemen:
Accessor Funds, Inc., a Maryland corporation ("Accessor Funds"), is an
open-end management investment company of the series type registered as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and subject to the rules and regulations promulgated thereunder.
Accessor Funds issues shares in separate diversified portfolios, each with a
different investment objective and policies.
Accessor Capital Management LP (formerly Bennington Capital Management
L.P.), a Washington limited partnership (the "Manager") acts as the manager and
administrator of Accessor Funds pursuant to the terms of a Management Agreement,
and is an "investment adviser," as that term is defined in Section 2(a)(20) of
the 1940 Act, to Accessor Funds. The Manager is responsible for the day-to-day
management and administration of Accessor Funds and for the coordination of
investments of each portfolio's assets; however, specific portfolio purchases
and sales for each portfolio's investment portfolio, or a portion thereof, are
to be made by the portfolio management organizations recommended and selected by
the Manager, subject to the approval of the Board of Directors of Accessor Funds
(the "Board").
1. Appointment as a Money Manager. The Manager and Accessor Funds hereby
appoint and employ Chicago Equity Partners Corporation, a Delaware corporation
(the "Money Manager"), as a discretionary money manager to Accessor Funds'
Growth Fund, on the terms and conditions set forth herein. The Manager
determines from time to time that portion of the assets of the Growth Fund that
are to be assigned to the Money Manager (the "Account"). The Account and those
assets of the Growth Fund managed by the Manager or another money manager as
determined by the Manager are referred to as the "Fund".
2. Acceptance of Appointment; Standard of Performance. The Money Manager
accepts the appointment as a discretionary money manager and agrees to use its
best professional judgment to make and implement investment decisions for the
Fund with respect to the investments of the Account in accordance with the
provisions of this Agreement.
3. Fund Management Services of the Money Manager. The Money Manager is
hereby employed and authorized to select portfolio securities for investment by
the Fund, to determine to purchase and sell securities for the Account, and upon
making any purchase or sale decision, to place orders for the execution of such
portfolio transactions in accordance with paragraphs 5 and 6 hereof and Exhibit
A attached hereto and incorporated by this reference herein (as it may be
amended in writing by the parties from time to time). In providing portfolio
management services to the Account, the Money Manager shall be subject to such
investment restrictions as are set forth in the 1940 Act and rules thereunder,
the supervision and control of the Board, such specific instructions as the
Board may adopt and communicate to the Money Manager, the investment objectives,
policies and restrictions of the Fund furnished pursuant to paragraph 4, and
instructions from the Manager; and the Money Manager shall maintain on behalf of
Accessor Funds the records listed in Exhibit B attached hereto and incorporated
by this reference herein (as it may be amended in writing by the parties from
time to time). At Accessor Funds' or the Manager's reasonable request (as
communicated by the Board or the officers of such entities), the Money Manager
will consult with the officers of Accessor Funds or the Manager, as the case may
be, with respect to any decision made by it with respect to the investments of
the Account. The Manger shall facilitate the delivery to Money Manager on a
day-to-day basis of all information that the Money Manager reasonably requests
regarding the Fund to enable the Money Manager to meet its obligations under
this Section of the Agreement.
4. Investment Objectives, Policies and Restrictions. Accessor Funds
shall provide the Money Manager with a statement of the investment objectives
and policies of the Fund and any specific investment restrictions applicable
thereto as established by Accessor Funds, including those set forth in its
Prospectus as amended from time to time. Accessor Funds retains the right, on
reasonable prior written notice to the Money Manager from Accessor Funds or the
Manager, to modify any such objectives, policies or restrictions in any manner
at any time. The Money Manager shall have no duty to investigate any
instructions received from Accessor Funds, the Manager, or both, and, absent
manifest error, such instructions shall be presumed reasonable.
5. Transaction Procedures. All transactions will be consummated by
payment to or delivery by Accessor Funds' custodian (the "Custodian"), or such
depositary or agents as may be designated by the Custodian, as custodian for
Accessor Funds, of all cash and/or securities due to or from the Account, and
the Money Manager shall not have possession or custody thereof or any
responsibility or liability with respect thereto. The Money Manager shall advise
the Custodian in writing or by electronic transmission or facsimile of all
investment orders for the Fund placed by it with broker/dealers at the time and
in the manner and as set forth in Exhibit A hereto. Accessor Funds shall issue
to the Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Money Manager. Accessor Funds
shall be responsible for all custodial arrangements and the payment of all
custodial charges and fees and, upon the Money Manager giving proper
instructions to the Custodian, the Money Manager shall have no responsibility or
liability with respect to custodial arrangements or the acts, omissions or other
conduct of the Custodian.
6. Allocation of Brokerage. The Money Manager shall have authority and
discretion to select broker/dealers to execute portfolio transactions initiated
by the Money Manager, and for the selection of the markets on/in which the
transaction will be executed.
A. In doing so, the Money Manager's primary objective shall be
to select a broker/dealer that can be expected to obtain the best net
price and execution for Accessor Funds. However, this responsibility
shall not be deemed to obligate the Money Manager to solicit competitive
bids for each transaction; and the Money Manager shall have no
obligation to seek the lowest available commission cost to Accessor
Funds, so long as the Money Manager believes in good faith, based upon
its knowledge of the capabilities of the firm selected, that the
broker/dealer can be expected to obtain the best price on a particular
transaction and that the commission cost is reasonable in relation to
the total quality and reliability of the brokerage and research services
made available by the broker/dealer to the Money Manager viewed in terms
of either that particular transaction or of the Money Manager's overall
responsibilities with respect to its clients, including Accessor Funds,
as to which the Money Manager exercises investment discretion,
notwithstanding that Accessor Funds may not be the direct or exclusive
beneficiary of any such services or that another broker/dealer may be
willing to charge Accessor Funds a lower commission on the particular
transaction.
B. Accessor Funds shall retain the right to request that
transactions involving the Account that give rise to brokerage
commissions in an annual amount of up to 50% of the Money Manager's
executed brokerage commissions, shall be executed by broker/dealers
which provide brokerage or research services to Accessor Funds or its
Manager, or as to which an ongoing relationship will be of value to
Accessor Funds with respect to the Fund, which services and relationship
may, but need not, be of direct benefit to the Fund so long as (i) the
Money Manager believes in good faith, based upon its knowledge of the
capabilities of the firm selected, that the broker/dealer can be
expected to obtain the best price on a particular transaction and (ii)
Accessor Funds determines that the commission cost is reasonable in
relation to the total quality and reliability of the brokerage and
research services made available to Accessor Funds, or to the Manager
for the benefit of its clients for which it exercises investment
discretion, notwithstanding that the Fund may not be the direct or
exclusive beneficiary of any such service or that another broker/dealer
may be willing to charge Accessor Funds a lower commission on the
particular transaction. The Money Manager may reject any request for
directed brokerage that does not appear to it to be reasonable.
C. Accessor Funds agrees that it will provide the Money Manager
with a list of broker/dealers which are "affiliated persons" of Accessor
Funds and its other money managers. Upon receipt of such list, the Money
Manager agrees that it will not execute any portfolio transactions with
a broker/dealer which is an "affiliated person" (as defined in the 1940
Act) of Accessor Funds or of any money manager for Accessor Funds
without the prior written approval of Accessor Funds.
D. As used in this paragraph 6, "brokerage and research
services" shall be those services described in Section 28(e)(3) of the
Securities Exchange Act of 1934, as amended.
7. Proxies. Unless the Manager gives written instructions to the
contrary, the Money Manager shall vote all proxies solicited by or with respect
to the issuers of securities in which assets of the Account may be invested. The
Money Manager shall use its best good faith judgment to vote such proxies in a
manner which best serves the interests of the Fund's shareholders.
8. Reports to the Money Manager. Accessor Funds and the Manager shall
furnish or otherwise make available to the Money Manager such information
relating to the business affairs of Accessor Funds, including periodic reports
concerning the Fund, as the Money Manager at any time, or from time to time, may
reasonably request in order to discharge its obligations hereunder.
9. Fees for Services.
A. The compensation of the Money Manager for its services under
this Agreement shall be calculated and paid by Accessor Funds in
accordance with Exhibit C attached hereto and incorporated by this
reference herein. The Money Manager acknowledges that any such fee is
payable solely out of assets of the Fund Account.
B. The Money Manager acknowledges that the index against which
the Money Manager's performance is based (the "benchmark index"), as set
forth on Exhibit D, attached hereto and incorporated herein by reference
as may be amended from time to time, may be changed by the Board,
including a majority of the directors who are not parties to this
Agreement (as defined in the 1940 Act) or interested persons of any such
party, upon at least one quarter's prior notice. The Money Manager
acknowledges that a change in the benchmark index may alter the
subsequent return of the index measure, but performance prior to the
change in the benchmark index will continue to be based on the former
benchmark index.
10. Other Investment Activities of the Money Manager. Accessor Funds
acknowledges that the Money Manager, or one or more of its affiliates, may have
investment responsibilities or render investment advice to, or perform other
investment advisory services for, other individuals or entities (the "Affiliated
Accounts"). Subject to the provisions of paragraph 2 hereof, Accessor Funds
agrees that the Money Manager and its affiliates may give advice, exercise
investment responsibility and take other action with respect to the Affiliated
Accounts which may differ from the advice given or the timing or nature of
action taken with respect to the Account, provided that the Money Manager acts
in good faith, and provided further that it is the Money Manager's policy to
allocate, within its reasonable discretion, investment opportunities to the
Account over a period of time on a fair and equitable basis relative to the
Affiliated Accounts, taking into account the investment objectives and policies
of the Fund and any specific investment restrictions applicable thereto.
Accessor Funds acknowledges that one or more of the Affiliated Accounts may at
any time hold, acquire, increase, decrease, dispose of or otherwise deal with
positions in investments in which the Account may have an interest from time to
time, whether in transactions which may involve the Account or otherwise. The
Money Manager shall have no obligation to acquire for the Account a position in
any investment which any Affiliated Account may acquire, and the Fund shall have
no first refusal, co-investment or other rights in respect of any such
investment, either for the Account or otherwise.
11. Certificate of Authority. Each of Accessor Funds, the Manager and
the Money Manager shall furnish to the others from time to time certified copies
of the resolutions of its Board of Directors, Board of Trustees, Managing
Partner or executive committee, as the case may be, evidencing the authority of
its officers and employees who are authorized to act on behalf of it.
12. Limitation of Liability. The Money Manager shall not be liable for,
and shall be indemnified by Accessor Funds for any action taken, omitted or
suffered to be taken by it in its reasonable judgment, in good faith and
believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement, or in accordance with (or in the absence
of) specific directions or instructions from Accessor Funds or the Manager;
provided, however, that such acts or omissions shall not have resulted from the
Money Manager's willful misfeasance, bad faith or gross negligence, violation of
applicable law, or reckless disregard of its duty or of its obligations
hereunder. The rights and obligations that are provided for in this Paragraph 12
shall survive the cancellation, expiration or termination of this Agreement.
13. Confidentiality. Subject to the right of each money manager and
Accessor Funds to comply with applicable law, including any demand or request of
any regulatory or taxing authority having jurisdiction over it, the parties
hereto shall treat as confidential all information pertaining to the Fund and
the actions of each money manager, the Manager and Accessor Funds in respect
thereof, other than any such information which is or hereafter becomes
ascertainable from public or published information or trade sources. The rights
and obligations that are provided for in this Paragraph 13 shall survive the
cancellation, expiration or termination of this Agreement.
14. Use of the Money Manager's Name. Accessor Funds and the Manager
agree to furnish the Money Manager at its principal office prior to use thereof
copies of all prospectuses, proxy statements, reports to stockholders, sales
literature, or other material prepared for distribution to stockholders of
Accessor Funds or the public that refer in any way to the Money Manager, and not
to use such material if the Money Manager reasonably objects in writing within
three business days (or such other time as may be mutually agreed) after receipt
thereof. In the event of termination of this Agreement, Accessor Funds and the
Manager will continue to furnish to the Money Manager copies of any of the
above-mentioned materials that refer in any way to the Money Manager, and will
not use such material if the Money Manager reasonably objects in writing within
three business days (or such other time as may be mutually agreed) after receipt
thereof.
15. Assignment. No assignment, as that term is defined in Section
2(a)(4) of the 1940 Act, of this Agreement shall be made by the Money Manager,
and this Agreement shall terminate automatically in the event that it is
assigned. The Money Manager shall notify the Manager and Accessor Funds in
writing sufficiently in advance of any proposed change of control, as defined in
Section 2(a)(9) of the 1940 Act, to enable the Manager and Accessor Funds to
consider whether an assignment, as that term is defined in Section 2(a)(4) of
the 1940 Act, will occur, and to take the steps necessary to enter into a new
money manager agreement with the Money Manager.
16. Representations, Warranties and Agreements of the Investment Company
Accessor Funds represents, warrants and agrees that:
A. The Money Manager has been duly appointed by the Board to
provide investment services to the Account as contemplated hereby.
B. Accessor Funds will deliver to the Money Manager a true and
complete copy of its current prospectus as effective from time to time,
such other documents or instruments governing the investments of Fund,
and such other information as is necessary for the Money Manager to
carry out its obligations under this Agreement.
C. The organization of Accessor Funds and the conduct of the
business of the Fund as contemplated by this Agreement, materially
complies, and shall at all times materially comply, with the
requirements imposed upon Accessor Funds by applicable law.
17. Representations, Warranties and Agreements of Manager. Manager
represents, warrants and agrees that:
A. The Manager acts as an "investment adviser," as that term is
defined in Section 2(a)(20) of the 1940 Act, pursuant to a Management
Agreement with Accessor Funds.
B. The appointment of the Money Manager by the Manager
to provide the investment services as contemplated hereby has been
approved by the Board.
C. The Manager is registered as an "investment adviser" under
the Investment Advisers Act of 1940, as amended (the "Advisers Act").
18. Representations, Warranties and Agreements of Money Manager. The
Money Manager represents, warrants and agrees that:
A. The Money Manager is registered as an "investment adviser"
under the Advisers Act; or it is a "bank" as defined in Section
202(a)(2) of the Advisers Act or an "insurance company" as defined in
Section 202(a)(12) of the Advisers Act and is exempt from registration
thereunder.
B. The Money Manager will maintain, keep current and preserve on
behalf of Accessor Funds, the records identified in Exhibit B, in the
manner required by such Exhibit. The Money Manager agrees that such
records (other than those required by No. 4 of Exhibit B) are the
property of Accessor Funds and will be surrendered to Accessor Funds
promptly upon request. The Money Manager may retain copies of any
records surrendered to the Accessor Funds.
C. The Money Manager will adopt or has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the 1940 Act,
will provide to Accessor Funds a copy of the code of ethics and evidence
of its adoption, and will make such reports to Accessor Funds as
required by Rule 17j-1 under the 1940 Act. The Money Manager has
policies and procedures sufficient to enable the Money Manager to detect
and prevent the misuse of material, nonpublic information by the Money
Manager or any person associated with the Money Manager, in compliance
with the Insider Trading and Securities Fraud Enforcement Act of 1988.
D. The Money Manager will notify Accessor Funds of any changes
in the membership of its partnership or in the case of a corporation in
the ownership of more than five percent of its voting securities, within
a reasonable time after such change.
19. Amendment. This Agreement may be amended at any time, but only by
written agreement among the Money Manager, the Manager and the Fund, which
amendment, other than amendments to Exhibits A and B, must be approved by the
Board in the manner required by the 1940 Act.
20. Effective Date; Term. This Agreement shall become effective for the
Fund on the effective date set forth on page 1 of this Agreement, and shall
continue in effect until the termination date set forth on page 1 of this
Agreement. Thereafter, the Agreement shall continue in effect for successive
annual periods only so long as its continuance has been specifically approved at
least annually (a) by a vote of a majority of the Board or (b) by a vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund for which the Money Manager acts as money manager, and in either case
by a majority of the directors who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as directors of
Accessor Funds) cast in person at a meeting called for purposes of voting on the
Agreement.
21. Termination. This Agreement may be terminated, without the payment
of any penalty, by the Board, the Manager, the Money Manager or by the vote of a
majority of the outstanding voting securities (as that term is defined in the
1940 Act) of the Fund for which the Money Manager acts as money manager, upon 60
days' prior written notice to the other parties hereto. Any such termination
shall not affect the status, obligations or liabilities of any party hereto to
any of the other parties that accrued prior to such termination.
22. Applicable Law. To the extent that state law shall not have been
preempted by the provisions of any laws of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the State
of Washington.
ACCESSOR FUNDS, INC. ACCESSOR CAPITAL MANAGEMENT LP
By Bennington Management Associates, Inc.
Its Managing General Partner
BY:/s/J. Anthony Whatley, III BY:/s/J. Anthony Whatley, III
J. Anthony Whatley, III J. Anthony Whatley, III
President President and Principal Executive Officer
DATE: 3/15/2000 DATE: 3/15/2000
Accepted and agreed to:
CHICAGO EQUITY PARTNERS CORPORATION
By:/s/James D. Miller
James D. Miller
President
DATE:3/14/2000
EXHIBITS: A. Operational Procedures (including Schedules 1 and 2).
B. Recordkeeping Requirements.
C. Fee Schedule.
D. Benchmark Index
<PAGE>
EXHIBIT A
OPERATIONAL PROCEDURES
The Money Manager shall abide by certain rules and procedures in order
to minimize operational problems. The Money Manager will be required to have
various records and files (as required by regulatory agencies) at its offices.
The Money Manager will have to maintain a certain flow of information to The
Fifth Third Bank ("Fifth Third"), the accounting agent and the custodian bank,
for Accessor Funds.
The Money Manager will be required to furnish Fifth Third with daily
information as to executed trades. Fifth Third should receive this data no later
than the morning following the day of the trade. The necessary information
should be transmitted via facsimile machine or electronic transmission to Fifth
Third. Upon receipt of brokers' confirmations, the Money Manager or Fifth Third
will be required to notify the other party if any differences exist. The
reporting of trades by the Money Manager to Fifth Third must include the
following:
o Name of the Fund of Accessor Funds as to which trade relates
o Whether purchase or sale
o Security name
o Number of shares or principal amount
o Price per share or bond
o Commission rates per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC (Purchase only)
When opening accounts with brokers for Accessor Funds, the account
should be a cash account. No margin accounts are to be maintained. The broker
should be advised to use Fifth Third's Institutional Delivery ("ID") system
number to facilitate the receipt of information by Fifth Third. If this
procedure is followed, DK problems will be held down to a minimum and additional
costs of security trades will not become an important factor in doing business.
Delivery and receipt instructions are attached as Schedule 1.
The Money Manager will also be required to submit to Fifth Third a daily
trade authorization form signed by two authorized individuals prior to
settlement date. A list of authorized persons with specimen signatures must be
sent to Fifth Third (see Schedule 2). The authorization will contain information
on which Fifth Third can rely to either accept delivery or deliver out of the
account securities as per each trade by the Money Manager. A preprinted form
will be supplied to the Money Manager by Accessor Funds, or the Money Manager
may use an equivalent form acceptable to Fifth Third and Accessor Funds.
<PAGE>
SCHEDULE 1 TO EXHIBIT A
Mailing Instructions and Delivery Instructions:
Confirmation Instructions (Copy of Broker Advice):
MAILING ADDRESS: (to be used w/trade confirmations)
Fifth Third Bank, N.A.
Attn: Custody Operation
Mail Drop 1090F2
38 Fountain Square Plaza
Cincinnati, OH 45263
Portfolio # 010033141306
For the account of Accessor Funds, Inc.
GROWTH Portfolio
STREET ADDRESS:
Fifth Third Bank, N.A.
Attn: Custody Operation
Mail Drop 1090F2
38 Fountain Square Plaza
Cincinnati, OH 45263
NOMINEE NAME: AGEN & Co
NOMINEE TAX ID: __________________
DTC NOMINEE Name: CEDE & Co.
Delivery Instructions:
Depository Trust Company (DTC) #10016 Agent Bank I.D.
# 2116 DTC Participant #
#11153 Institution No. (Note:
If you have your own
Institution number,
substitute that number for
Fifth Third's)
Portfolio #010033141306
New York Office: Commercial Paper (all Ineligible DTC Securities)
CHEMICAL BANK
A/C STATE STREET BANK & TRUST
4 NEW YORK PLAZA
RECEIVE WINDOW - GROUND FLOOR
NEW YORK, NY 10004
FFC: FIFTH THIRD BANK - A/C #QF02
VS. payment (Fed Funds or Commercial Paper Only)
All physical deliveries of Corporate Bonds and other non-eligible DTC items
should be delivered as follows:
CHEMICAL BANK
A/C STATE STREET BANK & TRUST
4 NEW YORK PLAZA
RECEIVE WINDOW - GROUND FLOOR
NEW YORK, NY 10004
FFC: FIFTH THIRD BANK - A/C #QF02
All Government Issues: Deliver through Federal Reserve Bank to:
Federal Reserve Eligible Securities through Fed
Cincinnati
ABA#042000314/Fifth Cin/1050
FFC: Accessor Growth Portfolio A/C#010033141306
Repurchase Agreements through Fed Cincinnati
ABA#042000314/Fifth Cin/1040
FFC: Accessor Growth Portfolio A/C#010033141306
(VS Payment Federal Funds)
PTC Eligible Securities: Fifth Third Bank
A/C FIFTH
F/A/O Accessor Growth Portfolio
A/C #010033141306
Cash:
Receiving Bank ABA # 042000314
Information Further Credit to: #010033141306
Fifth Third Bank
Fifth Third Center
Cincinnati, OH 45263
Beneficiary BNF =Mutual Funds
Information DDA#71575856
Foreign Holdings:
Please contact Tim Maul at Fifth Third Bank (Phone: (513) 744-7091) to
obtain delivery instructions.
<PAGE>
SCHEDULE 2 TO EXHIBIT A
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
Fifth Third, Inc.
MD 1090 F1
Fifth Third Center
Cincinnati, OH 45263
Attention: Accessor Funds, Inc.
Re: Persons Authorized to Execute Trades For Growth Fund
The following individuals are authorized to execute and report trade
instructions on behalf of the Growth Fund. Should there be any changes to the
list of authorized persons, we will notify you immediately of those changes.
NAME SIGNATURE
Sincerely yours,
[Money Manager]
<PAGE>
EXHIBIT B
RECORDS TO BE MAINTAINED BY MONEY MANAGER
1*. A record of each brokerage order, and all other portfolio purchases and
sales, given by the Money Manager or on behalf of the Fund for, or in
connection with, the purchase or sale of securities, whether executed or
unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification or
cancellation thereof,
C. The time of entry or cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F. The name of the person who placed the order on behalf of the Fund
(Rule 31a-1(b)(5) and (6) of the 1940 Act).
2*. A record for each fiscal quarter, completed within ten (10) days after
the end of the quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio
securities to brokers or dealers was made, and the division of brokerage
commissions or other compensation on such purchase and sale orders. The
record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund
(ii) the supplying of services or benefits by brokers or dealers to:
(a) The Fund,
(b) The Manager (Accessor Capital Management),
(c) Yourself (i.e., the Money Manager), and
(d) Any person other than the foregoing
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation (Rule 31a-1(b)(9) of the 1940
Act).
3*. A record in the form of an appropriate memorandum identifying the person
or persons, committees, or groups authorizing the purchase or sale of
portfolio securities. Where an authorization is made by a committee or
group, a record shall be kept of the names of its members who
participate in the authorization. There shall be retained as part of
this record any memorandum, recommendation, or instruction supporting or
authorizing the purchase or sale of portfolio securities (Rule
31a-1(b)(10) of the 1940 Act) and such other information as is
appropriate to support the authorization.**
4*. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Advisers Act, to the extent such records are
necessary or appropriate to record the Money Manager's transactions with
the Fund. (Rule 31a-1(f) of the 1940 Act).
5. All accounts, books, records or other documents that are required to be
maintained pursuant to the 1940 Act, the Advisers Act, or any rule or
regulation thereunder, need only be retained by the Money Manager as
required under such laws, rule or regulations. Any other account, book,
record or other document that is required to be maintained by the Money
Manager pursuant to this Exhibit B need only be maintained for five
years after the date of its creation.
- ------------------
* Maintained as property of the Fund pursuant to Rule 31a-3(a) of the 1940
Act.
** Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from
brokerage firms (including their recommendations, i.e., buy, sell, hold)
and any internal reports or portfolio manager reviews.
<PAGE>
EXHIBIT C
MONEY MANAGER FEE
The following compensation of the Money Manager for its services under
the Agreement shall be calculated and paid by Accessor Funds (except that no
such fees shall be paid to the Manager as to any portion of the Fund for which
it acts as money manager).
Fees will be calculated and paid after the end of each calendar quarter
at one-fourth of an annual percentage rate as described in the following
paragraph and in the table below applied to the average daily net assets of the
Account. The net assets of the Account are determined by including receivables
and deducting payables. Expenses beyond the control of the Money Manager
including, but not limited to, fees payable to Accessor Funds' Custodian,
Accounting Agent and Transfer Agent, fees of accountants, legal fees and
expenses allocable to the Fund are not included as payables of the Account, but
expenses within the control of the Money Manager including, but not limited to,
brokerage commissions are included in determining the net assets of the Account.
For the first five complete calendar quarters of management of the
Account by the Money Manager, Accessor Funds will pay the Money Manager on a
monthly basis at the following annual fee rates, applied to the average daily
net assets of the Fund.
Basic Fee Fund Management Fee Total
0.10% 0.10% 0.20%
Commencing with the sixth calendar quarter of management by the Money
Manager for the Account, Accessor Funds will pay the Money Manager based on the
schedule below as applied to the average daily net assets of the Fund.
Average Annual Annual
Performance Differential Performance
Basic Fee vs. Benchmark Index Fee
0.10% plus 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% 0.00%
The Account's performance differential versus the benchmark index is
recalculated at the end of each calendar quarter based on the Account's
performance during all calendar quarters since commencement of management by the
Money Manager for the Account through the next preceding calendar quarter, so
that the performance fee, although measured on an average annual rate of return
basis, covers all prior quarters except that of the immediately preceding
quarter. Commencing with the 14th calendar quarter of management by the Money
Manager for the Account, the Account's average annual performance differential
will be recalculated based on the Account's performance during the preceding 12
calendar quarters (other than the immediately preceding quarter) on a rolling
basis.
For purposes of calculating the performance of the benchmark index,
Accessor Funds, the Manager and the Money Manager agree to accept the
calculation provided by the publisher of the index or another mutually
acceptable source. For purposes of calculating the performance differential
versus the benchmark index, the investment performance of the Account for any
period, expressed as a percentage of its net asset value per share at the
beginning of such period, is equal to the sum of: (i) the change in the net
asset value per share of the Account during such period; (ii) the value of the
Account's cash distributions per share accumulated to the end of such period;
and (iii) the value of capital gains taxes per share paid or payable on
undistributed realized long-term capital gains accumulated to the end of such
period. For this purpose, the value of distributions per share of realized
capital gains, or dividends per share paid from investment income and of capital
gains taxes per share paid or payable on undistributed realized long-term
capital gains, shall be treated as reinvested in shares of the Account at the
net asset value per share in effect at the close of business on the record date
for the payment of such distributions and dividends and the date on which
provision is made for such taxes, after giving effect to such distributions,
dividends and taxes. The investment record of the benchmark index for any period
shall mean the sum of: (i) the change in the level of the index during such
period; and (ii) the value, computed consistently with the index, of cash
distributions made by companies whose securities comprise the index accumulated
to the end of such period; expressed as a percentage of the index level at the
beginning of such period. For this purpose cash distributions on the securities
which comprise the index shall be treated as reinvested in the index at least as
frequently as the end of each calendar quarter following the payment of the
dividend.
<PAGE>
EXHIBIT D
BENCHMARK INDEX
March 15, 2000
Fund Index
- ----- ------
Growth S&P/BARRA Growth Index
MONEY MANAGER AGREEMENT
Effective Date: May 1, 2000
Termination Date: Two years
after Effective Date
Fund and Account: Approximately 90% of the
GROWTH FUND
Chicago Equity Partners LLC
231 South LaSalle Street
Chicago, Illinois 60697
Re: Accessor Funds, Inc. Money Manager Agreement
Gentlemen:
Accessor Funds, Inc., a Maryland corporation ("Accessor Funds"), is an
open-end management investment company of the series type registered as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and subject to the rules and regulations promulgated thereunder.
Accessor Funds issues shares in separate diversified portfolios, each with a
different investment objective and policies.
Accessor Capital Management LP (formerly Bennington Capital Management
L.P.), a Washington limited partnership (the "Manager") acts as the manager and
administrator of Accessor Funds pursuant to the terms of a Management Agreement,
and is an "investment adviser," as that term is defined in Section 2(a)(20) of
the 1940 Act, to Accessor Funds. The Manager is responsible for the day-to-day
management and administration of Accessor Funds and for the coordination of
investments of each portfolio's assets; however, specific portfolio purchases
and sales for each portfolio's investment portfolio, or a portion thereof, are
to be made by the portfolio management organizations recommended and selected by
the Manager, subject to the approval of the Board of Directors of Accessor Funds
(the "Board").
1. Appointment as a Money Manager. The Manager and Accessor Funds hereby
appoint and employ Chicago Equity Partners LLC, a Delaware limited liability
company (the "Money Manager"), as a discretionary money manager to Accessor
Funds' Growth Fund, on the terms and conditions set forth herein. The Manager
determines from time to time that portion of the assets of the Growth Fund that
are to be assigned to the Money Manager (the "Account"). The Account and those
assets of the Growth Fund managed by the Manager or another money manager as
determined by the Manager are referred to as the "Fund".
2. Acceptance of Appointment; Standard of Performance. The Money Manager
accepts the appointment as a discretionary money manager and agrees to use its
best professional judgment to make and implement investment decisions for the
Fund with respect to the investments of the Account in accordance with the
provisions of this Agreement.
3. Fund Management Services of the Money Manager. The Money Manager is
hereby employed and authorized to select portfolio securities for investment by
the Fund, to determine to purchase and sell securities for the Account, and upon
making any purchase or sale decision, to place orders for the execution of such
portfolio transactions in accordance with paragraphs 5 and 6 hereof and Exhibit
A attached hereto and incorporated by this reference herein (as it may be
amended in writing by the parties from time to time). In providing portfolio
management services to the Account, the Money Manager shall be subject to such
investment restrictions as are set forth in the 1940 Act and rules thereunder,
the supervision and control of the Board, such specific instructions as the
Board may adopt and communicate to the Money Manager, the investment objectives,
policies and restrictions of the Fund furnished pursuant to paragraph 4, and
instructions from the Manager; and the Money Manager shall maintain on behalf of
Accessor Funds the records listed in Exhibit B attached hereto and incorporated
by this reference herein (as it may be amended in writing by the parties from
time to time). At Accessor Funds' or the Manager's reasonable request (as
communicated by the Board or the officers of such entities), the Money Manager
will consult with the officers of Accessor Funds or the Manager, as the case may
be, with respect to any decision made by it with respect to the investments of
the Account. The Manger shall facilitate the delivery to Money Manager on a
day-to-day basis of all information that the Money Manager reasonably requests
regarding the Fund to enable the Money Manager to meet its obligations under
this Section of the Agreement.
4. Investment Objectives, Policies and Restrictions. Accessor Funds
shall provide the Money Manager with a statement of the investment objectives
and policies of the Fund and any specific investment restrictions applicable
thereto as established by Accessor Funds, including those set forth in its
Prospectus as amended from time to time. Accessor Funds retains the right, on
reasonable prior written notice to the Money Manager from Accessor Funds or the
Manager, to modify any such objectives, policies or restrictions in any manner
at any time. The Money Manager shall have no duty to investigate any
instructions received from Accessor Funds, the Manager, or both, and, absent
manifest error, such instructions shall be presumed reasonable.
5. Transaction Procedures. All transactions will be consummated by
payment to or delivery by Accessor Funds' custodian (the "Custodian"), or such
depositary or agents as may be designated by the Custodian, as custodian for
Accessor Funds, of all cash and/or securities due to or from the Account, and
the Money Manager shall not have possession or custody thereof or any
responsibility or liability with respect thereto. The Money Manager shall advise
the Custodian in writing or by electronic transmission or facsimile of all
investment orders for the Fund placed by it with broker/dealers at the time and
in the manner and as set forth in Exhibit A hereto. Accessor Funds shall issue
to the Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Money Manager. Accessor Funds
shall be responsible for all custodial arrangements and the payment of all
custodial charges and fees and, upon the Money Manager giving proper
instructions to the Custodian, the Money Manager shall have no responsibility or
liability with respect to custodial arrangements or the acts, omissions or other
conduct of the Custodian.
6. Allocation of Brokerage. The Money Manager shall have authority and
discretion to select broker/dealers to execute portfolio transactions initiated
by the Money Manager, and for the selection of the markets on/in which the
transaction will be executed.
A. In doing so, the Money Manager's primary objective shall be
to select a broker/dealer that can be expected to obtain the best net
price and execution for Accessor Funds. However, this responsibility
shall not be deemed to obligate the Money Manager to solicit competitive
bids for each transaction; and the Money Manager shall have no
obligation to seek the lowest available commission cost to Accessor
Funds, so long as the Money Manager believes in good faith, based upon
its knowledge of the capabilities of the firm selected, that the
broker/dealer can be expected to obtain the best price on a particular
transaction and that the commission cost is reasonable in relation to
the total quality and reliability of the brokerage and research services
made available by the broker/dealer to the Money Manager viewed in terms
of either that particular transaction or of the Money Manager's overall
responsibilities with respect to its clients, including Accessor Funds,
as to which the Money Manager exercises investment discretion,
notwithstanding that Accessor Funds may not be the direct or exclusive
beneficiary of any such services or that another broker/dealer may be
willing to charge Accessor Funds a lower commission on the particular
transaction.
B. Accessor Funds shall retain the right to request that
transactions involving the Account that give rise to brokerage
commissions in an annual amount of up to 50% of the Money Manager's
executed brokerage commissions, shall be executed by broker/dealers
which provide brokerage or research services to Accessor Funds or its
Manager, or as to which an ongoing relationship will be of value to
Accessor Funds with respect to the Fund, which services and relationship
may, but need not, be of direct benefit to the Fund so long as (i) the
Money Manager believes in good faith, based upon its knowledge of the
capabilities of the firm selected, that the broker/dealer can be
expected to obtain the best price on a particular transaction and (ii)
Accessor Funds determines that the commission cost is reasonable in
relation to the total quality and reliability of the brokerage and
research services made available to Accessor Funds, or to the Manager
for the benefit of its clients for which it exercises investment
discretion, notwithstanding that the Fund may not be the direct or
exclusive beneficiary of any such service or that another broker/dealer
may be willing to charge Accessor Funds a lower commission on the
particular transaction. The Money Manager may reject any request for
directed brokerage that does not appear to it to be reasonable.
C. Accessor Funds agrees that it will provide the Money Manager
with a list of broker/dealers which are "affiliated persons" of Accessor
Funds and its other money managers. Upon receipt of such list, the Money
Manager agrees that it will not execute any portfolio transactions with
a broker/dealer which is an "affiliated person" (as defined in the 1940
Act) of Accessor Funds or of any money manager for Accessor Funds
without the prior written approval of Accessor Funds.
D. As used in this paragraph 6, "brokerage and research
services" shall be those services described in Section 28(e)(3) of the
Securities Exchange Act of 1934, as amended.
7. Proxies. Unless the Manager gives written instructions to the
contrary, the Money Manager shall vote all proxies solicited by or with respect
to the issuers of securities in which assets of the Account may be invested. The
Money Manager shall use its best good faith judgment to vote such proxies in a
manner which best serves the interests of the Fund's shareholders.
8. Reports to the Money Manager. Accessor Funds and the Manager shall
furnish or otherwise make available to the Money Manager such information
relating to the business affairs of Accessor Funds, including periodic reports
concerning the Fund, as the Money Manager at any time, or from time to time, may
reasonably request in order to discharge its obligations hereunder.
9. Fees for Services.
A. The compensation of the Money Manager for its services under
this Agreement shall be calculated and paid by Accessor Funds in
accordance with Exhibit C attached hereto and incorporated by this
reference herein. The Money Manager acknowledges that any such fee is
payable solely out of assets of the Fund Account.
B. The Money Manager acknowledges that the index against which
the Money Manager's performance is based (the "benchmark index"), as set
forth on Exhibit D, attached hereto and incorporated herein by reference
as may be amended from time to time, may be changed by the Board,
including a majority of the directors who are not parties to this
Agreement (as defined in the 1940 Act) or interested persons of any such
party, upon at least one quarter's prior notice. The Money Manager
acknowledges that a change in the benchmark index may alter the
subsequent return of the index measure, but performance prior to the
change in the benchmark index will continue to be based on the former
benchmark index.
10. Other Investment Activities of the Money Manager. Accessor Funds
acknowledges that the Money Manager, or one or more of its affiliates, may have
investment responsibilities or render investment advice to, or perform other
investment advisory services for, other individuals or entities (the "Affiliated
Accounts"). Subject to the provisions of paragraph 2 hereof, Accessor Funds
agrees that the Money Manager and its affiliates may give advice, exercise
investment responsibility and take other action with respect to the Affiliated
Accounts which may differ from the advice given or the timing or nature of
action taken with respect to the Account, provided that the Money Manager acts
in good faith, and provided further that it is the Money Manager's policy to
allocate, within its reasonable discretion, investment opportunities to the
Account over a period of time on a fair and equitable basis relative to the
Affiliated Accounts, taking into account the investment objectives and policies
of the Fund and any specific investment restrictions applicable thereto.
Accessor Funds acknowledges that one or more of the Affiliated Accounts may at
any time hold, acquire, increase, decrease, dispose of or otherwise deal with
positions in investments in which the Account may have an interest from time to
time, whether in transactions which may involve the Account or otherwise. The
Money Manager shall have no obligation to acquire for the Account a position in
any investment which any Affiliated Account may acquire, and the Fund shall have
no first refusal, co-investment or other rights in respect of any such
investment, either for the Account or otherwise.
11. Certificate of Authority. Each of Accessor Funds, the Manager and
the Money Manager shall furnish to the others from time to time certified copies
of the resolutions of its Board of Directors, Board of Trustees, Managing
Partner or executive committee, as the case may be, evidencing the authority of
its officers and employees who are authorized to act on behalf of it.
12. Limitation of Liability. The Money Manager shall not be liable for,
and shall be indemnified by Accessor Funds for any action taken, omitted or
suffered to be taken by it in its reasonable judgment, in good faith and
believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement, or in accordance with (or in the absence
of) specific directions or instructions from Accessor Funds or the Manager;
provided, however, that such acts or omissions shall not have resulted from the
Money Manager's willful misfeasance, bad faith or gross negligence, violation of
applicable law, or reckless disregard of its duty or of its obligations
hereunder. The rights and obligations that are provided for in this Paragraph 12
shall survive the cancellation, expiration or termination of this Agreement.
13. Confidentiality. Subject to the right of each money manager and
Accessor Funds to comply with applicable law, including any demand or request of
any regulatory or taxing authority having jurisdiction over it, the parties
hereto shall treat as confidential all information pertaining to the Fund and
the actions of each money manager, the Manager and Accessor Funds in respect
thereof, other than any such information which is or hereafter becomes
ascertainable from public or published information or trade sources. The rights
and obligations that are provided for in this Paragraph 13 shall survive the
cancellation, expiration or termination of this Agreement.
14. Use of the Money Manager's Name. Accessor Funds and the Manager
agree to furnish the Money Manager at its principal office prior to use thereof
copies of all prospectuses, proxy statements, reports to stockholders, sales
literature, or other material prepared for distribution to stockholders of
Accessor Funds or the public that refer in any way to the Money Manager, and not
to use such material if the Money Manager reasonably objects in writing within
three business days (or such other time as may be mutually agreed) after receipt
thereof. In the event of termination of this Agreement, Accessor Funds and the
Manager will continue to furnish to the Money Manager copies of any of the
above-mentioned materials that refer in any way to the Money Manager, and will
not use such material if the Money Manager reasonably objects in writing within
three business days (or such other time as may be mutually agreed) after receipt
thereof.
15. Assignment. No assignment, as that term is defined in Section
2(a)(4) of the 1940 Act, of this Agreement shall be made by the Money Manager,
and this Agreement shall terminate automatically in the event that it is
assigned. The Money Manager shall notify the Manager and Accessor Funds in
writing sufficiently in advance of any proposed change of control, as defined in
Section 2(a)(9) of the 1940 Act, to enable the Manager and Accessor Funds to
consider whether an assignment, as that term is defined in Section 2(a)(4) of
the 1940 Act, will occur, and to take the steps necessary to enter into a new
money manager agreement with the Money Manager.
16. Representations, Warranties and Agreements of the Investment Company
Accessor Funds represents, warrants and agrees that:
A. The Money Manager has been duly appointed by the Board to
provide investment services to the Account as contemplated hereby.
B. Accessor Funds will deliver to the Money Manager a true and
complete copy of its current prospectus as effective from time to time,
such other documents or instruments governing the investments of Fund,
and such other information as is necessary for the Money Manager to
carry out its obligations under this Agreement.
C. The organization of Accessor Funds and the conduct of the
business of the Fund as contemplated by this Agreement, materially
complies, and shall at all times materially comply, with the
requirements imposed upon Accessor Funds by applicable law.
17. Representations, Warranties and Agreements of Manager. Manager
represents, warrants and agrees that:
A. The Manager acts as an "investment adviser," as that term is
defined in Section 2(a)(20) of the 1940 Act, pursuant to a Management
Agreement with Accessor Funds.
B. The appointment of the Money Manager by the Manager
to provide the investment services as contemplated hereby has been
approved by the Board.
C. The Manager is registered as an "investment adviser" under
the Investment Advisers Act of 1940, as amended (the "Advisers Act").
18. Representations, Warranties and Agreements of Money Manager. The
Money Manager represents, warrants and agrees that:
A. The Money Manager is registered as an "investment adviser"
under the Advisers Act; or it is a "bank" as defined in Section
202(a)(2) of the Advisers Act or an "insurance company" as defined in
Section 202(a)(12) of the Advisers Act and is exempt from registration
thereunder.
B. The Money Manager will maintain, keep current and preserve on
behalf of Accessor Funds, the records identified in Exhibit B, in the
manner required by such Exhibit. The Money Manager agrees that such
records (other than those required by No. 4 of Exhibit B) are the
property of Accessor Funds and will be surrendered to Accessor Funds
promptly upon request. The Money Manager may retain copies of any
records surrendered to the Accessor Funds.
C. The Money Manager will adopt or has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the 1940 Act,
will provide to Accessor Funds a copy of the code of ethics and evidence
of its adoption, and will make such reports to Accessor Funds as
required by Rule 17j-1 under the 1940 Act. The Money Manager has
policies and procedures sufficient to enable the Money Manager to detect
and prevent the misuse of material, nonpublic information by the Money
Manager or any person associated with the Money Manager, in compliance
with the Insider Trading and Securities Fraud Enforcement Act of 1988.
D. The Money Manager will notify Accessor Funds of any changes
in the membership of its partnership or in the case of a corporation in
the ownership of more than five percent of its voting securities, within
a reasonable time after such change.
19. Amendment. This Agreement may be amended at any time, but only by
written agreement among the Money Manager, the Manager and the Fund, which
amendment, other than amendments to Exhibits A and B, must be approved by the
Board in the manner required by the 1940 Act.
20. Effective Date; Term. This Agreement shall become effective for the
Fund on the effective date set forth on page 1 of this Agreement, and shall
continue in effect until the termination date set forth on page 1 of this
Agreement. Thereafter, the Agreement shall continue in effect for successive
annual periods only so long as its continuance has been specifically approved at
least annually (a) by a vote of a majority of the Board or (b) by a vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund for which the Money Manager acts as money manager, and in either case
by a majority of the directors who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as directors of
Accessor Funds) cast in person at a meeting called for purposes of voting on the
Agreement.
21. Termination. This Agreement may be terminated, without the payment
of any penalty, by the Board, the Manager, the Money Manager or by the vote of a
majority of the outstanding voting securities (as that term is defined in the
1940 Act) of the Fund for which the Money Manager acts as money manager, upon 60
days' prior written notice to the other parties hereto. Any such termination
shall not affect the status, obligations or liabilities of any party hereto to
any of the other parties that accrued prior to such termination.
22. Applicable Law. To the extent that state law shall not have been
preempted by the provisions of any laws of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the State
of Washington.
ACCESSOR FUNDS, INC. ACCESSOR CAPITAL MANAGEMENT LP
By Bennington Management Associates, Inc.
Its Managing General Partner
BY:/s/J. Anthony Whatley, III BY:/s/J. Anthony Whatley, III
J. Anthony Whatley, III J. Anthony Whatley, III
President President and Principal Executive Officer
DATE: DATE:
Accepted and agreed to:
CHICAGO EQUITY PARTNERS LLC
By:/s/Patrick C. Lynch
Patrick C. Lynch
Senior Vice President, Treasurer
DATE:
EXHIBITS: A. Operational Procedures (including Schedules 1 and 2).
B. Recordkeeping Requirements.
C. Fee Schedule.
D. Benchmark Index
<PAGE>
EXHIBIT A
OPERATIONAL PROCEDURES
The Money Manager shall abide by certain rules and procedures in order
to minimize operational problems. The Money Manager will be required to have
various records and files (as required by regulatory agencies) at its offices.
The Money Manager will have to maintain a certain flow of information to The
Fifth Third Bank ("Fifth Third"), the accounting agent and the custodian bank,
for Accessor Funds.
The Money Manager will be required to furnish Fifth Third with daily
information as to executed trades. Fifth Third should receive this data no later
than the morning following the day of the trade. The necessary information
should be transmitted via facsimile machine or electronic transmission to Fifth
Third. Upon receipt of brokers' confirmations, the Money Manager or Fifth Third
will be required to notify the other party if any differences exist. The
reporting of trades by the Money Manager to Fifth Third must include the
following:
o Name of the Fund of Accessor Funds as to which trade relates
o Whether purchase or sale
o Security name
o Number of shares or principal amount
o Price per share or bond
o Commission rates per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC (Purchase only)
When opening accounts with brokers for Accessor Funds, the account
should be a cash account. No margin accounts are to be maintained. The broker
should be advised to use Fifth Third's Institutional Delivery ("ID") system
number to facilitate the receipt of information by Fifth Third. If this
procedure is followed, DK problems will be held down to a minimum and additional
costs of security trades will not become an important factor in doing business.
Delivery and receipt instructions are attached as Schedule 1.
The Money Manager will also be required to submit to Fifth Third a daily
trade authorization form signed by two authorized individuals prior to
settlement date. A list of authorized persons with specimen signatures must be
sent to Fifth Third (see Schedule 2). The authorization will contain information
on which Fifth Third can rely to either accept delivery or deliver out of the
account securities as per each trade by the Money Manager. A preprinted form
will be supplied to the Money Manager by Accessor Funds, or the Money Manager
may use an equivalent form acceptable to Fifth Third and Accessor Funds.
<PAGE>
SCHEDULE 1 TO EXHIBIT A
Mailing Instructions and Delivery Instructions:
Confirmation Instructions (Copy of Broker Advice):
MAILING ADDRESS: (to be used w/trade confirmations)
Fifth Third Bank, N.A.
Attn: Custody Operation
Mail Drop 1090F2
38 Fountain Square Plaza
Cincinnati, OH 45263
Portfolio # 010033141306
For the account of Accessor Funds, Inc.
GROWTH Portfolio
STREET ADDRESS:
Fifth Third Bank, N.A.
Attn: Custody Operation
Mail Drop 1090F2
38 Fountain Square Plaza
Cincinnati, OH 45263
NOMINEE NAME: AGEN & Co
NOMINEE TAX ID: __________________
DTC NOMINEE Name: CEDE & Co.
Delivery Instructions:
Depository Trust Company (DTC) #10016 Agent Bank I.D.
# 2116 DTC Participant #
#11153 Institution No. (Note:
If you have your own
Institution number,
substitute that number for
Fifth Third's)
Portfolio #010033141306
New York Office: Commercial Paper (all Ineligible DTC Securities)
CHEMICAL BANK
A/C STATE STREET BANK & TRUST
4 NEW YORK PLAZA
RECEIVE WINDOW - GROUND FLOOR
NEW YORK, NY 10004
FFC: FIFTH THIRD BANK - A/C #QF02
VS. payment (Fed Funds or Commercial Paper Only)
All physical deliveries of Corporate Bonds and other non-eligible DTC items
should be delivered as follows:
CHEMICAL BANK
A/C STATE STREET BANK & TRUST
4 NEW YORK PLAZA
RECEIVE WINDOW - GROUND FLOOR
NEW YORK, NY 10004
FFC: FIFTH THIRD BANK - A/C #QF02
All Government Issues: Deliver through Federal Reserve Bank to:
Federal Reserve Eligible Securities through Fed
Cincinnati
ABA#042000314/Fifth Cin/1050
FFC: Accessor Growth Portfolio A/C#010033141306
Repurchase Agreements through Fed Cincinnati
ABA#042000314/Fifth Cin/1040
FFC: Accessor Growth Portfolio A/C#010033141306
(VS Payment Federal Funds)
PTC Eligible Securities: Fifth Third Bank
A/C FIFTH
F/A/O Accessor Growth Portfolio
A/C #010033141306
Cash:
Receiving Bank ABA # 042000314
Information Further Credit to: #010033141306
Fifth Third Bank
Fifth Third Center
Cincinnati, OH 45263
Beneficiary BNF =Mutual Funds
Information DDA#71575856
Foreign Holdings:
Please contact Tim Maul at Fifth Third Bank (Phone: (513) 744-7091) to
obtain delivery instructions.
<PAGE>
SCHEDULE 2 TO EXHIBIT A
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
Fifth Third, Inc.
MD 1090 F1
Fifth Third Center
Cincinnati, OH 45263
Attention: Accessor Funds, Inc.
Re: Persons Authorized to Execute Trades For Growth Fund
The following individuals are authorized to execute and report trade
instructions on behalf of the Growth Fund. Should there be any changes to the
list of authorized persons, we will notify you immediately of those changes.
NAME SIGNATURE
Sincerely yours,
[Money Manager]
<PAGE>
EXHIBIT B
RECORDS TO BE MAINTAINED BY MONEY MANAGER
1*. A record of each brokerage order, and all other portfolio purchases and
sales, given by the Money Manager or on behalf of the Fund for, or in
connection with, the purchase or sale of securities, whether executed or
unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification or
cancellation thereof,
C. The time of entry or cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F. The name of the person who placed the order on behalf of the Fund
(Rule 31a-1(b)(5) and (6) of the 1940 Act).
2*. A record for each fiscal quarter, completed within ten (10) days after
the end of the quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio
securities to brokers or dealers was made, and the division of brokerage
commissions or other compensation on such purchase and sale orders. The
record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund
(ii) the supplying of services or benefits by brokers or dealers to:
(a) The Fund,
(b) The Manager (Accessor Capital Management),
(c) Yourself (i.e., the Money Manager), and
(d) Any person other than the foregoing
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation (Rule 31a-1(b)(9) of the 1940
Act).
3*. A record in the form of an appropriate memorandum identifying the person
or persons, committees, or groups authorizing the purchase or sale of
portfolio securities. Where an authorization is made by a committee or
group, a record shall be kept of the names of its members who
participate in the authorization. There shall be retained as part of
this record any memorandum, recommendation, or instruction supporting or
authorizing the purchase or sale of portfolio securities (Rule
31a-1(b)(10) of the 1940 Act) and such other information as is
appropriate to support the authorization.**
4*. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Advisers Act, to the extent such records are
necessary or appropriate to record the Money Manager's transactions with
the Fund. (Rule 31a-1(f) of the 1940 Act).
5. All accounts, books, records or other documents that are required to be
maintained pursuant to the 1940 Act, the Advisers Act, or any rule or
regulation thereunder, need only be retained by the Money Manager as
required under such laws, rule or regulations. Any other account, book,
record or other document that is required to be maintained by the Money
Manager pursuant to this Exhibit B need only be maintained for five
years after the date of its creation.
- ------------------
* Maintained as property of the Fund pursuant to Rule 31a-3(a) of the 1940
Act.
** Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from
brokerage firms (including their recommendations, i.e., buy, sell, hold)
and any internal reports or portfolio manager reviews.
<PAGE>
EXHIBIT C
MONEY MANAGER FEE
The following compensation of the Money Manager for its services under
the Agreement shall be calculated and paid by Accessor Funds (except that no
such fees shall be paid to the Manager as to any portion of the Fund for which
it acts as money manager). For purposes of calculating the Money Manager's fees,
commencement of investment operations for the Account shall be considered to be
March 15, 2000.
Fees will be calculated and paid after the end of each calendar quarter
at one-fourth of an annual percentage rate as described in the following
paragraph and in the table below applied to the average daily net assets of the
Account. The net assets of the Account are determined by including receivables
and deducting payables. Expenses beyond the control of the Money Manager
including, but not limited to, fees payable to Accessor Funds' Custodian,
Accounting Agent and Transfer Agent, fees of accountants, legal fees and
expenses allocable to the Fund are not included as payables of the Account, but
expenses within the control of the Money Manager including, but not limited to,
brokerage commissions are included in determining the net assets of the Account.
For the first five complete calendar quarters of management of the
Account by the Money Manager, Accessor Funds will pay the Money Manager on a
monthly basis at the following annual fee rates, applied to the average daily
net assets of the Fund.
Basic Fee Fund Management Fee Total
0.10% 0.10% 0.20%
Commencing with the sixth calendar quarter of management by the Money
Manager for the Account, Accessor Funds will pay the Money Manager based on the
schedule below as applied to the average daily net assets of the Fund.
Average Annual Annual
Performance Differential Performance
Basic Fee vs. Benchmark Index Fee
0.10% plus 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% 0.00%
The Account's performance differential versus the benchmark index is
recalculated at the end of each calendar quarter based on the Account's
performance during all calendar quarters since commencement of management by the
Money Manager for the Account through the next preceding calendar quarter, so
that the performance fee, although measured on an average annual rate of return
basis, covers all prior quarters except that of the immediately preceding
quarter. Commencing with the 14th calendar quarter of management by the Money
Manager for the Account, the Account's average annual performance differential
will be recalculated based on the Account's performance during the preceding 12
calendar quarters (other than the immediately preceding quarter) on a rolling
basis.
For purposes of calculating the performance of the benchmark index,
Accessor Funds, the Manager and the Money Manager agree to accept the
calculation provided by the publisher of the index or another mutually
acceptable source. For purposes of calculating the performance differential
versus the benchmark index, the investment performance of the Account for any
period, expressed as a percentage of its net asset value per share at the
beginning of such period, is equal to the sum of: (i) the change in the net
asset value per share of the Account during such period; (ii) the value of the
Account's cash distributions per share accumulated to the end of such period;
and (iii) the value of capital gains taxes per share paid or payable on
undistributed realized long-term capital gains accumulated to the end of such
period. For this purpose, the value of distributions per share of realized
capital gains, or dividends per share paid from investment income and of capital
gains taxes per share paid or payable on undistributed realized long-term
capital gains, shall be treated as reinvested in shares of the Account at the
net asset value per share in effect at the close of business on the record date
for the payment of such distributions and dividends and the date on which
provision is made for such taxes, after giving effect to such distributions,
dividends and taxes. The investment record of the benchmark index for any period
shall mean the sum of: (i) the change in the level of the index during such
period; and (ii) the value, computed consistently with the index, of cash
distributions made by companies whose securities comprise the index accumulated
to the end of such period; expressed as a percentage of the index level at the
beginning of such period. For this purpose cash distributions on the securities
which comprise the index shall be treated as reinvested in the index at least as
frequently as the end of each calendar quarter following the payment of the
dividend.
<PAGE>
EXHIBIT D
BENCHMARK INDEX
May 1, 2000
Fund Index
- ----- ------
Growth S&P/BARRA Growth Index
MONEY MANAGER AGREEMENT
Effective Date: May 1, 2000
Termination Date: Two years
after Effective Date
Fund and Account: Approximately 90% of the
HIGH YIELD BOND FUND
Financial Management Advisors, Inc.
1900 Avenue of the Stars
Suite 900
Los Angeles, CA 90067
Re: Accessor Funds, Inc. Money Manager Agreement
Ladies and Gentlemen:
Accessor Funds, Inc., a Maryland corporation ("Accessor Funds"), is an
open-end management investment company of the series type registered as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and subject to the rules and regulations promulgated thereunder.
Accessor Funds issues shares in separate diversified portfolios, each with a
different investment objective and policies.
Accessor Capital Management LP, a Washington limited partnership (the
"Manager") acts as the manager and administrator of Accessor Funds pursuant to
the terms of a Management Agreement, and is an "investment adviser" as that term
is defined in Section 2(a)(20) of the 1940 Act, to Accessor Funds. The Manager
is responsible for the day-to-day management and administration of Accessor
Funds and for the coordination of investments of each portfolio's assets;
however, specific portfolio purchases and sales for each portfolio's investment
portfolio, or a portion thereof, are to be made by the portfolio management
organizations recommended and selected by the Manager, subject to the approval
of the Board of Directors of Accessor Funds (the "Board").
1. Appointment as a Money Manager. The Manager and Accessor Funds hereby
appoint and employ Financial Management Advisors, Inc., a California corporation
(the "Money Manager"), as a discretionary money manager to Accessor Funds' High
Yield Bond Fund (the "Fund"), on the terms and conditions set forth herein. The
Manager shall determine from time to time that portion of the assets of the Fund
that are to be assigned to and managed by the Money Manager (the "Account"). The
Account and those assets of the Fund managed by the Manager or another money
manager as determined by the Manager are referred to as the "Fund".
2. Acceptance of Appointment; Standard of Performance. The Money Manager
accepts the appointment as a discretionary money manager for the Fund and agrees
to use its best professional judgment to make and implement investment decisions
for the Fund with respect to the investments of the Account in accordance with
the provisions of this Agreement.
3. Fund Management Services of the Money Manager. The Money Manager is
hereby employed and authorized to select portfolio securities for investment by
the Fund, to determine to purchase and sell securities for the Account, and upon
making any purchase or sale decision, to place orders for the execution of such
portfolio transactions in accordance with paragraphs 5 and 6 hereof and Exhibit
A attached hereto and incorporated by this reference herein (as it may be
amended in writing by the parties from time to time). In providing portfolio
management services for the Account, the Money Manager shall be subject to such
investment restrictions as are set forth in the 1940 Act and rules thereunder,
the supervision and control of the Board, such specific written instructions as
the Board may adopt and communicate to the Money Manager, the investment
objectives, policies and restrictions of the Fund furnished pursuant to
paragraph 4, and instructions from the Manager; and the Money Manager shall
maintain on behalf of the Fund the records listed in Exhibit B attached hereto
and incorporated by this reference herein (as it may be amended in writing by
the parties from time to time). At Accessor Fund's or the Manager's reasonable
request (as communicated by the Board or the officers of such entities), the
Money Manager will consult with the officers of Accessor Funds or the Manager,
as the case may be, with respect to any decision made by it with respect to the
investments of the Account.
4. Investment Objectives, Policies and Restrictions. The Fund shall
provide the Money Manager with a written statement of the investment objectives
and policies of Accessor Funds and any specific investment restrictions
applicable thereto as established by Accessor Funds, including those set forth
in its Prospectus as amended from time to time. Accessor Funds retains the
right, on reasonable prior written notice to the Money Manager from Accessor
Funds or the Manager, to modify any such objectives, policies or restrictions in
any manner at any time. The Money Manager shall have no duty to investigate any
instructions received from Accessor Funds, the Manager, or both, and, absent
manifest error, such instructions shall be presumed reasonable.
5. Transaction Procedures. All transactions will be consummated by
payment to or delivery by Accessor Funds' custodian (the "Custodian"), or such
depositary or agents as may be designated by the Custodian, as custodian for the
Fund, of all cash and/or securities due to or from the Account, and the Money
Manager shall not have possession or custody thereof or any responsibility or
liability with respect thereto. The Money Manager shall advise the Custodian in
writing or by electronic transmission or facsimile of all investment orders for
the Fund placed by it with broker/dealers at the time and in the manner and as
set forth in Exhibit A hereto. Accessor Funds shall issue to the Custodian such
instructions as may be appropriate in connection with the settlement of any
transaction initiated by the Money Manager. Accessor Funds shall be responsible
for all custodial arrangements and the payment of all custodial charges and fees
and, upon the Money Manager giving proper instructions to the Custodian, the
Money Manager shall have no responsibility or liability with respect to
custodial arrangements or the acts, omissions or other conduct of the Custodian.
6. Allocation of Brokerage. The Money Manager shall have authority and
discretion to select brokers/dealers to execute portfolio transactions initiated
by the Money Manager, and for the selection of the markets on/in which the
transaction will be executed.
A. In doing so, the Money Manager's primary objective shall be
to select a broker/dealer that can be expected to obtain the best net
price and execution for Accessor Funds. However, this responsibility
shall not be deemed to obligate the Money Manager to solicit competitive
bids for each transaction; and the Money Manager shall have no
obligation to seek the lowest available commission cost to Accessor
Funds, so long as Money Manager believes in good faith, based upon its
knowledge of the capabilities of the firm selected, that the broker or
dealer can be expected to obtain the best price on a particular
transaction and that the commission cost is reasonable in relation to
the total quality and reliability of the brokerage and research services
made available by the broker/dealer to the Money Manager viewed in terms
of either that particular transaction or of the Money Manager's overall
responsibilities with respect to its clients, including Accessor Funds,
as to which the Money Manager exercises investment discretion,
notwithstanding that Accessor Funds may not be the direct or exclusive
beneficiary of any such services or that another broker/dealer may be
willing to charge Accessor Funds a lower commission on the particular
transaction.
B. Accessor Funds shall retain the right to request that
transactions involving the Account that give rise to brokerage
commissions in an annual amount of up to 50% of the Money Manager's
executed brokerage commissions, shall be executed by broker/dealers
which provide brokerage or research services to Accessor Funds or its
Manager, or as to which an ongoing relationship will be of value to
Accessor Funds with respect to the Fund, which services and relationship
may, but need not, be of direct benefit to the Fund so long as (i) the
Money Manager believes in good faith, based upon its knowledge of the
capabilities of the firm selected, that the broker/dealer can be
expected to obtain the best price on a particular transaction and (ii)
Accessor Funds determines that the commission cost is reasonable in
relation to the total quality and reliability of the brokerage and
research services made available to Accessor Funds, or to the Manager
for the benefit of its clients for which it exercises investment
discretion, notwithstanding that the Fund may not be the direct or
exclusive beneficiary of any such service or that another broker/dealer
may be willing to charge Accessor Funds a lower commission on the
particular transaction. The Money Manager may reject any request for
directed brokerage that does not appear to it to be reasonable.
C. Accessor Funds agrees that it will provide the Money Manager
with a list of broker/dealers which are "affiliated persons" of Accessor
Funds and its other money managers. Upon receipt of such list, the Money
Manager agrees that it will not execute any portfolio transactions with
a broker/dealer which is an "affiliated person" (as defined in the 1940
Act) of Accessor Funds or of any money manager for Accessor Funds unless
it is in accordance with the procedures of Accessor Funds.
D. As used in this paragraph 6, "brokerage and research
services" shall be those services described in Section 28(e)(3) of the
Securities Exchange Act of 1934, as amended.
7. Proxies. Unless the Manager gives written instructions to the
contrary, the Money Manager shall vote all proxies solicited by or with respect
to the issuers of securities in which assets of the Account may be invested. The
Money Manager shall use its best good faith judgment to vote such proxies in a
manner which best serves the interests of the Fund's shareholders.
8. Reports to the Money Manager. Accessor Funds and the Manager shall
furnish or otherwise make available to the Money Manager such information
relating to the business affairs of the Fund, including periodic reports
concerning the Fund, as the Money Manager at any time, or from time to time, may
reasonably request in order to discharge its obligations hereunder.
9. Fees for Services.
A. The compensation of the Money Manager for its services under
this Agreement shall be calculated and paid by Accessor Funds in
accordance with Exhibit C attached hereto and incorporated by this
reference herein. The Money Manager acknowledges that any such fee is
payable solely out of assets of the Fund's Account.
B. The Money Manager acknowledges that the index against which
the Money Manager's performance is based (the "benchmark index"), as set
forth on Exhibit D, attached hereto and incorporated herein by reference
as may be amended from time to time, may be changed by the Board,
including a majority of the directors who are not parties to this
Agreement (as defined in the 1940 Act) or interested persons of any such
party, upon at least one quarter's prior notice. The Money Manager
acknowledges that a change in the benchmark index may alter the
subsequent return of the index measure, but performance prior to the
change in the benchmark index will continue to be based on the former
benchmark index.
10. Other Investment Activities of the Money Manager. Accessor Funds
acknowledges that the Money Manager, or one or more of its affiliates, may have
investment responsibilities or render investment advice to, or perform other
investment advisory services for, other individuals or entities, including
without limitation, registered investment advisers and private money managers
(collectively, the "Affiliated Accounts"). Subject to the provisions of
paragraph 2 hereof, Accessor Funds agrees that the Money Manager and its
affiliates may give advice, exercise investment responsibility and take other
action with respect to the Affiliated Accounts which may differ from the advice
given or the timing or nature of action taken with respect to the Account,
provided that the Money Manager acts in good faith, and provided further that it
is the Money Manager's policy to allocate, within its reasonable discretion,
investment opportunities to the Account over a period of time on a fair and
equitable basis relative to the Affiliated Accounts, taking into account the
investment objectives and policies of the Fund and any specific investment
restrictions applicable thereto. Accessor Funds acknowledges that one or more of
the Affiliated Accounts may at any time hold, acquire, increase, decrease,
dispose of or otherwise deal with positions in investments in which the Account
may have an interest from time to time, whether in transactions which may
involve the Account or otherwise. The Money Manager shall have no obligation to
acquire for the Account a position in any investment which any Affiliated
Account may acquire, and the Fund shall have no first refusal, co-investment or
other rights in respect of any such investment, either for the Account or
otherwise.
11. Certificate of Authority. Each of Accessor Funds, the Manager and
the Money Manager shall furnish to the others from time to time certified copies
of the resolutions of its Board of Directors, Board of Trustees, Managing
Partner or executive committee, as the case may be, evidencing the authority of
its officers and employees who are authorized to act on behalf of it.
12. Limitation of Liability. The Money Manager shall not be liable for,
and shall be indemnified by the Fund for any action taken, omitted or suffered
to be taken by it in its reasonable judgment, in good faith and believed by it
to be authorized or within the discretion or rights or powers conferred upon it
by this Agreement, or in accordance with (or in the absence of) specific
directions or instructions from Accessor Funds or the Manager; provided,
however, that such acts or omissions shall not have resulted from the Money
Manager's willful misfeasance, bad faith or gross negligence, violation of
applicable law, or reckless disregard of its duty or of its obligations
hereunder. The rights and obligations that are provided for in this Paragraph 12
shall survive the cancellation, expiration or termination of this Agreement.
13. Confidentiality. Subject to the right of the Money Manager, the
Manager and Accessor Funds to comply with applicable law, including any demand
or request of any regulatory or taxing authority having jurisdiction over it,
the parties hereto shall treat as confidential all information pertaining to the
Fund and the actions of the Money Manager, the Manager and Accessor Funds in
respect thereof, other than any such information which is or hereafter becomes
ascertainable from public or published information or trade sources. The rights
and obligations that are provided for in this Paragraph 13 shall survive the
cancellation, expiration or termination of this Agreement.
14. Use of the Money Manager's Name. Accessor Funds and the Manager
agree to furnish the Money Manager at its principal office prior to use thereof
copies of all prospectuses, proxy statements, reports to stockholders, sales
literature, or other material prepared for distribution to stockholders of the
Fund or the public that refer in any way to the Money Manager, and not to use
such material if the Money Manager reasonably objects in writing within three
business days (or such other time as may be mutually agreed) after receipt
thereof. In the event of termination of this Agreement, the Fund and the Manager
will continue to furnish to the Money Manager copies of any of the
above-mentioned materials that refer in any way to the Money Manager, and will
not use such material if the Money Manager reasonably objects in writing within
three business days (or such other time as may be mutually agreed) after receipt
thereof.
15. Assignment. No assignment, as that term is defined in Section
2(a)(4) of the 1940 Act, of this Agreement shall be made by the Money Manager,
and this Agreement shall terminate automatically in the event that it is
assigned. The Money Manager shall notify the Manager and Accessor Funds in
writing sufficiently in advance of any proposed change of control, as defined in
Section 2(a)(9) of the 1940 Act, to enable the Manager and Accessor Funds to
consider whether an assignment, as that term is defined in Section 2(a)(4) of
the 1940 Act, will occur, and to take the steps necessary to enter into a new
money manager agreement with the Money Manager.
16. Representations, Warranties and Agreements of the Investment Company
Accessor Funds represents, warrants and agrees that:
A. The Money Manager has been duly appointed by the Board to
provide investment services to the Account as contemplated hereby.
B. Accessor Funds will deliver to the Money Manager a true and
complete copy of its current prospectus as effective from time to time,
such other documents or instruments governing the investments of Fund,
and such other information as is necessary for the Money Manager to
carry out its obligations under this Agreement.
C. The organization of Accessor Funds and the conduct of the
business of the Fund as contemplated by this Agreement, materially
complies, and shall at all times materially comply, with the
requirements imposed upon Accessor Funds by applicable law.
17. Representations, Warranties and Agreements of Manager. Manager
represents, warrants and agrees that:
A. The Manager acts as an "investment adviser," as that term is
defined in Section 2(a)(20) of the 1940 Act, pursuant to a Management
Agreement with the Fund.
B. The appointment of the Money Manager by the Manager to
provide the investment services as contemplated hereby has been approved
by the Board.
C. The Manager is registered as an "investment adviser" under
the Investment Advisers Act of 1940, as amended (the "Advisers Act").
D. The Manager has received and reviewed Money Manager's Form
ADV, Part II, more than 48 hours prior to entering into this Agreement.
18. Representations, Warranties and Agreements of Money Manager. The
Money Manager represents, warrants and agrees that:
A. The Money Manager is registered as an "investment adviser"
under the Advisers Act; or it is a "bank" as defined in Section
202(a)(2) of the Advisers Act or an "insurance company" as defined in
Section 202(a)(12) of the Advisers Act and is exempt from registration
thereunder.
B. The Money Manager will maintain, keep current and preserve on
behalf of the Fund, the records identified in Exhibit B, in the manner
required by such Exhibit. The Money Manager agrees that such records
(other than those required by No. 4 of Exhibit B) are the property of
the Fund and will be surrendered to the Fund promptly upon request.
C. The Money Manager will adopt or has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the 1940 Act,
will provide to the Fund a copy of the code of ethics and evidence of
its adoption, and will make such reports to the Fund as required by Rule
17j-1 under the 1940 Act. The Money Manager has policies and procedures
sufficient to enable the Money Manager to detect and prevent the misuse
of material, nonpublic information by the Money Manager or any person
associated with the Money Manager, in compliance with the Insider
Trading and Securities Fraud Enforcement Act of 1988.
D. The Money Manager will notify Accessor Funds of any changes
in the general partner(s) of its partnership or in the case of a
corporation in the ownership of more than five percent of its voting
securities, within a reasonable time after such change.
19. Amendment. This Agreement may be amended at any time, but only by
written agreement among the Money Manager, the Manager and Accessor Funds, which
amendment, other than amendments to Exhibits A and B, must be approved by the
Board in the manner required by the 1940 Act.
20. Effective Date; Term. This Agreement shall become effective for the
Fund on the effective date set forth on page 1 of this Agreement, and shall
continue in effect until the termination date set forth on page 1 of this
Agreement. Thereafter, the Agreement shall continue in effect for successive
annual periods only so long as its continuance has been specifically approved at
least annually (a) by a vote of a majority of the Board or (b) by a vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund for which the Money Manager acts as money manager, and in either case
by a majority of the directors who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as directors of
the Fund) cast in person at a meeting called for purposes of voting on the
Agreement.
21. Termination. This Agreement may be terminated, without the payment
of any penalty, by the Board, the Manager, the Money Manager or by the vote of a
majority of the outstanding voting securities (as that term is defined in the
1940 Act) of the Fund for which the Money Manager acts as money manager, upon 60
days' prior written notice to the other parties hereto. Any such termination
shall not affect the status, obligations or liabilities of any party hereto to
any of the other parties that accrued prior to such termination. Termination by
either the Manager or the Money Manager shall not have the effect of canceling
orders to purchase or sell securities placed prior to the receipt of written
notice of termination.
22. Applicable Law. To the extent that state law shall not have been
preempted by the provisions of any laws of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the State
of Washington.
ACCESSOR FUNDS, INC. ACCESSOR CAPITAL MANAGEMENT LP
By Bennington Management Associates, Inc.
Its Managing General Partner
BY:/s/J. Anthony Whatley, III BY:/s/J. Anthony Whatley, III
J. Anthony Whatley, III J. Anthony Whatley, III
President President and Principal Executive Officer
DATE: 3/24/2000 DATE: 3/24/2000
Accepted and agreed to:
FINANCIAL MANAGEMENT ADVISORS, INC.
BY:/s/Kenneth D. Malamed
Kenneth D. Malamed
President
DATE: 4/3/2000
EXHIBITS: A. Operational Procedures (including Schedules 1, 2 and 3).
B. Recordkeeping Requirements.
C. Fee Schedule.
D. Benchmark Index.
<PAGE>
EXHIBIT A
OPERATIONAL PROCEDURES
The Money Manager (the "MM") shall abide by certain rules and procedures
in order to minimize operational problems. The MM will be required to have
various records and files (as required by regulatory agencies) at its offices.
The MM will have to maintain a certain flow of information to Fifth Third Bank
("Fifth Third") the Fund's accounting agent and the custodian bank.
The MM will be required to furnish Fifth Third with daily information as
to executed trades. Fifth Third should receive this data no later than the
morning following the day of the trade. The necessary information should be
transmitted via facsimile machine or electronic transmission to Fifth Third.
Upon receipt of brokers' confirmations, the MM or Fifth Third will be required
to notify the other party if any differences exist. The reporting of trades by
the MM to Fifth Third must include the following:
o Name of the Portfolio of the Fund as to which trade relates
o Whether Purchase or Sale
o Security name
o Number of shares or principal amount
o Price per share or bond
o Commission rate per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC (Purchase only)
When opening accounts with brokers for the Fund, the account should be a
cash account. No margin accounts are to be maintained. The broker should be
advised to use Fifth Third's ID system number to facilitate the receipt of
information by Fifth Third. If this procedure is followed, DK problems will be
held down to a minimum and additional costs of security trades will not become
an important factor in doing business. Delivery and receipt instructions are
attached as Schedule 1.
The MM will also be required to submit to Fifth Third a daily trade
authorization form signed by two authorized individuals prior to settlement
date. A list of authorized persons with specimen signatures must be sent to
Fifth Third (see Schedule 2). The authorization will contain information on
which Fifth Third and Fifth Third can rely to either accept delivery or deliver
out of the account securities as per each trade by the MM. A preprinted form
will be supplied to the MM by the Fund, or the MM may use an equivalent form
acceptable to Fifth Third and the Fund.
<PAGE>
SCHEDULE 1 TO EXHIBIT A
FIFTH THIRD BANK
DELIVERY INSTRUCTIONS FOR
THE ACCESSOR FUNDS, INC. - HIGH YIELD BOND FUND
I. DTC ELIGIBLE SECURITIES
II. FEDERAL RESERVE WIRE TRANSFERS
III. FEDERAL RESERVE ELIGIBLE SECURITIES: REPURCHASE AGREEMENTS:
IV. PTC ELIGIBLE SECURITIES (i.e. GNMAs)
V. PHYSICAL/INELIGIBLE
PHYSICAL NEW YORK
Bank of New York
One Wall Street - Securities Department
3rd Floor - "Window A"
New York, NY 10286
FFC: Fifth Third Bank - A/C #135500
EUROCLEAR
(Payment due 1 day prior to settlement date)
Euroclear #97816
A/C The Bank of New York
Ref: Fifth Third Bank
A/C #135500
<PAGE>
SCHEDULE 2 TO EXHIBIT A
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
Fifth Third, Inc.
Fifth Third Center
38 Fountain Square Plaza
Cincinnati, OH 45263
Attention: Accessor Funds, Inc. - High Yield Bond Fund
Re: Persons Authorized to Execute Trades For High Yield Bond Fund
The following individuals are authorized to execute and report trade
instructions on behalf of the Fund. Should there be any changes to the list of
authorized persons, we will notify you immediately of those changes.
NAME SIGNATURE
Sincerely yours,
[Money Manager]
<PAGE>
EXHIBIT B
RECORDS TO BE MAINTAINED BY MONEY MANAGER
*1. A record of each brokerage order, and all other portfolio purchases and
sales, given by the Money Manager or on behalf of Accessor Funds for, or
in connection with, the purchase or sale of securities, whether executed
or unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification or
cancellation thereof,
C. The time of entry or cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F The name of the person who placed the order on behalf of Accessor
Funds (Rule 31a-1(b)(5) and (6) of the 1940 Act).
*2. A record for each fiscal quarter, completed within ten (10) days after
the end of the quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio
securities to brokers or dealers was made, and the division of brokerage
commissions or other compensation on such purchase and sale orders. The
record:
A. Shall include the consideration given to:
(i) The sale of shares of the Accessor Funds.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) Accessor Funds,
(b) The Manager (Accessor Capital Management),
(c) Yourself (i.e., the Money Manager), and
(d) Any person other than the foregoing.
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions
or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation (Rule 31a-1(b)(9) of the 1940 Act)
*3. A record in the form of an appropriate memorandum identifying the person
or persons, committees, or groups authorizing the purchase or sale of
portfolio securities. Where an authorization is made by a committee or
group, a record shall be kept of the names of its members who
participate in the authorization. There shall be retained as part of
this record any memorandum, recommendation, or instruction supporting or
authorizing the purchase or sale of portfolio securities (Rule
31a-1(b)(10) of the 1940 Act) and such other information as is
appropriate to support the authorization.**
*4. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Advisers Act, to the extent such records are
necessary or appropriate to record the Money Manager's transactions with
Accessor Funds. (Rule 31a-1(f) of the 1940 Act).
5. All accounts, books, records or other documents that are required to be
maintained pursuant to the 1940 Act, the Advisers Act, or any rule or
regulation thereunder, need only be retained by the Money Manager as
required under such laws, rule or regulations. Any other account, book,
record or other document that is required to be maintained by the Money
Manager pursuant to this Exhibit B need only be maintained for five
years after the date of its creation.
- ---------------------
* Maintained as property of the Fund pursuant to Rule 31a-3(a) of the 1940 Act.
** Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms
(including their recommendations, i.e., buy, sell, hold), and any internal
reports or portfolio manager reviews.
<PAGE>
EXHIBIT C
MONEY MANAGER FEE
The following compensation of the Money Manager for its services under
the Agreement shall be calculated and paid by Accessor Funds (except that no
such fees shall be paid to the Manager as to Accounts for which it acts as money
manager).
Fees will be calculated and paid after the end of each calendar quarter
at one-fourth of an annual percentage rate as described in the following
paragraph and in the table below applied to the average daily net assets of the
Account. The net assets of the Account are determined by including receivables
and deducting payables. Expenses beyond the control of the Money Manager
including, but not limited to, fees payable to Accessor Fund's Custodian,
Accounting Agent and Transfer Agent, fees of accountants, legal fees and
expenses allocable to the Fund are not included as payables of the Account, but
expenses within the control of the Money Manager including, but not limited to,
brokerage commissions, are included in determining the net assets of the
Account.
For the first five complete calendar quarters of investment operations for the
Account, Accessor Funds will pay the Money Manager on a quarterly basis at the
following annual fee rates, applied to the average daily net assets of the
Account.
Basic Fee Portfolio Management Fee Total
0.07% 0.08% 0.15%
Commencing with the sixth calendar quarter of investment operations for
the Account, Accessor Funds will pay the Money Manager based on the schedule
below as applied to the average daily net assets.
Average Annual Performance Annual Total
Differential vs. Performance Annual
Basic Fee Benchmark Index Fee Fee
0.07% Less than or equal to -1.00% 0.00% 0.07%
Greater than -1.00% and Less than or equal to -0.50% 0.04% 0.11%
Greater than -0.50% and Less than or equal to 0.50% 0.08% 0.15%
Greater than 0.50% and Less than or equal to 1.00% 0.12% 0.19%
Greater than 1.00% and Less than or equal to 1.50% 0.16% 0.23%
Greater than 1.50% and Less than or equal to 2.00% 0.20% 0.27%
Greater than 2.00% 0.22% 0.29%
The Account's performance differential versus the benchmark index is
recalculated at the end of each calendar quarter based on the Account's
performance during all calendar quarters since commencement of investment
operations through the next preceding calendar quarter, so that the performance
fee, although measured on an average annual rate of return basis, covers all
prior quarters except that of the immediately preceding quarter. Commencing with
the 14th calendar quarter of investment operations, the Account's average annual
performance differential will be recalculated based on the Account's performance
during the preceding 12 calendar quarters (other than the immediately preceding
quarter) on a rolling basis.
For purposes of calculating the performance of the benchmark index,
Accessor Funds, Manager and Money Manager agree to accept the calculation
provided by the publisher of the index or another mutually acceptable source.
For purposes of calculating the performance differential versus the benchmark
index, the investment performance of the Account for any period, expressed as a
percentage of its net asset value per share at the beginning of such period, is
equal to the sum of: (i) the change in the net asset value per share of the
Account during such period; (ii) the value of the Account's cash distributions
per share accumulated to the end of such period; and (iii) the value of capital
gains taxes per share paid or payable on undistributed realized long-term
capital gains accumulated to the end of such period. For this purpose, the value
of distributions per share of realized capital gains, or dividends per share
paid from investment income and of capital gains taxes per share paid or payable
on undistributed realized long-term capital gains shall be treated as reinvested
in shares of the Account at the net asset value per share in effect at the close
of business on the record date for the payment of such distributions and
dividends and the date on which provision is made for such taxes, after giving
effect to such distributions, dividends and taxes. The investment record of the
benchmark index for any period shall mean the sum of: (i) the change in the
level of the index during such period; and (ii) the value, computed consistently
with the index, of cash distributions made by companies whose securities
comprise the index accumulated to the end of such period; expressed as a
percentage of the index level at the beginning of such period. For this purpose
cash distributions on the securities which comprise the index shall be treated
as reinvested in the index at least as frequently as the end of each calendar
quarter following the payment of the dividend.
Accessor Funds and Manager acknowledge that the use of a performance fee
may result in a higher degree of risk with respect to the Account than the use
of base fees.
<PAGE>
EXHIBIT D
BENCHMARK INDEX
May 1, 2000
Fund Index
High Yield Bond Fund Lehman Brothers U.S. Corporate High Yield Index
AMENDED
EXHIBIT A
---------
FUNDS OF ACCESSOR FUNDS, INC.
THIS AMENDED EXHIBIT A, dated as of May 1, 2000, is Exhibit A to the
Fund Accounting and Services Agreement dated as of October 4, 1996, by and among
Accessor Capital Management LP (formerly Bennington Capital Management L.P.),
Fifth Third Bank and Accessor Funds, Inc. This Amended Exhibit A shall supersede
all previous forms of Exhibit A.
Name of Fund Date
- ------------ ----
Growth Fund November 18, 1996
Value Fund November 18, 1996
Small to Mid Cap Fund November 18, 1996
International Equity Fund November 18, 1996
Intermediate Fixed-Income Fund October 7, 1996
Short-Intermediate Fixed-Income Fund October 7, 1996
High Yield Bond Fund May 1, 2000
Mortgage Securities Fund November 18, 1996
U.S. Government Money Fund October 7, 1996
ACCESSOR FUNDS, INC.
By:/s/Ravindra A. Deo
Ravindra A. Deo
Vice President
ACCESSOR CAPITAL MANAGEMENT LP
By: Bennington Management Associates, Inc.
Its: Managing General Partner
By:/s/J. Anthony Whatley III
J. Anthony Whatley III
President
THE FIFTH THIRD BANK
By:/s/Tracie D. Hoffman
Tracie D. Hoffman
Vice President
<PAGE>
AMENDED
EXHIBIT B
---------
FEE SCHEDULE
THIS AMENDED EXHIBIT B, dated as of May 1, 2000, is Exhibit B to the
Fund Accounting and Services Agreement dated as of October 4, 1996, by and among
Accessor Capital Management LP (formerly Bennington Capital Management L.P.),
Fifth Third Bank ("Fifth Third") and Accessor Funds, Inc. ("Accessor Funds").
This Amended Exhibit B shall supersede all previous forms of Exhibit B.
Accessor Funds will pay Fifth Third an annual fund accounting and
service fee (the "Fee"), to be calculated daily and paid monthly. The annual Fee
for each Fund shall be the greater of a monthly minimum or an asset based fee,
as follows:
<TABLE>
<CAPTION>
Monthly Mimumum Or Asset Based Fees
- ------------------------------------------------------------------------------------------------------------
First Next Assets over
Fund $100,000,000 $150,000,000 $250,000,000
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth $1,500 .03% .02% .01%
Value $1,500 .03% .02% .01%
Small to Mid Cap $1,500 .03% .02% .01%
International Equity $3,000 .04% .03% .02%
Intermediate Fixed-Income $2,000 .03% .02% .01%
Short-Intermediate Fixed Income $2,000 .03% .02% .01%
High Yield Bond $2,000 .03% .02% .01%
Mortgage Securities $2,000 .03% .02% .01%
U.S. Government Money $1,500 .03% .02% .01%
</TABLE>
Accessor Funds will pay an additional annual Fee of $2,000 per Fund for
other administrative services rendered, to be charged monthly. Should Accessor
Funds add additional share classes, there will be an annual charge of $7,000 per
additional class per Fund, also to be charged monthly. Finally, Accessor Funds
will reimburse Fifth Third for its out-of-pocket expenses incurred in performing
its services under this Agreement, including, but not limited to: postage and
mailing, telephone, facsimile, overnight courier services and outside
independent pricing service charges, and record retention/storage.
ACCESSOR FUNDS, INC. ACCESSOR CAPITAL MANAGEMENT LP
By: Bennington Management Associates, Inc.
Its: Managing General Partner
By:/s/Ravindra A. Deo By:/s/J. Anthony Whatley III
Ravindra A. Deo J. Anthony Whatley III
Vice President President
THE FIFTH THIRD BANK
By:/s/Tracie D. Hoffman
Tracie D. Hoffman
Vice President
- --------------------------------------------------------------------------------
KIRKPATRICK & LOCKHART LLP
- --------------------------------------------------------------------------------
75 STATE STREET
BOSTON, MASSACHUSETTS 02109-1808
TELEPHONE (617) 261-3100
April 28, 2000
Accessor Funds, Inc.
1420 Fifth Avenue
Suite 3600
Seattle, Washington 98101
Ladies and Gentlemen:
We have acted as counsel to Accessor Funds, Inc., a Maryland
corporation (the "Company"), in connection with Post-Effective Amendment No. 17
(the "PEA") to the Company's Registration Statement on Form N-1A (File No.
33-41245), relating to the issuance and sale of Shares of the Company. You have
requested our opinion with respect to the matters set forth below.
In this opinion letter, the term "Shares" refers to the Investor Class
and Advisor Class shares of common stock of Growth Fund, Value Fund, Small to
Mid Cap Fund, International Equity Fund, Intermediate Fixed-Income Fund,
Short-Intermediate Fixed-Income Fund, High Yield Bond Fund, Mortgage Securities
Fund, and U.S. Government Money Fund, each of which is a series ("Series") of
the Company, that may be issued during the time that the PEA is effective and
has not been superseded by a post-effective amendment and is limited to an
aggregate (including shares that are issued and outstanding as of the effective
date of the PEA but excluding shares that, as of the date a Share is issued,
have been redeemed) of 9,000,000,000 shares of the Company.
In connection with rendering the opinions set forth below, we have
examined copies of the Company's Articles of Incorporation and by-laws, and
resolutions and minutes of meetings of the Company's Board of Directors relating
to the PEA and the issuance and sale of the Shares. We have also examined and
relied upon certificates of public officials. We have not independently
established the facts so relied on.
The opinions expressed in this opinion letter are limited to the laws
(other than the laws relating to choice of law) of the State of Maryland that in
our experience are normally applicable to the issuance of shares by corporations
and to the Securities Act of 1933 ("1933 Act"), the Investment Company Act of
1940 ("1940 Act") and the regulations of the Securities and Exchange Commission
thereunder.
Based on and subject to the foregoing, it is our opinion that:
1. The issuance of the Shares has been duly authorized by the Company.
2. When sold in accordance with the terms contemplated by the PEA,
including receipt by the Company of full payment for the Shares and compliance
with the 1933 Act and the 1940 Act, the Shares will have been validly issued and
will be fully paid and non-assessable.
We hereby consent to the filing of this opinion letter as an exhibit to
the PEA and to the reference to our firm in the statement of additional
information that is being filed as part of the PEA.
Very truly yours,
/s/ Kirkpatrick & Lockhart LLP
Kirkpatrick & Lockhart LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 17 to Registration Statement on Form N-1A under the Securities Act of 1933,
filed under Registration Statement No. 33-41245, relating to Accessor Funds,
Inc., including Growth Fund, Value Fund, Small to Mid Cap Fund, International
Equity Fund, Intermediate Fixed-Income Fund, Short-Intermediate Fixed-Income
Fund, Mortgage Securities Fund, and U.S. Government Money Fund of our report
dated February 11, 2000 appearing in the annual report to shareholders of
Accessor Funds, Inc. for December 31, 1999 and to the references to us under the
captions "Financial Highlights"and "Independent Auditors"in such Registration
Statement.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
April 25, 2000
ACCESSOR FUNDS, INC.
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN
FOR INVESTOR CLASS SHARES
This distribution and service 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 the diversified series (each a "Portfolio" and collectively, the
"Portfolios") 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"), or to compensate such third parties for
providing personal and/or account maintenance services to their clients who own
Investor Class Shares (the "Shareholder Services").
(b) The Fund shall enter into dealer and service 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 and/or
Shareholder 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 or service related costs or expenses
as necessary, such that 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. Investor Class Shares shall incur no interest or
carrying charges for expenses carried forward. In the event the Distribution and
Service 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 Distribution 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 a
Distribution 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
a Distribution Agreement with the Fund. For the purposes of determining the
payments or reimbursements payable under the Distribution and Service 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. (a) 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.
(b) The Shareholder Services, if any, 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 Funds of Accessor Funds 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 Accessor Funds may
reasonably request to the extent the Service Organizations are permitted to do
so under applicable statutes, rules and regulations provided, however, if the
National Association of Securities Dealers, Inc. ("NASD") adopts a definition of
"shareholder services" for purposes of 2830 of the NASD Conduct Rules that
differs from the definition of "shareholder services" as presently used herein,
or if the NASD adopts a related definition intended to define the same concept,
the definition of "shareholder services" as used herein shall be automatically
amended to conform to the NASD definition.
Section 5. Any Service Organization entering into an agreement with the Fund
under this Distribution and Service Plan may also enter into an Administrative
Services Agreement with regard to its Investor Class Shares with the Fund
pursuant to an Administrative Services Plan adopted by the Fund, which will not
be subject to the terms of this Distribution and Service Plan. The Fund under
this Distribution and Service 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 and Service 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 and Service Plan and such related agreements.
Section 7. The Distribution and Service 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 and Service Plan in paragraph 6.
Section 8. Any person authorized to direct the disposition of monies paid or
payable by Investor Class Shares for Distribution Services pursuant to the
Distribution and Service 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 and Service 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 and Service 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 and Service 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 and Service Plan shall become effective only upon
approval as provided in paragraph 7 hereof.
Section 11. While the Distribution and Service 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 and Service 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 and
Service 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 and Service 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 and Service Plan that would
materially increase the cost to the Invest Class Shares of the Portfolios to
which the Distribution and Service Plan relates requires approval of the
affected shareholders of the Portfolios.
IN WITNESS WHEREOF, the Fund has adopted this Distribution and Service 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
DRAFT
[Date]
[Contact]
[Name of Advisor]
[Address]
Re: INVESTOR CLASS SHARES - ACCESSOR FUNDS, INC.
DEALER AND SERVICE AGREEMENT
Dear [Contact]:
Accessor Funds, Inc. ("Accessor Funds") is a registered open-end investment
management company currently offering the Funds set forth on Schedule A, as may
be amended from time to time (each a "Fund" and collectively, the "Funds"). This
letter will confirm our understanding and agreement with respect to payments to
be made by the Accessor Funds for reimbursements of expenses to you pursuant to
a distribution and service plan adopted by Accessor Funds, pursuant to Rule
12b-1 (the "Distribution and Service Plan") under the Investment Company Act of
1940, as amended (the "1940 Act"). The Distribution and Service Plan and a form
of this Dealer and Service Agreement (the "Agreement") have been approved by a
majority of the Directors of the Accessor Funds, including a majority of the
Directors who are not interested persons of the Accessor Funds and who have no
direct or indirect financial interest in the operation of the Distribution and
Service 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 and Service Plan will benefit the Accessor Funds and its
shareholders.
The terms and conditions of this Agreement are as follows:
Section 1. To the extent you provide such services, the Accessor Funds shall
make directly, or cause to be made to you, out of the assets of the Accessor
Funds, payments for costs and expenses or to provide for the reimbursement of
expenses, incurred in connection with your providing (i) services primarily
intended to result in the sale of Investor Class Shares (the "Distribution
Services"), or (ii) personal and/or account maintenance services to your clients
who may from time to time own Investor Class Shares (the "Shareholder
Services").
Distribution Services include, but are not necessarily 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 Accessor Funds to prospective holders of
Investor Class Shares;
(d) costs involved in preparing, printing and distributing sales literature
pertaining to the Accessor Funds and
(e) costs involved in obtaining whatever information, analyses and reports with
respect to marketing and promotional activities that the Accessor Funds
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 Funds.
Shareholder Services include, but are not necessarily limited to:
(a) shareholder liaison services;
(b) providing information periodically to your clients ("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;
(c) furnishing statements and confirmations of transactions in Client's
account;
(d) 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
(e) 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; provided, however, if the National Association of
Securities Dealers, Inc. ("NASD") adopts a definition of "shareholder
services" for purposes of 2830 of the NASD Conduct Rules that differs from
the definition of "shareholder services" as presently used in the
Distribution and Service Plan or this Agreement, or if the NASD adopts a
related definition intended to define the same concept, the definition of
"shareholder services" as used in the Distribution and Service Plan or
herein shall be automatically amended to conform to the NASD definition.
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
Accessor Funds 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 Accessor Funds, or any variation of any such
trademark, trade name, service mark or logo, without the Accessor Funds' prior
written consent, the granting of which shall be at the Accessor Funds' sole
option.
Section 5. In consideration of the services and facilities provided by you
hereunder, we will pay directly or reimburse to you, and you will accept as full
payment therefor, a total amount for Distribution Services and Shareholder
Services at an annual rate not to exceed 0.25% of the average daily net asset
value of the Investor Class Shares beneficially owned by your Clients, which
amount will be computed and accrued daily and payable monthly within fifteen
(15) days after the close of each month for which such amount is payable, or at
such other interval as may be agreed upon between the parties. Payment will be
made by wire transfer as described on Schedule B, 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 Accessor Funds for the relevant
month and such other supporting data as may be reasonably requested by you.
Provided, however, that we shall not directly or indirectly pay you any amounts
that exceed any applicable limits imposed by law or the NASD. For purposes of
determining the amounts 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 amount stated above
may be prospectively increased, decreased or discontinued 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 for Distribution Services 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 be
primarily intended to result in the sale of Investor Class Shares or to provide
personal and/or account maintenance services and (iii) the receipt of the
amounts described in Section 5 and the provision of Distribution Services or
Shareholder 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 facsimile or
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 Accessor Funds 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: ________________________
Name
Title
Accepted and Agreed to:
NAME OF ADVISOR
By: ________________________
Name
Title
Date: ______________________
<PAGE>
SCHEDULE A
TO DEALER AND SERVICE AGREEMENT
This Dealer and Service Agreement shall be entered into with respect to the
Investor Class shares of the following Funds of Accessor Funds, Inc.:
Growth Fund
Value Fund
Small to Mid Cap Fund
International Equity Fund
Intermediate Fixed-Income Fund
Short-Intermediate Fixed-Income Fund
Mortgage Securities Fund
High Yield Bond Fund
U.S. Government Money Fund
<PAGE>
SCHEDULE B
WIRE TRANSFER INFORMATION
Bank Name:
ABA#:
Account#:
For Credit to:
Special Instructions:
ACCESSOR FUNDS, INC.
Amended and Restated
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. Accessor Capital Management
L.P. 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 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 and Service Plan adopted under Rule
12b-1 of the 1940 Act. The amounts of the payments or fees under the relevant
Distribution and 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
Accessor Capital Management L.P. 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 on a Class-by-Class basis: (a) payments or
reimbursements under the Distribution and Service Plan, and fees under the
Administrative Services Plan (as relevant) and; (b) to the extent practicable,
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. Prior to any material amendment(s) to this
18f-3 Plan, the Board of Directors, including a majority of the Directors who
are not interested persons (deemed to have the same meaning that this term has
under the 1940 Act) of the Fund, 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, and the
best interest of each of the Portfolios 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, as amended March 31, 1999 and February 14, 2000.
<PAGE>
SCHEDULE A
February 15, 2000
This 18f-3 Plan shall be adopted with respect to the following Portfolios
of Accessor Funds, Inc.:
Growth Fund
Value Fund
Small to Mid Cap Fund
International Equity Fund
Intermediate Fixed-Income Fund
Short-Intermediate Fixed-Income Fund
Mortgage Securities Fund
High Yield Bond Fund
U.S. Government Money Fund
<PAGE>
SCHEDULE B
Amount of Distribution and Service 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%
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%
ACCESSOR FUNDS, INC.
FOURTH AMENDED AND RESTATED CODE OF ETHICS
This Code of Ethics (the "Code"), establishes rules of conduct for Accessor
Funds, Inc. ("Accessor Funds"), the investment portfolios of Accessor Funds
listed on the attached ATTACHMENT A (individually a "Fund" and collectively the
"Funds"). The Code has been adopted by the Board of Directors of Accessor Funds
pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended (the
"Act").
Section I. Definitions
For purposes of this Code, "COVERED PERSON" shall mean the following
persons:
(A) any officer or employee of Accessor Capital Management LP ("Accessor
Capital"), the investment adviser of the Fund, or any natural person
in a control(1) relationship to Accessor Capital (an "ACCESSOR CAPITAL
COVERED PERSON");
(B) any independent contractor or any employee of any independent
contractor or any person working on a temporary basis for a period of
more than two weeks on the premises of Accessor Funds who, in
connection with his or her regular functions or duties, makes,
participates in or obtains information regarding the purchase or sale
of securities of the Fund ("INDEPENDENT COVERED PERSON");
(C) any employee of any Money Manager (a "Money Manager" or collectively
the "Money Managers") of a Fund or of any company in a control
relationship to any Money Manager who, in connection with his or her
regular functions or duties, makes, participates in or obtains
information regarding the purchase or sale of securities of the Fund
managed by the Money Manager or whose functions or duties as part of
the ordinary course of his or her business relate to the making of any
recommendations with respect to the Fund managed by the Money Manager
regarding the purchase or sale of securities (an "ADVISORY COVERED
PERSON");
(D) any director or officer of Accessor Funds not otherwise covered by (A)
or (B) above; and any natural person in a control relationship to
Accessor Funds who obtains information concerning recommendations made
to Accessor Funds with regard to the purchase or sale of a security
("OUTSIDE DIRECTOR COVERED PERSON").
For purposes of this Code, the term "SECURITY" shall have the meaning set
forth in Section 2(a)(36) of the Act(2), except that it does not include direct
obligations of the Government of the United States, bankers' acceptances, bank
certificates of deposit, commercial paper and high quality short-term debt
instruments, including repurchase agreements, shares of open-end investment
companies registered under the Act, and such other instruments as designated by
the Board of Directors of the Fund.
Section II. Statement of General Principles
The general fiduciary principles that govern the personal trading
activities of Covered Persons are the duty at all times to place the interests
of the shareholders of Accessor Funds first; the requirement that all personal
securities transactions be conducted in a manner which does not interfere with
Accessor Funds' or a Fund's transactions, so as to avoid any actual or potential
conflict of interest or any abuse of an individual's position of trust and
responsibility; and the fundamental standard that Covered Persons should not
take any inappropriate or unfair advantage of their relationship with Accessor
Funds or the Funds.
All Covered Persons must adhere to these general principles as well as
comply with the Code's specific provisions.
Section III. Designated Supervisory Persons
The Chief Compliance Officer of Accessor Funds is designated to oversee the
provisions of the Code (the "DESIGNATED SUPERVISORY PERSON"). The Chief
Compliance Officer may designate an alternate to administer the Code. The
Secretary of Accessor Funds is designated as the alternate Designated
Supervisory Person and shall review any trades by the Chief Compliance Officer.
Each Money Manager shall appoint one or more supervisory persons in accordance
with that Money Manager's obligations pursuant to Rule 17j-1 of the Act to
supervise the provisions of a Code of Ethics adopted by the Money Manager (an
"ADVISORY SUPERVISORY PERSON").
Section IV. Primary Prohibitions
(A) No Covered Person shall recommend any securities transaction by
Accessor Funds or a Fund without having disclosed his or her interest,
if any, in such securities or the issuer of the securities, including
without limitation:
(1) his or her direct or indirect beneficial ownership of any
securities of such issuer;
(2) any contemplated transaction by such person in such securities;
(3) any position with such issuer or its affiliates; and
(4) any present or proposed business relationship between such issuer
or its affiliates and such person or any party in which such
person has a significant interest.
(B) No Covered Person shall accept any gift or other thing of more than de
minimus value from any person or entity that does business with or on
behalf of Accessor Funds or a Fund.
(C) No Covered Person shall, directly or indirectly in connection with the
purchase or sale of any securities held or to be acquired(3) by
Accessor Funds or any Fund:
(1) employ any device, scheme or artifice to defraud Accessor Funds
or any Fund;
(2) make to Accessor Funds or any Fund any untrue statement of a
material fact or omit to state to Accessor Funds or any Fund a
material fact necessary in order to make the statements made, in
light of the circumstances under which they are made, not
misleading; or
(3) engage in any act, practice or course of business which operates
or would operate as a fraud or deceit upon Accessor Funds or any
Fund.
(D) No Covered Person shall purchase, directly or indirectly, or by reason
of such transaction acquire, any direct or indirect beneficial
ownership(4) of any securities in an initial public offering or a
private placement transaction eligible for purchase or sale by
Accessor Funds or a Fund. Furthermore, all covered persons shall
obtain pre-approval for any purchases of an initial public offerings
or private placement.
Section V. Accessor Capital Covered Persons
No Accessor Capital Covered Person shall purchase(5), directly or
indirectly, any security in which he or she has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership. Securities
may be sold subject to pre-approval by the Designated Supervisory Person (for
information on obtaining pre-approval, see Attachment B).
Except that such prohibitions shall not apply to:
(A) purchases or sales effected in any account over which the Accessor
Capital Covered Person has no direct or indirect influence or control;
(B) purchases or sales that are non-volitional on the part of the Accessor
Capital Covered Person;
(C) purchases that are part of an automatic dividend reinvestment plan;
and
(D) purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from the issuer, and sales of such rights so
acquired.
Section VI. Independent Covered Person
During the period engaged to work on the premises of the Accessor Funds, no
Independent Covered Person shall purchase, directly or indirectly, any security
in which he or she has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership. Securities may be sold subject to pre-approval by
the Designated Supervisory Person (for information on obtaining pre-approval,
see ATTACHMENT B).
Except that such prohibitions shall not apply to:
(A) purchases or sales effected in any account over which the Independent
Covered Person has no direct or indirect influence or control;
(B) purchases or sales that are non-volitional on the part of the
Independent Covered Person;
(C) purchases that are part of an automatic dividend reinvestment plan;
and
(D) purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from the issuer, and sales of such rights so
acquired;
Section VII. Advisory Covered Person
Each Money Manager shall adopt and maintain a Code of Ethics in accordance
with that Money Manager's obligations pursuant to Rule 17j-1 of the Act and each
Advisory Covered Person of each Money Manager shall be subject to such Code of
Ethics. Each Money Manager shall deliver a copy of its respective Code of Ethics
to the Designated Supervisory Person upon commencement of services to the Funds
and within six months of any material changes.
Section VIII. Outside Director Covered Person
Outside Director Covered Persons are not subject to specific prohibitions
on personal securities transactions except as set forth in Section IV, Primary
Prohibitions, but are subject to the reporting obligation set forth in Section
IX, Reporting.
Section IX. Reporting
Initial Holdings Reports:
Within 10 days of becoming either an Accessor Capital or an
Independent Covered Person, each such person must provide the following
information to the Designated Supervisory Person: (i) the title, number of
shares, and principal amount of each security in which the person had any
direct or indirect beneficial ownership when the person became a Covered
Person and (ii) the name of any broker, dealer or bank with whom the person
maintains any account in which any securities are held. During this time
each person must also request duplicate confirmations and statements to be
sent directly to Compliance for all accounts. (See ATTACHMENTS C and D).
Quarterly Transaction Reports:
(A) Accessor Capital and Independent Covered Persons must submit a report
to the Designated Supervisory Person no later than 10 days after the
end of each calendar quarter in a form containing the information as
set forth in ATTACHMENT E about each transaction, if any, by which he
or she acquires or sells any direct or indirect beneficial ownership
of a security. At this time, for any account established by an
Accessor Capital Covered Person in which securities were held during
the quarter, the person must submit a report providing the name of the
broker, dealer or bank where the account was established as well as
the date the account was established.
(B) Outside Director Covered Persons who obtain information concerning
recommendations made to Accessor Funds with regard to the purchase or
sale of a security, shall be required to report a transaction only if
such person, at the time of that transaction, knew, or in the ordinary
course of fulfilling his or her official duties as a director of
Accessor Funds should have known, that during the 15-day period
immediately preceding or after the date of the transaction by such
person, the security such person purchased or sold is or was
purchased, or sold by Accessor Funds or was being considered for
purchase or sale by the Fund, Accessor Capital or any of the Money
Managers.
(C) Advisory Supervisory Persons must certify that each Advisory Covered
Person is in compliance with their respective Codes of Ethics or
report any. Advisory Supervisory Persons shall make such
certifications and/or reports to the Designated Supervisory Person
within 15 days of the end of each quarter.
Annual Holdings Report:
All Accessor Capital and Independent Covered Persons must submit
annually the following information: (i) the title, number of shares and
principal amount of each Security (other than those excepted from the
definition of security) in which the person had any direct or indirect
beneficial ownership and (ii) the name of any broker, dealer or bank with
whom the person maintains an account in which any securities are held. (See
ATTACHMENTS C and D)
Section X. Administration and Procedural Matters
The Designated Supervisory Person of Accessor Funds shall:
(A) furnish a copy of this Code to each Accessor Capital Covered Person,
Independent Covered Person, Outside Director Covered Person and to the
appropriate Supervisory Advisory Person of each Money Manager;
(B) notify each Accessor Capital Covered Person, Independent Covered
Person, Outside Director Covered Person, and each Advisory Supervisory
Person of his or her obligation to file reports as provided by this
Code;
(C) request reports from the appropriate Advisory Supervisory Person of
each Money Manager;
(D) review the applicable Code of Ethics of each Money Manager on an
annual basis;
(E) provide to the Board of Directors, no less than annually, the
following information:
(1) a report that describes any issues arising under the Code since
the last report to the Board, including, but not limited to,
information about violations of the Codes, and any sanctions
imposed in response to the violations, and
(2) a certification that the Fund and its investment advisers have
adopted procedures reasonable necessary to prevent Covered
Persons from violating the Code.
(F) supervise the implementation of this Code and the enforcement of the
terms hereof;
(G) determine whether any particular securities transaction should be
exempted pursuant to the provisions of this Code;
(H) issue either personally or with the assistance of counsel as may be
appropriate, any interpretation of this Code which may appear
consistent with the objectives of Rule 17j-1 and this Code;
(I) conduct such inspections or investigations as shall reasonably be
required to detect and report any apparent violations of this Code to
the Board of Directors or any committee appointed by them to deal with
such information; and
(J) maintain and cause to be maintained in an easily accessible place, the
following records:
(1) a copy of any Code adopted pursuant to Rule 17j-1 which has been
in effect during the past five (5) years;
(2) a record of any violation of any such Code and of any action
taken as a result of such violation;
(3) a copy of each report made by a Covered Person, including any
information provided in lieu of the reports;
(4) a list of all persons who are, or within the past five (5) years
have been, required to make reports and of those persons required
to review such reports pursuant to Rule 17j-1 and this Code with
an appropriate description of their title or employment.
(5) a copy of each report required by Section X(E) made by the
Designated Supervisory Persons during the past five (5) years;
The Board of Directors of Accessor Funds shall:
(A) approve by a majority vote, including a majority of directors who are
not interested persons, the Code of Ethics of each investment adviser
and any material changes to these codes. Approval must be based upon a
determination that the Code contains provisions reasonable necessary
to prevent Covered Persons from engaging in any conduct prohibited by
Section IV of this Code. Prior to approval, the Board must receive a
certification from the Fund or its investment advisers that it has
adopted procedures reasonably necessary to prevent Covered Persons
from violating their Codes of Ethics,
(B) approve the Code of Ethics of an Investment Adviser before initially
retaining the services of the adviser, and
(C) approve all material changes to a code no later than six months after
adoption of the material change.
Section XI. Sanctions
Upon discovering that a Covered Person has not complied with the
requirements of this Code, the Board of Directors may impose on such Covered
Person whatever sanctions the Board deems appropriate, including, among other
things, a fine, a letter of censure, suspension or termination of such Covered
Person's position or relationship with Accessor Funds and/or restitution of an
amount equal to the difference between the price paid or received by Accessor
Funds or a Fund and the more advantageous price paid or received by such Covered
Person as a result of their transgression. Advisory Covered Persons shall first
be subject to sanctions imposed under their respective Codes of Ethics.
The Board of Directors, in its discretion, may impose any of the sanctions
set forth in this Article XI for any violations of the requirements of this
Code, including, but not limited to, the filing by any Covered Person of any
false, incomplete or untimely reports contemplated by the Code.
Section XII. Confidentiality
All information obtained from any Covered Person hereunder shall be kept in
strict confidence, except that reports of securities transactions hereunder will
be made available to the Securities and Exchange Commission or any other
regulatory or self-regulatory organization only to the extent required by law or
regulation.
Section XIII. Other Laws, Rules and Statements of Policy
Nothing contained in this Code shall be interpreted as relieving any
Covered Person from acting in accordance with the provision of any applicable
law, rule or regulation or any other statement of policy or procedure governing
the conduct of such person adopted by the Fund.
Section XIV. Certification By Covered Persons
All Accessor Capital Covered Persons, Independent Covered Persons, and
Outside Director Covered Persons must:
(A) certify that they have read and understand this Code;
(B) recognize that as a Covered Person they are subject to the terms of
this Code; and
(C) certify on an annual basis that they have complied with the
requirements of this Code and that they have disclosed or reported all
personal securities transactions required to be disclosed or reported
pursuant to the requirements of this Code.
An appropriate form of certification is attached as ATTACHMENT F.
The Advisory Supervisory Person for each Money Manager shall certify to the
Designated Supervisory Person of the Fund that they have received similar
certification from each Advisory Covered Person of the respective Money
Managers.
- --------
(1) "CONTROL" means the power to exercise a controlling influence over the
management or policies of a company, unless such power is solely the result of
an official position with such company. Any person who owns beneficially, either
directly or through one or more controlled companies, more than 25 per centum of
the voting securities of a company shall be presumed to control such company.
Any person who does not so own more than 25 per centum of the voting securities
of any company shall be presumed not to control such company.
(2) "SECURITY" means any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any profit-sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security (including a certificate of deposit) or on any group or index of
securities (including any interest therein or based on the value thereof), or
any put, call, straddle, option, or privilege entered into on a national
securities exchange relating to foreign currency, or, in general, any interest
or instrument commonly known as a "security," or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, or warrant or right to subscribe to or purchase, any of the foregoing.
(3) A security "HELD OR TO BE ACQUIRED" means (i) a security which in the most
recent 15 days is or has been held by the Fund or is being or has been
considered by the Fund or its investment adviser for purchase by the Fund (ii)
any option to purchase or sell, and any security convertible or exchangeable for
a security described in (i) above.
A security is "BEING CONSIDERED FOR PURCHASE OR SALE" when a recommendation
to purchase or sell such security has been made and communicated and, with
respect to the person making the recommendation, when such person seriously
considers making such a recommendation.
(4) The term "BENEFICIAL OWNERSHIP" as used in the Code is to be interpreted by
reference to Rule 16a-1 under the Securities Exchange Act of 1934, as amended
(the "Rule"), except that the determination of direct or indirect beneficial
ownership for purposes of the Code must be made with respect to all securities
that a Covered Person has or acquires. Under the Rule, a person is generally
deemed to have beneficial ownership of securities if: (1) the person, directly
or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares (a) voting power, which includes the power to vote, or
to direct the voting of, the securities and/or (b) investment power, which
includes the power to dispose of, or to direct the disposition of, the
securities; and (2) the person, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in the securities. A person is deemed to have voting
and/or investment power with respect to securities within the meaning of the
Rule if the person has the right to acquire beneficial ownership of the security
within 60 days, including any right to acquire the security; through the
exercise of any option, warrant or right; through the conversion of a security;
pursuant to the power to revoke a trust, discretionary account or similar
arrangement; or pursuant to the automatic termination of a trust, discretionary
account or similar arrangement.
The term "PECUNIARY INTEREST" in particular securities is generally defined
in the Rule to mean the opportunity, directly or indirectly, to profit or share
in any profit derived from a transaction in the securities. A person is deemed
to have an "indirect pecuniary interest" within the meaning of the Rule in any
securities held by members of the person's immediate family sharing the same
household, the term "immediate family" including any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, as
well as adoptive relationships. Under the Rule, an indirect pecuniary interest
also includes, among other things: a general partner's proportionate interest in
the Fund securities held by a general or limited partnership; a person's right
to dividends that is separated or separable from the underlying securities; a
person's interest in certain trusts; and a person's right to acquire equity
securities through the exercise or conversion of any derivative security,
whether or not presently exercisable, the term "derivative security" being
generally defined as any option, warrant, convertible security, stock
appreciation right or similar right with an exercise or conversion privilege at
a price related to an equity security, or similar securities with, or value
derived from, the value of an equity security. For purposes of the Rule, a
person who is a shareholder of a corporation or similar entity is not deemed to
have a pecuniary interest in Fund securities held by the corporation or entity,
so long as the shareholder is not a controlling shareholder of the corporation
or the entity and does not have or share investment control over the
corporation's or the entity's Fund.
(5) New employees of Accessor Capital shall have 90 days from the date of their
hire to put their accounts in order, prior to being subject to the comprehensive
restrictions on the purchase and sale of securities as described in Section V of
the Code. During the 90-day period, the new employee may engage in the purchase
or sale of a security provided that the employee has obtained pre-approval from
the Designated Supervisory Person for such purchase or sale, except for those
transactions listed in subsections (A) through (D) of the Section V of the Code.
(For information on obtaining pre-approval, see ATTACHMENT B).
- ----------
Dated: April 6, 1995.
Revised: February 6, 1996.
Revised: February 20, 1997.
Revised: February 19, 1998.
Revised: May 7, 1999
Revised: August 19, 1999
Revised: May 18, 2000
<PAGE>
ATTACHMENT A
------------
Accessor Funds, Inc.
Growth Fund
Value Fund
Small to Mid Cap Fund
International Equity Fund
Intermediate Fixed-Income Fund
Short-Intermediate Fixed-Income Fund
High Yield Bond Fund
Mortgage Securities Fund
U.S. Government Money Fund
<PAGE>
ATTACHEMENT B
Section 1
---------
Upon written request from an Accessor Capital or Independent Covered
Person, the Designated Supervisory Person shall have the sole discretion to
pre-approve a sale of a security. The Designated Supervisory Person shall make
such determination in accordance with the following:
(A) Prior approval shall be granted only if the sale is consistent with
the purposes of this Code and Section 17(j) of the Act. To illustrate,
sale shall be considered consistent with the Code if it is only
remotely potentially harmful to a Fund because such sale would be
unlikely to affect a highly institutional market, or because such sale
is clearly not related economically to the securities held, purchased
or sold by a Fund.
(B) Prior approval shall take into account, among other factors:
(1) whether the amount or nature of the transaction or person making
it is likely to affect the price or market for the security (i.e.
under 500 shares of an issuer with a market cap >$1Billion);
(2) whether the Covered Person making the proposed sale is likely to
benefit from purchases or sales being made or being considered by
a Fund; and
(3) whether the security proposed to be sold is one that would
qualify for purchase or sale by a Fund.
(C) Covered Persons must submit in writing all requests for pre-approval
using either the form below or any similar form containing the same
information about the transaction(including an email request).
Approval will be granted or denied and evidenced by the signature of
the Designated Supervisory Person. Such Designated Supervisory Person
shall retain a copy of all pre-approval forms, with all required
signatures.
If approval is given to the Covered Person to engage in a sale, the Covered
Person is under an obligation to disclose that position if such Covered Person
plays a material role in a Fund's subsequent investment decision regarding the
same issuer.
APPROVAL GRANTED TO THE COVERED PERSON IS ONLY EFFECTIVE FOR THE BUSINESS
WEEK IN WHICH APPROVAL WAS GRANTED. IF THE TRADE IS NOT MADE IN THAT WEEK,
APPROVAL MUST BE OBTAINED AGAIN.
<PAGE>
ATTACHMENT B
Section 2
---------
ACCESSOR FUNDS, INC.
REQUEST FOR PERMISSION TO
ENGAGE IN PERSONAL TRANSACTION
To the Designated Supervisory Person:
On each of the dates proposed below, I hereby request permission to effect
sales in which I have a beneficial ownership, interest or legal title, and which
transactions are required to be pre-approved pursuant to the Fourth Amended and
Restated Code of Ethics adopted by Accessor Funds, Inc. ("Accessor Fund")
pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended.
(Use approximate dates and amounts of proposed transactions.)
No. of Nature of
Proposed Shares or Dollar Transaction Broker/
Name of Date of Principal Amount of (Purchase, Dealer
Security Transaction Amount Transaction Sale, Other) or Bank Price
- -------- ----------- --------- ----------- ------------ ------- -----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name:
Date: Signature:
Position
with Fund:
Date: Signature:
Designated Supervisory Person
Permission Granted Permission Denied
For Compliance Use only:
Security Held by Fund:
Activity in Security in past 15 days:
Market Cap of Security:
<PAGE>
ATTACHMENT C
------------
To the Designated Supervisory Person:
In accordance with the Accessor Funds, Inc. Code of Ethics and as an Accessor
Captial Covered Person or an Independent Covered Person, I am providing the
following list of securities of which I have direct or indirect beneficial
ownership. In addition, I have indicated any broker, dealer, or bank with whom I
have an account in which these securities are held.
For Internal Use:
BROKER, DEALER, SOLD SHARES DATE
TITLE SHARES OR BANK -------------------------
- ----------------------------------------------
- ------------- --------- -----------------
- ------------- --------- -----------------
- ------------- --------- -----------------
- ------------- --------- -----------------
- ------------- --------- -----------------
attach additional pages if necessary
This report (i) excludes transactions with respect to which I had no direct or
indirect influence or control, (ii) any other transactions not required to be
reported under the Code, and (iii) is not an admission that I have or had any
direct or indirect beneficial ownership in the securities listed above.
Date: Signature:
Print Name:
Position with
Accessor Funds or
Accessor Capital:
<PAGE>
ATTACHMENT D
------------
(Date)
(Broker Name)
(Broker Address)
Re: (Employee)
(SSN)
Dear Sir or Madam:
Please be advised that the above-referenced person is an employee of Accessor
Capital Management, a registered investment adviser. Please send duplicate
confirmation of this employee's transactions in securities, as well as duplicate
statements to the attention of:
Accessor Capital Management LP
1420 Fifth Ave, Suite 3600
Seattle, WA 98101
attn: Christine J. Stansbery
This request is made pursuant to the Code of Ethics of Accessor Funds, Inc. as
required under federal securities law.
Thank you for your cooperation.
Sincerely,
(Employee)
Cc: Accessor Capital Management
<PAGE>
ATTACHMENT E
------------
ACCESSOR FUNDS, INC.
REPORT OF SECURITIES TRANSACTIONS
____QUARTER 2000
To the Designated Supervisory Person:
On the dates indicated, the following transactions, if any, were
effected in securities of which I, my family (spouse, minor children or adults
living in my household) or trusts of which I am trustee, participated or
acquired, direct or indirect "beneficial ownership," and which transactions are
required to be reported pursuant to the Fourth Amended and Restated Code of
Ethics (the "Code") adopted by Accessor Funds, Inc. (the "Fund") pursuant to
Rule 17j-1 under the Investment Company Act of 1940, as amended (the "Act"). If
no such transactions were effected, I have so indicated by typing or printing
"NONE."
Nature of
Shares or Dollar Transaction Broker/
Name of Date of Principal Amount of (Purchase, Dealer
Security Transaction Amount Transaction Sale, Other) or Bank Price
- -------- ----------- --------- ----------- ------------ ------- -----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This report (i) excludes transactions with respect to which I had no direct or
indirect influence or control, (ii) any other transactions not required to be
reported under the Code, and (iii) is not an admission that I have or had any
direct or indirect beneficial ownership in the securities listed above.
Date: Signature:
Print Name:
Position with
Accessor Funds or
Accessor Capital:
Reviewed by:
Date:
<PAGE>
ATTACHMENT F
------------
CERTIFICATION
To the Designated Supervisory Person of Accessor Funds, Inc.:
I hereby acknowledge receipt of a copy of the Code of Ethics of Accessor
Funds, Inc. ("Accessor Funds").
I have read and understand the Code of Ethics and recognize that I am
subject thereto. I certify that I have complied to date with this policy during
the term of my employment with Accessor Funds or Accessor Capital Management LP
and that I will continue to adhere to these policies and procedures in the
future. Moreover, I agree to promptly report to or discuss with the Designated
Supervisory Person any breach or possible breach of such policy by any person to
whom they are applicable.
Further, I understand that on no less than a quarterly basis, I have an
obligation to provide evidence of all trading activity, in other than exempted
transactions, to the Designated Supervisory Person. I acknowledge that the sale
of any securities owned by me prior to my date of employment with Accessor
Funds, must be pre-approved by the Designated Supervisory Person prior to my
executing these trades. I further acknowledge that I may be subject to
sanctions, including fines, for any failure to abide by the Code of Ethics.
NOTE Accessor Capital and Independent Covered Persons: A fine of $50 will be
levied against anyone who fails to provide any required report within the
appropriate time period as contained within this Code.
Date: Signature:
Print Name:
Received on behalf of Accessor Funds:
Date: Signature:
Designated Supervisory Person
================================================================================
Title: PERSONAL SECURITIES TRANSACTIONS
Section: COMPLIANCE
Ref. No.: E-04
Adopted/Revised: January 1, 1999
================================================================================
Pertinent Regulation:
SEC Rule 204-2(a)(13)
Investment Company Act of 1940 17(j)-1
Investment Advisers Act of 1940 204A, 203(e) and (f)
Associates must comply with the Bank of America Corporation Code of Ethics, the
Chicago Equity Partners Code of Ethics, Chicago Equity Partners Personal Trading
Guidelines ('the Guidelines') and the codes of ethics adopted by the board of
each mutual fund managed by Chicago Equity Partners.
For these purposes, Chicago Equity Partners employees are considered "access
persons" under the Investment Company Act of 1940 and "advisory representatives"
under the Investment Advisers Act of 1940. All associates must provide the
Compliance Office with duplicate copies of their brokerage statements and
confirmations of trades. Associates must complete quarterly Personal Securities
Statements. The Compliance Office will maintain copies of these records for six
years, two of which will be readily accessible.
The Rules extend not only to associates trading but also to the trading of
persons and companies connected with associates of Chicago Equity Partners.
Refer to:
o Policy A-01, Chicago Equity Partners Code of Ethics
o Code of Ethics for mutual funds managed by Chicago Equity Partners
o Exhibit E-04-A, Chicago Equity Partners Personal Securities Trading
Guidelines
o Bank of America Corporation Code of Ethics and General Policy on Insider
Trading
<PAGE>
================================================================================
Title: PERSONAL SECURITIES TRADING GUIDELINES
Section: COMPLIANCE
Ref. No.: E-04
Exhibit: EXHIBIT A
Adopted/Revised: January 1, 1999
================================================================================
CHICAGO EQUITY PARTNERS CORPORATION
PERSONAL SECURITIES TRADING GUIDELINES
Each Associate of Chicago Equity Partners Corporation (Chicago Equity Partners)
is subject to the Bank of America Code of Ethics. This code specifically states
that "Associates must never make changes in their personal investments on the
basis of confidential information relating to Bank of America". The Code of
Ethics also incorporates the Bank's General Policy on Insider Trading.
PERSONAL SECURITY TRADING GUIDELINES
A. PERSONAL SECURITY TRADES. No associate will trade for their personal
account based on knowledge of trades by any account managed by Chicago
Equity Partners. Associates are expected to maintain the highest standards
of personal integrity in regard to any personal securities activity. The
mere appearance of impropriety is to be avoided due to the position of
public trust in which Bank of America and Chicago Equity Partners operate.
B. PURPOSE. These guidelines are designed to provide rules governing the
purchase and sale of individual securities by associates who may have
access to sensitive investment information. They apply to all purchases and
sales of securities and their derivative unless specifically exempted
below.
C. INDIVIDUAL TRADING. Associates are encouraged by management to use
mutual funds for personal investment purposes. However, associates are
permitted to trade in individual securities as long as they observe these
guidelines.
D. APPLICATION. Associates must report all securities transactions in which
they have a direct or indirect beneficial interest within ten calendar (10)
days following the end of a quarter. The personal securities trading (PST)
forms used to report these transactions will be distributed to the Director
of Compliance for internal distribution at the end of each quarter.
E. EXEMPT SECURITIES. These guidelines do not apply to individual purchases
or sales in the securities listed below. In addition, trades in these
securities are not required to be reported on the quarterly PST report.
Holdings of these securities must be reported on the Annual Listing of
Assets.
1. Open-end mutual funds whether proprietary or non-proprietary.
2. Money market instruments.
3. US Government securities.
4. Short-term US Government agency securities and short-term
securities guaranteed by the US Government or its agencies.
5. Derivative securities of any of the above instruments.
6. Securities purchased under an existing dividend reinvestment
program.
F. BANK OF AMERICA STOCK. The receipt of Bank of America stock option
awards need not be reported on the quarterly PST report. However,
purchases, sales, and the exercise of Bank of America stock options must be
reported on the quarterly PST report. The holdings of Bank of America stock
or options must also be reported on the Annual Listing of Assets.
G. PRECLEARANCE. All purchases and sales of individual securities,
including put and call transactions, must be precleared by the Director of
Compliance and a Co-manager of the Equity Research Group. The purchase and
sale of Bank of America stock does not require preclearance. (The
Preclearance Form is attached.)
1. Preclearance is effective only for the day it is granted.
Associates must complete their trade within the same day of
receiving preclearance.
2. Original Preclearance forms are retained by the Director of
Compliance.
3. Preclearance will not be authorized if the trading desk is
working on an order for client(s) in the security for which the
trade is being requested.
Preclearance is not required for exchange-traded or stock index
futures (i.e., the S&P 500) yet transactions in such securities
must be reported on the quarterly PST form. Nor is preclearance
required for spousal trades in which the associate does not have
a direct or indirect beneficial interest, and copies of the
spouse's brokerage confirmations and statements are being sent to
the Director of Compliance for Chicago Equity Partners.
H. SECURITY TRADES. Associates cannot personally trade in securities that
are listed in the rebalancing list developed from the rebalancing meetings
of the Equity Research unit for a period of 15 calendar days. The following
two examples provide further clarification of this requirement.
1. If ATT was added to the rebalancing list on March 3, the 15-day
clock would begin and no associate could buy or sell ATT until
March 18.
2. If there is a subsequent decision involving the same security
during the 15 day period , the clock starts anew. Again, if on
March 3 ATT was added to the rebalancing list, the 15-day clock
would begin and no associate could buy or sell ATT until March
18. If on March 10, the Research unit made an additional
recommendation to increase the holdings of ATT the 15 day clock
would begin again. Thus, in this example, no one could buy or
sell ATT for their own account from March 3 to March 25 (15 days
after March 10).
I. BLACK OUT PERIODS. In addition to the purchase and sale restrictions
noted above, no Fund manager or equity analyst may purchase or sell a
security for their own account within seven (7) calendar days before and
after the fund he/she manages or supports trades in that security.
J. SHORT-TERM TRADING. Associates may not profit from the purchase and
sale, or sale and purchase, of the same securities within a period of 60
calendar days. This prohibition includes any derivative or market
equivalent of the security. Profits recognized on short-term trades ( i.e.,
trades made within a 60 day period) will be required to be disgorged. This
prohibition applies to any trade of the associate and is not contingent on
the security being held by a fund. It also includes trades in options and
futures.
K. OTHER PROHIBITED TRANSACTIONS.
1. Associates subject to these guidelines are prohibited from
acquiring securities through an initial public offering.
*EXCEPTION. Associates may acquire municipal bonds underwritten by
Bank of America during the initial public offering period, inasmuch as
these bonds are ineligible for purchase by any fund .
2. Associates may not acquire securities through private placements.
3. Associates are prohibited from trading in any closed-end fund for
which an investment subsidiary of Bank of America is acting as
investment advisor. Holdings acquired prior to the date of this
policy should be reported and sales of units pre-approved by the
Compliance Office or other appropriately designated associate.
4. The provisions of sections I, J, and K include transactions in
corporate and municipal bonds.
II. MONITORING AND DISCLOSURE
The Director of Compliance of Chicago Equity Partners and Corporate Compliance
will monitor the observance of these guidelines and are authorized to modify
these requirements upon proper disclosure and under appropriate circumstances.
A. BROKERAGE STATEMENTS. Associates subject to these guidelines are
required to provide the Director of Compliance with copies of their
brokerage statements and trading confirmations.
B. ANNUAL LISTING OF ASSETS. In January of each year, all associates
subject to these Guidelines will provide Corporate Compliance a statement
of assets.
C. The Director of Compliance or other appropriately designated associate,
will obtain a list of assets from new associates.
<PAGE>
CHICAGO EQUITY PARTNERS
Personal Securities Transaction Pre-Clearance Form
for Designated Associates
Directions:
1. Complete a separate form for each security transaction (buy/sell).
2. Direct completed form to Director of Compliance prior to initiating
trade.
3. Director of Compliance will coordinate approval with Trading Desk or
Co-Manager of Research.
4. Preclearance is effective the day it is granted and only for that day.
- --------------------------------------------------------------------------------
Name of Security:___________________________________________
Buy or Sell: _____________________
Employee Name: __________________________________________
Date: _____________________
This security is not on the current rebalancing list or the restriction period
has expired.
Y / N
Approval:
Y / N
Director of Compliance: _______________________________________
Trading Desk or
Co-Manager Research : ________________________________________
================================================================================
Title: CHICAGO EQUITY PARTNERS CODE OF ETHICS
Section: GENERAL
Ref. No.: A-01
Adopted/Revised: May 1, 2000
================================================================================
Under the terms of the Investment Advisers Act of 1940, Chicago Equity Partners
LLC (Chicago Equity Partners) has a fiduciary relationship in providing
investment management services to its clients. This Code of Ethics shall govern
all associates and directors of Chicago Equity Partners.
General Policy
Associates shall conduct themselves with integrity and act ethically in their
dealings with clients, the public and fellow associates. Associates are also
subject to codes of ethics of the NationsFunds and the Accessor Funds. All
associates who are investment professionals will comply with the AIMR Code of
Ethics (Exhibit A).
Compliance with Laws and Regulations
Associates shall maintain knowledge of and shall comply with all applicable laws
and regulations of any governing agency or self-regulatory organization, and
shall comport himself or herself in conformity with standards or conduct
promulgated by applicable professional or financial organizations.
Prohibition Against Use of Material Nonpublic Information
Associates shall comply with all government laws and regulations and Chicago
Equity Partners' policies and procedures relating to the use and communication
of material nonpublic information. Associates shall not trade securities while
in possession of, nor communicate, material nonpublic information in breach of a
duty, or if the information is misappropriated.
Responsibility of Management and Associates
Management of Chicago Equity Partners shall establish, maintain and enforce this
Code of Ethics and relevant policies and procedures designed to implement the
standards hereunder, to prevent the breach of any applicable laws and
regulations. Compliance is an individual responsibility. Failure to comply with
all rules and regulations will result in penalties up to and including
termination.
Investment Management
Associates of Chicago Equity Partners engaged in any facet of investment
management of client accounts shall exercise diligence and thoroughness in
making investment recommendations, avoiding material misrepresentations, and
maintaining records to support the reasonableness of any such actions. Such
associates shall deal fairly with all clients in disseminating investment
recommendations and taking investment actions.
Priority of Transactions
Associates shall ensure that transactions for clients shall have priority over
transactions in securities or other investments in which associates have
beneficial interests. Management of Chicago Equity Partners shall take
appropriate measures to ensure that all associates abide by the highest ethical
standards, in conformity with all applicable government laws and regulations, as
well as Chicago Equity Partner's policies and procedures.
Conflicts of Interest
Associates shall make every effort to avoid even the appearance of conflict of
interest in the conduct of their duties. Associates and Chicago Equity Partners
shall disclose to clients any conflict of interest.
Preservation of Confidentiality
Associates shall preserve the confidentiality of information communicated by the
client concerning matters within the scope of the confidential relationship.
Professional Misconduct
Associates shall not commit any felony or other criminal act that upon
conviction materially reflects adversely on his/her honesty or trustworthiness,
nor shall he or she engage in conduct involving dishonesty, fraud, deceit or
misrepresentation.
AIMR CODE OF ETHICS
The Code of Ethics
As amended and restated May, 1999.
Members of the Association for Investment Management and Research shall:
1. Act with integrity, competence, dignity, and in an ethical manner when
dealing with the public, clients, prospects, employers, employees, and
fellow members.
2. Practice and encourage others to practice in a professional and ethical
manner that will reflect credit on members and their profession.
3. Strive to maintain and improve their competence and the competence of
others in the profession.
4. Use reasonable care and exercise independent professional judgment.
Standard I: Fundamental Responsibilities
Members shall:
A. Maintain knowledge of and comply with all applicable laws, rules, and
regulations (including AIMR's Code of Ethics and Standards of Professional
Conduct) of any government, governmental agency, regulatory organization,
licensing agency, or professional association governing the members'
professional activities.
B. Not knowingly participate in or assist any violation of such laws, rules,
or regulations.
Standard II: Relationships with and Responsibilities to the Profession
A. Use of Professional Designation.
1. AIMR members may reference their membership only in a dignified and
judicious manner. The use of the reference may be accompanied by an
accurate explanation of the requirements that have been met to obtain
membership in these organizations.
2. Those who have earned the right to use the Chartered Financial Analyst
designation may use the marks "Chartered Financial Analyst" or "CFA"
and are encouraged to do so, but only in a proper, dignified, and
judicious manner. The use of the designation may be accompanied by an
accurate explanation of the requirements that have been met to obtain
the right to use the designation.
3. Candidates in the CFA Program, as defined in theAIMR Bylaws, may
reference their participation in the CFA Program, but the reference
must clearly state that an individual is a candidate in the CFA
Program and cannot imply that the candidate has achieved any type of
partial designation.
B. Professional Misconduct.
1. Members shall not engage in any professional conduct involving
dishonesty, fraud, deceit, or misrepresentation or commit any act that
reflects adversely on their honesty, trustworthiness, or professional
competence.
2. Members and candidates shall not engage in any conduct or commit any
act that compromises the integrity of the CFA designation or the
integrity or validity of the examinations leading to the award of the
right to use the CFA designation.
C. Prohibition against Plagiarism.
Members shall not copy or use, in substantially the same form as the
original, material prepared by another without acknowledging and
identifying the name of the author, publisher, or source of such material.
Members may use, without acknowledgment, factual information published by
recognized financial and statistical reporting services or similar sources.
Standard III: Relationships with and Responsibilities to the Employer
A. Obligation to Inform Employer of Code and Standards.
Members shall:
1. Inform their employer in writing, through their direct supervisor,
that they are obligated to comply with the Code and Standards and are
subject to disciplinary sanctions for violations thereof.
2. Deliver a copy of the Code and Standards to their employer if the
employer does not have a copy.
B. Duty to Employer. Members shall not undertake any independent practice that
could result in compensation or other benefit in competition with their
employer unless they obtain written consent from both their employer and
the persons or entities for whom they undertake independent practice.
C. Disclosure of Conflicts to Employer. Members shall:
1. Disclose to their employer all matters, including beneficial ownership
of securities or other investments, that reasonably could be expected
to interfere with their duty to their employer or ability to make
unbiased and objective recommendations.
2. Comply with any prohibitions on activities imposed by their employer
if a conflict of interest exists.
D. Disclosure of Additional Compensation Arrangements. Members shall disclose
to their employer in writing all monetary compensation or other benefits
that they receive for their services that are in addition to compensation
or benefits conferred by a member's employer.
E. Responsibilities of Supervisors. Members with supervisory responsibility,
authority, or the ability to influence the conduct of others shall exercise
reasonable supervision over those subject to their supervision or authority
to prevent any violation of applicable statutes, regulations, or provisions
of the Code and Standards. In so doing, members are entitled to rely on
reasonable procedures to detect and prevent such violations.
Standard IV: Relationships with and Responsibilities to Clients and Prospects
A. Investment Process.
A.1 Reasonable Basis and Representations. Members shall:
a. Exercise diligence and thoroughness in making investment
recommendations or in taking investment actions.
b. Have a reasonable and adequate basis, supported by appropriate
research and investigation, for such recommendations or actions.
c Make reasonable and diligent efforts to avoid any material
misrepresentation in any research report or investment recommendation.
d. Maintain appropriate records to support the reasonableness of such
recommendations or actions.
A.2 Research Reports. Members shall:
a. Use reasonable judgment regarding the inclusion or exclusion of
relevant factors in research reports.
b. Distinguish between facts and opinions in research reports.
c. Indicate the basic characteristics of the investment involved when
preparing for public distribution a research report that is not
directly related to a specific portfolio or client.
A.3 Independence and Objectivity. Members shall use reasonable care and
judgment to achieve and maintain independence and objectivity in making
investment recommendations or taking investment action.
B. Interactions with Clients and Prospects.
B.1 Fiduciary Duties. In relationships with clients, members shall use
particular care in determining applicable fiduciary duty and shall comply
with such duty as to those persons and interests to whom the duty is owed.
Members must act for the benefit of their clients and place their clients'
interests before their own.
B.2 Portfolio Investment Recommendations and Actions. Members shall:
a. Make a reasonable inquiry into a client's financial situation,
investment experience, and investment objectives prior to making any
investment recommendations and shall update this information as
necessary, but no less frequently than annually, to allow the members
to adjust their investment recommendations to reflect changed
circumstances.
b. Consider the appropriateness and suitability of investment
recommendations or actions for each portfolio or client. In
determining appropriateness and suitability, members shall consider
applicable relevant factors, including the needs and circumstances of
the portfolio or client, the basic characteristics of the investment
involved, and the basic characteristics of the total portfolio.
Members shall not make a recommendation unless they reasonably
determine that the recommendation is suitable to the client's
financial situation, investment experience, and investment objectives.
c. Distinguish between facts and opinions in the presentation of
investment recommendations.
d. Disclose to clients and prospects the basic format and general
principles of the investment processes by which securities are
selected and portfolios are constructed and shall promptly disclose to
clients and prospects any changes that might significantly affect
those processes.
B.3 Fair Dealing. Members shall deal fairly and objectively with all clients
and prospects when disseminating investment recommendations, disseminating
material changes in prior investment recommendations, and taking investment
action.
B.4 Priority of Transactions. Transactions for clients and employers shall have
priority over transactions in securities or other investments of which a
member is the beneficial owner so that such personal transactions do not
operate adversely to their clients' or employer's interests. If members
make a recommendation regarding the purchase or sale of a security or other
investment, they shall give their clients and employer adequate opportunity
to act on their recommendations before acting on their own behalf. For
purposes of the Code and Standards, a member is a "beneficial owner" if the
member has
a. a direct or indirect pecuniary interest in the securities;
b. the power to vote or direct the voting of the shares of the securities
or investments;
c. the power to dispose or direct the disposition of the security or
investment.
B.5 Preservation of Confidentiality. Members shall preserve the confidentiality
of information communicated by clients, prospects, or employers concerning
matters within the scope of the client-member, prospect-member, or
employer-member relationship unless a member receives information
concerning illegal activities on the part of the client, prospect, or
employer.
B.6 Prohibition against Misrepresentation. Members shall not make any
statements, orally or in writing, that misrepresent
a. the services that they or their firms are capable of performing;
b. their qualifications or the qualifications of their firm;
c. the member's academic or professional credentials.
Members shall not make or imply, orally or in writing, any assurances or
guarantees regarding any investment except to communicate accurate
information regarding the terms of the investment instrument and the
issuer's obligations under the instrument.
B.7 Disclosure of Conflicts to Clients and Prospects. Members shall disclose to
their clients and prospects all matters, including beneficial ownership of
securities or other investments, that reasonably could be expected to
impair the members' ability to make unbiased and objective recommendations.
B.8 Disclosure of Referral Fees. Members shall disclose to clients and
prospects any consideration or benefit received by the member or delivered
to others for the recommendation of any services to the client or prospect.
Standard V: Relationships with and Responsibilities to the Public
A. Prohibition against Use of Material Nonpublic Information.
Members who possess material nonpublic information related to the value of
a security shall not trade or cause others to trade in that security if
such trading would breach a duty or if the information was misappropriated
or relates to a tender offer. If members receive material nonpublic
information in confidence, they shall not breach that confidence by trading
or causing others to trade in securities to which such information relates.
Members shall make reasonable efforts to achieve public dissemination of
material nonpublic information disclosed in breach of a duty.
B. Performance Presentation.
1. Members shall not make any statements, orally or in writing, that
misrepresent the investment performance that they or their firms have
accomplished or can reasonably be expected to achieve.
2. If members communicate individual or firm performance information
directly or indirectly to clients or prospective clients, or in a
manner intended to be received by clients or prospective clients,
members shall make every reasonable effort to assure that such
performance information is a fair, accurate, and complete presentation
of such performance.
Standards of Practice Handbook
Experience has shown that the working investment professional can best
understand and apply AIMR's Code of Ethics and Standards of Professional Conduct
if they are accompanied by practical illustrations describing application of
individual standards. The Standards of Practice Handbook was developed with this
type of illustration in mind. The Eighth Edition of the Standards of Practice
Handbook contains detailed analysis of the Standards, as well as three topical
studies on fiduciary duty, insider trading, and personal investing.
<PAGE>
================================================================================
Title: PERSONAL SECURITIES TRANSACTIONS
Section: COMPLIANCE
Ref. No.: E-04
Adopted/Revised: May 1, 2000
================================================================================
Pertinent Regulation:
SEC Rule 204-2(a)(13)
Investment Company Act of 1940 17(j)-1
Investment Advisers Act of 1940 204A, 203(e) and (f)
Associates must comply with the the Chicago Equity Partners Code of Ethics,
Chicago Equity Partners Personal Trading Guidelines ('the Guidelines') and the
codes of ethics adopted by the board of each mutual fund managed by Chicago
Equity Partners.
For these purposes, all Chicago Equity Partners employees are considered "access
persons" under the Investment Company Act of 1940 and "advisory representatives"
under the Investment Advisers Act of 1940. All associates must provide the
Director of Compliance with duplicate copies of their brokerage statements and
confirmations of trades. Associates must complete quarterly Personal Securities
Statements. The Director of Compliance will maintain copies of these records for
six years, two of which will be readily accessible.
The Rules extend not only to associates trading but also to the trading of
persons and companies connected with associates of Chicago Equity Partners.
Refer to:
o Policy A-01, Chicago Equity Partners Code of Ethics
o Codes of Ethics for mutual funds managed by Chicago Equity Partners
o Exhibit E-04-A, Chicago Equity Partners Personal Securities Trading
Guidelines
<PAGE>
================================================================================
Title: PERSONAL SECURITIES TRADING GUIDELINES
Section: COMPLIANCE
Ref. No.: E-04
Exhibit: EXHIBIT A
Adopted/Revised: May 1, 2000
================================================================================
CHICAGO EQUITY PARTNERS
PERSONAL SECURITIES TRADING GUIDELINES
Each Associate of Chicago Equity Partners is subject to the Chicago Equity
Partners Code of Ethics. This code specifically states that "Associates must
never make changes in their personal investments on the basis of confidential
information". Employees may only place trades based on information available to
the general public.
Consistent with the above policies all associates of Chicago Equity Partners are
subject to the following personal security trading guidelines.
PERSONAL SECURITY TRADING GUIDELINES
A. PERSONAL SECURITY TRADES. No associate will trade for their personal
account based on knowledge of trades by any account managed by Chicago
Equity Partners. Associates are expected to maintain the highest standards
of personal integrity in regard to any personal securities activity. The
mere appearance of impropriety is to be avoided due to the position of
public trust in which and Chicago Equity Partners operate.
B. PURPOSE. These guidelines are designed to provide rules governing the
purchase and sale of individual securities by associates who may have
access to sensitive investment information. They apply to all purchases and
sales of securities and their derivatives unless specifically exempted
below.
C. INDIVIDUAL TRADING. Associates are encouraged by management to use
mutual funds for personal investment purposes. However, associates are
permitted to trade in individual securities as long as they observe these
guidelines.
D. QUARTERLY REPORTING. Associates must report all securities transactions
in which they have a direct or indirect beneficial interest within ten
calendar (10) days following the end of a quarter. The personal securities
trading (PST) forms used to report these transactions will be distributed
by the Director of Compliance at the end of each quarter.
E. EXEMPT SECURITIES. These guidelines do not apply to individual purchases
or sales in the securities listed below. In addition, trades in these
securities are not required to be reported on the quarterly PST report.
Holdings of these securities must be reported on the Annual Listing of
Assets.
1. Open-end mutual funds whether proprietary or non-proprietary.
2. Money market instruments.
3. US Government securities.
4. Short-term US Government agency securities and short-term
securities guaranteed by the US Government or its agencies.
5. Derivative securities of any of the above instruments.
6. Securities purchased under an existing dividend reinvestment
program.
F. PRECLEARANCE. All purchases and sales of individual securities,
including put and call transactions, must be precleared by the two of the
following employees: the Director of Compliance, the Managing Director
responsible for Trading or the Head Equity Trader. (In the absence of two
of these individuals, any Managing Director may serve as a substitute.)
1. Preclearance is effective only for the day it is granted.
Associates must complete their trade within the same day of
receiving preclearance.
2. Original Preclearance forms are retained by the Director of
Compliance.
3. Preclearance will not be authorized if the trading desk is
working on an order for client(s) in the security for which the
trade is being requested.
Preclearance is not required for exchange-traded or stock index
futures (i.e., the S&P 500) yet transactions in such securities
must be reported on the quarterly PST form. Nor is preclearance
required for spousal trades in which the associate does not have
a direct or indirect beneficial interest, and copies of the
spouse's brokerage confirmations and statements are being sent to
the Director of Compliance for Chicago Equity Partners.
H. SECURITY TRADES. Associates cannot personally trade in securities that
are listed in the rebalancing list developed from the rebalancing meetings
of the Equity Research unit for a period of 15 calendar days. The following
two examples provide further clarification of this requirement.
1. If ATT was added to the rebalancing list on March 3, the 15-day
clock would begin and no associate could buy or sell ATT until
March 18.
2. If there is a subsequent decision involving the same security
during the 15-day period, the clock starts anew. Again, if on
March 3 ATT was added to the rebalancing list, the 15-day clock
would begin and no associate could buy or sell ATT until March
18. If on March 10, the Research unit made an additional
recommendation to increase the holdings of ATT the 15-day clock
would begin again. Thus, in this example, no one could buy or
sell ATT for their own account from March 3 to March 25 (15 days
after March 10).
I. BLACK OUT PERIODS. In addition to the purchase and sale restrictions
noted above, no Fund manager or equity analyst may purchase or sell a
security for their own account within seven (7) calendar days before and
after the fund he/she manages or supports, trades in that security.
J. SHORT-TERM TRADING. Associates may not profit from the purchase and
sale, or sale and purchase, of the same securities within a period of 60
calendar days. This prohibition includes any derivative or market
equivalent of the security. Profits recognized on short-term trades ( i.e.,
trades made within a 60 day period) will be required to be disgorged. This
prohibition applies to any trade of the associate and is not contingent on
the security being held by a fund. It also includes trades in options and
futures.
K. OTHER PROHIBITED TRANSACTIONS.
1. Associates subject to these guidelines are prohibited from
acquiring securities through an initial public offering.
2. Associates may not acquire securities through private placements.
3. The provisions of sections I, J, and K include transactions in
corporate and municipal bonds.
MONITORING AND DISCLOSURE
The Director of Compliance of Chicago Equity Partners will monitor the
observance of these guidelines and are authorized to modify these requirements
upon proper disclosure and under appropriate circumstances.
A. BROKERAGE STATEMENTS. Associates subject to these guidelines are
required to provide the Director of Compliance with copies of their
brokerage statements and trading confirmations.
B. ANNUAL LISTING OF ASSETS. In January of each year, all associates
subject to these Guidelines will provide Corporate Compliance a statement
of assets. Any exceptions or irregularities will be reported to the
Executive Committee.
C. The Director of Compliance will obtain a list of assets from new
associates.
D. Quarterly reports will be reviewed by the Director of Compliance. Any
exceptions, failure to follow preclearance guidelines or other
irregularities will be reported to the Executive Committee.
STATEMENT OF POLICY ON PERSONAL SECURITIES TRANSACTIONS
AND CODE OF ETHICS
MARTINGALE ASSET MANAGEMENT, L.P.
Revised April 2000
I. Introduction
A primary duty of all directors, officers and certain employees
(defined below as "advisory persons") of Martingale Asset Management, L.P. (the
"Adviser") when dealing with investment advisory clients, is to conduct
themselves in conformance with the highest ethical standards. Thus, no advisory
person of the Adviser shall engage in any activity that could result in an
actual, potential or perceived conflict of interest, and must avoid any action
which may be perceived as a breach of trust.
This Statement of Policy on Personal Securities Transactions and Code
of Ethics ("Code of Ethics") sets forth the policies concerning the purchase or
sale of securities by advisory persons of the Adviser. It further sets forth the
procedures to be used to report the purchase or sale of any securities by such
person. This Code of Ethics is designed to ensure compliance with the
requirements of Section 204A and 204 of the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), and Rule 204-2(a)(12) thereunder, as well as
Section 17(j) of the Investment Company Act of 1940 (the "1940 Act") and Rule
17j-1 (the "Rule") thereunder. In addition, this Code of Ethics is designed to
provide a program for detecting and preventing insider trading by advisory
persons of the Adviser.
Section 17(j) of the 1940 Act makes it unlawful for an affiliated
person of a registered investment company to engage in transactions in
securities which are also held or are to be acquired by a registered investment
company if such transactions are in contravention of rules adopted by the
Securities and Exchange Commission to prevent fraudulent, deceptive, or
manipulative practices. Section 17(j) broadly prohibits any such affiliate from
engaging in any type of manipulative, deceptive, or fraudulent practice with
respect to the investment company and, furtherance of that prohibition, requires
each adviser to a registered investment company to adopt a written code of
ethics containing provisions reasonably necessary to prevent "advisory persons"
from engaging in conduct prohibited by the Rule. The Rule also requires that
reasonable diligence be used and procedures instituted to prevent violations of
such code of ethics.
A copy of this Code of Ethics shall be circulated to each advisory
person by the designated compliance officer of the Adviser listed on Exhibit A
together with an acknowledgment of receipt which shall be signed and returned to
a designated compliance officer by each advisory person. The designated
compliance officer is charged with responsibility for ensuring that the
requirements of this Code of Ethics are adhered to by all advisory persons.
This Code of Ethics is not intended to cover all possible areas of
potential liability under the Advisers Act or 1940 Act or under the federal
securities law in general. Persons covered by this Code, therefore, are advised
to seek advice before engaging in any transactions involving securities held or
under consideration for purchase or sale by the Adviser.
In addition, the Securities Exchange Act of 1934 may impose fiduciary
obligations and trading restrictions on advisory persons in certain situations.
It is expected that advisory persons will be sensitive to these areas of
potential conflict, even though this Code of Ethics does not address
specifically these other areas of fiduciary responsibility.
Definitions
- -----------
1. "Advisory person" mean any officer, director or employee involved in
the advisory process, including portfolio managers, traders, employees whose
duties or functions involve them in the investment process, and any employee who
obtains information concerning the investment decisions that are being made for
an advisory client, and any affiliated or control person of the Adviser. For
purposes of this Code of Ethics, advisory persons also include members of such
person's immediate family (i.e., husband, wife, children and who are directly or
indirectly dependents of an advisory person), accounts in which an advisory
person or members of his or her family has a beneficial interest or over which
an advisory person has investment control or exercises investment discretion
(e.g., a trust account).
2. "Advisory client" means any individual, group of individuals,
partnership, trust or company, including a registered investment company for
whom the Adviser acts as investment adviser.
3. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been communicated and, with
respect to the person making the recommendation, when such person seriously
considers making such a recommendation.
4. "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an advisory person has or
acquires.
5. "Cash compensation" means any discount, concession, fee, service
fee, commission, asset-based sales charge, loan, override or cash employee
benefit received in connection with the offering of the Adviser's services.
6. "Control" means the power to exercise a controlling influence over
the management or policies of the Adviser.
7. "Hot-issue" is defined as securities of a public offering which
trade at a premium in the secondary market whenever such secondary market
begins.
8. "Non-cash compensation" means any form of compensation received in
connection with the offering of the Adviser's services that is not cash
compensation, including but not limited to merchandise, gifts and prizes, travel
expenses, meals and lodging.
9. The "purchase or sale" of a security includes the writing of an
option to purchase or sell a security.
10. "Security" shall have the meaning set forth in Section 2(a)(36) of
the 1940 Act except that it shall not include shares of registered open-end
investment companies, securities issued by the Government of the United States
(including Government agencies), short term debt securities which are
"government securities" within the meaning of Section 2(a)(16) of the 1940 Act,
banker acceptances, bank certificates of deposit and commercial paper
("Government Securities").
Pre-Approval
- ------------
All purchases and sales (including short sales) of individual
Securities (defined above to exclude Government Securities and other items) must
be pre-approved before an order is placed. Options transactions also require
pre-approval. Approval must be given by one of the persons listed on Exhibit A.
Approval must be obtained in writing (or, in unusual circumstances, promptly
confirmed in writing), initialed by one of the persons listed on Exhibit A, and,
once approved, orders must be executed within one business day of the approval
date. As necessary, before giving approval, the person providing approval will
consult (on a "no name" basis) with the appropriate trader to determine whether
the proposed purchase or sale in any way conflicts with any trading being
carried out on behalf of an advisory client. Advisory persons seeking approval
to acquire or dispose of individual securities should allow sufficient time for
this review and approval process. Records of each approval, and the rational
supporting each such approval, shall be maintained for at least five years after
the end of the fiscal year in which such approval is granted.
Prohibited Purchase and Sales
- -----------------------------
No approval will be given for proposed transactions that violate the
following rules, subject to the limited exception given below. No advisory
person shall purchase or sell (including short sales and options), directly or
indirectly, any security in which he or she has, or by such transaction
acquires, any direct or indirect beneficial ownership, which security at the
time of such purchase or sale:
(1) is being purchased or sold for the account of an advisory client;
or
(2) was purchased or sold for the account of an advisory client
within seven days before and seven days after the date of such
purchase or sale. Any profits realized during this proscribed
period shall be disgorged.
Additionally, no advisory person shall engage in a transaction,
directly or indirectly, that involves an opportunity that an advisory client
could utilize, unless one of the persons indicated in Exhibit A has confirmed,
on behalf of the Adviser, that the account of the advisory clients do not wish
to take advantage of the opportunity and approves such transaction.
These restrictions shall continue to apply until the recommendation has
been rejected or any authorization to buy or sell has been completed or
canceled. Knowledge of any such consideration, intention, recommendation or
purchase or sale is always a matter of strictest confidence.
These restrictions shall not apply to purchase or sales of securities
which receive the prior approval of a person indicated in Exhibit A where that
person, in his or her discretion, has determined that such purchases or sales
are only remotely potentially harmful to any advisory client, where they would
be very unlikely to affect a highly institutional market or where they are
clearly not related economically to the securities to be purchased, sold or held
by the account of an advisory client.
Additional Investment Policies
- ------------------------------
1. Investment Through Mutual Funds Encouraged. All advisory persons
are encouraged to make personal investments exclusively through mutual funds,
and to limit their investments in individual securities to mutual funds or to
Government Securities. No prior approval is needed to make such investments.
2. No Trading. All individual security positions are expected to be
taken for investment purposes. Securities trading as distinct from investment is
discouraged. If an advisory person desires to sell a position he or she has held
for less than six months (or desires to re-acquire a recently liquidated
position), the approval request must include an explanation of the reason for
the transaction (mutual funds and Government Securities excepted).
3. Ownership Reports and New Employees. Advisory persons who are new
employees of the Adviser shall submit a schedule of current security holdings
within ten days of the date their employment commences, which shall include: (i)
the name, number of shares and cost basis of all securities owned by such access
person and (ii) any securities account such access person maintains with a
broker dealer or bank, and shall subsequently follow this Code of Ethics in
receiving approvals to liquidate or add to their security positions.
4. Private Placements and IPOs. Investments in private placements,
initial public offerings ("IPOs") and other individual securities that are not
generally available to the public may present conflicts of interest even though
such securities may not be currently eligible for acquisition by some or all of
the accounts of advisory clients. Prior approval must be obtained before buying
or selling such investments, as with any other individual security transaction.
In addition, with respect to private placements, the approval request must
indicate that the investment is being purchased (or liquidated) on terms that
are substantially the same to the terms available to other similarly situated
private investors, and that the advisory person does not have any specific
knowledge of an imminent public offering or any material nonpublic information
about the issuer. It is expected that any investment in a private placement, IPO
or similar security will be held for at least six months. If the security
subsequently becomes eligible for investment by an account of an advisory client
and is, in fact, purchased by such account, any advisory person who owns the
security will be expected to continue to hold such security for at least six
months following its eligibility.
5. Private Investment Partnerships. Just as investments through mutual
funds are encouraged and investments in individual securities are discouraged in
order to minimize potential conflicts of interest and/or the appearance of any
conflict of interest, the Adviser likewise encourages advisory persons to effect
their venture investments through venture limited partnerships rather than
individual private placements. Although venture limited partnerships are
preferred over individual private placements, venture limited partnerships
nevertheless can present potential conflicts. Accordingly, while pre-approval is
not required to participate in a venture limited partnership, an advisory person
will be expected to report any transaction involving a venture limited
partnership within 10 days of the investment to one of the persons on Exhibit A.
6. No Directorships. No advisory person may serve on the board of
directors for any private or public operating company without prior written
approval from one of the persons on Exhibit A. Such directorships are generally
discouraged because of their potential for creating conflicts of interest.
Advisory persons should also restrict their activities on committees (e.g.,
advisory committees or shareholder/creditor committees). This restriction is
necessary because of the potential conflict of interest involved and the
potential impediment created for the advisory clients. Advisory persons serving
on board or committees of operating companies may obtain material nonpublic
information in connection with their directorship or position on a committee
that would effectively preclude the investment freedom that would otherwise be
available to the advisory clients.
7. No Special Favors. It goes without saying that no advisory person
may purchase or sell securities on the basis of material nonpublic information
or in reciprocity for allocating brokerage, buying securities in an account of
an advisory client, or any other business dealings with a third party.
Information on or advisory to personal investments as a favor for doing business
on behalf of the advisory clients-- regardless of what form the favor takes --
is strictly prohibited. The appearance of "special favor" is also sufficient to
make a personal transaction prohibited under these guidelines.
8. Non-Cash Compensation. No advisory person shall directly or
indirectly accept or make payments or offers of payments of any non-cash
compensation except as provided below:
(a) gifts that do not exceed an annual amount per advisory
person or other person of $100 and are not preconditioned on
achievement of a sales target;
(b) an occasional meal, a ticket to a sporting event or theater
or comparable entertainment which is neither so frequent nor
so extensive as to raise any question of impropriety and is
not preconditioned on achievement of a sales target;
(c) payment or reimbursement in connection with meetings held
for the purpose of training or education of advisory persons
or other persons provided that:
(i) advisory persons obtain the Adviser's approval to
attend the meeting and attendance by advisory persons
is not preconditioned on the achievement of a sales
target or any other incentives pursuant to a non-cash
compensation arrangement;
(ii) the location is appropriate for the purpose of the
meeting;
(iii)the payment or reimbursement is not applied to the
expenses of guests of the advisory person or other
person; and
(iv) the payment or reimbursements not preconditioned on the
achievement of a sales target.
9. No Hot-Issues. No advisory person may purchase or receive a hot
issue in any of his or her accounts, including any accounts in which the
advisory person has a beneficial interest.
Annual Reporting
- ----------------
Each advisory person shall submit to the designated compliance officer,
not later than ten days after the end of each calendar year, an annual report
that discloses:
(i) The name, number of shares and principal amount of all securities
owned by such access persons; and
(ii) any securities account maintained by such access person with a
broker dealer or bank.
Quarterly Reporting
- -------------------
1. Subject to the exceptions set forth below, every advisory person
shall report to the designated compliance officer the information described in
subsection 2 below with respect to transactions in any security in which such
advisory person has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership in the securities.
2. Every report shall be made not later than 10 days after the end of
the calendar quarter in which the transaction to which the report relates was
effected and shall be on the Form attached hereto as Exhibit B or on a form that
contains substantially the same information (i.e., a brokerage confirmation
statement) and shall contain the following information:
(a) the date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(b) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(c) the price at which the transaction was effected; and
(d) the name of the broker, dealer or bank with or through which
the transaction was effected.
3. Any such report may contain a statement that making such report
should not be construed as an admission that an advisory person has any direct
or indirect beneficial ownership in the security to which the report relates.
4. If such access person established a securities account during the
prior quarter, such report must disclose the name of the broker dealer or bank
with which the account was established and the date on which the account was
established.
5. Copies of bank statements or broker's advice containing the
information specified in subsection 2 above may be attached to the report
instead of listing the transactions.
Exceptions to Reporting Requirements and Prohibited Sales and Purchases
- -----------------------------------------------------------------------
Notwithstanding any other provision of this Code, an advisory person
need not make a report with respect to transactions effected for any account
over which such person does not have any direct or indirect influence; and
The reporting provisions and prohibitions on sales and purchases
contained in this Code also shall not apply to:
(a) purchases or sales of securities which are non-volitional on the
part of either the advisory person (e.g., receipt of gifts); ----
(b) purchases of securities which are part of an automatic dividend
reinvestment plan; and
(c) purchases of securities effected upon the exercise of rights
issued by an issuer pro rata to all holders of a class of its
securities, to the extent such rights were acquired from such
issuer, and the sales of such rights so acquired.
Review by Designated Compliance Officer
- ---------------------------------------
The designated compliance officer shall compare all reports of personal
securities transactions with completed and contemplated portfolio transactions
of advisory client to determine whether a violation of the Code of Ethics may
have occurred. No person shall review his or her own report. Before making any
determination that a violation has been committed by any person, the designated
compliance officer shall give such person an opportunity to supply additional
explanatory material.
If the designated compliance officer determines that a violation of the
Code of Ethics has or may have occurred, he or she shall submit his or her
written determination, together with the transaction report, if any, and any
additional explanatory material provided by the individual, to the President or,
if the President shall be the designated compliance officer, the Chairman, who
shall make an independent determination of whether a violation has occurred.
If it is determined that a material violation has occurred, a report of
the violation shall be made to such persons as required by law. If a securities
transaction of the designated compliance officer is under consideration, the
Chairman shall act in all respects in the manner prescribed herein for the
designated compliance officer.
Oversight by Governing Board
- ----------------------------
This Code of Ethics, as revised, has been approved by the Adviser's
governing board. Any material change to this Code of Ethics shall be approved by
such board within six months of such change.
The designated compliance officer shall provide a written report to the
Adviser's governing board no less frequently than annually that (i) describes
any material issues regarding this Code of Ethics and any material violations
thereof and (ii) certifies to such board that the Adviser has adopted procedures
reasonably necessary to prevent advisory persons from violating this Code of
Ethics.
Confidentiality
- ---------------
All reports of securities transactions and any other information filed
pursuant to this Code of Ethics shall be treated as confidential, but are
subject to review as provided herein and by personnel of the Securities and
Exchange Commission.
Annual Certification
- --------------------
Each advisory person shall re-certify annually his or her familiarity
with this Code of Ethics and other procedures and shall certify compliance with
these guidelines and procedures.
<PAGE>
EXHIBIT A
Persons Designated to Give Approval of Transactions:
Patricia J. O'Connor
Arnold S. Wood
Alan J. Strassman
William E. Jacques
Designated Compliance Officer:
Patricia J. O'Connor
<PAGE>
PERSONAL SECURITY TRANSACTION REPORT
Person for whom
Report is being made:________________________ Quarter Ending __________, 20__
____ Please check if a brokerage statement or brokerage trade
confirmation(s) has been submitted directly to the compliance officer
by your brokerage firm for any security transactions in this period.
____ Please check if a brokerage statement or brokerage trade
confirmation(s) has been attached to this report in lieu of completing
the report. (If this box is checked, you need not complete the tables
below; however, you must still sign and date this report.)
There were NO securities transactions reportable by me during the above quarter,
except those listed below. Note: All transactions are reportable (regardless of
size) except purchases and sales of shares of registered open-end investment
companies, securities issued by the Government of the United States, short term
debt securities which are "government securities" within the meaning of Section
2(a)(16) of the 1940 Act, bankers acceptances, bank certificates of deposit and
commercial paper. Bank or brokers statements may be attached if desired instead
of listing the transactions. If necessary, continue on the reverse side. If the
transaction is not a sale or purchase, mark it with a cross and explain the
nature of each account in which the transaction took place, i.e., personal,
wife, children, charitable trust, etc.
PURCHASES
Date Security Amount/No. of Price Broker Nature of Reviewing
Shares Account Officers
Initials
- ------ ----------- --------------- ------- ---------- ----------- ----------
SALES
Date Security Amount/No. of Price Broker Nature of Reviewing
Shares Account Officers
Initials
- ------ ----------- --------------- ------- ---------- ----------- ----------
Date:
Employee Signature:____________________
Transaction(s) approved (check one)? ___ Yes ___ No
Signature of compliance officer:_______________________
Name (please print):
<PAGE>
EXHIBIT B
EXPLANATORY NOTES
This report must be filed quarterly by the 10th day of the month following the
end of the quarter and cover all accounts in which you have an interest, direct
or indirect. This includes any account in which you have "beneficial ownership"
(unless you have no interest or control over it) and non-client accounts over
which you act in an advisory or supervisory capacity.
( ) Tick if you wish to claim that the reporting of the account of the
securities transaction shall not be construed as an admission that you have any
direct or indirect beneficial ownership in such account or securities.
<PAGE>
GUIDELINES FOR PERSONAL TRADING
MARTINGALE ASSET MANAGEMENT, L.P.
Revised April 2000
These guidelines are designed to supplement the official Code of Ethics
and Trading Policies previously adopted by Martingale Asset Management, L.P.
("the Adviser"), and should be read in conjunction with that Code of Ethics and
the Adviser's Trading Policies. The purpose of these guidelines (as well as the
Code of Ethics and Trading Policies) is to minimize conflicts of interest
(including the appearance of such conflicts).
These procedures are not intended to prohibit conscientious
professionals from making responsible personal investment decisions within the
boundaries reasonably necessary to protect fiduciary relationships owed to the
Adviser's clients (each an "advisory client"). To that end, these guidelines are
designed to encourage investment in a manner that is consistent with the
fiduciary relationship that exists between the Adviser and its advisory clients.
1. WHO IS COVERED. These guidelines apply to all officers, directors
and control persons of the Adviser. These guidelines also apply to all persons
involved in the advisory process, including portfolio managers, traders,
employees whose duties or functions involve them in the investment process, and
any employee who obtains information concerning the investment decisions that
are being made for the advisory clients, including affiliated persons of the
Adviser. All such persons shall be designated "advisory persons" for purposes of
these guidelines. These guidelines also apply to investments by members of an
advisory person's immediate family (i.e., husband, wife, children and who are
directly or indirectly dependents of an advisory person), accounts in which an
advisory person or members of his or her family has a beneficial interest or
over which an advisory person has investment control or exercises investment
discretion (e.g., a trust account).
2. INVESTMENT THROUGH MUTUAL FUNDS ENCOURAGED. All advisory persons are
encouraged to make personal investments exclusively through mutual funds, and to
limit their investments in individual securities to mutual funds or to U.S.
Government Securities, as that term in defined in the Code of Ethics. No prior
approval is needed to make such investments.
3. INDIVIDUAL SECURITIES REQUIRE PRE-APPROVAL. All purchases and sales
(including short sales) of individual Securities (defined in the Code of Ethics
to exclude Government Securities and other items) must be pre-approved before an
order is placed. Options transactions also require pre-approval. Approval may be
given by any of the persons listed in Exhibit A to the Code of Ethics. Approval
must be obtained in writing (or, in unusual circumstances, promptly confirmed in
writing), initialed by one of the persons listed in Exhibit A, and, once
approved, orders must be executed within one business day of the approval date.
As necessary, before giving approval, the person providing approval will consult
(on a "no name" basis) with the appropriate trader to determine whether the
proposed purchase or sale in any way conflicts with any trading being
contemplated or carried out on behalf of an advisory client. Advisory persons
seeking approval to acquire or dispose of individual securities should allow
sufficient time for this review and approval process.
4. NO TRADING. All individual security positions are expected to be
taken for investment purposes. Securities trading as distinct from investment is
discouraged. If an advisory person desires to sell a position he or she has held
for less than six months (or desires to re-acquire a recently liquidated
position), the approval request must include an explanation of the reason for
the transaction (mutual funds and Government Securities excepted).
5. OWNERSHIP REPORTS AND NEW EMPLOYEES. Advisory persons who are new
employees of the Adviser shall submit a schedule of current security holdings
within ten days of the date their employment commences, which shall include (i)
the name, number of shares and principal for all securities owned by such access
person and (ii) any securities account such access person maintains with a
broker dealer or bank, and shall subsequently follow these guidelines in
receiving approvals to liquidate or add to their security positions.
6. PRIVATE PLACEMENTS AND IPOS. Investments in private placements and
other individual securities that are not generally available to the public may
present conflicts of interest even though such securities may not be currently
eligible for acquisition by some or all of the accounts of advisory clients.
Prior approval must be obtained before buying or selling such investments, as
with any other individual security transaction. In addition, with respect to
private placements, the approval request must indicate that the investment is
being purchased (or liquidated) on terms that are substantially the same to the
terms available to other similarly situated private investors, and that the
advisory person does not have any specific knowledge of an imminent public
offering or any material non-public information about the issuer. It is expected
that any investment in a private placement, IPO or similar security will be held
for at least six months. If the security subsequently becomes eligible for
investment by an account of an advisory client and is, in fact, purchased by
such account, any advisory person who owns the security will be expected to
continue to hold such security for at least six months following its eligibility
7. PRIVATE INVESTMENT PARTNERSHIPS. Just as investments through mutual
funds are encouraged and investments in individual securities are discouraged in
order to minimize potential conflicts of interest and/or the appearance of any
conflict of interest, the Adviser likewise encourages advisory persons to effect
their venture investments through venture limited partnerships rather than
individual private placements. Although venture limited partnerships are
preferred over individual private placements, venture limited partnerships
nevertheless can present potential conflicts. Accordingly, while pre-approval is
not required to participate in a venture limited partnership, an advisory person
will be expected to report any transaction involving a venture limited
partnership within ten (10) days of the investment to any of the persons listed
on Exhibit A to the Code of Ethics.
8. NO DIRECTORSHIPS. No advisory person may serve on the board of
directors for any private or public operating company without prior written
approval from one of the persons listed on Exhibit A to the Code of Ethics. Such
directorships are generally discouraged because of their potential for creating
conflicts of interest. Advisory persons should also restrict their activities on
committees (e.g., advisory committees or shareholder/creditor committees). The
restriction is necessary because of the potential conflict of interest involved
and the potential impediment created for the advisory clients. Advisory persons
serving on boards or committees of operating companies may obtain material
non-public information in connection with their directorship or position on a
committee that would effectively preclude the investment freedom that would
otherwise be available to the advisory clients.
9. NO SPECIAL FAVORS. It goes without saying that no advisory person
may purchase or sell securities on the basis of material nonpublic information
or in reciprocity for allocating brokerage, buying securities in an account of
an advisory client, or any other business dealings with a third party.
Information on or advisory to personal investments as a favor for doing business
on behalf of the advisory clients-- regardless of what form the favor takes --
is strictly prohibited. The appearance of a "special favor" is also sufficient
to make a personal transaction prohibited under these guidelines.
10. NON-CASH COMPENSATION. No advisory person shall directly or
indirectly accept or make payments or offers of payments of any form of
compensation received in connection with the offering of the Adviser's services
that is not cash compensation, including but not limited to merchandise, gifts
and prizes, travel expenses, meals and lodging, except as provided below:
(a) gifts that do not exceed an annual amount per advisory person
or other person of $100 and are not preconditioned on
achievement of a sales target;
(b) an occasional meal, a ticket to a sporting event or theater or
comparable entertainment which is neither so frequent nor so
extensive as to raise any question of impropriety and is not
preconditioned on achievement of a sales target;
(c) payment or reimbursement in connection with meetings held for
the purpose of training or education of advisory persons or
other persons provided that:
(i) advisory persons obtain the Adviser's approval to
attend the meeting and attendance by advisory persons
is not preconditioned on the achievement of a sales
target or any other incentives pursuant to a non-cash
compensation arrangement;
(ii) the location is appropriate for the purpose of the
meeting;
(iii) the payment or reimbursement is not applied to the
expenses of guests of the advisory person or other
person; and
(iv) the payment or reimbursements not preconditioned on
the achievement of a sales target.
11. NO HOT ISSUES. No advisory person may purchase or receive
securities of a public offering which trade at a premium in the secondary market
whenever such secondary market begins in any of his or her accounts, including
any accounts in which the advisory person has a beneficial interest.
12. THESE ARE SUPPLEMENTAL PROCEDURES. All advisory persons also remain
fully subject to the obligations imposed by the Code of Ethics and the Adviser's
trading policies as contained in the Compliance Manual. With respect to
reporting obligations, these reporting obligations, in brief, require that all
securities transactions be reported not later than 10 days after the end of the
calendar quarter in which the transactions was effected. The reports shall
contain the type of information typically included in a confirmation, namely
identification of the account, the title and amount of the security involved,
the date and nature of the transaction, price at which it was effected, and the
name of the broker, dealer or bank with or through whom the transaction was
effected.
13. EXCEPTIONS. Exceptions to the procedures and requirements contained
in these guidelines will be permitted only in highly unusual circumstances. Any
exception must be documented and approved by any of the persons listed on
Exhibit A to the Code of Ethics.
14. ANNUAL CERTIFICATION. Each advisory person shall re-certify
annually his or her familiarity with these guidelines and other procedures and
shall certify compliance with these guidelines and procedures.
Symphony Asset Management
Code of Ethics
On October 31, 1980, the Securities and Exchange Commission (the "SEC")
adopted Rule 17j-l under the Investment Company Act of 1940, as amended, (the
"Company Act") to require each investment company to adopt a written Code of
Ethics. The Code of Ethics is designed to deal with the potential "conflicts of
interests" that might arise regarding to transactions by the investment
companies' affiliated persons. Effective as of October 29, 1999, the SEC made
substantial changes to Rule 17j-1. Each investment adviser to a Fund is required
to adopt a Code of Ethics for approval by the Board of Directors of the Fund.
Thus, Symphony Asset Management, Inc. and Symphony Asset Management LLC (each an
"Adviser") has each adopted this Code of Ethics in compliance with Rule 17j-1,
as revised, to govern its relationship with each investment company (a "Fund")
advised by the Adviser. This Code of Ethics governs the Adviser's directors and
officers, as well as its Fund advisory persons and investment personnel, as
defined herein.
A. Definitions
1. Access Person.
As used in Rule 17j-1 and this Code of Ethics, the term "access person"
shall mean any of the Adviser's directors, officers or advisory persons of the
Fund.
2. Advisory Person.
The term "advisory person" means:
(a) Any employee of the Adviser (or of any company in a
control relationship with the Adviser) who, in connection with his or
her regular functions or duties, makes, participates in or obtains
information regarding the purchase or sale of Covered Securities by the
Fund, or whose functions relate to the making any recommendations with
respect to the purchases or sales; and
(b) Any natural person in a control relationship to the
Adviser who obtains information concerning recommendations made to the
Fund with regard to the purchase or sale of Covered Securities by the
Fund.
3. Investment Personnel.
As used in Rules 17j-1 and this Code, the term "investment personnel"
means:
(a) Any employee of the Adviser who (or any company that is in
a control relationship to the Adviser) who, in connection with his or
her regular functions or duties, makes or participates in making
recommendations regarding the purchase or sale of securities by the
Fund; and
(b) Any natural person who controls the Adviser and who
obtains information concerning recommendations to the Fund regarding
the purchase or sale of securities of the Fund.
4. Purchase or Sale of a Security.
As used in this Code, the "purchase or sale of a security" includes,
inter alia, writing of an option to purchase or sell a security.
5. Covered Security.
As used in this Code, the term "covered security" means a security as
defined in Section 2(a)(36) of the Company Act, except that it shall not include
a direct obligation of the Government of the United States, bankers'
acceptances, bank certificates of deposit, commercial paper, high quality
short-term debt instruments, including repurchase agreements, and shares of
registered open-end investment companies.
6. Security Held or to be Acquired.
As used in this Code, this term shall mean any security as defined
above which, within the most recent fifteen (15) days, (a) is or has been held
by the Fund, or (b) is being or has been considered by the Fund or its Adviser
for purchase by the Fund.
7. "Being Considered for Purchase or Sale."
A security is "being considered for purchase or sale" on behalf of the
Fund when a recommendation to purchase or sell a security has been made or
communicated and, with respect to the person making the recommendation, when
such person seriously considers making such a recommendation.
8. Initial Public Offering (IPO).
An IPO means an offering of securities registered under the Securities
Act of 1933 (the "1933 Act"), the issuer or which, immediately before the
registration, was not subject to the reporting requirements of Sections 13 or
15(d) of the Exchange Act.
9. Limited Offering.
A "limited offering" means an offering that is exempt from the
registration requirements of the 1933 Act pursuant to Sections 4(2), 4(6) or
77d(6) or pursuant to Rules 504, 505 or 506 under the 1933 Act.
10. Beneficial Ownership.
The term "beneficial ownership," as used in the Code, shall be
interpreted in the same manner as it would be in determining whether a person
is subject to the provisions of Section 16 of the Securities Exchange Act of
1934 and the rules and regulations thereunder, except that the determination of
direct or indirect beneficial ownership shall apply to all securities which
an access person has or acquires.
11. Authorized Person.
An authorized person of the Fund shall mean an officer of the Fund or
of the Fund's Adviser and such other persons as shall be specifically designated
by the Fund's directors.
B. Confidentiality of Fund Transactions
1. Portfolio and Research Activities.
Information relating to the Fund's portfolio and research activities is
confidential. Whenever statistical information or research is supplied to or
requested by the Fund or the Adviser, such information shall not be disclosed to
any persons other than authorized persons. Consideration of a particular
purchase or sale for the account of the Fund shall not be disclosed except to
authorized persons.
2. Brokerage Orders.
All brokerage orders for the purchase and sale of securities for the
account of the Fund will be so executed as to assure that the nature of the
transactions shall be kept confidential and disclosed only on a need to know
basis until the information is publicly released in the normal course of
business.
3. Non-Public Information.
If any officer, employee or director of the Adviser should obtain
non-public information concerning the Fund's portfolio, such person shall
respect the confidential nature of this information and shall not divulge it
unless specifically authorized to do so by the President of the Fund.
4. Confidentiality Procedures.
In order to assure maximum confidentiality:
(a) The Adviser shall have the responsibility for coordinating
all transactions for the purchase and sale of securities for the
account of the Fund.
(b) All orders for the purchase or sale of securities for the
Fund's account shall be placed for execution by one or more employees
of the Adviser specifically designated to do so.
(c) All records of the Fund's transactions shall be kept in a
secured place and shall not be released to anyone other than authorized
persons.
(d) A representative designated by the Adviser shall make such
inspections as he or she may deem necessary in order to assure
compliance with this Section.
C. Prohibited Purchases and Sales
1. For Access Persons.
The following procedures apply to all of the Adviser's directors,
officers, and advisory persons of the Fund:
(a) No access person may purchase any security that at the
time is being purchased or, to his or her knowledge, is being
considered for purchase by the Fund.
(b) No access person may sell any security that at the time is
being sold or, to his or her knowledge, is being considered for sale by
the Fund.
2. For Access Persons who are Investment Personnel.
The following procedures apply to the Adviser's investment personnel,
as defined above:
(a) Investment personnel must notify the Compliance
Administrator in writing of any intended purchase by the Fund of a
security which such access person beneficially owns.
(b) Investment personnel may not dispose of such beneficially
owned security until at least fifteen (15) days after the Fund
completes its acquisition program, except where the access person can
demonstrate to the satisfaction of the Compliance Administrator a bona
fide reason why such 15-day period should be waived. Examples of such
bona fide reasons would be unexpected personal hardship occasioning a
need for funds or special year-end tax considerations. Change in
investment objectives or special new investment opportunities would not
constitute acceptable reasons for a waiver.
(c) Investment personnel may not purchase any security that at
the time is being purchased or being considered for purchase by the
Fund, until at least fifteen (15) days after the Fund completes its
acquisition program unless such access person obtains prior clearance
for such purchase from the Adviser's Compliance Administrator or such
other person to whom such authority is delegated.
(d) Investment personnel must notify the Compliance
Administrator in writing of his or her intended purchase of a security
if such purchase occurs within fifteen (15) days after the Fund has
sold such security.
(e) The Adviser's investment personnel are required by Rule
17j-1 to obtain approval from the Adviser before directly or indirectly
acquiring beneficial ownership in an securities in an IPO or a limited
offering. Currently, the Adviser's personal trading policies prohibit
all of the Adviser's employees from investing in initial public
offerings and limited offerings.
D. Scope of Code of Ethics
1. Beneficial Ownership.
This Code of Ethics applies to any security in which the access person
has "a direct or indirect beneficial ownership." Currently, "beneficial
ownership" under Rule 17j-1 is determined in the same way as the term is
interpreted under Section 16 of the Exchange Act. Section 16 used the definition
of "beneficial ownership" that is set out in Rule 13d-3 under the Exchange Act.
Thus, as used in this Code of Ethics, a person is the beneficial owner of a
security if the person directly or indirectly, through contract, arrangement,
understanding, relationship, or otherwise has or shares:
(a) Voting power that includes the power to vote, or to direct
the voting of, such security; and/or
(b) Investment power that includes the power to dispose, or to
direct the disposition of, such security.
2. Exempt Purchases and Sales.
The prohibitions set forth in Section C of this Code shall not apply
to:
(a) Purchases or sales effected in any security over which an
access person has no direct or indirect influence or control;
(b) Purchases or sales of securities that are not eligible for
purchase or sale by the Fund, except that investing in initial public
offerings and limited offerings is prohibited;
(c) Purchases or sales of securities that are issued by the
Government of the United States, bankers' acceptances, bank
certificates of deposit, commercial paper and shares of registered
open-end investment companies;
(d) Purchases or sales that are non-volitional on the part of
either the access person or the Fund;
(e) Purchases that are part of an automatic dividend
reinvestment plan;
(f) Purchases effected upon exercise of rights issued by an
issuer pro rata to all holders of a class of its securities, to the
extent such rights were acquired from such issuer, and sales of such
rights so acquired;
(g) Purchases or sales that receive prior approval from the
Compliance Administrator because they are only remotely potentially
harmful to the Fund, they would be very unlikely to affect a highly
institutional market, or they clearly are not related economically to
the securities to be purchased, sold or held for the account of the
Fund; or
(h) Purchases or sales by non-investment personnel that have
the prior approval of the Compliance Administrator, who has ascertained
that such person is not trading upon any special knowledge acquired by
virtue of his or her position. Such transactions apply only to
securities within the ambit of the Fund. Such pre-clearance procedure
will be applicable to fixed income and equity funds.
3. Identification of Access Persons.
Currently, the Adviser considers each of its directors, officers as
well as its advisory persons to the Fund and its investment personnel, as
defined herein, to be access persons of the Fund. The Adviser's employees who
are advisory persons of the Fund and investment personnel of the Fund are the
Adviser's portfolio managers who are assigned to manage the Fund's assets. These
access persons of Adviser are subject to the reporting requirements and
limitations under the provisions of this Code of Ethics.
Annually, the Adviser will identify its access persons to the Fund and
inform the access persons of their reporting requirements and other limitations.
E. Initial Holdings Reports
An initial report of all securities holdings is required for each of
the Adviser's access persons who becomes an access person of the Fund on or
after March 1, 2000 (the "Initial Holdings Report"). Each Holdings Report should
contain a list of all securities held by in an account controlled by the access
person making the report (except those exempt from reporting, as set out in
Section D.2.). The Adviser's access persons will use a form provided by the
Adviser for this purpose.
The Adviser's access persons to the Fund may fulfill this requirement
by having their broker-dealers, banks or other custodians send a list of their
holdings directly to the Adviser's Compliance Administrator or such other person
designated by the Adviser. In the event that the initial Holdings Report is
provided in this means, the Adviser's access persons must verify that the
Compliance Administrator has received all of his or her holdings. The Adviser's
access persons must sign a verification that all holdings have been provided to
the Compliance Administrator or other designated person. The Adviser has adopted
a form for this purpose as part of its general personal trading policies. The
certification and the list of holdings will make up the Initial Holdings Report
for the Adviser's access persons.
An Initial Holdings Report is due within ten (10) days of a person
becoming an access person of the Fund. Initial Holdings Reports are not required
of access persons of the Fund who held that role as of the effective date of the
amendment to Rule 17j-l that requires such reports.
F. Quarterly Transactions Reports
1. Scope of Reports.
Each of the Adviser's access persons, including its directors,
officers, advisory persons of the Fund and its investment personnel for the Fund
are required to cause quarterly statements for all of his or her brokerage
accounts to be forwarded to the Adviser's Compliance Administrator (or such
other person designated by the Adviser). The brokerage statements must include
every security transaction in which an access person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership, except
purchases and sales specified in this Code as exempt and except to the extent
such report would duplicate information reported pursuant to Rules 204-2(a)(12)
or 204-2(a)(13) under the Investment Advisers Act of 1940. The Adviser's
personal trading policies require its employees to arrange to provide the
Adviser with all personal securities transactions by having duplicate brokerage
statements sent to the Adviser, except as excepted herein.
2. Form of Report.
(a) Each access person of the Adviser shall authorize and
require that brokerage statements for all brokerage accounts shall be
sent to the Compliance Administrator showing every transaction in any
security in which such access person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership,
except purchases or sales effected in any account over which such
access person has no direct or indirect control.
(b) All transactions during a calendar quarter required to be
reported by the Code should be reported through brokerage statements no
later than ten (10) days after the end of each quarter. A copy of
brokerage confirmation statements sent directly to the Compliance
Administrator by brokers is the Adviser's accepted form of reporting of
transactions by access persons. Confirmation statements or other
brokerage reports are not required if there were no reportable
transactions during the prior calendar quarter. The report may contain
a statement declaring that the reporting of any such transaction shall
not be construed as an admission by the person making such report that
he or she has any direct or indirect beneficial ownership in the
security to which the report relates.
(c) Information supplied on the brokerage statements and
confirmations is available for inspection by the SEC at any time during
the five (5) year period following the end of the fiscal year in which
each report is made.
G. Annual Reporting Requirements
1. The Adviser's Annual Report.
Annually, the Adviser shall report to the Board of the Fund on all
issues that arose under the Code of Ethics during the preceding calendar year.
The annual reports to the Fund's Board shall include the following information:
(a) Material violations of the Code of Ethics by the Adviser's
access persons for the Fund;
(b) Sanctions imposed for any material violations;
(c) A certification that the Adviser has procedures that are
necessary to prevent violations of the Code of Ethics.
2. Annual Holdings Reports.
Each access person of the Fund is required to provide an annual list of
all securities holdings (the "Annual Holdings Report"). The Adviser's access
persons must submit their Annual Holdings Report to the Adviser's Compliance
Administrator or such other person designated by the Adviser.
Annual Holdings Reports are due within 10 days of the calendar year
end. Such reports may be reported in the means described herein for Initial
Holdings Reports.
Information contained in the Annual Holdings Reports must be dated
within 30 days of the date submitted to the Adviser.
3. Annual Compliance Certification.
Each of the Adviser's access persons is required to provide the
Compliance Administrator with an annual certification that the individual has
complied with the Fund's Code of Ethics. The annual certification required of
all of the Adviser's Employees under its personal trading policies satisfies
this reporting requirement.
H. Review of Required Reports
The Adviser has developed a process for review of the reports filed by
its access persons under this Code of Ethics. Currently, the Adviser's
Compliance Administrator reviews such reports. The Adviser may designate other
persons to perform this review role from time to time. The process is reasonably
designed to prevent an abuse of this Code of Ethics. On-going review of the
process for preventing personal trading conflicts is a part of the Adviser's
personal trading policies and procedures.
I. Sanctions
No Code of Ethics can cover every possible circumstance, and an
individual's conduct must depend ultimately upon his or her sense of fiduciary
obligation to the Fund and its shareholders. Nevertheless, this Code of Ethics
sets forth the Fund's policy regarding conduct in those situations in which
conflicts of interest are most likely to develop. Because the standards in this
Code of Ethics are minimal rather than permissive, careful adherence to the Code
is essential.
Upon discovering a violation of this Code, the Adviser may impose
sanctions that are appropriate under the circumstances. Violators may be
required to give up any profit or other benefit realized from any transaction
in violation of this Code. In addition, conduct inconsistent with this Code
may result in a letter of censure or suspension or termination of the employment
of the violator. Material violations and sanctions are reported to the Fund's
Board as set out above. A record of violations of this Code of Ethics, and of
any action taken as a result of such violations, will be available for
inspection by the SEC at any time during the five-year period following the end
of the fiscal year in which each such violation occurs.
Reviewed and approved by the Fund's Board of Directors on:
NICHOLAS-APPLEGATE
CODE OF ETHICS AND CONDUCT
================================================================================
MESSAGE FROM THE MANAGING PARTNER
Nicholas-Applegate, quite simply, does not exist without our clients. While it's
true we are an investment management firm, known for providing excellent
investment returns and client service, a large part of our success is built on
our reputation for integrity and professionalism. Our clients place not only
their money, but also their trust with us when they hire us. It is up to us as a
firm, and each one of us individually, to ensure that trust is upheld. Without
it, we would not have a single client, regardless of our investment returns.
With this in mind, the firm has long had a formal Code of Ethics in place. Every
employee commits to follow this Code when he/she joins the firm, and we, as a
firm, are committed to the principles embodied by the Code. The driving
principle is actually pretty easy to express: "Our clients come first."
Everything, really, flows from that simple statement. When you review and sign
the attached Code of Ethics, I'd like you to keep these principles in mind and
know that they are supported at our firm from the top down. I'd also like you to
recognize that ultimately the Code of Ethics is really just an expression about
the way we, as a firm, want to do business, and that it is our responsibility
individually, and as a firm, to ensure the Code is followed in spirit, as well
as word. The Code can't cover every individual situation that may come up, so we
must all use our best efforts to apply the principles of the Code in our
everyday business. We, and our clients, should expect nothing less.
Art Nicholas
================================================================================
TABLE OF CONTENTS
A. DEFINITIONS ........................................................A-1
I. INTRODUCTION & OVERVIEW...............................................1
II. PERSONS COVERED BY THIS CODE
A. EMPLOYEES & COVERED PERSONS...........................................3
B. OUTSIDE FUND DIRECTORS /TRUSTEES......................................3
C. THE ADMINISTRATOR 4
III. PERSONAL SECURITIES TRANSACTIONS
A. COVERED SECURITIES & TRANSACTIONS.....................................5
B. EXEMPT SECURITIES & TRANSACTIONS......................................5
IV. PROCEDURES FOR TRADING SECURITIES
A. PRE-CLEARANCE.........................................................7
B. VIOLATIONS............................................................8
C. HOLDING PERIOD RESTRICTION...........................................10
D. BLACKOUT PERIOD......................................................10
E. DE MINIMIS TRANSACTIONS..............................................10
F. INITIAL PUBLIC OFFERINGS ("IPOS") & PRIVATE PLACEMENTS...............11
G. FRONT-RUNNING........................................................11
H. INSIDE INFORMATION...................................................11
V. REPORTS & CERTIFICATIONS REGARDING PERSONAL SECURITIES TRANSACTIONS
A. PERSONAL HOLDINGS REPORTS............................................13
B. MONTHLY TRANSACTION & GIFT REPORTS...................................13
C. DUPLICATE BROKERAGE STATEMENTS & CONFIRMATIONS.......................14
D. CERTIFICATION OF COMPLIANCE..........................................14
VI. POTENTIAL CONFLICT OF INTEREST ISSUES
A. SERVICE ON BOARDS OF OTHER COMPANIES.................................15
B. GIFTS................................................................15
C. GIFT PRE-CLEARANCE...................................................15
D. GIFT VIOLATIONS......................................................16
VII. VIOLATIONS OF THE CODE ..............................................17
VIII. ANNUAL BOARD REVIEW .................................................18
IX. ADMINISTRATION & CONSTRUCTION .......................................19
X. AMENDMENTS & MODIFICATIONS...........................................20
POLICIES & PROCEDURES - INSIDER TRADING POLICY ...................... APPENDIX I
EXAMPLES OF BENEFICIAL OWNERSHIP ....................................APPENDIX II
PERSONAL TRADING RESTRICTION SUMMARY .............................. APPENDIX III
EXCEPTIONS TO BAN ON SHORT-TERM TRADING ............................ APPENDIX IV
CODE OF ETHICS SIGNATURE PAGES....................................... APPENDIX V
<PAGE>
DEFINITIONS
The following definitions apply to this Code of Ethics:
NACM: Nicholas-Applegate Capital Management, Inc., a CA LP
NAS: Nicholas-Applegate Securities
NAIF OR FUNDS: Nicholas-Applegate Institutional Funds
NA: Nicholas-Applegate (i.e., NACM, NAS and NAIF)
CODE: NA Code of Ethics
EMPLOYEES: All officers, partners and employees of NACM and NAS, well as
part-time employees, consultants, temps and interns after one month
COVERED PERSONS: Any Employee and any relative by blood or marriage living in
the Employee's household or any person who holds an account
that names Employee as a beneficiary or otherwise
INVESTMENT PERSONNEL: Trading Desk personnel, portfolio managers and financial
analysts
ADMINISTRATOR: Brown Brothers Harriman - Administrator of the Funds
ADVISORY CLIENTS: Shareholders of funds, institutional clients and any other
person or entity whom NA provides investment advisory
services
EXEMPT TRANSACTIONS: Any transaction that does not require pre-clearance by NA's
Compliance Department prior to execution (e.g., -- open-end
mutual funds, U.S. government securities and named indices
as listed in the Code at Appendix IV)
TRUSTEES: Trustees of the Funds
BENEFICIAL OWNERSHIP: For purposes of this Code, "beneficial ownership" means
any interest in a security for which a Covered Person
can directly or indirectly receive a monetary benefit,
including the right to buy or sell a security to direct
the purchase or sale of a security, or to vote or direct
the voting of a security. Please refer to Appendix II
for additional examples of beneficial ownership
NON-EMPLOYEE TRUSTEES: Trustees of the Funds who are not Employees of NACM or
NAS (including employees of the Administrator)
PERSONAL SECURITIES TRANSACTION: Any trade in debt or equity securities
executed on a stock market, or other
securities not defined as "exempt securities"
under the NA Code of Ethics, by a Covered
Person. This includes all futures, options,
warrants, short-sells, margin calls, or other
instrument of investment relating to an
equity security
EXEMPT SECURITIES: Securities, which, under the Code, do not require pre-
clearance authorization by the Compliance Department (see
page 11 and Appendix IV)
BLUEFORM: Monthly Personal Securities Transaction and Gift Report
INSIDER: Persons who are officers, directors, employees and spouse and anyone
else who is privy to inside information
INSIDER TRADING: Buying or selling of a security while in possession of
material, non-public information or anyone who has
communicated such information in connection with a
transaction that results in a public trade or information
service or medium
NON-PUBLIC INFORMATION: Any information that is not made known via a public
magazine, newspaper or other public document
ACCESS PERSON: Any Employee of NA, including temporary employees (if here more
than one month), interns and consultants (working on NA
premises)
OPEN-END INVESTMENT COMPANIES Funds that continuously offer new shares and
(OPEN-END MUTUAL FUNDS): redeem outstanding shares at NAV on any
business day. Shares are purchased directly
from the distributor of the funds
CLOSED-END INVESTMENT COMPANIES: Funds whose shares traded on the secondary
market with most being listed on stock
exchanges. New shares are not continuously
offered, nor are outstanding shares redeemable.
<PAGE>
CODE OF ETHICS AND CONDUCT
Nicholas-Applegate Capital Management
Nicholas-Applegate Securities
Nicholas-Applegate Institutional Funds
Revised as of March 20, 2000
I. INTRODUCTION & OVERVIEW
Nicholas-Applegate Capital Management ("NACM"), Nicholas-Applegate Securities
("NAS") and Nicholas-Applegate Institutional Funds ("NAIF") (collectively, "NA")
have developed and maintain a reputation for integrity and high ethical
standards. Therefore, it is essential not only that NA and its employees comply
with relevant federal and state securities laws, but that we also maintain high
standards of personal and professional conduct. NA's Code of Ethics and Conduct
(the "Code") is designed to help ensure that we conduct our business in a manner
consistent with these high standards.
As a registered investment adviser, NA and its employees owe a fiduciary duty to
our clients that requires each of us to place the interests of our clients ahead
of our own. A critical component of meeting our fiduciary duty is to avoid
potential conflicts of interest. Accordingly, you must avoid all activities,
interests and relationships that interfere or appear to interfere with making
decisions in the best interests of the shareholders of NAIF (or "Funds") and any
other person or entity to which NA provides investment advisory services
(together, "Advisory Clients").
Please bear in mind a conflict of interest can arise even if there is no
financial loss to Advisory Clients and regardless of the employee's motivation.
Many potential conflicts of interest can arise in connection with employee
personal trading and related activities.
The Code is designed to address and prevent potential conflicts of interest
pertaining to personal trading and related activities and is based on the
following principles:
1) We must at all times place the interests of our Advisory Clients
first. In other words, as a fiduciary, you must scrupulously avoid
serving your own personal interests ahead of the interests of NA
Advisory Clients.
2) We must make sure that all personal securities transactions are
conducted consistent with the Code and in such a manner as to avoid
any actual or potential conflicts of interest or any abuse of an
individual's position of trust and responsibility.
3) We must not take inappropriate advantage of our positions. The receipt
of investment opportunities, perquisites, or gifts from persons
seeking business with NA could call into question the exercise of your
independent judgment.
The Code contains policies and procedures relating to personal trading by
Covered Persons, as well as Trustees of the Funds.
- --------------------------------------------------------------------------------
You must become familiar
with and abide by the Code
- --------------------------------------------------------------------------------
Compliance with the Code is a condition of your employment with NA. Violations
of the Code will be taken seriously and will result in sanctions against the
violator, up to and including termination of employment.
As with all policies and procedures, the Code was designed to apply to a myriad
of circumstances and conduct. However, this Code is not intended to be
all-inclusive as no policy can anticipate every potential conflict of interest
that can arise in connection with personal trading.
- --------------------------------------------------------------------------------
you are expected to abide not only by the letter of the Code,
but also by the spirit of the Code
- --------------------------------------------------------------------------------
Whether or not a specific provision of the Code addresses a particular
situation, you must conduct your activities in accordance with the general
principles contained in the Code and in a manner that is designed to avoid any
actual or potential conflicts of interest. NA reserves the right, when it deems
necessary in light of particular circumstances, to impose more stringent
requirements on those persons subject to the Code, or to grant exceptions to the
Code.
Because governmental regulations and industry standards relating to personal
trading and potential conflicts of interest can evolve over time, NA reserves
the right to modify any or all of the policies and procedures set forth in the
Code. If NA revises the Code, the Director of Compliance will provide you with
written notification of the changes. You must familiarize yourself with any
modifications to the Code.
If you have any questions about any aspect of the Code, or if you have questions
regarding application of the Code in a particular situation, contact the
Compliance Department.
II. PERSONS COVERED BY THIS CODE
A. Employees & Covered Persons
The policies and procedures set forth in the Code apply to all officers,
principals and employees of NACM and NAS (collectively, "Employees"). The
Code also applies to all temporary employees, consultants and interns (if
here more than one month) who work for NA on premises.
The policies and procedures set forth in the Code also apply to all members
of an Employee's immediate family which, for purposes of the Code, refers
to any relative by blood or marriage living in the Employee's household
(together with Employees, "Covered Persons").
- --------------------------------------------------------------------------------
The Code also applies to accounts in which the
Employee is named as a beneficiary, trustee or
is otherwise able to exercise investment control
- --------------------------------------------------------------------------------
B. Outside Fund Directors/Trustees
Special rules apply to Fund Trustees who are not employees of NACM or NAS
("Non-Employee Trustees"). Specifically, Non-Employee Trustees are NOT
subject to the:
o 3-day blackout period;
o prohibition on initial public offerings;
o restrictions on private placements;
o ban on short-term trading profits;
o gift restrictions; or
o restriction on service as a director.
Further, a Non-Employee Trustee is not required to pre-clear personal
securities transactions provided he or she did not have knowledge of any
current or pending transactions in the Security that have been completed
within the last fifteen (15) calendar days immediately preceding the date
of the transaction.
A Non-Employee Trustee is not required to submit quarterly personal
securities transaction reports, unless he or she knew, or should have
known, in the ordinary course of the fulfillment of his or her official
duties as a trustee of one of the Funds, that during the 15-day period
immediately preceding or following the date of a transaction in a security
by the Non-Employee Trustee that such security was purchased or sold, or
was considered for a purchase or sale, by a Fund or by NA for an Advisory
Client. Non-Employee Trustees also are not required to submit annual
portfolio holdings reports to NA.
C. The Administrator
Officers of the Fund who are officers or employees of the Fund's
Administrator are exempt from all provisions of this Code to the extent
that the Administrator has adopted reasonable written policies and
procedures regarding personal securities transactions by its employees.
III. PERSONAL SECURITIES TRANSACTIONS
The firm's policies and procedures set forth in the Code regarding personal
investing apply to ALL personal securities transactions by Covered Persons,
unless a transaction is in an Exempt Security or the transaction is an Exempt
Transaction as defined below.
A. Covered Securities & Transactions
Personal securities transactions subject to the Code include, but are not
limited to:
o equity securities including common and preferred stock, except as
otherwise exempted below;
o investment and non-investment grade debt securities;
o investments onvertible into, or exchangeable for, stock or debt
securities;
o any derivative instrument relating to any of the above securities,
including options, warrants and futures;
o any interest in a partnership investment in any of the foregoing;
and
o shares of closed-end investment companies.
B. Exempt Securities & transactions
The Code pre-clearance procedures and reporting requirements do not apply
to the following types of securities and transactions, unless specified
otherwise, which are referred to as "Exempt Securities" and "Exempt
Transactions":
Exempt Securities
1. Shares of registered open-end mutual funds and money market
funds;
2. Treasury bonds, treasury notes, treasury bills, U.S. Savings
Bonds, and other instruments issued by the U.S. government or its
agencies or instrumentalities;
3. Debt instruments issued by a banking institution, such as
bankers' acceptances and bank certificates of deposit; (this does
not exempt corporate bonds or high yield bonds)
4. Commercial paper;
5. Municipal bonds; or
6. Stock indices; (See Appendix IV)
Exempt Transactions
1. Transactions in an account over which a Covered Person has no
direct or indirect influence or control; or in any account held
by a Covered Person which is managed on a discretionary basis by
a person other than the Covered Person and, with respect to which
the Covered Person does not influence or control the
transactions;
2. Transactions that are non-voluntary on the part of the Covered
Person (these transactions must be reported on the monthly report
or "Blue Form") (e.g., bond calls, stock splits, spin-offs,
etc.);
3. Purchases that are part of an automatic dividend reinvestment
plan. However, your initial purchase into a DRIP program must be
pre-cleared with Compliance and reported on your first monthly
report after starting the program. If you ever contribute more
than the automatic deduction to this plan, you must pre-clear
this transaction as if it were a non-exempt transaction;
4. Purchases as a result of the exercise by a Covered Person of
rights issued pro rata to all holders of a class of securities,
to the extent that such rights were acquired from the issuer, and
the sale of such rights;
5. Other similar circumstances as determined by the Director of
Compliance or General Counsel; or
6. Transactions in options or futures contracts on commodities,
currencies or interest rates.
Additionally, transactions in accounts over which the Covered Person
has no beneficial ownership, nor exercises direct or indirect
influence or control, may be excluded from the Code (and treated as
Exempt Transactions).
If you have any questions about whether a particular transaction
qualifies as an Exempt Transaction, contact the Compliance Department
or the General Counsel.
IV. PROCEDURES FOR TRADING SECURITIES
Covered Persons wishing to purchase or sell securities for their own accounts
must follow certain procedures designed to avoid actual or potential conflicts
of interest. These procedures include pre-clearing the transaction, holding the
security for at least the required minimum length of time, and adhering to a
blackout period around Advisory Client trades. Please note that these procedures
do not apply to Exempt Securities and Exempt Transactions, as described above.
A. Pre-clearance
As a Covered Person, you must submit an Employee Personal Request (an
electronic pre-clearance form), which can be found on the NA intranet site
at home.nacm.com under Trading/Monthly Reports and Forms - CTI iTrade,
prior to the purchase or sale of securities for your own account or any
accounts over which you have control or have a beneficial interest. In
addition, Investment Personnel must have all transactions approved by the
Chief Investment Officer ("CIO") (or investment partner in the CIO's
absence). Requests received without the required signature will not be
cleared.
You must submit pre-clearance for all personal securities transactions,
unless the transaction qualifies as an Exempt or De Minimis Transaction
(described below). All other purchase or sale transactions, including
transactions in equity securities of up to 1,000 shares or $10,000 that are
not listed on a domestic exchange or have market capitalization of less
than $2 billion, must be pre-cleared prior to execution.
- --------------------------------------------------------------------------------
Transactions in equity securities under 1000 shares
or $10,000, with a market capitalization of
over $2 billion do not need pre-clearance
- --------------------------------------------------------------------------------
However, if you are buying 500 shares or less, the security is on NYSE or
the issuer's market capitalization is over $500 million the trade will be
approved even if NA is active in the security.
NA will treat the pre-clearance process as confidential and will not
disclose the information given during the pre-clearance process, except as
required by law or for applicable business purposes.
As a Covered Person, you cannot execute the requested transaction until you
receive authorization from the Compliance Department to do so.
Pre-clearance requests will be processed by the Compliance Department as
quickly as possible. Please remember that pre-clearance approval is not
automatically granted for every trade.
Priority Pre-Clearance Window
-----------------------------
Compliance Department personnel will give priority attention to any
pre-clearance request submitted prior to 9:00 a.m. In these cases, you
will normally receive notification of your pre-clearance approval or
denial within 10-15 minutes. Pre-clearance requests submitted after
9:00 a.m. will be processed in as timely a manner as possible, but
other Compliance Department duties may delay the response for two (2)
hours or more (depending on department priorities) after submission.
Pre-Clearance Period
--------------------
Pre-clearance must be obtained on the date of the proposed
transaction. Pre-clearance approval for domestic Personal Securities
Transactions effected through a broker-dealer is the day it is
pre-cleared up until the "market open" the next business day (6:30
a.m. PT, except holidays) after the day that pre-clearance was
obtained.
- --------------------------------------------------------------------------------
If you decide not to execute the transaction on the day your
pre-clearance approval is given, or your entire trade is
not executed, you must request pre-clearance again at
such time as you decide to execute the trade
- --------------------------------------------------------------------------------
Pre-clearance approval is valid only for the particular security and
quantity indicated on the Form. For example, if you wish to increase the
size of the transaction, you must submit a new pre-clearance request and
receive a new pre-clearance approval. However, you may decrease the size of
the transaction without obtaining new authorization, but should inform
Compliance if this is done.
Failure to obtain pre-clearance for a personal securities transaction is a
serious breach of NA's Code. If you fail to obtain pre-clearance approval
for your personal securities transaction, you will be subject to
disciplinary action, up to and including termination of employment. You may
also be required to cancel the trade and bear any losses that occur. You
may also be required to disgorge any profits realized on the unauthorized
trade and donate them to a charity designated by NA (see below).
B. Violations
1. Monthly Reporting Violations
You must complete your Personal Security Transaction and Gift Report
("Blueform") via the intranet site by the end of the 10th day of each
month, regardless of whether you had any trading or gift activity for
that month.
- --------------------------------------------------------------------------------
You must submit your Blueform
by the 10th of every month
- --------------------------------------------------------------------------------
The Executive Committee member with oversight of your department may
grant exceptions to this requirement for legitimate business or
personal reasons. However, you should make every reasonable effort to
submit your report in a timely manner.
- --------------------------------------------------------------------------------
if you fail to remit your Blueform on Time,
you will be fined $50 for the first day
late & $10 for each additional day
the report is late.
- --------------------------------------------------------------------------------
2. Trading Violations
Any trading-related violation of this Code, including failure to
properly pre-clear a non-exempt personal trade, etc., will incur the
following sanctions, in addition to disgorging any profits on personal
trades that conflict with NA client transactions:
First Violation
---------------
o A fine of 0.5% of base salary up to $500;
o Meet with Department Head and the Director of Compliance to
discuss and re-sign the Code of Ethics.
Second Violation (within 12 months)
-----------------------------------
o A fine of 1% of base salary up to $1,000;
o Meet with Department Head and the Director of Compliance to
discuss and re-sign the Code of Ethics;
o Written warning to personnel file;
Third violation (within 12 months)
----------------------------------
o A fine of 2% of base salary up to $2,000;
o Meet with Department Head and the Director of Compliance to
discuss and re-sign the Code of Ethics;
o Written warning to personnel file;
o Prohibition from trading personally for a specific period of
time (e.g., 6 months to 1 year) except to close out current
positions;
o May result in termination of employment with NA.
All fines will be paid to a charity of NA's choice: currently the
United Way. Checks will be submitted to Compliance and forwarded to
the selected charity.
C. Holding Period Restriction
As a general principle, personal securities transactions must be for
investment purposes and not for the purposes of generating short-term
profits. Any profits realized on a sale of a security held less than 60
days will be disgorged, with a check written to a charity of NA's choice,
currently the United Way. Checks will be submitted to Compliance and
forwarded to the selected charity. You may, however, sell a security held
less than 60 days if the security is being sold for no profit.
This holding period restriction does not apply to Exempt Securities or
Exempt Transactions. NA's Director of Compliance or General Counsel may
also grant exceptions to this prohibition in limited circumstances (e.g.,
bankruptcy, eviction, personal health emergency, etc.) upon prior written
request.
- --------------------------------------------------------------------------------
you may not sell a security acquired within the
previous 60 days, unless selling at a loss
- --------------------------------------------------------------------------------
D. Blackout Period
As a Covered Person, you may not buy or sell equity securities for your
personal accounts if:
o NA has engaged in a transaction in the same or an equivalent
security for an Advisory Client account within the last three (3)
days, or
o the security is on the NA trading blotter or proposed blotter.
In the event you effect a prohibited personal securities transaction within
3 business days before or after an Advisory Client account transaction in
the same or equivalent security, you will be required to close out your
position in the security and disgorge any profit realized from the
transaction to a charity designated by NA. However, if you properly
obtained pre-clearance for a transaction and an Advisory Client account
subsequently transacted in the same security within 3 days of your
transaction, this will not normally result in required disgorgement, unless
otherwise determined by NA's Director of Compliance or General Counsel.
The blackout period does not apply to transactions that qualify as Exempt
Securities or Exempt Transactions.
E. De Minimis Transactions
You are NOT required to pre-clear certain de minimis transactions that meet
the following criteria. However, you must report these transactions on your
monthly Blue Form:
Equity Securities
-----------------
Any purchase or sale transaction of up to 1,000 shares or $10,000
daily in a NYSE-listed security or any security listed on another
domestic exchange (including NASDAQ) with a market capitalization of
at least $2 billion.
Debt Securities
---------------
Any purchase or sale transaction of up to 100 units ($100,000
principal amount) in an issuer with a market capitalization of at
least $2 billion.
- --------------------------------------------------------------------------------
All de minimis transactions are subject to
the Holding Period restriction
- --------------------------------------------------------------------------------
F. Initial Public Offerings ("IPOs") & Private Placements
As a Covered Person, you may not engage in a personal securities
transaction in any security in a private placement or IPO without prior
written approval of NA's Director of Compliance or its General Counsel. In
considering such approval, the Director of Compliance or General Counsel
will take into account, among other factors, whether the investment
opportunity is available to and/or should be reserved for an Advisory
Client account, and whether the opportunity is being offered to the Covered
Person by virtue of his or her position.
If you are approved to engage in a personal securities transaction in a
private placement or IPO, you must disclose that investment if you play a
part directly or indirectly in subsequent investment considerations of the
security for an Advisory Client account. In such circumstances, NA's
decision to purchase or sell securities of the issuer shall be subject to
an independent review by an NA Employee with no personal interest in the
issuer. In addition, you may also be required to refrain from trading the
security.
G. Front-Running
As a Covered Person, you may not front-run an order or recommendation, even
if you are not handling the order or the recommendation (and even if the
order or recommendation is for someone other than the Covered Person).
Front-running consists of executing a transaction based on the knowledge of
the forthcoming transaction or recommendation in the same or an underlying
security, or other related securities, within three (3) business days
preceding a transaction on behalf of an Advisory Client.
H. Inside Information
As a Covered Person, you may not use material, non-public information about
any issuer of securities, whether or not such securities are held in the
portfolios of Advisory Clients or suitable for inclusion in such
portfolios, for personal gain or on behalf of an Advisory Client. If you
believe you are in possession of such information, you must contact NA's
Director of Compliance immediately to discuss the information and the
circumstances surrounding its receipt. This prohibition does not prevent a
Covered Person from contacting officers and employees of issuers or other
investment professionals in seeking information about issuers that is
publicly available. (Refer to NA's Insider Trading Policy attached Appendix
I for more information.)
- --------------------------------------------------------------------------------
As a Covered Person, you may not use material,
non-public information about any issuer of securities
- --------------------------------------------------------------------------------
If you have any regarding personal trading, contact the Compliance
Department or the General Counsel.
V. REPORTS & CERTIFICATIONS REGARDING PERSONAL SECURITIES TRANSACTIONS
A. Personal Holdings Reports
In order to address potential conflicts of interest that can arise when a
Covered Person acquires or disposes of a security, and to help ensure
compliance with the Code, as a Covered Person, you must submit a Personal
Holdings Report at the time of commencement of employment with NACM or NAS
and annually thereafter with a list of all securities holdings in which you
have a beneficial interest (other than interests in Exempt Securities).
- --------------------------------------------------------------------------------
You must submit a complete Personal Holdings
Report upon commencement of
employment & annually thereafter
- --------------------------------------------------------------------------------
B. Monthly Transaction & Gift Reports
As a Covered Person, you must file a Monthly Securities Transaction and
Gift Report ("Blueform") with Compliance by the 10th day of each month for
the previous month (e.g., a September Blue Form would be due by the 10th of
October). If you did not execute any securities transactions during the
applicable month, you must still submit a Blue Form indicating that fact.
You file these Reports electronically on the NA Intranet site at
http://home.nacm.com/Compliance. The Compliance Department receives all
Report confirmations via email and stores them in a master database that is
archived annually to CD ROM.
Your Report must contain the following information with respect to each
reportable personal securities transaction. All fields must be completed in
order for your report to be successfully filed:
o Date of transaction;
o Nature of the transaction (purchase, sale or any other type of
acquisition or disposition);
o Security name;
o Security symbol or CUSIP;
o Number of shares/par;
o Principal amount of each security and/or the price at which the
transaction was effected; and o Name of the broker, dealer or
bank with or through whom the transaction was effected.
Monthly Reports may contain a statement that the report is not to be
construed as an admission that the person filing the report has or had any
direct or indirect beneficial interest in any security described in the
report.
C. Duplicate Brokerage Statements & Confirmations
To assist NA in monitoring compliance with the Code, as a Covered Person,
you must instruct each broker-dealer with whom you maintain an account to
send duplicate copies of all transaction confirmations and statements
directly to NA's Compliance Department. This requirement does not apply to
accounts that are exclusively hold Exempt Securities or are held at a
mutual fund company.
D. Certification of Compliance
As a newly hired Employee, you must certify that you have read, understand
and will comply with the Code.
As a continuing Employee, you must annually certify that you have read,
understand, have complied, and will continue to comply, with the Code.
VI. POTENTIAL CONFLICT OF INTEREST ISSUES
Certain activities, while not directly involving personal trading issues,
nonetheless raise similar potential conflict of interest issues and are
appropriate for inclusion in the Code. These monitored activities are as
follows:
A. Service on Boards of Other Companies
As a Covered Person, you are prohibited from serving on the board of
directors of any publicly traded company or organization. In addition, if
you wish to serve on the board of directors of a privately held "for
profit" company, you must first obtain prior written approval from NA's
Director of Compliance or General Counsel. It is not necessary to obtain
approval to serve on the board of directors of entities such as schools,
churches, industry organizations or associations, or similar non-profit
boards.
B. Gifts
As a Covered Person, you may not seek any gift, favor, gratuity, or
preferential treatment from any person or entity that:
o does business with or on behalf of NA;
o is or may appear to be connected with any present or future
business dealings between NA and that person or organization; or
o may create or appear to create a conflict of interest.
You may only accept gifts offered as a courtesy. You must report on your
monthly Blueform all gifts, favors or gratuities valued at $25 more (except
meals valued at less than $50). Non-Employee Trustees only need to report
gifts if values in excess of $100 and the gift is given in connection with
the Trustee's affiliation with the NA.
C. Gift Pre-Clearance
You must submit a gift pre-clearance form and obtain prior written approval
for all gifts with a fair market value in excess of $100. Fair market value
applies to the value of the total gift (e.g., if you receive 4 tickets
valued at $55 a piece, this is considered a gift in valued over $100 and
must be pre-cleared). You must make every reasonable effort to obtain
approval from your direct supervisor and the Compliance Department prior to
accepting anything of value over $100. In the event that pre-approval is
not possible, you must make disclosure as soon as possible after the
gift/event, in any event, no later than on your next Blue Form.
A gift may be denied or required to be returned or reimbursed if you
receive an excessive number of gifts, especially if received from a single
source or if the total dollar value of gifts received during a single year
is deemed excessive.
D. Gift Violations
In the event you fail to properly disclose and/or pre-clear these items,
the Management Committee will require the employee personally to either
donate the fair market value of the item (or the item itself) to charity or
directly reimburse the person or entity responsible for giving the item.
As a Covered Person, you may not offer any gifts, favors or gratuities that
could be viewed as influencing decision-making or otherwise could be
considered as creating a conflict of interest on the part of the recipient.
You must never give or receive gifts or entertainment that would be
controversial to either you or NA, if the information was made public. You
should be aware that certain NA clients might also place restrictions on
gifts you may give to their employees.
VII. VIOLATIONS OF THE CODE
A violation of this Code is subject to the imposition of such sanctions as may
be deemed appropriate under the circumstances to achieve the purposes of this
Code. NA's Director of Compliance and the Executive Committee will determine
sanctions for violations of the Code. Such sanctions may include those
previously described, as well as others deemed appropriate.
Sanctions for a material violation (i.e., one that involves an actual conflict
or appearance of impropriety) of this Code by a Trustee of the Funds will be
determined by a majority vote of that Fund's Disinterested Trustees.
If you have any questions about any aspect of the Code, contact the Director of
Compliance.
VIII. ANNUAL BOARD REVIEW
The NA management annually prepares a report to the Funds' boards summarizing
existing procedures concerning personal trading (including any changes in the
Code), highlights material violations of the Code requiring significant
corrective action and identifies any recommended changes to the Code.
IX. Administration & Construction
NA's Director of Compliance serves as the "Administrator" of this Code. The
Administrator's duties include:
o Maintenance of a current list of Covered Persons;
o Providing all Employees with a copy of the Code and periodically
informing them of their duties and obligations under the Code;
o Supervising the implementation and enforcement of the terms of the
Code;
o Maintaining or supervising the maintenance of all records and reports
required by the Code;
o Preparing a list of all transactions effected by any Covered Person
during the three (3) day blackout period;
o Determining whether any particular securities transactions should be
exempted pursuant to the provisions of Section III of the Code;
o Issuing, either personally or with the assistance of counsel, any
interpretation of the Code which would be consistent with the
objectives of the Code;
o Conducting inspections or investigations reasonably required to detect
and report material violations of the Code and provide recommendations
relative to these violations to NA's Management Committee, or the
Board of Trustees of a Fund or any Committee appointed by them to deal
with such information;
o Submitting a quarterly report to the Trustees of each Fund containing
a description of any material violation and action taken and any other
significant information concerning administration of the Code; and
o Regular reporting on Code compliance to the Executive Committee and
General Counsel.
X. AMENDMENTS & MODIFICATIONS
This Code may be amended or modified as deemed necessary by the officers of the
Funds, with the advice of Fund counsel, provided such amendments or
modifications shall be submitted to the Board of Trustees of the Funds for
ratification and approval at the next available meeting. This version of the
Code has been amended taking into account the recent amendments to Rule 17j-1
under the Investment Company Act of 1940. This Code is effective as of March 20,
2000 to be ratified by the Board of Trustees of the Funds at its next regularly
scheduled meeting.
<PAGE>
APPENDIX I
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
NICHOLAS-APPLEGATE SECURITIES
POLICIES AND PROCEDURES CONCERNING THE MISUSE
OF MATERIAL NON-PUBLIC INFORMATION
("INSIDER TRADING")
Every employee of Nicholas-Applegate Capital Management, a California Limited
Partnership ("NA") must read and retain a copy of these Policies and Procedures.
Any questions regarding the Policies and Procedures described herein should be
referred to NA's Compliance Department ("Compliance").
SECTION I. POLICY STATEMENT ON INSIDER TRADING ("Policy Statement")
NA's Policy Statement applies to every Employee and extends to activities
both within and outside the scope of their duties at NA. NA forbids any
Employee from engaging in any activities that would be considered "insider
trading."
The term "insider trading" is not defined in the federal securities laws,
but generally is understood to prohibit the following activities:
o Trading by an insider, while in possession of material non-public
information;
o Trading by a non-insider, while in possession of material
non-public information, where the information either was
disclosed to the non-insider in violation of an insider's duty to
keep it confidential or was misappropriated;
o Recommending the purchase or sale of securities while in
possession of material non-public information; or o Communicating
material non-public information to others (i.e., "tipping").
The elements of insider trading and the penalties for such unlawful conduct
are discussed below. If you have any questions regarding this Policy
Statement you should consult the Compliance Department.
WHO IS AN INSIDER?
The concept of "insider" is broad and it includes officers, partners and
employees of a company. In addition, a person can be a "temporary insider"
if he or she enters into a special confidential relationship in the conduct
of a company's affairs and, as a result, is given access to information
solely for the company's purposes. A temporary insider can include, among
others, company attorneys, accountants, consultants, bank lending officers,
and the employees of these organizations. In addition, NA and its Employees
may become temporary insiders of a company that NA advises or for which NA
performs other services. According to the U.S. Supreme Court, before an
outsider will be considered a temporary insider for these purposes, the
company must expect the outsider to keep the disclosed non-public
information confidential and the relationship must, at least, imply such a
duty.
WHAT IS MATERIAL INFORMATION?
Trading, tipping, or recommending securities transactions while in
possession of inside information is not an actionable activity unless the
information is "material." Generally, information is considered material
if: (i) there is a substantial likelihood that a reasonable investor would
consider it important in making his or her investment decisions or (ii) it
is reasonably certain to have a substantial effect on the price of a
company's securities. Information that should be considered material
includes, but is not limited to:
o dividend changes; o earnings estimates;
o changes in previously released earnings estimates;
o a joint venture;
o the borrowing of significant funds;
o a major labor dispute, merger or acquisition proposals or
agreements;
o major litigation;
o liquidation problems; and
o extraordinary management developments.
For information to be considered material, it need not be so important that
it would have changed an investor's decision to purchase or sell particular
securities; rather it is enough that it is the type of information on which
reasonable investors rely in making purchase or sale decisions. The
materiality of information relating to the possible occurrence of any
future event would depend on the likelihood that the event will occur and
its significance if it did occur.
Material information does not have to relate to a company's business. For
example, in U.S. v. Carpenter, 791 F.2d 1024 (2d Cir. 1986), aff'd, 484
U.S. 19 (1987) (affirmed without opinion by an evenly divided court with
respect to the charge of insider trading, based on the "misappropriation"
theory), the court considered as material certain information about the
contents of a forthcoming newspaper column that was expected to affect the
market price of a security. In that case, a Wall Street Journal reporter
was found criminally liable for disclosing to others the dates that reports
on various companies would appear in the Journal and whether those reports
would be favorable or not.
WHAT IS NON-PUBLIC INFORMATION?
All information is considered non-public until it has been effectively
communicated to the marketplace. One must be able to point to some fact to
show that the information is generally public. For example, information
found in a report filed with the SEC, or appearing in Dow Jones, Reuters
Economic Services, The Wall Street Journal or other publications of general
circulation would be considered public. Information in bulletins and
research reports disseminated by brokerage firms are also generally
considered to be public information.
BASIS FOR LIABILITY
In order to be found liable for insider trading, one must either (i) have a
fiduciary relationship with the other party to the transaction and have
breached the fiduciary duty owed to that other party, or (ii) have
misappropriated material non-public information from another person.
FIDUCIARY DUTY THEORY
---------------------
Insider trading liability may be imposed on the theory that the
insider breached a fiduciary duty to a company. In 1980, the U.S.
Supreme Court held that there is no general duty to disclose before
trading on material non-public information, and that such a duty
arises only where there is a fiduciary relationship. That is, there
must be an existing relationship between the parties to the
transaction such that one party has a right to expect that the other
party would either (a) disclose any material non-public information,
if appropriate or permitted to do so, or (b) refrain from trading on
such material non-public information. Chiarella v. U.S., 445 U.S. 222
(1980).
In Dirks v. SEC, 463 U.S. 646 (1983), the U.S. Supreme Court stated
alternative theories under which non-insiders can acquire the
fiduciary duties of insiders: (a) they can enter into a confidential
relationship with the company through which they gain the information
(e.g., attorneys, accountants, etc.), or (b) they can acquire a
fiduciary duty to the company's shareholders as "tippees" if they were
aware, or should have been aware, that they had been given
confidential information by an insider that violated his or her
fiduciary duty to the company's shareholders by providing such
information to an outsider.
However, in the "tippee" situation, a breach of duty occurs only where
the insider personally benefits, directly or indirectly, from the
disclosure. Such benefit does not have to be pecuniary, and can be a
gift, a reputational benefit that will translate into future earnings,
or even evidence of a relationship that suggests a quid pro quo.
MISAPPROPRIATION THEORY
-----------------------
Another basis for insider trading liability is the "misappropriation"
theory. Under the misappropriation theory, liability is established
when trading occurs as a result of, or based upon, material non-public
information that was stolen or misappropriated from any other person.
In U.S. v. Carpenter, supra, the court held that a columnist for The
Wall Street Journal had defrauded the Journal when he obtained
information that was to appear in the Journal and used such
information for trading in the securities markets. The court held that
the columnist's misappropriation of information from his employer was
sufficient to give rise to a duty to disclose such information or
abstain from trading thereon, even though the columnist owed no direct
fiduciary duty to the issuers of the securities described in the
column or to purchasers or sellers of such securities in the
marketplace. Similarly, if information is given to an analyst on a
confidential basis and the analyst uses that information for trading
purposes, liability could arise under the misappropriation theory.
PENALTIES FOR INSIDER TRADING
Penalties for trading on, or communicating material non-public information
are severe, both for individuals involved in such unlawful conduct and
their employers. A person can be subject to some or all of the penalties
below even if he or she did not personally benefit from the violation.
Penalties include:
o Civil injunctions;
o Criminal penalties for individuals of up to $1 million and for
"non-natural persons" of up to $2.5 million plus, for
individuals, a maximum jail term from five to ten years;
o Private rights of actions for disgorgement of profits;
o Civil penalties for the person who committed the violation of up
to three times the profit gained or loss avoided, whether or not
the person actually benefited;
o Civil penalties for the employer or other controlling person of
up to the greater of $1 million per violation or three times the
amount of the profit gained or loss avoided, as a result of each
violation; and
o A permanent bar, pursuant to the SEC's administrative
jurisdiction, from association with any broker, dealer,
investment company, investment adviser, or municipal securities
dealer.
In addition, any violation of this Policy Statement can be expected to
result in serious sanctions by NA, including dismissal of the persons
involved.
SECTION II. PROCEDURES TO IMPLEMENT NA'S POLICY STATEMENT
The following procedures have been established to aid NA's Employees in avoiding
insider trading, and to aid NA in preventing, detecting and imposing sanctions
against insider trading. Every Employee of NA must follow these procedures or
risk serious sanctions, as described above. If you have any questions about
these procedures you should consult with the Director of Compliance.
IDENTIFYING INSIDER INFORMATION
Before trading for yourself or others, including for any client accounts
managed by NA, in the securities of a company about which you may have
potential insider information, or revealing such information to others or
making a recommendation based on such information, you should ask yourself
the following questions.
o Is the information material?
o Is this information that an investor would consider important in
making an investment decision?
o Is this information that would substantially affect the market
price of the securities if generally disclosed?
o Is the information non-public? o To whom has this information
been provided?
o Has the information been effectively communicated to the
marketplace by being published in The Wall Street Journal or
other publications of general circulation, or has it otherwise
been made available to the public?
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the
information may be material and non-public, you should take the following
steps.
o Report the matter immediately to Compliance and disclose all
information that you believe may bear on the issue of whether the
information you have is material and non-public;
o Refrain from purchasing or selling securities with respect to
such information on behalf of yourself or others, including for
client accounts managed by NA; and
o Refrain from communicating the information inside or outside NA,
other than to Compliance.
After Compliance has reviewed the issue, you will be instructed to continue
the prohibitions against trading, tipping, or communication, or you will be
allowed to trade and communicate the information. In appropriate
circumstances, our Director of Compliance will consult with our General
Counsel as to the appropriate course of action.
PERSONAL SECURITIES TRADING
All Employees of NA must adhere to NA's Code of Ethics and Conduct ("Code")
with respect to:
o securities transactions effected for their own account,
o accounts over which they have a direct or indirect beneficial
interest, and
o accounts over which they exercise any direct or indirect
influence.
Please refer to NA's Code as necessary. In accordance with the Code,
Employees are required to obtain prior written approval from Compliance for
all personal securities transactions (unless otherwise exempt under the
Code) and to submit to Compliance a Monthly Securities Transaction and Gift
Report ("Blueform") concerning all equity securities transactions as
required by NA's Code.
RESTRICTING ACCESS TO MATERIAL NON-PUBLIC INFORMATION
Information in your possession that you identify, or that has been
identified to you as material and non-public, must not be communicated to
anyone, except as provided above. In addition, you should make certain that
such information is secure. For example, files containing material
non-public information should be sealed and inaccessible and access to
computer files containing material non-public information should be
restricted by means of a password or other similar restriction.
RESOLVING ISSUES CONCERNING INSIDER TRADING
If, after consideration of the items set forth above, doubt remains as to
whether information is material or non-public, or if there is any
unresolved question as to the applicability or interpretation of the
foregoing procedures, or as to the propriety of any action, please discuss
such matters with our Director of Compliance before trading or
communicating the information in question to anyone.
SUPERVISORY PROCEDURES
NA's Compliance Department is critical to the implementation and
maintenance of these Policies and Procedures against insider trading. The
supervisory procedures set forth below are designed to detect and prevent
insider trading.
PREVENTION OF INSIDER TRADING
-----------------------------
In addition to the pre-approval and monthly reporting procedures specified
in the Code concerning personal securities transactions, the following
measures have been implemented to prevent insider trading by NA's
Employees.
1. All Employees of NA will be provided with a copy of these Policies and
Procedures regarding insider trading.
2. Compliance will, as deemed necessary, conduct educational seminars to
familiarize Employees with NA's Policies and Procedures. Such
educational seminars will target, in particular, persons in sensitive
areas of NA who may receive inside information more often than others;
3. Compliance will answer questions regarding NA's Policies and
Procedures;
4. Compliance will resolve issues of whether information received by an
Employee of NA is material and non-public;
5. Compliance will review these Policies and Procedures on a regular
basis and update as necessary;
6. Whenever it has been determined that an Employee of NA has possession
of material non-public information, Compliance will (i) implement
measures to prevent dissemination of such information, and (ii)
restrict Employees from trading in the securities by placing such
securities on NA's Restricted List; and
7. Upon the request of any Employee, Compliance will review and any
requests for clearance to trade in specified securities and either
approve or disapprove.
DETECTION OF INSIDER TRADING
----------------------------
To detect insider trading, Compliance will:
1. Review the personal securities transaction reports filed by each
Employee, including subsequent monthly review of all personal
securities transactions;
2. Review the trading activity of client accounts managed by NA;
3. Review the trading activity of NA's own accounts, if any; and
4. Coordinate the review of such reports with other appropriate Employees
of NA when Compliance has reason to believe inside information has
been provided to certain Employees.
REPORTS TO MANAGEMENT
---------------------
Promptly upon learning of a potential violation of NA's Policies and
Procedures, Compliance will prepare a confidential written report to
management, providing full details and recommendations for further action.
In addition, Compliance will prepare reports to management, when
appropriate, setting forth:
1. A summary of existing procedures to prevent and detect insider
trading;
2. Full details of any investigation, either internal or by a regulatory
agency,of any suspected insider trading and the results of such
investigation;
3. An evaluation of the current procedures and any recommendations for
improvement; and
4. A description of NA's continuing education program regarding insider
trading, including the dates of any seminars since the last report to
management.
In response to such report, management will determine whether any changes
to the Policies and Procedures might be appropriate.
<PAGE>
APPENDIX II
EXAMPLES OF BENEFICIAL OWNERSHIP
>> Securities held by an Access Person for their own benefit, regardless of
the form in which held;
>> Securities held by others for an Access Person's benefit, such as
securities held by custodians, brokers, relatives, executors or
administrators;
>> Securities held by a pledgee for an Access Person's account;
>> Securities held by a trust in which an Access Person has an income or
remainder interest, unless the Access Person's only interest is to receive
principal (a) if some other remainderman dies before distribution or (b) if
some other person can direct by will a distribution of trust property or
income to the Access Person;
>> Securities held by an Access Person as trustee or co-trustee, where the
Access Person or any member of their immediate family (i.e., spouse,
children or their descendants, stepchildren, parents and their ancestors,
and stepparents, in each case treating a legal adoption as a blood
relationship) has an income or remainder interest in the trust;
>> Securities held by a trust of which the Access Person is the settlor, if
the Access Person has the power to revoke the trust without obtaining the
consent of all the beneficiaries;
>> Securities held by a general or limited partnership in which an Access
Person is either the general partner of such partnership or a controlling
partner of such entity (e.g., Access Person owns more than 25% of the
partnership's general or limited partnership interests);
>> Securities held by a personal holding company controlled by an Access
Person alone or jointly with others;
>> Securities held in the name of an Access Person's spouse - unless legally
separated or divorced;
>> Securities held in the name of minor children of an Access Person or in the
name of any relative of an Access Person or of their spouse (including an
adult child) who is presently sharing the Access Person's home;
>> Securities held in the name of any person other than an Access Person and
those listed in above, if by reason of any contract, understanding,
relationship, agreement, or other arrangement the Access Person obtains
benefits equivalent to those of ownership; and
>> Securities held in the name of any person other than an Access Person ,
even though the Access Person does not obtain benefits equivalent to those
of ownership (as described above), if the Access Person can vest or re-vest
title in himself.
<PAGE>
APPENDIX III
QUICK REFERENCE GUIDE
- --------------------------------------------------------------------------------
DESCRIPTION PRE- REPORT BLACK-OUT HOLDING TRADING DISGORGEMENT
CLEAR (Blue PERIOD PERIOD FINE REQUIRED
Form) APPLIES
- --------------------------------------------------------------------------------
Exempt Securities: NO NO NO NO N/A N/A
Open-end mutual funds,
US Gov't securities,
BAs, CDs, CP, Muni
bond and stock indices
- --------------------------------------------------------------------------------
Exempt Transactions: NO NO NO NO N/A N/A
No control or influence,
non-voluntary, automatic
dividend reinvestment
plan, exercise of pro-rata
rights issue, options
or futures on commodities,
currencies or interest rates
- --------------------------------------------------------------------------------
De Minimis Transactions: NO YES NO YES YES YES
1,000 shares or $10,000
and NYSE or other
listed domestic exchange,
including NASDAQ, and
market cap = $2 billion
(daily limit)
- --------------------------------------------------------------------------------
= 500 shares, NYSE, or YES YES NO YES YES YES
market cap = $500 million
million
- --------------------------------------------------------------------------------
NOTE: This information is provided as a summary only. You are responsible to
ensure your personal securities trading complies with the Code. Please refer to
the Code for further details. If you have any questions, please contact
Compliance.
<PAGE>
APPENDIX IV
EXEMPT INDICES
The following are exempt from the 60-day minimum hold rule and are exempt from
pre-clearance:
o S&P 500 Index
o S&P 100 Index
o S&P Mid Cap Index (400 Issues)
o S&P Small Cap Index (600 Issues)
o NASDAQ 100 Index
o Russell 2000 Index
o Wilshire Small Cap Index (250 Issues)
o EUROTOP 100 Index
o Financial Times Stock Exchange (FT-SE) 100 Index
o Japan Index (210 Issues)
o NYSE Composite Index (2400 Issues)
o PHLX National OTC Index (100 Issues)
o Standard & Poor's Depository Receipts (SPDRs)
o Standard & Poor's Mid Cap 400 Depository Receipts (Mid Cap SPDRs)
o Gold/Silver Index Options
o World Equity Benchmark Shares (WEBS)
o JP Morgan Commodity Indexed Preferred Securities, Series A (Symbol JPO)
o Dow Jones Industrials Diamonds (DIA)
o NASDAQ 100 Shares (QQQ)
The Director of Compliance may approve any other Index on a case-by-case basis.
If you have any questions regarding the above, please contact the Compliance
Department.
<PAGE>
APPENDIX V
NEW HIRES:
PLEASE COMPLETE, SIGN & RETURN THE FOLLOWING 4 PAGES TO THE COMPLIANCE
DEPARTMENT WITHIN 5 DAYS OF YOUR DATE OF HIRE
YOU ARE NOT PERMITTED TO EXECUTE ANY PERSONAL
TRADES UNTIL THESE CERTIFICATES ARE FILED.
ANNUAL RECERTIFICATION (PRESENT EMPLOYEES):
YOU ARE REQUIRED TO COMPLETE, SIGN & RETURN THE FOLLOWING 4 PAGES TO THE
COMPLIANCE DEPARTMENT BY THE ANNUAL DUE DATE (STATED IN RENEWAL PACKET). IF IT
IS RECEIVED AFTER THAT DATE YOU WILL INCUR A FINE AS FOLLOWS - $50 FOR THE FIRST
DAY LATE & $10 EVERY DAY AFTER THAT.
ALL FINES ARE WRITTEN & SENT TO THE UNITED WAY.
YOU WILL ALSO BE RESTRICTED FROM TRADING UNTIL THESE
CERTIFICATES ARE RECEIVED IN COMPLIANCE (ONLY IF LATE).
THANK YOU
- --------------------------------------------------------------------------------
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
NICHOLAS-APPLEGATE SECURITIES
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
CERTIFICATE OF COMPLIANCE
- -----------------------------------
NAME (PLEASE PRINT)
This is to certify that the Code of Ethics and Conduct ("Code"), updated as of
March 2000, is available for my review on the intranet site (home.nacm.com) for
the year 2000. I have read and understand the Code. I certify that I will comply
with these policies and procedures during the course of my employment by NACM or
NAS. Moreover, I agree to promptly report to the Director of Compliance any
violation, or possible violation of this Code, of which I become aware.
I understand that a violation of this Code will be grounds for disciplinary
action or dismissal and may also be a violation of federal and/or state
securities laws.
- ------------------------------------
SIGNATURE
- ------------------------------------
DATE
- --------------------------------------------------------------------------------
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
NICHOLAS-APPLEGATE SECURITIES
INSIDER TRADING POLICY
{APPENDIX I}
CERTIFICATE OF COMPLIANCE
- ------------------------------------
NAME (PLEASE PRINT)
This is to certify that I have read and understand the policies and procedures
of NA's Insider Trading Policy (the "Policy"), updated as of March 2000, and
available for my review on the intranet site (home.nacm.com) for the year 2000.
I certify that I will comply with these policies and procedures during the
course of my employment with NA. Moreover, I agree to promptly report to the
Director of Compliance any violation, or possible violation, of the Policy of
which I became aware.
I understand that violation of the Policy will be grounds for disciplinary
action or dismissal and may also be a violation of federal and/or state
securities laws.
- ------------------------------------
SIGNATURE
- ------------------------------------
DATE
<PAGE>
PERSONAL HOLDINGS REPORT
As required in Section V of the NA's Code of Ethics ("Code"), please provide a
list of all Securities (except Exempt Securities) in which you have a beneficial
interest, including those in accounts of your immediate family and all
Securities in non-client accounts for which you make investment decisions.
1. List all Securities that are:
a) personally owned; or
b) in which a beneficial interest is held by you, your spouse, minor child,
or any other member of your immediate household;
c) any trust or estate of which you or your spouse is a trustee, other
fiduciary or beneficiary, or of which your minor child is a beneficiary; or
d) any person for whom you direct or effect transactions under a power of
attorney or otherwise.
TABLE A
========= ============ ============ ============= =============== ==============
NAME OF TYPE OF HOLDINGS HOLDINGS RELATIONSHIP(3) DISCLAIMER OF
SECURITY SECURITY(1) # OF SHARES PRINCIPAL BENEFICIAL
AMOUNT($)(2) INTEREST(4)
========= ============ ============ ============= =============== ==============
- --------- ------------ ------------ ------------- --------------- --------------
- --------- ------------ ------------ ------------- --------------- --------------
- --------- ------------ ------------ ------------- --------------- --------------
- --------- ------------ ------------ ------------- --------------- --------------
- --------- ------------ ------------ ------------- --------------- --------------
* If none, write NONE.
* NOTE: Continue listing as necessary on additional sheets. (You may attach a
copy of a broker statement listing the information - if so, indicate by writing
"See attached.")
IF YOU ARE A PRESENT EMPLOYEE (new employees continue to Table B)
- -----------------------------------------------------------------
2. Have you, during the past 12 months, requested prior clearance of and filed
monthly reports for all applicable securities transactions as required by
the Code? Yes No
-------- -----
If "No", has the transaction been discussed with the Compliance Department?
Yes No
-------- -----
If not, please advise the Compliance Department in writing separately of
any securities transactions not pre-cleared or reported.
3. Have you filed monthly reports for all reportable securities transactions
as required by the Code?
Yes No
-------- -----
In addition, Nicholas-Applegate requires all employees to disclose all brokerage
accounts in their name, any spouse's account, any children's account or any
other account over which the employee has control or is a beneficiary.
TABLE B
================ ================= ====================
NAME OF BROKER ACCOUNT NUMBER NAME(S) ON ACCOUNT
================ ================= ====================
- ---------------- ----------------- --------------------
- ---------------- ----------------- --------------------
- ---------------- ----------------- --------------------
* If none, write NONE.
I certify that the statements made by me on this form are true, complete and
correct to the best of my knowledge and belief and are made in good faith.
- --------------------- -----------------------------------
DATE SIGNATURE
- ----------------
(1) Insert the following symbol as pertinent to indicate the type of security
held: C-common stock, P-preferred stock, O-option, W-warrant and D-debt
security.
(2) To be completed only for debt securities.
(3) Insert a, b, c, or d as explained above, to describe your interest in these
securities.
(4) Mark x to indicate that the reporting or recording of this securities
holding shall not be construed as an admission that you have any direct or
indirect beneficial interest in these securities. Please see Appendix II
for a list of examples of beneficial interest.
Cypress Asset Management
Code of Ethics
January 1,2000
Attached is a copy of the following documents:
1) Code of Ethics of Cypress Asset Management (the "Code")
2) Acknowledgement Form for _____________
DATE
The acknowledgement form (the "Acknowledgement Form") documents your
representation that you read the Code, understand the Code and complied with the
Code during ___________.
DATE
You may want to review the Code again prior to completing the Acknowledgement
Form.
Please complete the acknowledgment form and return it to me as soon as possible.
Cypress' obtaining and retention of this form is required by the Investment
Advisers Act of 1940 and the Investment Company Act of 1940.
If you were not employed by Cypress during the previous year, please so note on
the acknowledgement form, as appropriate.
If you have questions, please call me.
Rosemary K. Books
Manager, Operations
<PAGE>
CYPRESS ASSET MANAGEMENT
CODE OF ETHICS
January 1, 2000
I. Statement of General Principles
Cypress Asset Management ("Cypress" or the "Firm") holds its employees to a
high standard of integrity and business practice. In serving its clients,
the Firm strives to avoid conflicts of interest or the appearance of
conflicts in connection with the securities transactions of the Firm and
its employees. This Code of Ethics is intended to serve as a guide to
administering and overseeing the Firm's investment advisory business, and
includes procedures relating to the trading practices of the Firm's
personnel.
Cypress is an investment adviser registered under the Investment Advisers
Act of 1940 ("Advisers Act"), and provides investment advice to investment
companies registered under the Investment Company Act of 1940 ("1940 Act")
and others. Consistent with Rule 17j-1 of the 1940 Act, Cypress has adopted
this Code of Ethics which contains provisions reasonably necessary to
prevent the Firm's employees from engaging in any act, practice, or course
of business that would defraud or mislead any of its clients, or that would
constitute a manipulative practice.
II. Applicability
This Code of Ethics applies to all employees of Cypress, as well as to
Cypress's owners and officers. For purposes of this Code the term
"employee" includes, but is not limited to, persons who, in the course of
their regular functions or duties, participate in the process of purchasing
or selling securities, or participate in making recommendations with
respect to the purchase or sale of securities, on behalf of any of the
Firm's clients, including investment companies.
III. Definitions
A. An "approved trade" is a trade for which an employee has received
prior approval pursuant to the procedures described in this Code.
B. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the
recommendation, when such person considers making the recommendation.
C. An employee will be deemed to have a "beneficial interest" in a
security or in an account in which the employee, spouse, minor child
or relative of the employee or spouse who shares the same household as
the employee has a direct or indirect pecuniary interest.
D. A "Firm trade" is a security in which the Firm has entered orders for
one or more clients.
E. "Security" means any stocks, bonds, notes, debentures and any interest
commonly known as a security, including options, warrants and rights
to purchase or sell.
IV. Standards of Conduct
A. Investment-related information learned by an employee during the
course of carrying out Firm-related duties is to be kept confidential
until or unless publicly available. Such information may include, but
is not limited to, portfolio-related research activity, brokerage
orders being placed on behalf of a client, and recommendations to
purchase or sell specific securities.
B. Employees may not intentionally induce a Firm's client to take action
or not take action for the purpose of achieving a personal benefit.
C. Employees may not use actual knowledge of a client's transactions to
profit by the market effect of the client's transaction.
D. Employees will not take unique investment opportunities that should be
made in the Firm's clients' accounts for accounts in which they have a
beneficial interest.
V. Restriction on Personal Investment and Related Activities
A. Opening an Account Each employee who wishes to establish an account,
including any account in which the employee will have a beneficial
interest, must notify and obtain approval from the Firm's compliance
officer prior to opening an account.
B. Trading Approvals Each employee who wishes to trade in an account in
which the employee has a beneficial interest, must notify and obtain
prior approval from the Firm's compliance officer prior to effecting
the trade.
1. Approval is to be requested by submitting an affidavit entitled
"Buy or Sell Order for Employee's Personal Account" to President,
Xavier J. Urpi, and then to the Firm's Trading Desk.
2. Approvals will be granted at the discretion of the compliance
officer. If the compliance officer approves the trade, the Firm's
Trading Desk must also review the trade, prior to approval, by
reviewing outstanding orders.
3. Employees must effect trades by the close of business on the same
day approval is received.
C. Trading Prohibitions An employee may not buy or sell a security for an
account in which they have a beneficial interest, when a security is
being considered for purchase or sale, a Firm trade is being made, or
during the 48-hour period following a Firm trade in that security. If
the Cypress Trading Desk anticipates trading in the security the trade
may be denied. However, if a Firm trade is being made in a security,
only to size-up or size-down an account (due to deposits and/or
withdrawals), an employee may be permitted to trade in that security,
at the discretion of President, Xavier J. Urpi, if such a trade is
deemed immaterial considering all relevant facts.
D. Firm Trade Occurs After Approved Employee Trade If the Firm enters an
order for a security within 24 hours after an employee has effected an
approved trade, the President will discuss the trade with the
employee. Depending on the circumstances, the President may, for
example:
1. Break the trade if (a) it appears that the employee may have had
advance information concerning the Firm's trade, or (b) to avoid
the appearance of impropriety; or
2. Allow the trade if circumstances justify such action. If this
option is exercised, the President is required to write an
explanatory memo to the Firm's files.
E. Trading by Research Analysts The Firm's research analysts may not
trade, for any account or accounts in which they have a beneficial
interest, in any security they are considering recommending for a Firm
Trade. The compliance officer may grant exceptions in advance of
trades as deemed appropriate.
F. Outside Directorships Firm employees may not serve on the boards of
directors of publicly traded companies unless (I) the Firm's board of
directors grants prior Authorization, and (II) a mechanism is put into
place and maintained for the purpose of preventing the flow of
information from the employee serving on the Board to the employee
making investment decisions on behalf of the Firm's Clients.
VI. Exemptions
A. The provisions of Section V are not applicable to:
1. Purchases or sales of securities issued by the Government of the
United States, bankers' acceptances, bank certificates of
deposit, commercial paper, money market instruments and shares of
registered open-end investment companies.
2. Purchases or sales of securities which are non-volitional on the
part of either the employee or the Firm client.
3. Purchases which are part of an automatic dividend reinvestment
plan.
4. Purchases effected pursuant to the exercise of rights issued by
an issuer pro-rata to all holders of a class of its securities,
to the extent such rights were acquired from the issuer, and the
subsequent sale of those rights.
B. The President may exercise discretion to approve a trade if, for
example it appears that:
1. The potential harm to the Firm's client is remote:
2. The trade is unlikely to affect a highly institutionalized
market; or
3. The trade is clearly not related economically to securities to be
purchased, sold or held by any of the Firm's clients.
VII. Reporting
A. Upon being hired by the Firm, all employees must submit to the
compliance officer, a list of personal securities holdings no later
than 10 days after the employee becomes an access person. The report
must be a list of every security in the account. The holdings report
must include the title of the security, the number of shares held, the
principal amount of the security and its cusip number.
B. Quarterly transaction reports will also be required no later than 10
days after the end of the calendar quarter and must contain the cusip
number for each security for which a transaction occurred and the date
that the employee submitted the report.
C. In addition to the initial holdings report and quarterly transaction
report submitted by the employee, an annual holdings report will also
be required to be submitted.
D. For each (I) employee brokerage account or commodity account, (II)
brokerage or commodity account in which an employee has a beneficial
interest, or (III) account over which an employee has the right to
exercise discretionary trading authority, employees must arrange with
the broker-dealer to have duplicate confirmations and statements sent
to the Firm's compliance officer.
E. Any report, confirmation or statement submitted pursuant to this
Section is not to be construed as an admission of beneficial interest
in the security to which the item relates.
VIII. Sanctions
A. In the event of a failure by any employee to comply with the
provisions of this Code or of applicable securities laws, the Chief
Operating Officer may impose, or recommend that the Firm's board of
directors or other officers impose, appropriate sanctions, including
dismissal.
B. Consistent with the statement of the Securities and Exchange
Commission in connection with its adoption of Rule 17j-1 of the 1940
Act, violations of this Code are not to be construed as per se
violations of the law.
IX. Insider Trading Policy Statement
A. Cypress forbids any officer, director or employee from trading, either
for his or her personal account or on behalf of others (including
mutual funds and private accounts managed by the Firm), while in
possession of material nonpublic information, or communicating
material non-public information to others in violation of the law.
This prohibited conduct is often referred to as "insider trading."
B. As a general guide for Firm employees and to provide assistance in
understanding and in complying with Section IX.A, "insider trading" is
described below.
1. Who is an insider?: The concept of "insider" is broad. It
includes officers, directors, trustees and employees of a
company. In addition, a person can be a "temporary insider" if he
or she enters into a special confidential relationship in the
conduct of a company's affairs and as a result is given access to
information solely for the company's purposes. A temporary
insider can include, among others, a company's attorneys,
accountants, consultants, bank lending officers, and the
employees of those organizations. In addition, Cypress may become
a temporary insider of a company for which it provides investment
advice. According to the U. S. Supreme Court, the company must
expect the outsider to keep the disclosed nonpublic information
confidential and the relationship must at least imply such a duty
before the outsider will be considered an insider.
2. What is material information?: Trading on information is not a
basis for liability unless the information is material.
Information generally is considered "material" if: a. There is a
substantial likelihood that a reasonable investor would consider
the information important in making an investment decision; or b.
The information is reasonably certain to have a substantial
effect on the price of a company's securities. Information that
should be considered material includes, but is not limited to:
dividend changes, earnings estimates not previously released,
significant merger or acquisition proposals or agreement, major
litigation, liquidity problems, and extraordinary management
developments.
3. What is non-public information?: Information is non-public until
it has been effectively communicated to the marketplace. One must
be able to point to some fact to show that the information is
public. For example, information found in a report filed with the
SEC, or appearing in Dow Jones, Reuters Economic Services, The
Wall Street Journal or other publications of general circulation
ordinarily would be considered public. Further, in certain
circumstances, information disseminated to certain segments of
the investment community may be deemed "public"; for example,
research communicated through institutional information
dissemination services such as First Call.
4. Penalties for insider trading?: Penalties for insider trading can
be severe, both for the individuals involved, as well as for
their employers. A person can be subject to some or all of the
penalties listed below even if he or she does not personally
benefit from the violation. Penalties include:
a. Jail sentences
b. Civil injunctions
c. Treble damages
d. Disgorgement of profits
e. Fines for the person who committed the violation of up to
three times the profit gained or loss avoided, whether or
not the person actually benefited, and
f. Fines for the employer or other controlling person of up to
the greater of $1,000,000 or three times the amount of the
profit gained or loss avoided.
(1) Investment advisers and broker-dealers may be subject
to substantial monetary penalties for a failure to
supervise if their personnel engage in insider trading.
In connection with this violation, the SEC or other
regulatory authority establishes that the firm either:
(a) "knew or recklessly disregarded" evidence that an
officer, employee, or other "controlled person"
was likely to engage in insider trading and failed
to take appropriate steps to prevent it; or
(b) knowingly or recklessly failed to establish
written policies and procedures designed to
prevent insider trading and such failures
substantially contributed to or permitted the
occurrence of the violation.
(2) In this regard, Section 204A of the Investment Advisers
Act of 1940 ("Prevention of Misuse of Non-public
Information") requires investment advisers to (1)
establish, and (2) enforce, written supervisory
procedures "reasonably designed" (taking into account
the nature of the investment adviser's business) to
prevent trading on material, non-public information by
the adviser and its employees. Unless both (1) and (2)
are complied with, the adviser may be subject to
monetary penalties.
C. All questions regarding this policy statement are to be directed to
the Firm's President.
<PAGE>
CYPRESS ASSET MANAGEMENT
CODE OF ETHICS AND INSIDER TRADING POLICY AND PROCEDURES
ACKNOWLEDGEMENT FORM
1. I certify that I have read and am familiar with Cypress Asset Management's
Code of Ethics and Insider Trading Policy Statement (the "Code").
2. I represent that I have complied with the Code at all times during the
previous calendar year.
3. I have, during the previous calendar year, disclosed and confirmed all
holdings and transactions required to be disclosed or confirmed pursuant to
the Code and Insider Trading Policy Statement, including any and all
accounts in which I have a beneficial interest and over which I exercise
trading discretion.
4. If I opened any new accounts during the previous year, I notified the Firm,
and I authorized duplicate statements and confirmations with respect to
such account to be sent to the Firm.
Name (print):___________________________________________________________
Position:_______________________________________________________________
Signature:______________________________________________________________
Date:__________________________________________________________________
Exception:
Item Number Explanation
- ----------- -----------
LIST OF ACCOUNTS
(Attach additional sheets, if necessary)
Account Title: _________________________________
Broker Dealer: _________________________________
Account Number: _______________________________
Account Title: _______________________________
Broker Dealer: _______________________________
Account Number: _______________________________
Account Title: _______________________________
Broker Dealer: _______________________________
Account Number: _______________________________
Code of Ethics for Cypress Updated 1-2000.doc
FINANCIAL MANAGEMENT ADVISORS, INC.
PERSONAL TRADING POLICY & PROCEDURES
February 15, 2000
I. FIRM POLICY STATEMENT ON PERSONAL TRADING
It is the established policy of Financial Management Advisors, Inc. (the
"Firm") that as an investment adviser and fiduciary to our clients, the Firm
(including its officers, directors and employees) is committed to complying with
all applicable regulatory and legal obligations with respect to our obligations
concerning the proper handling of inside information, the avoidance of any
conflicts of interest between the Firm and any of our clients and the prevention
of Access Persons from engaging in fraudulent activities. Accordingly, no
officer, director or any employee (each, an "Access Person") may misuse any
inside information in any manner, or trade, either personally or on behalf of
others, including mutual funds and private accounts managed by the Firm, on
material non-public information or communicate material non-public information
to others in violation of the law, trade in a manner that will create a conflict
of interest between a client and the Firm, or trade in a manner that will
constitute a fraud
II. BACKGROUND
There are various federal and state securities laws which address and
prohibit the misuse of material, non-public information, including the
anti-fraud provisions of the Securities Exchange Act of 1934 ("Exchange Act")
and in particular, the Insider Trading and Securities Fraud Enforcement Act of
1988 ("ITSFEA"). Also, the Investment Advisers Act of 1940 ("Advisers Act"),
Section 204A, requires every investment adviser to establish, maintain and
enforce written policies and procedures reasonably designed, taking into
consideration the nature of such adviser's business, to prevent the misuse of
material, non-public information in violation of the Advisers Act or the
Exchange Act by the investment adviser or any person associated with the
investment adviser. In addition, Rule 17j-1 under the Investment Company Act of
1940 (the "Investment Company Act") requires an investment adviser to a
registered investment company (i.e., a mutual fund) to establish a Code of
Ethics to prevent Access Persons from engaging in fraud. Generally, Rule 17j-1
requires the Firm to institute procedures reasonably necessary to prevent Access
Persons from violating the anti-fraud provisions of Rule 17j-1 by monitoring the
trading activity of certain personnel to see whether any personal trading
activity creates a conflict of interest between a client and the Firm. To the
extent that the Firm serves as an adviser or subadviser to any investment
company registered under the Investment Company Act , these Personal Trading
Policy and Procedures are intended to constitute a Code of Ethics as required by
Rule 17j-1 under the Investment Company Act.
A. INSIDER INFORMATION
Insider information is very broadly defined by the courts and
regulatory authorities to mean material and non-public information. There
may be broad and complex interpretations as to the facts and circumstances
of what may constitute inside information.
B. MATERIAL INFORMATION
Information will be determined to be "material" if there is a
substantial likelihood that a reasonable investor would consider the
information important when deciding to purchase, sell or hold a security.
Generally, information will be viewed as material if there is likely
to be an effect on the price of a security when the information is publicly
disclosed. In most cases, information concerning the following events
should be presumed to be "material":
o Increases or decreases in dividends
o Declarations of stock splits and stock dividends
o Financial forecasts, especially estimates of earnings
o Changes in previously disclosed financial information
o Mergers, acquisitions or takeovers
o Proposed issuances of new securities
o Significant changes in operations
o Significant increases or declines in backlog orders or the award
of a significant contract
o Extraordinary borrowings
o Major litigation
o Financial liquidity problems
o Significant changes in management
o Purchase or sale of substantial assets
Material information does not have to relate to a company's business.
For example, in a 1987 case, the Supreme Court considered as material
certain information about the contents of a forthcoming newspaper column
that was expected to affect the market price of a security. In that case, a
Wall Street Journal reporter was found criminally liable for disclosing to
others the dates that reports on various companies would appear in the
Journal and whether those reports would be favorable or not.
C. NON-PUBLIC INFORMATION
Information is "non-public" until it is broadly disseminated and
available to the general public through such means as press releases, news
stories, regulatory filings, research reports, among many other means of
distributing information.
Non-public information may also mean information that is proprietary
to the firm, i.e., the firm's businesses, the firm's clients, and areas as
advice to investment banking clients, trading strategies, e.g., large block
trades, and investment recommendations to clients, unpublished research
reports, among many other possibilities.
D. MISUSE OF INSIDE INFORMATION
Misuse of inside information means improper use or acting upon the
material non-public information that constitutes fraud under the securities
laws. Misuse of such information may include buying or selling securities
based on the information for yourself, a client, friend, relative or anyone
else, "tipping" another person about the information or other improper use
of the inside information. The circumstances of what may constitute misuse
may be complex and very broadly interpreted.
E. PENALTIES
Penalties for trading on or communicating material non-public
information are severe, both for individuals involved in such unlawful
conduct and their employers. A person can be subject to some or all of the
penalties below even if he or she does not personally benefit from the
violation. Penalties include:
1. Civil injunction
2. Treble damages
3. Disgorgement of profits
4. Jail sentence
5. Fines for the person who committed the violation of up to three
times the profit gained or loss avoided, whether or not the
person actually benefited
6. Fines for the employer or other controlling person of up to the
greater of $1,000,000 or three times the amount of the profit
gained or loss avoided
In addition, any violation of this policy statement can be expected to
result in serious sanctions by the Firm, including dismissal of the
person(s) involved.
F. AVOIDANCE OF FRAUD
Rule 17j-1 under the Investment Company Act prohibits fraudulent
activities by the Firm and its Access Persons. Specifically, it is unlawful
for any Access Person to:
1. employ any device, scheme or artifice to defraud a client that is
a mutual fund (a "Fund");
2. make any untrue statement of a material fact to a Fund or omit to
state a material fact necessary in order to make the statements
made to a Fund, in light of the circumstances under which they
are made, not misleading;
3. to engage in any act, practice or course of business that
operates or would operate as a fraud or deceit on a Fund; or
4. to engage in any manipulative practice with respect to a Fund.
In order to meet the requirements of Rule 17j-1, the Personal Trading
Policy and Procedures includes a procedure for detecting and preventing
material trading abuses and requires all Access Persons to report personal
securities transactions on an initial, quarterly and annual basis (the
"Reports"). See Section IV - Procedures Regarding Trading for Personal
Accounts.
III. INSIDE INFORMATION POLICY RESTRICTIONS
In accordance with the Firm's Personal Trading Policy and Procedures, the
following restrictions are established to aid each Access Person of the Firm in
avoiding insider trading and to aid the Firm in preventing, detecting and
imposing sanctions against insider trading.
Before trading for yourself or others, including investment companies or
private accounts managed by the Firm, in the securities of a company about which
you have potential inside information, ask yourself the following questions:
1. Is the information material? Is this information that an investor
would consider important in making his or her investment decision? Is
this information of the type that would substantially effect the
market price of the securities if generally disclosed?
2. Is this information non-public? To whom has this information been
provided? Has the information been effectively communicated to the
marketplace?
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the information
is material and non-public, you should take the following steps:
1. Report the matter immediately to the Compliance Officer.
2. Do not purchase or sell the securities on behalf of yourself or
others.
3. Do not communicate the information inside or outside the Firm, other
than to the Compliance Officer.
4. After the Compliance Officer has reviewed the issue, you will be
instructed on whether you can trade and communicate the information.
Information in your possession that you identify as material and non-public
may not be communicated to anyone, including persons within the Firm, except as
provided in the immediately preceding paragraph. In addition, care should be
taken so that such information is secure. For example, files containing material
non-public information should be restricted.
IV. PROCEDURES REGARDING TRADING FOR PERSONAL ACCOUNTS
A. INITIAL HOLDINGS REPORT
No later than 10 days after starting employment with the Firm you must
report, on the form attached as Exhibit A, the following information:
1. The title, number of shares and principal amount of each
Securit(1) in which you have any direct or indirect interest;
2. The name of any broker, dealer or bank with whom you maintain an
account; and
3. The date this report is submitted to the Compliance Officer.
B. QUARTERLY TRANSACTION REPORT
No later than 10 days after the end of a calendar quarter, you must
report, on the form attached as Exhibit B, the following information:
1. With respect to any transaction during the quarter in a Security:
(a) The date of the transaction, the title, the interest rate
and maturity date (if applicable), the number of shares and
the principal amount of each Security involved;
(b) The nature of the transaction (i.e., purchase, sale);
(c) The price at which the transaction was effected;
(d) The name of the broker or dealer through which the
transaction was effected; and
(e) The date this report is submitted to the Compliance Officer.
2. With respect to any account established during the quarter:
(a) The name of the broker, dealer or bank;
(b) The date the account was established; and
(c) The date that this report is submitted to the Compliance
Officer.
C. DUPLICATE STATEMENTS
For each account in which you hold an indirect or direct interest, you
must have duplicate statements and confirmations sent directly to the
Compliance Officer. If these statements and confirmations duplicate the
Quarterly Transaction Report, you do not need to submit that Quarterly
Transaction Report. See a sample letter attached as Exhibit C.
D. ANNUAL HOLDINGS REPORT
On an annual basis, you must report, on the form attached as Exhibit
D, the following information (the information must be current within 30
days of the report):
1. The title, number of shares and principal amount of each Security
in which you hold an indirect or direct beneficial interest;
2. The name of any broker, dealer or bank with whom you maintain an
account; and
3. The date that this report is submitted to the Compliance Officer.
E. PRE-CLEARANCE OF ALL TRADES
The purchase or sale of any Security must be pre-approved by the Chief
Investment Officer or Compliance Officer(2). A pre-clearance form - the
Employee Trading Request Form - is attached as Exhibit E. You must follow
these procedures:
1. Complete, sign and date the form;
2. More than one trade can be listed on a form but you must use a
different form if you are trading in more than one account;
3. Take the form and one copy to either the Chief Investment Officer
or the Compliance Officer for approval(2); and
4. Approval will be given only if there are no restrictions with
respect to that Security and for only ONE day.
F. FURTHER RESTRICTIONS
1. You may not buy or sell any Security for your own account, any
proprietary account of the Firm, any client account or any other
account based upon, or otherwise act upon any material non-public
information in your possession obtained from any source;
2. You may not buy or sell any Security or related Security for any
account or otherwise act upon any material proprietary
information you may have or obtain from any source;
3. You many not recommend the purchase or sale of any security to
any person based upon material non-public information;
4. You may not disclose any material non-public information to any
person outside the Firm without the approval of the Compliance
Officer;
5. Upon receiving any information which you believe could be
considered inside information, or if you are uncertain about
whether any information might be inside information, you may not
act on the information in any manner and must bring the
information to the attention of the Compliance Officer
immediately.
V. SUPERVISORY PROCEDURES AND REVIEW OF REPORTS
The Compliance Department has the responsibility for adopting, implementing
and monitoring the Firm's Personal Trading Policy & Procedures as well as
assisting Access Persons with the policy and reviewing any possible
violations/sanctions with management.
A. PREVENTION OF INSIDER TRADING
The Compliance Department utilizes the following reviews and
procedures to prevent any trading on inside information:
1. Distributing the Personal Trading Policy & Procedures to each new
Access Person upon joining the Firm and to all Access Persons on
an annual basis.
2. Holding an annual compliance meeting with all Access Persons
which will include an educational program to familiarize Access
Persons with the Firm's policy and obtaining an annual employee
certification as to each Access Person's compliance with the
policy and procedures.
3. Assisting any Access Person with any questions or interpretations
about the Firm's policy.
4. Reviewing periodically, at least annually, the Firm's policy and
revising as appropriate in view of any changes in the Firm, its
businesses, the regulations or other factors and informing all
Access Persons about the revised policy.
5. Interpreting and resolving with management or legal counsel any
issues relating to material non-public information, restricting
any such information and determining appropriate action(s) to be
taken.
B. DETECTION OF INSIDER TRADING, FRAUD AND CONFLICTS OF INTEREST
The Compliance Department utilizes the following reviews and
procedures to detect any possible trading on material non-public
information, fraudulent activity and conflicts of interest:
1. A review of any trading activity of the Firm in any proprietary
accounts;
2. A review of all Access Person Reports;
3. A review of all trading activity in all client accounts,
4. Investigation of any circumstances about any possible receipt,
trading or other use of material non-public information by an
Access Person,
5. Promptly upon learning of a potential violation of the Firm's
policy, preparation of a written report to management providing
full details and determination of recommendations and
coordination with management and legal counsel on appropriate
action.
C. ANNUAL REPORTS TO MANAGEMENT
On an annual basis, or immediately upon learning of a material
violation of this Personal Trading Policy and Procedures, the Compliance
Officer will prepare a written report to the management of the Firm setting
forth the following: (i) a summary of existing procedures to detect and
prevent insider trading; (ii) full details of any investigation, either
internal or by a regulatory agency, of any suspected insider trading and
the results of such investigation; (iii) an evaluation of the current
procedures and any recommendations for improvement; and (iv) a description
of the Firm's continuing educational program regarding insider trading,
including the dates of such programs since the last report to management.
D. ANNUAL REPORT AND CERTIFICATION
On an annual basis, the Firm will submit a report (an "Annual Report")
to the Board of Directors of any investment company registered under the
Investment Company Act for which it provides investment advisory services.
Such Annual Report shall describe any violations of this Personal Trading
Policy & Procedures Manual and also certify to the Board of Directors that
the Firm has policies and procedures in place reasonably necessary to
prevent violations of applicable provisions of the Investment Company Act.
VI. APPLICABILITY OF POLICY TO ALL EMPLOYEES
This policy covers each and every person associated with the Firm, and you
are responsible for being familiar with our policy and procedures. As part of
the Firm policy, each employee will be required to sign and return an annual
certification that you have read, understand and agree to abide by the Insider
Trading Policy & Procedures.
The Compliance Department will closely monitor our compliance with our
policy and procedures, however, the primary responsibility is with each
employee. If you should have any question about whether any information may be
inside, confidential or proprietary information, or become aware of any possible
violation, you are to bring either the information, or any question about the
information or the Firm's policy to the Compliance Officer or your department
manager in his absence.
You should be aware that any failure to observe the Firm's policy and
procedures may result in disciplinary action or termination by the Firm. Also,
any possible misuse of inside information may result in your being subject to
very substantial penalties, including criminal proceedings and penalties of very
substantial fines and/or imprisonment, SEC proceedings to obtain profits gained
or losses avoided, and/or orders of censures, sanctions or permanent bars from
our industry. There may also be lawsuits filed by investors seeking damages for
any violations of the insider trading laws.
VII. EMPLOYEE / ANNUAL CERTIFICATION
I certify that I have received, read and understand the Firm's Personal
Trading Policy & Procedures dated February 15, 2000 and represent that:
1. I will comply with the Firm's policy and procedures in all respects.
2. I understand that any violation of the Firm's policies may result in
serious sanctions, including dismissal, as well as possible criminal
proceedings and penalties.
- ------------- ------------------------
Date Signature
------------------------
Name
- --------------
(1) You do not need to report securities that are (i) direct obligations of the
U. S. Government; (ii) bankers' acceptances, certificates of deposit,
commercial paper or high-quality short-term debt instruments; or (iii)
shares issued by open-end funds (i.e., mutual funds).
(2) If neither the Chief Investment Officer nor the Compliance Officer is
available, the pre-approval may be obtained from a Portfolio Manager
<PAGE>
Exhibit A
Financial Management Advisors, Inc.
Initial Holdings Report
Please list all brokerage accounts and individual securities* that you, your
spouse or your immediate family living in your house have. If none, please
indicate so.
* Mutual Fund holdings are specifically exempt from reporting requirements.
=============== ======== ========== ======= ======= =========================
Name of Broker Security Number of Market Stock Duplicate statements
and Account Held Shares Value Symbol being sent to Compliance
Number Department (Yes or No)
=============== ======== ========== ======= ======= =========================
- --------------- -------- ---------- ------- ------- ------------------------
- --------------- -------- ---------- ------- ------- ------------------------
- --------------- -------- ---------- ------- ------- ------------------------
- --------------- -------- ---------- ------- ------- ------------------------
|_| Check here if no Brokerage Accounts.
I CERTIFY THAT THE INFORMATION GIVEN ON THIS FORM IS TRUE TO THE BEST OF MY
KNOWLEDGE. I UNDERSTAND THAT FALSIFICATION OR MISREPRESENTATION OF ANY
INFORMATION REQUESTED IS GROUNDS FOR DISCIPLINARY ACTION.
- --------------------- ---------------------- ---------------
Print Name Signature Date
Please return form to the Compliance Officer
within ten days of start of employement.
<PAGE>
Exhibit B
Financial Management Advisors, Inc.
Quarterly Transaction Report
Employee Name:_______________________________
======== =================== ========== ============== ========= ==========
Date Name of Security Buy/Sell Share/Amount Broker Price
======== =================== ========== ============== ========= ==========
- -------- ------------------- ---------- -------------- --------- ----------
- -------- ------------------- ---------- -------------- --------- ----------
- -------- ------------------- ---------- -------------- --------- ----------
- -------- ------------------- ---------- -------------- --------- ----------
|_| Check here if no transactions during the quarter.
I CERTIFY THAT THE INFORMATION GIVEN ON THIS FORM IS TRUE TO THE BEST OF MY
KNOWLEDGE. I UNDERSTAND THAT FALSIFICATION OR MISREPRESENTATION OF ANY
INFORMATION REQUESTED IS GROUNDS FOR DISCIPLINARY ACTION.
- --------------------- ---------------------- ---------------
Print Name Signature Date
List all new brokerage accounts opened during the previous quarter (include name
of broker, name of beneficial owner, and account number).
Please return form to the Compliance
Officer within ten days of the end of the quarter
<PAGE>
Exhibit C
Brokerage Statements Authorization Letter
(Date)
(Broker Name/Address)
RE: (Employee Name)
(Employee Social Security Number)
Dear Sir or Madam:
Please be advised that the above-referenced person is an employee of Financial
Management Advisors, Inc. (the "Firm"), a registered investment adviser. We
request that you send duplicate statements of this employee's transactions in
securities to the attention of:
Rick Malamed
Financial Management Advisors, Inc.
1900 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4310
This request is made pursuant to the personal trading policies of the Firm as
required under our compliance procedures adopted to comply with federal
securities law.
Thank you for your cooperation.
Sincerely, Authorization by Employee
--------------------------
Rick Malamed Employee Signature
Compliance Officer
<PAGE>
Exhibit D
Financial Management Advisors, Inc.
Annual Holdings Report
Please list all brokerage accounts and individual securities* that you, your
spouse or your immediate family living in your house have. If none, please
indicate so.
* Mutual Fund holdings are specifically exempt from reporting requirements.
=============== ======== ========== ======= ======= =========================
Name of Broker Security Number of Market Stock Duplicate statements
and Account Held Shares Value Symbol being sent to Compliance
Number Department (Yes or No)
=============== ======== ========== ======= ======= =========================
- --------------- -------- ---------- ------- ------- ------------------------
- --------------- -------- ---------- ------- ------- ------------------------
- --------------- -------- ---------- ------- ------- ------------------------
- --------------- -------- ---------- ------- ------- ------------------------
|_| Check here if no Brokerage Accounts.
I CERTIFY THAT THE INFORMATION GIVEN ON THIS FORM IS TRUE TO THE BEST OF MY
KNOWLEDGE. I UNDERSTAND THAT FALSIFICATION OR MISREPRESENTATION OF ANY
INFORMATION REQUESTED IS GROUNDS FOR DISCIPLINARY ACTION.
- --------------------- ---------------------- ---------------
Print Name Signature Date
Please return form to the Compliance Officer.
<PAGE>
Exhibit E
Financial Management Advisors, Inc.
Employee Pre-clearance Trading Request Form
Time Sensitive Document
Please Process Immediately
Requested By:
Date:
====================================== ============
Security Name & Symbol Approval
====================================== ============
|_| Buy |_| Sell -------------------------------------- ------------
|_| Buy |_| Sell -------------------------------------- ------------
|_| Buy |_| Sell -------------------------------------- ------------
Approved By CIO:
Approved By PM:
Approved By Compliance:
EMPLOYEE INVESTMENT TRANSACTION POLICY
For
BLACKROCK, INC.
And
ITS AFFILIATED COMPANIES
Effective March 1, 2000
EMPLOYEE INVESTMENT TRANSACTION POLICY
TABLE OF CONTENTS
TABLE OF CONTENTS..............................................................i
I. PREAMBLE....................................................................1
A. General Principles.....................................................1
B. The General Scope Of The Policy's Application To Personal Investment
Transactions..............................................................3
C. The Organization Of This Policy........................................3
D. Questions..............................................................4
II. PERSONAL INVESTMENT TRANSACTIONS...........................................4
A. In General.............................................................4
B. Reporting Obligations..................................................4
1. Use Of Broker-Dealers And Futures Commission Merchants............4
2. Initial Report....................................................4
3. New Accounts......................................................5
4. Timely Reporting Of Investment Transactions.......................6
5. Related Accounts..................................................6
6. Exemptions From Reporting.........................................6
C. Prohibited Or Restricted Investment Transactions.......................7
1. Initial Public Offerings..........................................7
2. Private Placements................................................7
D. Investment Transactions Requiring Prior Notification...................7
1. Prior Notification Procedure......................................8
2. Exemptions From Prior Notification................................8
(a) Transactions Exempt From Prior Notification................9
(b) Securities Exempt From Prior Notification...................9
(c) Futures Contracts Exempt From Prior Notification............9
E. Ban On Short-Term Trading Profits.....................................10
F. Blackout Periods......................................................10
1. Specific Blackout Periods........................................10
2. Exemptions From Blackout Restrictions............................11
III. INSIDE INFORMATION AND SERVICE AS A DIRECTOR.............................11
A. Inside Information....................................................11
B. Service As A Director.................................................12
IV. EXEMPTIONS................................................................12
V. COMPLIANCE.................................................................13
A. Certifications........................................................13
1. Upon Receipt Of This Policy......................................13
2. Annual Certificate Of Compliance.................................13
B. Supervisory Procedures................................................14
1. The Compliance Committee.........................................14
2. The Compliance Officer...........................................14
3. Post-Trade Monitoring And Investigations.........................14
4. Remedial Actions.................................................15
5. Reports Of Violations Requiring Significant Remedial Action......15
6. Annual Reports...................................................15
VI. EFFECTIVE DATE............................................................16
Appendices
I........Definitions Of Capitalized Terms
II.......Acknowledgment Of Receipt Of The Policy
III......Annual Certification Of Compliance With The Policy
IV.......Initial Report Of Accounts
V........Request For Duplicate Broker Reports
VI.......Investment Transaction Prior Notification Form
VII......Fully Discretionary Account Form
<PAGE>
EMPLOYEE INVESTMENT TRANSACTION POLICY
FOR BLACKROCK, INC. AND
ITS AFFILIATED COMPANIES
I. PREAMBLE
A. General Principles
This Employee Investment Transaction Policy (the "Policy") is based on the
principle that you, as an officer, director or other Advisory Employee of an
Advisor affiliated with BlackRock, Inc. ("BlackRock"), owe a fiduciary duty of
undivided loyalty to the registered investment companies, institutional
investment clients, personal trusts and estates, guardianships, employee benefit
trusts, and other Advisory Clients which that Advisor serves.(1) Accordingly,
you must avoid transactions, activities, and relationships that might interfere
or appear to interfere with making decisions in the best interests of those
Advisory Clients.
At all times, you must observe the following general principles:
1. You must place the interests of Advisory Clients first. As a fiduciary
you must scrupulously avoid serving your own personal interests ahead
of the interests of Advisory Clients. You must adhere to this general
fiduciary principle as well as comply with the Policy's specific
provisions. Technical compliance with the Policy will not
automatically insulate from scrutiny any Investment Transaction(2)
that indicates an abuse of your fiduciary duties or that creates an
appearance of such abuse.
Your fiduciary obligation applies not only to your personal Investment
Transactions but also to actions taken on behalf of Advisory Clients.
In particular, you may not cause an Advisory Client to take action, or
not to take action, for your personal benefit rather than for the
benefit of the Advisory Client. For example, you would violate this
Policy if you caused an Advisory Client to purchase a Security you
owned for the purpose of increasing the value of that Security. If you
are a Portfolio Employee,(3) you would also violate this Policy if you
made a personal investment in a Security that might be an appropriate
investment for an Advisory Client without first considering the
Security as an investment for the Advisory Client.
2. You must conduct all of your personal Investment Transactions in full
compliance with this Policy, the PNC Code of Ethics, and the other
policies of PNC Bank Corp. ("PNC") (including the policies that
prohibit insider trading or that restrict trading in PNC Securities).
BlackRock encourages you and your family to develop personal
investment programs. However, those investment programs must remain
within boundaries reasonably necessary to insure that appropriate
safeguards exist to protect the interests of our Advisory Clients and
to avoid even the appearance of unfairness or impropriety. Doubtful
situations should be resolved in favor of our Advisory Clients and
against your personal Investment Transactions.
3. You must not take inappropriate advantage of your position. The
receipt of investment opportunities, perquisites, gifts or gratuities
from persons seeking to do business, directly or indirectly, with
BlackRock, an affiliate, or an Advisory Client could call into
question the independence of your business judgment. Doubtful
situations should be resolved against your personal interests.
B. The General Scope Of The Policy's Application To Personal Investment
Transactions
Rule 17j-1 under the Investment Company Act of 1940, as amended, requires
reporting of all personal Investment Transactions in Securities (other than
certain "Exempt Securities") by Advisory Employees, whether or not they are
Securities that might be purchased or sold by or on behalf of an Advisory
Client. This Policy implements that reporting requirement.
However, since a primary purpose of the Policy is to avoid conflicts of
interest arising from personal Investment Transactions in Securities and other
instruments that are held or might be acquired on behalf of Advisory Clients,
this Policy only places restrictions on personal Investment Transactions in such
investments. This Policy also requires reporting and restricts personal
Investment Transactions in certain Futures Contracts which, although they are
not Securities, are instruments that Advisors buy and sell for Advisory Clients.
Although this Policy applies to all officers, directors and other Advisory
Employees of BlackRock, the Policy recognizes that Portfolio Managers, and the
other Portfolio Employees who provide them with advice and who execute their
decisions, occupy more sensitive positions than other Advisory Employees, and
that it is appropriate to subject their personal Investment Transactions to
greater restrictions.
C. The Organization Of This Policy
The remainder of this Policy is divided into four main topics. Section II
concerns personal investment transactions. Section III describes restrictions
that apply to Advisory Employees who receive inside information or seek to serve
on a board of directors or similar governing body. Section IV outlines the
procedure for seeking case-by-case exemptions from the Policy's requirements.
Section V summarizes the methods for ensuring compliance under this Policy. In
addition, the following Appendices are also a part of this Policy:
I. Definitions Of Capitalized Terms
II. Acknowledgment Of Receipt Of The Policy
III. Annual Certification Of Compliance With The Policy
IV. Initial Report Of Accounts
V. Request For Duplicate Broker Reports
VI. Investment Transaction Prior Notification Form
VII. Fully Discretionary Account Form
D. Questions
Questions regarding this Policy should be addressed to the Compliance
Officer. If you have any question regarding the interpretation of this Policy or
its application to a potential Investment Transaction, you should consult the
Compliance Officer before you execute that transaction.
II. PERSONAL INVESTMENT TRANSACTIONS
A. In General
Subject to the limited exceptions described below, you are required to
report all Investment Transactions in Securities and Futures Contracts made by
you, a member of your Immediate Family, a trust or an investment club in which
you have an interest, or on behalf of any account in which you have an interest
or which you direct.(4) In addition, you must provide prior notification of
certain Investment Transactions in Securities and Futures Contracts that an
Advisor holds or may acquire on behalf of an Advisory Client. (The exercise of
an option is an Investment Transaction for purposes of these requirements.) The
details of these reporting and prior notification requirements are described
below.
B. Reporting Obligations
1. Use Of Broker-Dealers And Futures Commission Merchants
You must use a registered broker-dealer or futures commission merchant to
engage in any purchase or sale of a publicly traded Security or Futures
Contract. This requirement also applies to any purchase or sale of a Security or
Futures Contract in which you have, or by reason of the Investment Transaction
will acquire, a Beneficial Ownership interest. Thus, as a general matter, any
Securities or Futures Contract transactions by members of your Immediate Family
will need to be made through a registered broker-dealer or futures commission
merchant.
2. Initial Report
Within 10 days of commencing employment or within 10 days of any event that
causes you to become subject to this Policy, you must supply to the Compliance
Officer copies of the most recent statements for each and every Personal Account
and Related Account that holds or is likely to hold a Security or Futures
Contract in which you have a Beneficial Ownership interest, as well as copies of
confirmations for any and all transactions subsequent to the effective dates of
those statements.(5) These documents should be supplied to the Compliance
Officer by attaching them to the form attached hereto as Appendix IV.
On that same form you should supply the name of any registered
broker-dealer and/or futures commission merchant and the number for any Personal
Account and Related Account that holds or is likely to hold a Security or
Futures Contract in which you have a Beneficial Ownership interest for which you
cannot supply the most recent account statement. You must also certify, where
indicated on the form, that the contents of the form and the documents attached
thereto disclose all such Personal Accounts and Related Accounts.
In addition, you must also supply, where indicated on the form, the
following information for each Security or Futures Contract in which you have a
Beneficial Ownership interest, to the extent that this information is not
available from the statements attached to the form:
1. A description of the Security or Futures Contract, including its
name or title;
2. The quantity (e.g., in terms of numbers of shares, units or
contracts) and value (in dollars) of the Security or Futures
Contract; and
3. The custodian of the Security or Futures Contract.
3. New Accounts
Upon the opening of a new Personal Account or a Related Account that holds
or is likely to hold a Security or a Futures Contract in which you have a
Beneficial Ownership interest, you must give written notice to the Compliance
Officer of the name of the registered broker-dealer or futures commission
merchant for that account, the identifying number for that Personal Account or
Related Account and the date that the account was established.
4. Timely Reporting Of Investment Transactions
You must cause each broker-dealer or futures commission merchant that
maintains a Personal Account or a Related Account that holds a Security or a
Futures Contract in which you have a Beneficial Ownership interest to provide to
the Compliance Officer, on a timely basis, duplicate copies of confirmations of
all transactions in that account and of periodic statements for that account
("Duplicate Broker Reports"). A form for that purpose is attached hereto as
Appendix V.
In addition, you must report to the Compliance Officer, on a timely basis,
any transaction in a Security or Futures Contract in which you have or acquired
a Beneficial Ownership interest that was made without the use of a registered
broker-dealer or futures commission merchant.
5. Related Accounts
The reporting obligations described above also apply to any Related Account
(as defined in Appendix I) and to any Investment Transaction in a Related
Account.
It is important that you recognize that the definitions of "Personal
Account," "Related Account" and "Beneficial Ownership" in Appendix I probably
will require you to provide, or to arrange for the broker-dealer or futures
commission merchant to furnish, copies of reports for any account used by or for
a member of your Immediate Family or a trust in which you or a member of your
Immediate Family has an interest, as well as for any other accounts in which you
may have the opportunity, directly or indirectly, to profit or share in the
profit derived from any Investment Transaction in that account, including the
account of any investment club to which you belong.
6. Exemptions From Reporting
You need not report Investment Transactions in any account, including a
Fully Discretionary Account,(6) over which neither you nor an Immediate Family
Member has or had any direct or indirect influence or control. For example,
Investment Transactions in the account of your spouse in an employee benefit
plan would not have to be reported if neither you nor your spouse has any
influence or control over those Investment Transactions.
You also need not report Investment Transactions in Exempt Securities nor
need you furnish, or require a broker-dealer or futures commission merchant to
furnish, copies of confirmations or periodic statements for accounts that hold
only Exempt Securities.(7) This includes accounts that only hold U.S. Government
securities, money market interests, or shares in registered open-end investment
companies (i.e., mutual funds). This exemption from reporting will end
immediately, however, at such time as there is an Investment Transaction in that
account in a Security that is not an Exempt Security.
C. Prohibited Or Restricted Investment Transactions
1. Initial Public Offerings
As an Advisory Employee, you may not acquire Beneficial Ownership of any
Security in an initial public offering, except that, with the approval of the
Compliance Committee and the General Counsel of BlackRock, you may acquire
Beneficial Ownership of a Security in an initial public offering directed or
sponsored by BlackRock. For purposes of this Policy, an initial public offering
shall not include the purchase of a Security in an initial public offering by
(i) a savings bank to its depositors, (ii) a mutual insurance company to its
policyholders, (iii) an issuer of debt securities (other than debt securities
convertible into common or preferred stock) or (iv) with respect to an Advisory
Employee employed by BlackRock International, Ltd. a building society to its
depositors.
2. Private Placements
If you are a Portfolio Employee, you may not acquire Beneficial Ownership
of any Security in a private placement, or subsequently sell that interest,
unless you have received the prior written approval of the Compliance Officer
and of any supervisor designated by the Compliance Officer. Approval will not be
given unless a determination is made that the investment opportunity should not
be reserved for one or more Advisory Clients, and that the opportunity to invest
has not been offered to you by virtue of your position with an Advisor.
If you have acquired Beneficial Ownership of Securities in a private
placement, you must disclose that investment to your supervisor when you play a
part in any consideration of any investment by an Advisory Client in the issuer
of the Securities, and any decision to make such an investment must be
independently reviewed by a Portfolio Manager who does not have a Beneficial
Ownership interest in any Securities of the issuer.
D. Investment Transactions Requiring Prior Notification
You must give prior notification to the Compliance Officer of any
Investment Transaction in Securities or Futures Contracts in a Personal Account
or Related Account, or in which you otherwise have or will acquire a Beneficial
Ownership interest, unless that Investment Transaction, Security or Futures
Contract falls into one of the following categories that are identified as
"exempt from prior notification." The purpose of prior notification is to permit
the Compliance Officer and the Compliance Committee to take reasonable steps to
investigate whether that Investment Transaction is in accordance with this
Policy. Satisfaction of the prior notification requirement does not, however,
constitute approval or authorization of any Investment Transaction for which you
have given prior notification. As a result, the primary responsibility for
compliance with this Policy rests with you.
1. Prior Notification Procedure
Prior notification must be given by completing and submitting to the
Compliance Officer a copy of the prior notification form attached hereto as
Appendix VII. No Investment Transaction requiring prior notification may be
executed prior to notice by the Compliance Officer that the prior notification
process has been completed. The time and date of that notice will be reflected
on the prior notification form. Unless otherwise specified, an Investment
Transaction requiring prior notification must be placed and executed by the end
of trading in New York City or, in the case of Advisory Employees employed by
BlackRock International, Ltd., by the end of trading in the United Kingdom on
the day of notice from the Compliance Officer that the prior notification
process has been completed. If a proposed Investment Transaction is not executed
(with the exception of a limit order) within the time specified, you must repeat
the prior notification process before executing the transaction. A notice from a
Compliance Officer that the prior notification process has been completed is no
longer effective if you discover, prior to executing your Investment
Transaction, that the information on your prior notification form is no longer
accurate, or if the Compliance Officer revokes his or her notice for any other
reason.
The Compliance Officer may undertake such investigation as he or she
considers necessary to investigate whether an Investment Transaction for which
prior notification has been sought complies with the terms of this Policy and is
consistent with the general principles described at the beginning of this
Policy.
As part of that investigation, the Compliance Officer or a designee of the
Compliance Officer will determine whether there is a pending buy or sell order
in the same equity Security or Futures Contract, or a Related Security, on
behalf of an Advisory Client.(8) If such an order exists, the Compliance Officer
will not provide notice that the prior notification process has been completed
until the Advisory Client's order is executed or withdrawn.
2. Exemptions From Prior Notification
Prior notification will not be required for the following Investment
Transactions, Securities and Futures Contracts. They are exempt only from the
Policy's prior notification requirement, and, unless otherwise indicated, remain
subject to the Policy's other requirements, including its reporting
requirements.
(a) Transactions Exempt From Prior Notification
Prior notification is not required for any of the following Investment
Transactions:
1. Any Investment Transaction in a Fully Discretionary Account
that has been approved as such by the Compliance Officer.
2. Purchases of Securities under dividend reinvestment plans.
3. Purchases of Securities by an exercise of rights issued to
the holders of a class of Securities pro rata, to the extent
those rights are issued with respect to Securities of which
you have Beneficial Ownership.
4. Acquisitions or dispositions of Securities as the result of
a stock dividend, stock split, reverse stock split, merger,
consolidation, spin-off or other similar corporate
distribution or reorganization applicable to all holders of
a class of Securities of which you have Beneficial
Ownership.
5. Purchases of common stock of PNC Bank Corp. under the
Employee Stock Purchase Plan.
6. With respect to Advisory Employees who are employed by
BlackRock International, Inc., automatic investments by
direct debit into a personal equity plan (PEP), or similar
type of plan in Exempt Securities if the pre-notification
process was completed for the first such investment.
7. Investment Transactions made by a person who serves on the
Board of Directors of an Advisor and is not involved with
the Advisory operations of such Advisor nor engages in the
type of activities described under (1) (2) or (3) under the
term Advisory Employee as defined in Appendix I.
(b) Securities Exempt From Prior Notification
Prior notification is not required for an Investment Transaction in an
Exempt Security, as defined in Appendix I, e.g., U.S. Government
securities, shares in registered open-end investment companies (i.e.,
mutual funds) and "high quality short-term debt instruments" (as defined in
Appendix I).
(c) Futures Contracts Exempt From Prior Notification
Prior notification is not required for an Investment Transaction in
the following Futures Contracts:
1. Currency futures.
2. U.S. Treasury futures.
3. Eurodollar futures.
4. Physical commodity futures (e.g., contracts for future
delivery of grain, livestock, fiber or metals).
5. Futures contracts to acquire Fixed Income Securities issued
by a U.S. Government agency, a foreign government, or an
international or supranational agency.
6. Futures contracts on the Standard and Poor's 500 (S&P 500)
or the Dow Jones Industrial Average stock indexes.
7. For Advisory Employees who are employed by BlackRock
International, Ltd., futures contracts on the Financial
Times Stock Exchange 100 (FTSE) Index.
E. Ban On Short-Term Trading Profits
You may not profit from the purchase and sale, or the sale and purchase,
within 60 calendar days, of the same Securities and/or Related Security. Any
such short-term trade must be reversed or unwound, or if that is not practical,
the profits must be disgorged and distributed in a manner determined by the
Compliance Committee.
This short-term trading ban does not apply to Investment Transactions in
Exempt Securities (as defined in Appendix I) or in Futures Contracts. This ban
also does not apply to a purchase or sale in connection with a Transaction
Exempt From Prior Notification (as described above in Section II.D.2.(a)), a
transaction in a Fully Discretionary Account or a transaction exempt from the
"blackout" periods pursuant to Section II.F.2 below.
You are considered to profit from a short-term trade if Securities of which
you have Beneficial Ownership (including Securities held by Immediate Family
members) are sold for more than their purchase price, even though the Securities
purchased and the Securities sold are held of record or beneficially by
different persons or entities.
F. Blackout Periods
Your ability to engage in certain Investment Transactions may be prohibited
or restricted during the "blackout" periods described below:
1. Specific Blackout Periods
a. You may not purchase or sell a Security, a Related Security, or
Futures Contract at a time when you intend or know of another's
intention to purchase or sell that same Security, a Related
Security, or Futures Contract, on behalf of an Advisory Client of
any Advisor (the "Specific Knowledge Blackout Period").
b. In addition, if you are a Portfolio Employee, you may not
purchase or sell a Security, a Related Security or a Futures
Contract which you are actively considering or which you have
actively considered and rejected for purchase or sale for an
Advisory Client within the previous 15 calendar days (the "15-Day
Blackout Period") unless the Compliance Officer, after
consultation with your supervisor, has approved your Investment
Transaction.(9)
c. Finally, if you are a Portfolio Manager, you may not purchase or
sell a Security, a Related Security, or Futures Contract within 7
calendar days before or after a transaction in that Security, a
Related Security, or Futures Contract, by an Advisory Client for
which you are responsible (the "7-Day Blackout Period").
For Portfolio Employees or Portfolio Managers, the Compliance Officer will
not give such notice until any applicable 15-Day Blackout Period or 7-Day
Blackout Period has expired or any required approvals or exemptions have been
obtained. An Investment Transaction that violates one of these Blackout
restrictions must be reversed or unwound, or if that is not practical, the
profits must be disgorged and distributed in a manner determined by the
Compliance Committee.
2. Exemptions From Blackout Restrictions
The foregoing blackout period restrictions do not apply to Investment
Transactions in:
a. Exempt Securities, as defined in Appendix I.
b. Securities of a company listed on the Standard & Poor's 100 (S &
P 100) Index.
c. A Futures Contract Exempt From Prior Notification under this
Policy (as described above).
d. A Fully Discretionary Account.
e. With respect to Advisory Employees who are employed by BlackRock
International, Ltd., securities of a company listed on the
Financial Times Stock Exchange 100 (FTSE 100).
III. INSIDE INFORMATION AND SERVICE AS A DIRECTOR
A. Inside Information
As an employee of a subsidiary of PNC, you must comply with the PNC Insider
Trading Policy. A copy of that policy is included in Section E of the PNC Code
of Ethics. In addition, as an Advisory Employee, you must notify the General
Counsel of BlackRock if you receive or expect to receive material non-public
information about an entity that issues securities. The General Counsel will
determine the restrictions, if any, that will apply to your communications and
activities while in possession of that information. In general, those
restrictions will include:
1. An undertaking not to trade, either on your own behalf or on behalf of
an Advisory Client, in the securities of the entity about which you
have material non-public information.
2. An undertaking not to disclose material non-public information to
other Advisory Employees.
3. An undertaking not to participate in discussions with or decisions by
other Advisory Employees relating to the entity about which you have
material non-public information.
The General Counsel, in cooperation with the Compliance Officer, will
maintain a "restricted list" of entities about which Advisory Employees may have
material non-public information. This "restricted list" will be available to the
Compliance Officer when he or she conducts investigations or reviews related to
the Prior Notification Procedure described previously in Section II(D)(1) or the
Post-Trade Monitoring process described below in Section V(B)(3).
B. Service As A Director
You may not serve on the board of directors or other governing board of any
entity unless you have received the prior written approval of the General
Counsel of PNC, to the extent such approval is required under the terms of the
PNC Code of Ethics, and the General Counsel of BlackRock. If permitted to serve
on a governing board, an Advisory Employee will be isolated from those Advisory
Employees who make investment decisions regarding the securities of that entity,
through a "Chinese wall" or other procedures determined by the General Counsel
of BlackRock. In general, the "Chinese wall" or other procedures will include:
1. An undertaking not to trade or to cause a trade on behalf of an
Advisory Client in the securities of the entity on whose board you
serve.
2. An undertaking not to disclose material non-public information about
that entity to other Advisory Employees.
3. An undertaking not to participate in discussions with or decisions by
other Advisory Employees relating to the entity on whose board you
serve.
Any entity on whose board an Advisory Employee serves will be included on
the "restricted list" referenced in subsection A, above.
IV. EXEMPTIONS
The Compliance Committee, in its discretion, may grant case-by-case
exceptions to any of the foregoing requirements, restrictions or prohibitions,
except that the Compliance Committee may not exempt any Investment Transaction
in a Security (other than an Exempt Security) or a Futures Contract from the
Policy's reporting requirements. Exemptions from the Policy's prior notification
requirements and from the Policy's restrictions on acquisitions in initial
public offerings, short-term trading and trading during blackout periods will
require a determination by the Compliance Committee that the exempted
transaction does not involve a realistic possibility of violating the general
principles described at the beginning of this Policy. An application for a
case-by-case exemption, in accordance with this paragraph, should be made in
writing to the Compliance Officer, who will promptly forward that written
request to the members of the Compliance Committee.
V. COMPLIANCE
A. Certifications
1. Upon Receipt Of This Policy
Upon commencement of your employment or the effective date of this Policy,
whichever occurs later, you will be required to acknowledge receipt of your copy
of this Policy by completing and returning to the Compliance Officer a copy of
the form attached hereto as Appendix II. By that acknowledgment, you will also
agree:
1. To read the Policy, to make a reasonable effort to understand its
provisions, and to ask the Compliance Officer questions about
those provisions you find confusing or difficult to understand.
2. To comply with the Policy, including its general principles, its
reporting requirements, its prohibitions, its prior notification
requirements, its short-term trading and blackout restrictions.
3. To advise the members of your Immediate Family about the
existence of the Policy, its applicability to their personal
Investment Transactions, and your responsibility to assure that
their personal Investment Transactions comply with the Policy.
4. To cooperate fully with any investigation or inquiry by or on
behalf of the Compliance Officer or the Compliance Committee to
determine your compliance with the provisions of the Policy.
In addition, your acknowledgment will recognize that any failure to comply
with the Policy and to honor the commitments made by your acknowledgment may
result in disciplinary action, including dismissal.
2. Annual Certificate Of Compliance
You are required to certify on an annual basis, on a copy of the form
attached hereto as Appendix III, that you have complied with each provision of
your initial acknowledgment (see above). In particular, your annual
certification will require that you certify that you have read and that you
understand the Policy, that you recognize that you are subject to its
provisions, that you complied with the requirements of the Policy during the
year just ended, and that you have disclosed, reported, or caused to be reported
all Investment Transactions required to be disclosed or reported pursuant to the
requirements of the Policy and that you have disclosed, reported or caused to be
reported all Personal Accounts and Related Accounts that hold or are likely to
hold a Security or Futures Contract in which you have a Beneficial Ownership
interest. In addition, you will be required to confirm the accuracy of the
record of information on file with the Advisor with respect to such Personal
Accounts and Related Accounts.
B. Supervisory Procedures
1. The Compliance Committee
The Policy will be implemented, monitored and reviewed by the Compliance
Committee. The initial members of the Compliance Committee will be appointed by
the management committee of BlackRock. The Compliance Committee, by a simple
majority of its members, may appoint new members of the Committee, may replace
existing members of the Committee, and may fill vacancies on the Committee.
Among other responsibilities, the Compliance Committee will consider requests
for case-by-case exemptions (described above) and will conduct investigations
(described below) of any actual or suspected violations of the Policy. The
Compliance Committee will determine what remedial actions, if any, should be
taken by an Advisor in response to a violation of the Policy. The Compliance
Committee will also provide reports (described below) regarding significant
violations of the Policy and the procedures to implement the Policy. The
Compliance Committee may recommend changes to those procedures or to the Policy
to the management of the Advisors. Finally, the Compliance Committee will
designate one person to act as Compliance Officer for all Advisors.
2. The Compliance Officer
The Compliance Officer designated by the Compliance Committee will be
responsible for the day-to-day administration of the Policy for all Advisors,
subject to the direction and control of the Compliance Committee. Based on
information supplied by the management of each Advisor, the Compliance Officer
will forward a copy of the Policy to each Advisory Employee subject to the
Policy and will notify each such person of his or her designation as an Advisory
Employee, Portfolio Employee or Portfolio Manager. The Compliance Officer will
also be responsible for administration of the reporting and prior notification
functions described in the Policy, and will maintain the reports required by
those functions. In addition, the Compliance Officer will attempt to answer any
questions from an Advisory Employee regarding the interpretation or
administration of the Policy. When necessary or desirable, the Compliance
Officer will consult with the Compliance Committee about such questions. The
Compliance Officer may designate one or more Assistant Compliance Officers to
whom the Compliance Officer may delegate any of the duties described in this
paragraph or in the succeeding paragraph, and who shall be empowered to act on
the Compliance Officer's behalf when the Compliance Officer is absent or
unavailable.
3. Post-Trade Monitoring And Investigations
The Compliance Officer will review the Duplicate Broker Reports and other
information supplied for each Advisory Employee so that the Compliance Officer
can detect and prevent potential violations of the Policy. This information may
also be disclosed to the Advisor's auditors, attorneys and regulators. If, based
on his or her review of information supplied for an Advisory Employee, or based
on other information, the Compliance Officer suspects that the Policy may have
been violated, the Compliance Officer will perform such investigations and make
such inquiries as he or she considers necessary. You should expect that, as a
matter of course, the Compliance Officer will make inquiries regarding any
personal Investment Transaction in a Security or Futures Contract that occurs on
the same day as a transaction in the same Security or Futures Contract on behalf
of an Advisory Client. If the Compliance Officer reaches a preliminary
conclusion that an Advisory Employee may have violated this Policy, the
Compliance Officer will report that preliminary conclusion in a timely manner to
the Compliance Committee and will furnish to the Committee all information that
relates to the Compliance Officer's preliminary conclusion. The Compliance
Officer may also report his or her preliminary conclusion and the information
relating to that preliminary conclusion to the Advisor's auditors, attorneys and
regulators.
Promptly after receiving the Compliance Officer's report of a possible
violation of the Policy, the Compliance Committee, with the aid and assistance
of the Compliance Officer, will conduct an appropriate investigation to
determine whether the Policy has been violated and will determine what remedial
action should be taken by the Advisor in response to any such violation(s). For
purposes of these determinations, a majority of the Compliance Committee will
constitute a quorum and action taken by a simple majority of that quorum will
constitute action by the Committee.
4. Remedial Actions
The remedial actions that may be recommended by the Compliance Committee
may include, but are not limited to, disgorgement of profits, imposition of a
fine, censure, demotion, suspension or dismissal. As part of any sanction, e.g.,
for violation of the Policy's restrictions on short-term trading or trading
during blackout periods, you may be required to reverse or unwind a transaction
and to forfeit any profit or to absorb any loss from the transaction. If an
Investment Transaction may not be reversed or unwound, you may be required to
disgorge any profits associated with the transaction, which profits will be
distributed in a manner prescribed by the Compliance Committee in the exercise
of its discretion. Profits derived from Investment Transactions in violation of
this Policy may not be offset by any losses from Investment Transactions in
violation of this Policy. Finally, evidence suggesting violations of criminal
laws will be reported to the appropriate authorities, as required by applicable
law.
In determining what, if any, remedial action is appropriate in response to
a violation of the Policy, the Compliance Committee will consider, among other
factors, the gravity of your violation, the frequency of your violations,
whether any violation caused harm or the potential of harm to any Advisory
Client, whether you knew or should have known that your Investment Transaction
violated the Policy, whether you engaged in an Investment Transaction with a
view to making a profit on the anticipated market action of a transaction by an
Advisory Client, your efforts to cooperate with the Compliance Officer's
investigation, and your efforts to correct any conduct that led to a violation.
In rare instances, the Compliance Committee may find that, for equitable
reasons, no remedial action should be taken.
5. Reports Of Violations Requiring Significant Remedial Action
In a timely manner, and not less frequently than annually, the Compliance
Committee will report to the management committee of BlackRock, and to the
directors or trustees of each investment company that is an Advisory Client, any
known Policy violation requiring significant remedial action (as defined below)
and the disposition of that violation. For this purpose, a significant remedial
action means any action that has a significant financial effect on the violator.
Evidence suggesting violations of criminal laws will be reported to the
appropriate authorities, as required by applicable law.
6. Annual Reports
The Compliance Committee will furnish an annual report to the management
committee of BlackRock, and to the directors or trustees of each investment
company that is an Advisory Client, that, at a minimum, will:
1. Summarize existing procedures and restrictions concerning
personal investing by Advisory Employees and any changes in those
procedures and restrictions that were made during the previous
year;
2. Summarize any violations of the Policy that resulted in
significant remedial action during the previous year; and
3. Describe any changes in existing procedures or restrictions that
the Compliance Committee recommends based upon its experience
under the Policy, evolving industry practices, or developments in
applicable laws or regulations.
VI. EFFECTIVE DATE
The provisions of this Policy will take effect on October 1, 1998.
Amendments to this Policy will take effect at the time such amendments are
promulgated and distributed to the Advisory Employees governed by this Policy.
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(1) This Policy uses a number of capitalized terms, e.g., Advisor, Advisory
Client, Advisory Employee, Beneficial Ownership, Exempt Security, Fixed Income
Security, Fully Discretionary Account, Futures Contract, Immediate Family,
Investment Transaction, Personal Account, Portfolio Employee, Portfolio Manager,
Related Account, and Security. The first time a capitalized term is used, a
definition is stated in the text or in a footnote. The full definitions of these
capitalized terms are set forth in Appendix I. To understand your
responsibilities under the Policy, it is important that you review and
understand all of the definitions of capitalized terms in Appendix I. As
indicated in Appendix I:
The term "Advisor" means any entity affiliated with BlackRock, whether now
in existence or formed after the date hereof, that is registered as (i) an
investment advisor under the Investment Advisers Act of 1940, as amended, or
(ii) a broker-dealer under the Securities Exchange Act of 1934, as amended,
other than any such investment advisor or broker-dealer that has adopted its own
employee investment transaction policy.
The term "Advisory Client" means a registered investment company, an
institutional investment client, a personal trust or estate, a guardianship, an
employee benefit trust, or another client with which the Advisor by which you
are employed or with which you are associated has an investment management,
advisory or sub-advisory contract or relationship.
The term "Advisory Employee" means an officer, director, or employee of an
Advisor, or any other person identified as a "control person" on the Form ADV or
the Form BD filed by the Advisor with the U.S. Securities and Exchange
Commission, (1) who, in connection with his or her regular functions or duties,
generates, participates in, or obtains information regarding that Advisor's
purchase or sale of a Security by or on behalf of an Advisory Client; (2) whose
regular functions or duties relate to the making of any recommendations with
respect to such purchases or sales; (3) who obtains information or exercises
influence concerning investment recommendations made to an Advisory Client of
that Advisor; or (4) who has line oversight or management responsibilities over
employees described in (1), (2) or (3), above.
(2) For purposes of this Policy, the term "Investment Transaction" means any
transaction in a Security or Futures Contract in which you have, or by reason of
the transaction will acquire, a Beneficial Ownership interest.
As a general matter, the term "Security" means any stock, note, bond,
debenture or other evidence of indebtedness (including any loan participation or
assignment), limited partnership interest or investment contract other than an
Exempt Security (as defined above). The term "Security" includes an option on a
Security, an index of Securities, a currency or a basket of currencies,
including such an option traded on the Chicago Board of Options Exchange or on
the New York, American, Pacific or Philadelphia Stock Exchanges as well as such
an option traded in the over-the-counter market. The term "Security" does not
include a physical commodity or a Futures Contract.
The term "Futures Contract" includes (a) a futures contract and an option
on a futures contract traded on a U.S. or foreign board of trade, such as the
Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Mercantile
Exchange, or the London International Financial Futures Exchange (a
"Publicly-Traded Futures Contract"), as well as (b) a forward contract, a
"swap", a "cap", a "collar", a "floor" and an over-the-counter option (other
than an option on a foreign currency, an option on a basket of currencies, an
option on a Security or an option on an index of Securities) (a
"Privately-Traded Futures Contract").
As a general matter, you are considered to have a "Beneficial Ownership"
interest in a Security or Futures Contract if you have the opportunity, directly
or indirectly, to profit or share in any profit derived from a transaction in
that Security or Futures Contract. You are presumed to have a Beneficial
Ownership interest in any Security or Futures Contract held, individually or
jointly, by you and/or by a member of your Immediate Family (as defined below).
In addition, unless specifically excepted by the Compliance Officer based on a
showing that your interest or control is sufficiently attenuated to avoid the
possibility of a conflict, you will be considered to have a Beneficial Ownership
interest in a Security held by: (1) a joint account to which you are a party,
(2) a partnership in which you are a general partner, (3) a limited liability
company in which you are a manager-member, (4) a trust in which you or a member
of your Immediate Family has an interest or (5) an investment club in which you
are a member.
See Appendix I for more complete definitions of the terms "Beneficial
Ownership," "Futures Contract," and "Security."
(3) The term "Portfolio Employee" means a Portfolio Manager or an Advisory
Employee who provides information or advice to a Portfolio Manager, who helps
execute a Portfolio Manager's decisions, or who directly supervises a Portfolio
Manager. The term "Portfolio Manager" means any employee of an Advisor who has
the authority, whether sole or shared or only from time to time, to make
investment decisions or to direct trades affecting an Advisory Client.
(4) The term "Immediate Family" means any of the following persons who reside in
your household or who depend on you for basic living support: your spouse, any
child, stepchild, grandchild, parent, stepparent, grandparent, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including any adoptive relationships.
(5) The term "Personal Account" means the following accounts that hold or are
likely to hold a Security or Futures Contract in which you have a Beneficial
Ownership interest:
o any account in your individual name;
o any joint or tenant-in-common account in which you have an interest or
are a participant;
o any account for which you act as trustee, executor, or custodian; and
o any account over which you have investment discretion or have the
power (whether or not exercised) to direct the acquisition or
disposition of Securities or Futures Contracts (other than an Advisory
Client's account that you manage or over which you have investment
discretion), including the accounts of any individual or entity that
is managed or controlled directly or indirectly by or through you,
such as the account of an investment club to which you belong. There
is a presumption that you can control accounts held by members of your
Immediate Family sharing the same household. This presumption may be
rebutted only by convincing evidence.
The term "Related Account" means any account, other than a Personal
Account, that holds a Security or Futures Contract in which you have a direct or
indirect Beneficial Ownership interest (other than an account over which you
have no investment discretion and cannot otherwise exercise control) and any
account (other than an Advisory Client's account) of any individual or entity to
whom you give advice or make recommendations with regard to the acquisition or
disposition of Securities or Futures Contracts (whether or not such advice is
acted upon).
(6) The term "Fully Discretionary Account" means a Personal Account or Related
Account managed or held by a broker-dealer, futures commission merchant,
investment advisor or trustee as to which neither you nor an Immediate Family
Member: (a) exercises any investment discretion; (b) suggests or receives notice
of transactions prior to their execution; and (c) you do not otherwise has any
direct or indirect influence or control. In addition, to qualify as a Fully
Discretionary Account, the individual broker, registered representative or
merchant responsible for that account must not be responsible for nor receive
advance notice of any purchase or sale of a Security or Futures Contract on
behalf of an Advisory Client. To qualify an account as a Fully Discretionary
Account, the Compliance Officer must receive and approve a written notice, in
the form attached hereto as Appendix VIII, that the account meets the foregoing
qualifications as a Fully Discretionary Account.
(7) The term "Exempt Security" means any Security (as defined in Appendix I) not
included within the definition of Security in SEC Rule 17j-1(e)(5) under the
Investment Company Act of 1940, as amended, including:
1. A direct obligation of the Government of the United States;
2. Shares of registered open-end investment companies (i.e., mutual
funds); and
3. High quality short-term debt instruments, including, but not limited
to, bankers' acceptances, bank certificates of deposit, commercial
paper and repurchase agreements.
See Appendix I for a more complete definition of "Exempt Security."
(8) The term "Related Security" means, as to any Security, any instrument
related in value to that Security, including, but not limited to, any option or
warrant to purchase or sell that Security, and any Security convertible into or
exchangeable for that Security.
(9) SEC Rule 17j-1 places restrictions on the purchase or sale of any "security
held or to be acquired" by a registered investment company. Rule 17j-1(e)(6)
defines a "security held or to be acquired" by a registered investment company
as including any security which, within the most recent 15 days, "is being or
has been considered by such company or its investment adviser for purchase by
such company."
<PAGE>
APPENDIX I
Definitions Of Capitalized Terms
The following definitions apply to the capitalized terms used in the Policy:
Advisor
The term "Advisor" means any entity affiliated with BlackRock, whether now
in existence or formed after the date hereof, that is registered as (i) an
investment advisor under the Investment Advisers Act of 1940, as amended, or
(ii) a broker-dealer under the Securities Exchange Act of 1934, as amended,
other than any such investment advisor or broker-dealer that has adopted its own
employee investment transaction policy.
Advisory Client
The term "Advisory Client" means a registered investment company, an
institutional investment client, a personal trust or estate, a guardianship, an
employee benefit trust, or another client with which the Advisor by which you
are employed or with which you are associated has an investment management,
advisory or sub-advisory contract or relationship.
Advisory Employee
The term "Advisory Employee" means an officer, director, or employee of an
Advisor, or any other person identified as a "control person" on the Form ADV or
the Form BD filed by the Advisor with the U.S. Securities and Exchange
Commission, (1) who, in connection with his or her regular functions or duties,
generates, participates in, or obtains information regarding that Advisor's
purchase or sale of a Security by or on behalf of an Advisory Client; (2) whose
regular functions or duties relate to the making of any recommendations with
respect to such purchases or sales; or (3) who obtains information or exercises
influence concerning investment recommendations made to an Advisory Client of
that Advisor or who has line oversight or management responsibilities over
employees who obtain such information or who exercise such influence.
Beneficial Ownership
As a general matter, you are considered to have a "Beneficial Ownership"
interest in a Security or Futures Contract if you have the opportunity, directly
or indirectly, to profit or share in any profit derived from a transaction in
that Security. You are presumed to have a Beneficial Ownership interest in any
Security or Futures Contract held, individually or jointly, by you and/or by a
member of your Immediate Family (as defined below). In addition, unless
specifically excepted by the Compliance Officer based on a showing that your
interest or control is sufficiently attenuated to avoid the possibility of a
conflict, you will be considered to have a Beneficial Ownership interest in a
Security or Futures Contract held by: (1) a joint account to which you are a
party, (2) a partnership in which you are a general partner, (3) a limited
liability company in which you are a manager-member, or (4) a trust in which you
or a member of your Immediate Family has a vested interest. Although you may
have a Beneficial Ownership interest in a Security or Futures Contract held in a
Fully Discretionary Account (as defined below), the application of this Policy
to such a Security or Futures Contract may be modified by the special exemptions
provided for Fully Discretionary Accounts.
As a technical matter, the term "Beneficial Ownership" for purposes of this
Policy will be interpreted in the same manner as it would be under SEC Rule
16a-1(a)(2) in determining whether a person has beneficial ownership of a
security for purposes of Section 16 of the Securities Exchange Act of 1934 and
the rules and regulations thereunder.
BlackRock
The term "BlackRock" means BlackRock, Inc.
Compliance Committee
The term "Compliance Committee" means the committee of persons who have
responsibility for implementing, monitoring and reviewing the Policy, in
accordance with Section V(B)(1) of the Policy.
Compliance Officer
The term "Compliance Officer" means the person designated by the Compliance
Committee as responsible for the day-to-day administration of the Policy in
accordance with Section V(B)(2) of the Policy.
Duplicate Broker Reports
The term "Duplicate Broker Reports" means duplicate copies of confirmations
of transactions in your Personal or Related Accounts and of periodic statements
for those accounts.
Exempt Security
The term "Exempt Security" means any Security (as defined below) not
included within the definition of Security in SEC Rule 17j-1(e)(5) under the
Investment Company Act of 1940, as amended, including:
1. A direct obligation of the Government of the United States;
2. Shares of registered open-end investment companies; and
3. High quality short-term debt instruments, including, but not limited
to, bankers' acceptances, bank certificates of deposit, commercial
paper and repurchase agreements. For these purposes, a "high quality
short-term debt instrument" means any instrument having a maturity at
issuance of less than 366 days and which is rated in one of the
highest two rating categories by a Nationally Recognized Statistical
Rating Organization, or which is unrated but is of comparable quality.
4. For Advisory Employees employed by BlackRock International, Ltd.,
shares of authorized unit trusts, open-ended investment companies
(OEIC's) and direct obligations of the Government of the United
Kingdom.
Fixed Income Securities
For purposes of this Policy, the term "Fixed Income Securities" means fixed
income Securities issued by agencies or instrumentalities of, or unconditionally
guaranteed by, the Government of the United States, corporate debt Securities,
mortgage-backed and other asset-backed Securities, fixed income Securities
issued by state or local governments or the political subdivisions thereof,
structured notes and loan participations, foreign government debt Securities,
and debt Securities of international agencies or supranational agencies. For
purposes of this Policy, the term "Fixed Income Securities" will not be
interpreted to include U.S. Government Securities or any other Exempt Security
(as defined above).
Fully Discretionary Account
The term "Fully Discretionary Account" means a Personal Account or Related
Account (as defined below) managed or held by a broker-dealer, futures
commission merchant, investment advisor or trustee as to which neither you nor
an Immediate Family Member (as defined below): (a) exercises any investment
discretion; (b) suggests or receives notice of transactions prior to their
execution; and (c) otherwise has any direct or indirect influence or control. In
addition, to qualify as a Fully Discretionary Account, the individual broker,
registered representative or merchant responsible for that account must not be
responsible for nor receive advance notice of any purchase or sale of a Security
or Futures Contract on behalf of an Advisory Client. To qualify an account as a
Fully Discretionary Account, the Compliance Officer must receive and approve a
written notice, in the form attached hereto as Appendix VIII, that the account
meets the foregoing qualifications as a Fully Discretionary Account.
Futures Contract
The term "Futures Contract" includes (a) a futures contract and an option
on a futures contract traded on a U.S. or foreign board of trade, such as the
Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Mercantile
Exchange, or the London International Financial Futures Exchange (a
"Publicly-Traded Futures Contract"), as well as (b) a forward contract, a
"swap", a "cap", a "collar", a "floor" and an over-the-counter option (other
than an option on a foreign currency, an option on a basket of currencies, an
option on a Security or an option on an index of Securities, which fall within
the definition of "Security") (a "Privately-Traded Futures Contract"). You
should consult with the Compliance Officer if you have any doubt about whether a
particular Investment Transaction you contemplate involves a Futures Contract.
For purposes of this definition, a Publicly-Traded Futures Contract is defined
by its expiration month, i.e., a Publicly-Traded Futures Contract on a U.S.
Treasury Bond that expires in June is treated as a separate Publicly-Traded
Futures Contract, when compared to a Publicly-Traded Futures Contract on a U.S.
Treasury Bond that expires in July.
Immediate Family
The term "Immediate Family" means any of the following persons who reside
in your household or who depend on you for basic living support: your spouse,
any child, stepchild, grandchild, parent, stepparent, grandparent, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including any adoptive relationships.
Investment Transaction
For purposes of this Policy, the term "Investment Transaction" means any
transaction in a Security or Futures Contract in which you have, or by reason of
the transaction will acquire, a Beneficial Ownership interest. The exercise of
an option to acquire a Security or Futures Contract is an Investment Transaction
in that Security or Futures Contract.
Personal Account
The term "Personal Account" means the following accounts that hold or are
likely to hold a Security or Futures Contract in which you have a Beneficial
Ownership interest:
o any account in your individual name;
o any joint or tenant-in-common account in which you have an interest or
are a participant;
o any account for which you act as trustee, executor, or custodian; and
o any account over which you have investment discretion or have the
power (whether or not exercised) to direct the acquisition or
disposition of Securities or Futures Contracts (other than an Advisory
Client's account that you manage or over which you have investment
discretion), including the accounts of any individual or entity that
is managed or controlled directly or indirectly by or through you.
There is a presumption that you can control accounts held by members
of your Immediate Family sharing the same household. This presumption
may be rebutted only by convincing evidence.
Policy
The term "Policy" means this Employee Investment Transaction Policy.
Portfolio Employee
The term "Portfolio Employee" means a Portfolio Manager or an Advisory
Employee who provides information or advice to a Portfolio Manager, who helps
execute a Portfolio Manager's decisions, or who directly supervises a Portfolio
Manager.
Portfolio Manager
The term "Portfolio Manager" means any employee of an Advisor who has the
authority, whether sole or shared or only from time to time, to make investment
decisions or to direct trades affecting an Advisory Client.
Related Account
The term "Related Account" means any account, other than a Personal
Account, that holds a Security or Futures Contract in which you have a direct or
indirect Beneficial Ownership interest (other than an account over which you
have no investment discretion and cannot otherwise exercise control) and any
account (other than an Advisory Client's account) of any individual or entity to
whom you give advice or make recommendations with regard to the acquisition or
disposition of Securities or Futures Contracts (whether or not such advice is
acted upon).
Related Security
The term "Related Security" means, as to any Security, any instrument
related in value to that Security, including, but not limited to, any option or
warrant to purchase or sell that Security, and any Security convertible into or
exchangeable for that Security. For example, the purchase and exercise of an
option to acquire a Security is subject to the same restrictions that would
apply to the purchase of the Security itself.
Security
As a general matter, the term "Security" means any stock, note, bond,
debenture or other evidence of indebtedness (including any loan participation or
assignment), limited partnership interest, or investment contract, other than an
Exempt Security (as defined above). The term "Security" includes an option on a
Security, an index of Securities, a currency or a basket of currencies,
including such an option traded on the Chicago Board of Options Exchange or on
the New York, American, Pacific or Philadelphia Stock Exchanges as well as such
an option traded in the over-the-counter market. The term "Security" does not
include a physical commodity or a Futures Contract. The term "Security" may
include an interest in a limited liability company (LLC) or in a private
investment fund.
As a technical matter, the term "Security" has the meaning set forth in
Section 2(a)(36) of the Investment Company Act of 1940, which defines a Security
to mean:
Any note, stock, treasury stock, bond debenture, evidence of indebtedness,
certificate of interest or participation in any profit-sharing agreement,
collateral-trust certificate, preorganization certificate or subscription,
transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in
oil, gas, or other mineral rights, any put, call, straddle, option, or
privilege on any security (including a certificate of deposit) or on any
group or index of securities (including any interest therein or based on
the value thereof), or any put, call, straddle, option, or privilege
entered into on a national securities exchange relating to foreign
currency, or, in general, any interest or instrument commonly known as a
"security", or any certificate of interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary
or interim certificate for, receipt for, guarantee of, warrant or right to
subscribe to or purchase any of the foregoing,
except that the term "Security" does not include any Security that is an Exempt
Security (as defined above), a Futures Contract (as defined above), or a
physical commodity (such as foreign exchange or a precious metal).
