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THE MUNDER FRAMLINGTON FUNDS TRUST
480 PIERCE STREET
BIRMINGHAM, MICHIGAN 48009
TELEPHONE (800) 438-5789
PROSPECTUS
CLASS Y SHARES
The Munder Framlington Funds Trust (the "Trust") is an open-end investment
company (a mutual fund) that currently offers a selection of investment
portfolios. This Prospectus describes the Class Y shares of the investment
portfolios offered by the Trust (the "Funds"):
Framlington International Growth Fund
Framlington Emerging Markets Fund
Framlington Healthcare Fund
Munder Capital Management (the "Advisor") serves as investment advisor to
the Funds. Framlington Overseas Investment Management Limited (the "Sub-
Advisor") serves as sub-advisor to the Funds.
This Prospectus contains the information that a prospective investor should
know before investing in the Funds. Investors are encouraged to read this
Prospectus and retain it for future reference. A Statement of Additional
Information dated January 2, 1997, as amended or supplemented from time to
time, has been filed with the Securities and Exchange Commission (the "SEC")
and is incorporated by reference into this Prospectus. The Statement of
Additional Information may be obtained free of charge by calling the Trust at
(800) 438-5789. In addition, the SEC maintains a web site (http://www.sec.gov)
that contains the Statement of Additional Information and other information
regarding the Funds.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS JANUARY 2, 1997.
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TABLE OF CONTENTS
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PAGE
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The Funds
Expense Table............................................................. 3
The Trust................................................................. 4
Investment Objectives and Policies........................................ 4
Portfolio Instruments and Practices and Associated Risk Factors........... 5
Investment Limitations.................................................... 11
Purchase and Redemption of Shares......................................... 11
Dividends and Distributions............................................... 12
Other Information
Net Asset Value........................................................... 13
Management................................................................ 14
Taxes..................................................................... 17
Description of Shares..................................................... 18
Performance............................................................... 18
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION, OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUNDS OR FUNDS DISTRIBUTOR, INC. (THE "DISTRIBUTOR"). THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUNDS OR BY THE DISTRIBUTOR IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
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EXPENSE TABLE
The following table sets forth certain costs and expenses that an investor
will incur either directly or indirectly as a shareholder of Class Y shares of
the Funds based on estimated operating expenses for the current fiscal year.
Class Y shares are sold without an initial or contingent deferred sales change
to fiduciary and discretionary accounts of institutions, "institutional
investors" (as defined herein), directors, Trustees, officers and employees of
the Trust, The Munder Funds, Inc., The Munder Funds Trust, the Advisor and the
Distributor, the Advisor's investment advisory clients and family members of
employees of the Advisor.
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<CAPTION>
EMERGING
INTERNATIONAL MARKETS HEALTHCARE
GROWTH FUND FUND FUND
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<S> <C> <C> <C>
Annual operating expenses
(as a percentage of average net assets)......
Advisory fees................................ 1.00% 1.25% 1.00%
Other expenses............................... .30% .30% .30%
---- ---- ----
Total Fund Operating Expenses................ 1.30% 1.55% 1.30%
==== ==== ====
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"Other expenses" in the above table include administration fees, custodial
fees, legal and accounting fees, printing costs, registration fees, fees for
any portfolio valuation service, the cost of regulatory compliance, the costs
of maintaining the Fund's legal existence and the costs involved with
communicating with shareholders. With respect to each Fund, the amount of
"Other expenses" is based on estimated expenses and projected assets for the
current fiscal year. See "Management" in this Prospectus for a further
description of the Funds' operating expenses and the nature of the services
for which the Funds are obligated to pay advisory fees. Any fees charged by
institutions directly to customer accounts for services provided in connection
with investments in shares of the Funds are in addition to the expenses shown
in the above Expense Table and the Example shown below.
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in the Funds. These amounts are based on payment
by the Funds of operating expenses at the levels set forth in the above table,
and are also based on the following assumptions:
An investor would pay the following expenses on a $1,000 investment,
assuming (1) a hypothetical 5% annual return and (2) redemption at the end of
the following time periods:
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<CAPTION>
1 YEAR 3 YEARS
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<S> <C> <C>
International Growth Fund........................................ $13 $41
Emerging Markets Fund............................................ $16 $49
Healthcare Fund.................................................. $13 $41
</TABLE>
The foregoing Expense Table and Example are intended to assist investors in
understanding the various shareholder transaction expenses and operating
expenses of the Funds that investors bear either directly or indirectly.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL INVESTMENT RETURN AND
OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
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THE TRUST
Each of the Funds is a series of shares issued by the Trust, an open-end
management investment company. The Trust was organized under the laws of the
Commonwealth of Massachusetts on October 30, 1996 and has registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Trust's
principal office is located at 480 Pierce Street, Birmingham, Michigan 48009
and its telephone number is (800) 438-5789.
INVESTMENT OBJECTIVES AND POLICIES
This Prospectus describes the following Funds offered by the Trust: the
Framlington International Growth Fund ("International Growth Fund"), the
Framlington Emerging Markets Fund ("Emerging Markets Fund"), and the
Framlington Healthcare Fund ("Healthcare Fund"). Purchasing shares of any Fund
should not be considered a complete investment program, but an important
segment of a well-diversified investment program.
INTERNATIONAL GROWTH FUND
The investment objective of International Growth Fund is to provide
shareholders with long-term capital appreciation. The Fund seeks to achieve
its objective through worldwide investment in equity securities of companies
which, in the opinion of the Sub-Advisor, show above-average profitability,
management quality and growth in their respective countries.
The Fund may invest in the securities of issuers located in various
countries which include, but are not limited to, the following: Argentina,
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Czech Republic,
Denmark, Egypt, Finland, France, Germany, Hong Kong, India, Ireland, Italy,
Japan, Korea, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand,
Norway, Peru, the Philippines, Poland, Portugal, Russia, Singapore, South
Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey and the United
Kingdom.
Under normal market conditions, at least 65% of the Fund's total assets will
be invested in the equity securities of foreign issuers and such issuers will
be located in at least three foreign countries.
EMERGING MARKETS FUND
The investment objective of Emerging Markets Fund is to provide shareholders
with long-term capital appreciation. The Fund seeks to achieve this objective
through investing primarily in equity securities of issuers in emerging market
countries. The Fund considers countries having emerging markets to be all
countries that are generally considered to be emerging or developing countries
by the International Bank for Reconstruction and Development (more commonly
referred to as the World Bank), the International Finance Corporation, the
United Nations or the European Bank for Reconstruction and Development.
Currently, the countries not in this category include Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Iceland, Ireland, Italy,
Japan, Luxembourg, the Netherlands, New Zealand, Norway, Spain, Sweden,
Switzerland, the United Kingdom and the United States. A company will be
deemed to be in an emerging market country if (i) the company is organized
under the laws of, and has a principal office in, an emerging market country;
(ii) the principal trading market for the company's equity securities is in an
emerging market country; or (iii) the company derives at least 50% of its
revenues or profits from goods produced or sold, investments made, or services
performed, in an emerging market country, or has at least 50% of its assets
situated in an emerging market country. Under normal market conditions, the
Fund will invest at least 65% of its total assets in equity securities of
issuers in emerging market countries. Determinations as to eligibility will be
made by the Sub-Advisor based on publicly available information and inquiries
made to the companies.
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HEALTHCARE FUND
The investment objective of the Healthcare Fund is to provide shareholders
with long-term capital appreciation. The Fund seeks to achieve this objective
through investment in companies providing healthcare and medical services and
products worldwide. The Fund will invest in producers of pharmaceuticals,
biotechnology firms, medical device and instrument manufacturers, distributors
of healthcare products, care providers and managers and other healthcare
services companies. Under normal market conditions, the Fund will invest at
least 65% of its total assets in healthcare companies as described above. The
Sub-Advisor considers healthcare companies to include companies for which at
least 50% of sales, earnings or assets arise from or are dedicated to health
services or medical technology activities. At the present time, the
predominant number of healthcare companies meeting the Fund's criteria are in
the United States.
INFORMATION REGARDING ALL FUNDS
Each Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e., "leverage" its portfolio). In addition, each Fund
may enter into transactions in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, and futures contracts
and related options. When deemed appropriate by the Sub-Advisor, a Fund may
invest cash balances in repurchase agreements and other money market
investments to maintain liquidity in an amount to meet expenses or for day-to-
day operating purposes. These investment techniques are described below and
under the heading "Investment Objectives and Policies" in the Statement of
Additional Information.
When the Sub-Advisor believes that market conditions warrant, a Fund may
adopt a temporary defensive position and may invest without limit in money
market securities denominated in U.S. dollars or in the currency of any
foreign country. See "Portfolio Instruments and Practices and Associated Risk
Factors--Liquidity Management."
PORTFOLIO INSTRUMENTS AND PRACTICES AND ASSOCIATED RISK FACTORS
Investment strategies that are available to the Funds are set forth below.
Additional information concerning certain of these strategies and their
related risks is contained in the Statement of Additional Information.
Equity Securities. "Equity securities," as used in this Prospectus, refers
to common stock, preferred stock, warrants or rights to subscribe to or
purchase such securities and sponsored or unsponsored American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs"), and Global
Depositary Receipts ("GDRs") (collectively, "Depositary Receipts"). Securities
considered for purchase by the Funds may be listed or unlisted, and may be
issued by companies with various levels of market capitalization.
Each Fund may invest up to 5% of its net assets at the time of purchase in
warrants and similar rights (other than those that have been acquired in units
or attached to other securities). Warrants represent rights to purchase
securities at a specific price valid for a specific period of time. The prices
of warrants do not necessarily correlate with the prices of the underlying
securities. In addition, each Fund may invest in convertible bonds and
convertible preferred stock. A convertible security is a security that may be
converted either at a stated price or rate within a specified period of time
into a specified number of shares of common stock. By investing in convertible
securities, a Fund seeks the opportunity, through the conversion feature, to
participate in the capital appreciation of the common stock into which the
securities are convertible, while earning higher current income than is
available from the common stock. Although a Fund may acquire convertible
securities that are rated below investment grade by Standard & Poor's Ratings
Service, a division of McGraw-Hill Companies Inc. ("S&P"), or Moody's
Investors Service, Inc. ("Moody's"), it is expected that investments in lower-
rated convertible securities will not exceed 10% of the value of the total
assets of a Fund at the time of purchase. These high yield, high risk
securities are commonly referred to as junk bonds. Securities that are rated
Ba by Moody's or BB by S&P have speculative characteristics with respect to
the issuer's capacity to pay interest and repay principal. Securities that are
rated B generally lack characteristics of a desirable investment, and
assurance of interest and principal
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payments over any long period of time may be small. Securities that are rated
Caa or CCC are of poor standing. These issues may be in default or present
elements of danger that may exist with respect to principal or interest. In
light of the risks, the Sub-Advisor, in evaluating the creditworthiness of an
issuer, will take various factors into consideration, which may include, as
applicable, the issuer's financial resources, its sensitivity to economic
conditions and trends, the ability of the issuer's management and regulatory
matters. To the extent a Fund purchases convertibles rated below investment
grade or convertibles that are not rated, a greater risk exists as to the
timely repayment of the principal of, and the timely payment of interest or
dividends on, such securities. Particular risks include (a) the sensitivity of
such securities to interest rate and economic changes, (b) the lower degree of
protection of principal and interest payments, (c) the relatively low trading
market liquidity for the securities, (d) the impact that legislation may have
on the market for these securities (and, in turn, on a Fund's net asset value)
and (e) the creditworthiness of the issuers of such securities. During an
economic downturn or substantial period of rising interest rates, highly
leveraged issuers may experience financial stress which would negatively
affect their ability to meet their principal and interest payment obligations,
to meet projected business goals and to obtain additional financing. An
economic downturn could also disrupt the market for lower-rated convertible
securities and negatively affect the value of outstanding securities and the
ability of the issuers to repay principal and interest. If the issuer of a
convertible security held by a Fund defaulted, the Fund could incur additional
expenses to seek recovery. Adverse publicity and investor perceptions, whether
or not they are based on fundamental analysis, could also decrease the values
and liquidity of lower-rated convertible securities held by a Fund, especially
in a thinly traded market.
Foreign Securities. Each Fund may invest in the securities of foreign
issuers. There are certain risks and costs involved in investing in securities
of companies and governments of foreign nations, which are in addition to the
usual risks inherent in U.S. investments. These considerations generally are
more of a concern in emerging market countries, where the possibility of
political instability (including revolution) and dependence on foreign
economic assistance may be greater than in developed countries. Investments in
companies domiciled in emerging market countries therefore may be subject to
potentially higher risks than investments in developed countries.
Investments in foreign securities involve higher costs than investments in
U.S. securities, including higher transaction costs as well as the imposition
of additional taxes by foreign governments. In addition, foreign investments
may include additional risks associated with the level of currency exchange
rates, less complete financial information about the issuers, less market
liquidity, and political instability. Future political and economic
developments, the possible imposition of withholding taxes on interest income,
the possible seizure or nationalization of foreign holdings, the possible
establishment of exchange controls, or the adoption of other governmental
restrictions might adversely affect a Fund's investment in foreign
obligations. Additionally, foreign banks and foreign branches of domestic
banks may be subject to less stringent reserve requirements, and to different
accounting, auditing and recordkeeping requirements. A Fund may encounter
difficulties or be unable to vote proxies, exercise shareholder rights, pursue
legal remedies, and obtain judgments in foreign courts. Also, some countries
may withhold portions of income and dividends at the source.
Foreign securities markets 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 assets of a Fund are uninvested and no return is earned
thereon. The inability of a Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to a Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registrations and/or approval in some
emerging market countries. A Fund could be adversely affected by delays in or
a refusal to grant any required governmental registrations or approval for
such repatriation.
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Further, the economies of emerging market countries generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed by the countries with which they trade.
In many emerging market countries, there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. There is an increased risk,
therefore, of uninsured loss due to lost, stolen, or counterfeit stock
certificates. In addition, the foreign securities markets of many of the
countries in which the Funds may invest may also be smaller, less liquid, and
subject to greater price volatility than those in the United States.
Although the Funds may invest in securities denominated in foreign
currencies, portfolio securities and other assets held by the Funds are valued
in U.S. dollars. As a result, the net asset value of a Fund's shares may
fluctuate with U.S. dollar exchange rates as well as with price changes of its
portfolio securities in the various local markets and currencies. In addition
to favorable and unfavorable currency exchange-rate developments, the Funds
are subject to the possible imposition of exchange control regulations or
freezes on convertibility of currency.
Depositary Receipts. ADRs are Depositary Receipts typically issued by a U.S.
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. EDRs and GDRs are typically issued by foreign banks
or trust companies, although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued by either a
foreign or a United States corporation. Generally, Depositary Receipts in
registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements
to have its securities traded in the form of Depositary Receipts. In
unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value
of the Depositary Receipts. Depositary Receipts also involve the risks of
other investments in foreign securities, as discussed above. For purposes of
the Funds' investment policies, a Fund's investments in Depositary Receipts
will be deemed to be investments in the underlying securities.
Concentration in the Healthcare Industries. The Healthcare Fund generally
intends to invest at least 65% of its total assets in securities of companies
in the healthcare industries. These industries are characterized by rapidly
changing technology and extensive government regulation. In particular,
technological advances can render existing products obsolete, and obtaining
governmental approval for new products from regulatory authorities can be
lengthy, expensive and uncertain as to outcome. Healthcare companies also can
be highly dependent on the strength of patents for maintenance of profit
margins and market exclusivity. Moreover, cost containment measures
implemented by governmental authorities have adversely affected certain
healthcare industries. While industry concentration may increase the risk and
volatility of an investment company's portfolio, the Healthcare Fund will
endeavor to reduce risk by having a portfolio of investments that is
diversified within its stated objective and policies.
Forward Foreign Currency Exchange Contracts. The Funds may enter into
forward foreign currency exchange contracts in an effort to reduce the level
of volatility caused by changes in foreign currency exchange rates. The Funds
may not enter into these contracts for speculative purposes. A forward foreign
currency exchange contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of
contract. A Fund will segregate cash or liquid securities to cover its
obligation to purchase foreign currency under a forward foreign
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currency contract. 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 that might be realized should the value of
such currency increase. A Fund will not enter into forward foreign currency
exchange contracts if as a result, the Fund will have more than 20% of its
total assets committed to consummation of such forward foreign currency
exchange contracts.
Futures Contracts and Options. The Funds may invest in futures contracts and
options on futures contracts for hedging purposes or to maintain liquidity.
However, a Fund may not purchase or sell a futures contract unless immediately
after any such transaction the sum of the aggregate amount of margin deposits
on its existing futures positions and the amount of premiums paid for related
options is 5% or less of its total assets.
Futures contracts obligate a Fund, at maturity, to take or make delivery of
certain securities or the cash value of a bond or securities index. When
interest rates are rising, futures contracts can offset a decline in value of
the Fund's portfolio securities. When rates are falling, these contracts can
secure higher yields for securities the Fund intends to purchase.
The Funds may purchase and sell call and put options on futures contracts
traded on an exchange or board of trade. When a Fund purchases an option on a
futures contract, it has the right to assume a position as a purchaser or
seller of a futures contract at a specified exercise price at any time during
the option period. When a Fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the option is
exercised. In anticipation of a market advance, a Fund may purchase call
options on futures contracts as a substitute for the purchase of futures
contracts to hedge against a possible increase in the price of securities
which the Fund intends to purchase. Similarly, if the value of a Fund's
portfolio securities is expected to decline, the Fund might purchase put
options or sell call options on futures contracts rather than sell futures
contracts. In connection with a Fund's position in a futures contract or
option thereon, the Fund will create a segregated account of liquid assets or
will otherwise cover its position in accordance with applicable requirements
of the SEC.
In addition, the Funds may write covered call options, buy put options, buy
call options and write secured put options on particular securities or various
stock indices. Options trading is a highly specialized activity which entails
greater than ordinary investment risks. A call option for a particular
security gives the purchaser of the option the right to buy, and a writer the
obligation to sell, the underlying security at the stated exercise price at
any time prior to the expiration of the option, regardless of the market price
of the security. The premium paid to the writer is in consideration for
undertaking the obligations under the option contract. A put option for a
particular security gives the purchaser the right to sell the underlying
security at the stated exercise price at any time prior to the expiration date
of the option, regardless of the market price of the security. In contrast to
an option on a particular security, an option on a stock index provides the
holder with the right to make or receive a cash settlement upon exercise of
the option.
The use of derivative instruments exposes a Fund to additional risks and
transaction costs. Risks inherent in the use of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the direction that a portfolio manager anticipates;
(2) imperfect correlation between the price of derivative instruments and
movements in the prices of the securities, interest rates or currencies being
hedged; (3) the fact that skills needed to use these strategies are different
than those needed to select portfolio securities; (4) inability to close out
certain hedged positions to avoid adverse tax consequences; (5) the possible
absence of a liquid secondary market for any particular instrument and
possible exchange-imposed price fluctuation limits, either of which may make
it difficult or impossible to close out a position when desired; (6) leverage
risk, that is, the risk that adverse price movements in an instrument can
result in a loss substantially greater than a Fund's initial investment in
that instrument (in some cases, the potential loss is unlimited); and (7)
particularly in the case of privately-negotiated instruments, the risk that
the counterparty will fail to perform its obligations, which could leave a
Fund worse off than if it had not entered into the position. For a further
discussion, see "Fund Investments" and the Appendix in the Statement of
Additional Information.
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When a Fund invests in a derivative instrument, it may be required to
segregate cash and other high-grade liquid debt securities or certain
portfolio securities to "cover" the Fund's position. Assets segregated or set
aside generally may not be disposed of so long as a Fund maintains the
positions requiring segregation or cover. Segregating assets could diminish a
Fund's return due to the opportunity losses of foregoing other potential
investments with the segregated assets.
The Funds are not commodity pools, and all futures transactions engaged in
by a Fund must constitute bona fide hedging or other permissible transactions
in accordance with the rules and regulations promulgated by the Commodity
Futures Trading Commission. Successful use of futures and options is subject
to special risk considerations.
For a further discussion see "Additional Information on Fund Investments"
and the Appendix to the Statement of Additional Information.
Repurchase Agreements. The Funds may agree to purchase securities from
financial institutions subject to the seller's agreement to repurchase them at
an agreed-upon time and price ("repurchase agreements"). The financial
institutions with which a Fund may enter into repurchase agreements include
member banks of the Federal Reserve System, any foreign bank or any domestic
or foreign broker/dealer which is recognized as a reporting government
securities dealer. The Advisor and/or Sub-Advisor will review and continuously
monitor the creditworthiness of the seller under a repurchase agreement, and
will require the seller to maintain liquid assets in a segregated account in
an amount that is greater than the repurchase price. Default by or bankruptcy
of the seller would, however, expose a Fund to possible loss because of
adverse market action or delays in connection with the disposition of the
underlying obligations.
Investment Company Securities. In connection with the management of daily
cash positions, the Funds may invest in securities issued by other investment
companies which invest in short-term debt securities and which seek to
maintain a $1.00 net asset value per share (i.e., "money market funds").
International Growth Fund and Emerging Markets Fund may also purchase shares
of investment companies investing primarily in foreign securities, including
so called "country funds." Securities of other investment companies will be
acquired within limits prescribed by the 1940 Act. These limitations, among
other matters, restrict investments in securities of other investment
companies to no more than 10% of the value of a Fund's total assets, with no
more than 5% invested in the securities of any one investment company. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the expenses a
Fund bears directly in connection with its own operations.
Liquidity Management. Pending investment, to meet anticipated redemption
requests, or as a temporary defensive measure if the Sub-Advisor determines
that market conditions warrant, the Funds may also invest without limitation
in short-term U.S. Government obligations, high quality money market
instruments, variable and floating rate instruments and repurchase agreements
as described above.
High quality money market instruments may include commercial paper, and
Europaper, which is U.S. dollar-denominated commercial paper of a foreign
issuer. The Funds may also purchase U.S. dollar-denominated bank obligations,
such as certificates of deposit, bankers' acceptances and interest-bearing
savings and time deposits, issued by U.S. or foreign banks or savings
institutions having total assets at the time of purchase in excess of $1
billion. Short-term obligations purchased by the Funds will either have short-
term debt ratings at the time of purchase in the top two categories by one or
more unaffiliated nationally recognized statistical rating organizations
("NRSROs") or be issued by issuers with such ratings. Unrated instruments
purchased by a Fund will be of comparable quality as determined by the Sub-
Advisor.
Illiquid Securities. Each Fund may invest up to 15% of the value of its net
assets (determined at time of acquisition) in securities which are illiquid.
Illiquid securities would generally include repurchase agreements and
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time deposits with notice/termination dates in excess of seven days, and
certain securities which are subject to trading restrictions because they are
not registered under the Securities Act of 1933, as amended (the "Act"). If,
after the time of acquisition, events cause this limit to be exceeded, the
Fund will take steps to reduce the aggregate amount of illiquid securities as
soon as reasonably practicable in accordance with the policies of the SEC.
The Funds may invest in commercial obligations issued in reliance on the
"private placement" exemption from registration afforded by Section 4(2) of
the Act ("Section 4(2) paper"). The Funds may also purchase securities that
are not registered under the Act, but which can be sold to qualified
institutional buyers in accordance with Rule 144A under the Act ("Rule 144A
securities"). Section 4(2) paper is restricted as to disposition under the
Federal securities laws, and generally is sold to institutional investors
which agree that they are purchasing the paper for investment and not with a
view to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper normally is resold to other institutional
investors through or with the assistance of the issuer or investment dealers
which make a market in the Section 4(2) paper, thus providing liquidity. Rule
144A securities generally must be sold only to other qualified institutional
buyers. If a particular investment in Section 4(2) paper or Rule 144A
securities is not determined to be liquid, that investment will be included
within the Fund's limitation on investment in illiquid securities. The Advisor
and/or Sub-Advisor will determine the liquidity of such investments pursuant
to guidelines established by the Trust's Board of Trustees.
U.S. Government Obligations. The Funds may purchase obligations issued or
guaranteed the U.S. Government and U.S. Government agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of
the U.S. Government, such as those of the Government National Mortgage
Association, are supported by the full faith and credit of the U.S. Treasury.
Others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the U.S. Treasury; and
still others, such as those of the Student Loan Marketing Association, are
supported only by the credit of the agency or instrumentality issuing the
obligation. No assurance can be given that the U.S. Government would provide
financial support to U.S. Government-sponsored instrumentalities if it is not
obligated to do so by law.
Borrowing and Reverse Repurchase Agreements. Each Fund is authorized to
borrow money in amounts up to 5% of the value of the Fund's total assets at
the time of such borrowing for temporary purposes. The Funds may also borrow
funds for temporary purposes by selling portfolio securities to financial
institutions such as banks and broker/dealers and agreeing to repurchase them
at a mutually specified date and price ("reverse repurchase agreements").
Reverse repurchase agreements involve the risk that the market value of the
securities sold by a Fund may decline below the repurchase price. A Fund would
pay interest on amounts obtained pursuant to a reverse repurchase agreement.
Additionally, a Fund is authorized to borrow money in amounts up to 33 1/3% of
its assets, as permitted by the 1940 Act, for the purpose of meeting
redemption requests. Borrowing by a Fund creates an opportunity for greater
total return but, at the same time, increases exposure to capital risk.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities on a Fund's net asset value. In
addition, borrowed funds are subject to interest costs that may offset or
exceed the return earned on the borrowed funds. However, a Fund will not
purchase portfolio securities while borrowings exceed 5% of the Fund's total
assets. For more detailed information with respect to the risks associated
with borrowing, see the heading "Borrowing" in the Statement of Additional
Information.
Lending of Portfolio Securities. To enhance the return of the portfolio, a
Fund may lend securities in its portfolio representing up to 25% of its total
assets, taken at market value, to securities firms and financial institutions,
provided that each loan is secured continuously by collateral in the form of
cash, high quality money market instruments or short-term U.S. Government
securities adjusted daily to have a market value at least equal to the current
market value of the securities loaned. The risk in lending portfolio
securities, as with other extensions of credit, consists of possible delay in
the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially.
Portfolio Transactions and Turnover. All orders for the purchase or sale of
securities on behalf of the Funds are placed by the Sub-Advisor with
broker/dealers that the Sub-Advisor selects. A high portfolio turnover rate
involves larger brokerage commission expenses or transaction costs which must
be borne directly by the Fund,
10
<PAGE>
and may result in the realization of short-term capital gains which are
taxable to shareholders as ordinary income. The Sub-Advisor will not consider
portfolio turnover rate a limiting factor in making investment decisions
consistent with a Fund's objective and policies. It is anticipated that each
Fund's annual portfolio turnover rate will range from 50% to 150%.
INVESTMENT LIMITATIONS
Each Fund's investment objective and policies may be changed by the Trust's
Board of Trustees without shareholder approval. No assurance can be given that
any Fund will achieve its investment objective.
Each Fund has also adopted certain fundamental investment limitations that
may be changed only with the approval of a "majority of the outstanding shares
of the Fund" (as defined in the Statement of Additional Information). These
limitations are set forth in the Statement of Additional Information.
PURCHASE AND REDEMPTION OF SHARES
Shares of each Fund are sold on a continuous basis by the Distributor. The
Distributor is a registered broker/dealer with principal offices at 60 State
Street, Boston, Massachusetts 02109.
PURCHASE OF SHARES
Class Y shares of the Funds are sold without an initial or contingent
deferred sales charge to fiduciary and discretionary accounts of institutions,
"institutional investors," directors, trustees, officers and employees of the
Trust, The Munder Funds, Inc., The Munder Funds Trust, the Advisor, the
Distributor and the Advisor's investment advisory clients and family members
of the Advisor's employees. "Institutional investors" may include financial
institutions (such as banks, savings institutions and credit unions); pension
and profit sharing and employee benefit plans and trusts; insurance companies;
investment companies; investment advisers; and broker-dealers acting for their
own accounts or for the accounts of such institutional investors. A minimum
initial investment of $500,000 for Class Y shares of a Fund is required for
fiduciary and discretionary accounts of institutions and institutional
investors.
Shares of each Fund are sold at net asset value per share next determined on
that day after receipt of a purchase order. Purchase orders by an institution
for Class Y shares must be received by the Distributor or the Transfer Agent
before the close of regular trading hours (currently 4:00 p.m. New York City
time) on the New York Stock Exchange (the "Exchange"), on any Business Day (as
defined below). Payment for such shares must be made by institutions in
Federal funds or other funds immediately available to the Custodian no later
than 4:00 p.m. (New York City time) on the next Business Day following the
receipt of the purchase order.
It is the responsibility of the institution to transmit orders for purchases
by its customers and to deliver required funds on a timely basis. If funds are
not received within the periods described above, the order will be canceled,
notice thereof will be given, and the institution will be responsible for any
loss to a Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with the
institution. In addition, an institution may receive fees from a Fund with
respect to the investments of its customers as described below under
"Management." Payments for Class Y shares of a Fund may, in the discretion of
the Advisor, be made in the form of securities that are permissible
investments for the Fund. For further information see "In-Kind Purchases" in
the Statement of Additional Information.
Purchases may be effected on days on which the Exchange is open for business
(a "Business Day"). The Trust reserves the right to reject any purchase order.
Payment for orders which are not received or accepted will be returned after
prompt inquiry. The issuance of shares is recorded on the books of the Trust,
and share certificates are not issued unless expressly requested in writing.
Certificates are not issued for fractional shares.
11
<PAGE>
Neither the Trust, the Distributor nor the Transfer Agent will be
responsible for the authenticity of telephone instructions for the purchase or
redemption of shares where such instructions are reasonably believed to be
genuine. Accordingly, the Institution will bear the risk of loss. The Trust
will attempt to confirm that telephone instructions are genuine and will use
such procedures as are considered reasonable. To the extent that the Trust
fails to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such instructions
that prove to be fraudulent or unauthorized.
AUTOMATIC INVESTMENT PLAN ("AIP")
An investor in Class Y shares of a Fund may arrange for periodic investments
in the Fund through automatic deductions from a checking or savings account by
completing the AIP Application Form. The minimum pre-authorized investment is
$50.
REDEMPTION OF SHARES
Redemption orders are effected at the net asset value per share next
determined after receipt of the order. Shares held by an institution on behalf
of its customers must be redeemed in accordance with instructions and
limitations pertaining to the account at the institution. The Funds intend to
pay cash for all shares redeemed, but in unusual circumstances may make
payment wholly or partly in portfolio securities at their then market value
equal to the redemption price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.
Share balances may be redeemed pursuant to arrangements between institutions
and investors. It is the responsibility of an institution to transmit
redemption orders to the Transfer Agent and to credit its Customers' accounts
with the redemption proceeds on a timely basis. If the Transfer Agent receives
a redemption order prior to 4:00 p.m. (New York City time), the redemption
proceeds for shares of a Fund are normally wired to the redeeming institution
the following Business Day. The Funds reserve the right to delay the wiring of
redemption proceeds for up to seven days after receipt of a redemption order
if, in the judgment of the Investment Advisor, an earlier payment could
adversely affect a Fund.
EXCHANGES
Class Y shares of a Fund may be exchanged for Class Y shares of other funds
of the Trust, The Munder Funds, Inc. and The Munder Funds Trust, based on
their respective net asset values, without the imposition of any sales
charges.
Any shares involved in an exchange must satisfy the requirements relating to
the minimum initial investment in an investment portfolio of the Trust, The
Munder Funds, Inc. or The Munder Funds Trust, and the shares involved must be
legally available for sale in the state of the investor's residence. For
Federal income tax purposes, a share exchange is a taxable event and,
accordingly, a capital gain or loss may be realized. Before making an exchange
request, shareholders should consult a tax or other financial advisor and
should consider the investment objective, policies and restrictions of the
investment portfolio into which the shareholder is making an exchange, as set
forth in the applicable prospectus. Certain brokers may charge a fee for
handling exchanges.
The Trust reserves the right to modify or terminate the exchange privilege
at any time. Notice will be given to shareholders of any material
modifications, except where notice is not required.
DIVIDENDS AND DISTRIBUTIONS
Each Fund expects to pay dividends and distributions from the net income and
capital gains, if any, earned on investments held by the Fund. Dividends from
net income are declared and paid at least annually. Each Fund's net realized
capital gains (including net short-term capital gains), if any, are
distributed at least annually. Dividends and capital gains are paid in the
form of additional shares of the same class of a Fund unless a shareholder
requests that dividends and capital gains be paid in cash. In the absence of
this request on the Account Application Form or in a subsequent request, each
purchase of shares is made on the understanding that the Transfer Agent is
automatically appointed to receive the dividends upon all shares in the
shareholder's
12
<PAGE>
account and to reinvest them in full and fractional shares of the same class
of the Fund at the net asset value in effect at the close of business on the
reinvestment date. Dividends are automatically paid in cash (along with any
redemption proceeds) not later than seven business days after a shareholder
closes an account.
A Fund's expenses are deducted from the income of the Fund before dividends
are declared and paid. These expenses include, but are not limited to, fees
paid to the Advisor, Administrator, Custodian and Transfer Agent; fees and
expenses of officers and Trustees; taxes; interest; legal and auditing fees;
brokerage fees and commissions; certain fees and expenses in registering and
qualifying the Funds and their shares for distribution under Federal and state
securities laws; expenses of preparing prospectuses and statements of
additional information and of printing and distributing prospectuses and
statements of additional information to existing shareholders; the expense of
reports to shareholders, shareholders' meetings and proxy solicitations;
fidelity bond and Trustees' and officers' liability insurance premiums; the
expense of using independent pricing services; and other expenses which are
not assumed by the Administrator. Any general expenses of the Trust that are
not readily identifiable as belonging to a particular fund of the Trust are
allocated among all funds of the Trust by or under the direction of the Board
of Trustees in a manner that the Board determines to be fair and equitable.
Except as noted in this Prospectus and the Statement of Additional
Information, the Funds' service contractors bear expenses in connection with
the performance of their services, and each Fund bears the expenses incurred
in its operations. The Advisor, Administrator, Custodian and Transfer Agent
may voluntarily waive all or a portion of their respective fees from time to
time.
NET ASSET VALUE
Net asset value for Class Y shares in a Fund is calculated by dividing the
value of all securities and other assets belonging to the Fund allocable to
that class, less the liabilities charged to that class, by the number of
outstanding shares of that class.
The net asset value per share of each Fund for the purpose of pricing
purchase and redemption orders is determined as of the close of regular
trading hours on the New York Stock Exchange (currently 4:00 p.m., New York
time) on each business day. Securities traded on a national securities
exchange or on the NASDAQ National Market System are valued at the last sale
price on such exchange or market as of the close of business on the date of
valuation. Securities traded on a national securities exchange or on the
NASDAQ National Market System for which there were no sales on the date of
valuation and securities traded on other over-the-counter markets, including
listed securities for which the primary market is believed to be over-the-
counter, are valued at the mean between the most recently quoted bid and asked
prices. Options will be valued at market value or fair value if no market
exists. Futures contracts will be valued in like manner, except that open
futures contract sales will be valued using the closing settlement price or,
in the absence of such a price, the most recently quoted asked price.
Portfolio securities primarily traded on the London Stock Exchange are
generally valued at the mid-price between the current bid and asked prices.
Portfolio securities which are primarily traded on foreign securities
exchanges, other than the London Stock Exchange, are generally valued at the
preceding closing values of such securities on their respective exchanges,
except when an occurrence subsequent to the time a value was so established is
likely to have changed such value. In such an event, the fair value of those
securities will be determined through the consideration of other factors by or
under the direction of the Boards of Trustees. Restricted securities and
securities and assets for which market quotations are not readily available
are valued at fair value by the Advisor under the supervision of the Board of
Trustees. Debt securities with remaining maturities of 60 days or less are
valued at amortized cost, unless the Board of Trustees determines that such
valuation does not constitute fair value at that time. Under this method, such
securities are valued initially at cost on the date of purchase (or the 61st
day before maturity).
The Trust does not accept purchase and redemption orders on days on which
the New York Stock Exchange is closed. The New York Stock Exchange is
currently scheduled to be closed on New Year's Day, Presidents' Day, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving and
Christmas, and on the preceding Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively.
13
<PAGE>
MANAGEMENT
BOARD OF TRUSTEES
The Trust is managed under the direction of its Board of Trustees. The
Statement of Additional Information contains the name and background
information of each Trustee.
INVESTMENT ADVISOR AND SUB-ADVISOR
Munder Capital Management, a Delaware general partnership with its principal
offices at 480 Pierce Street, Birmingham, Michigan 48009, serves as the Funds'
investment advisor. The Advisor was formed in December 1994. The principal
partners of the Advisor are Old MCM, Inc. ("MCM"), Munder Group LLC,
Woodbridge Capital Management, Inc. ("Woodbridge") and WAM Holdings, Inc.
("WAM"). MCM was founded in February 1985 as a Delaware corporation and was a
registered investment advisor. Woodbridge and WAM are indirect, wholly-owned
subsidiaries of Comerica Incorporated. Mr. Lee P. Munder, the Advisor's chief
executive officer, indirectly owns or controls a majority of the partnership
interests in the Advisor. As of September 30, 1996, the Advisor and its
affiliates had approximately $36 billion in assets under active management, of
which $18 billion were invested in equity securities, $8 billion were invested
in money market or other short-term instruments, and $10 billion were invested
in other fixed income securities.
Subject to the supervision of the Board of Trustees of the Trust, the
Advisor provides overall investment management for the Funds, provides
research and credit analysis, oversees the purchases and sales of portfolio
securities by the Sub-Advisor, maintains books and records with respect to the
Funds' securities transactions and provides periodic and special reports to
the Board of Trustees as requested.
For the advisory services provided and expenses assumed with regard to the
International Growth Fund and the Healthcare Fund, the Advisor has agreed to a
fee, computed daily and payable monthly, at an annual rate of 1.00% of each
Fund's average daily net assets up to $250 million, reduced to .75% of each
Fund's average daily net assets in excess of $250 million. For the advisory
services provided and expenses assumed with regard to the Emerging Markets
Fund, the Advisor has agreed to a fee, computed daily and payable monthly, at
an annual rate of 1.25% of the Fund's average daily net assets.
The Advisor may, from time to time, make payments to banks, broker-dealers
or other financial institutions for certain services to the Funds and/or their
shareholders, including sub-administration, sub-transfer agency and
shareholder servicing. Such payments are made out of the Advisor's own
resources and do not involve additional costs to the Funds or their
shareholders.
Pursuant to a sub-advisory agreement with the Advisor, Framlington Overseas
Investment Management Limited provides sub-advisory services to the Funds.
Subject to the supervision of the Advisor, the Sub-Advisor is responsible for
the management of each Fund's portfolio, including all decisions regarding
purchases and sales of portfolio securities by the Funds. The Sub-Advisor is
also responsible for arranging the execution of all portfolio management
decisions, including the selection of brokers to execute trades and the
negotiation of brokerage commissions in connection therewith. For its services
with regard to the International Fund and the Healthcare Fund, the Advisor
pays the Sub-Advisor a monthly fee equal on an annual basis of up to 0.50% of
each Fund's average daily net assets up to $250 million, reduced to .375% of
each Fund's average daily net assets in excess of $250 million. For its
services with regard to the Emerging Markets Fund, the Advisor pays the Sub-
Advisor a monthly fee equal on an annual basis of up to .625% of the Fund's
average daily net assets.
The Sub-Advisor is a subsidiary of Framlington Group plc, a public limited
company incorporated in England and Wales which, through its subsidiaries,
provides a wide range of investment services. The Sub-Advisor and its
affiliates serve as investment manager to various investment trusts organized
in the United Kingdom, and provides fund management services to pension funds
and charities. Framlington Group plc is a wholly owned subsidiary of
Framlington Holdings Limited which is, in turn, owned 49% by the Advisor and
51% by Credit Commercial de France S.A., a French banking corporation listed
on the Societe des Bourses Francaises.
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<PAGE>
PERFORMANCE OF EQUITY PORTFOLIOS MANAGED BY THE SUB-ADVISOR
Set forth below are certain performance data provided by the Sub-Advisor
relating to accounts managed by the Sub-Advisor and which have investment
objectives and policies similar to those of the corresponding Funds. See
"Investment Objectives and Policies" and "Portfolio Instruments and Practices
and Associated Risk Factors." In the case of the Healthcare portfolio
performance, the data relates to a unit trust organized under the laws of the
United Kingdom managed by the same personnel of the Sub-Advisor with similar
investment objectives and policies to the Healthcare Fund. In the case of
Emerging Markets portfolio performance, the data relates to a Canadian-based
institutional emerging markets portfolio managed by the same personnel of the
Sub-Advisor with similar investment objectives and policies to the Emerging
Markets Fund.
The trust account performance is provided by Micropal, an independent
research organization that is a recognized source of performance data in the
UK unit trust industry. The data is U.S. dollar adjusted on the basis of
exchange rates provided by Datastream using WM/Reuters closing rates. The
performance figures are net of brokerage commissions, actual investment
advisory fees and initial sales charges. The data assume the reinvestment of
net income and capital gain distributions. The trust account returns are
calculated using beginning offer and ending bid prices for periods ended
September 30, 1996.
Investors should not rely on the following performance data of the Sub-
Advisor's client accounts as an indication of future performance of the Funds.
It should be noted that the management of the Funds will be affected by
regulatory requirements under the 1940 Act and requirements of the Internal
Revenue Code of 1986, as amended, to qualify as a regulated investment
company.
<TABLE>
<CAPTION>
S&P
HEALTHCARE
COMPOSITE
PERIOD ENDED U.K. INDEX
SEPTEMBER 30, HEALTH CAPITAL
1996 PORTFOLIO CHANGE
------------- --------- ----------
<S> <C> <C>
1 Year.............................................. 33.68% 28.53%
3 Years............................................. 112.54% 110.78%
5 Years............................................. 134.42% 65.00%
Inception on April 30, 1987......................... 404.63% 225.90%
</TABLE>
Performance for the Health trust account is calculated on an offer-bid
basis; US Dollar adjusted total return net of all management fees but not
reflecting U.K. tax. Source: Micropal.
S&P Healthcare Composite Index performance shows capital change in US
Dollars but does not reflect the deduction of fees, expenses and taxes.
Source: Datastream.
<TABLE>
<CAPTION>
PERIOD ENDED CANADIAN MSCI EMERGING
SEPTEMBER 30, EMERGING MARKETS MARKETS
1996 ACCOUNT TOTAL RETURN
------------- ---------------- -------------
<S> <C> <C>
1 Year.................................... 4.23% 4.84%
Inception on November 1, 1994............. 0.65% -12.15%
</TABLE>
MSCI Emerging Markets Index performance shows total return in U.S. dollars
but does not reflect the deduction of fees, expenses and taxes. Source:
Datastream.
The performance of the Canadian institutional account is measured by the
World Markets Company on a total return basis and has been recalculated net of
the management fee charged the Canadian institutional account. The inception
date of the Canadian institutional account is November 1, 1994.
INDICES
The S&P Healthcare Composite Index is the composite Healthcare section of
the S&P 500 Index as defined and tracked by S&P. This index covers securities
listed in the USA only.
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<PAGE>
The MSCI Emerging Markets Index is maintained by Morgan Stanley Capital
International and covers 26 emerging markets. Total return is calculated using
the prices of the companies tracked and assumes the reinvestment of dividends.
PORTFOLIO MANAGERS
Simon Key, Chief Investment Officer of the Sub-Advisor, is the primary
portfolio manager for the Emerging Markets Fund. Mr. Key heads the asset
allocation committee of the Sub-Advisor, and is responsible for overall asset
allocation strategy. Prior to joining Framlington in 1989, Mr. Key was with
the Bank of England as economist and deputy head of the European team. He
graduated from the University of East Anglia with a BA in economics and
philosophy, and went on to complete a MSc in economics at the University of
London.
Antony Milford, Head of the Specialist Desk for the Sub-Advisor, is the
primary portfolio manager for the Healthcare Fund. Mr. Milford is a member of
the Sub-Advisor's asset allocation committee and has been managing funds for
Framlington since 1971, covering most geographic regions. Mr. Milford has
managed a healthcare portfolio for the Sub-Advisor since 1989. He graduated
from Oxford with a Classics degree.
The International Growth Fund is managed by a committee of professional
portfolio managers of the Sub-Advisor.
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
First Data Investor Services Group, Inc. ("First Data"), whose principal
business address is 53 State Street, Boston, Massachusetts 02109 (the
"Administrator"), serves as administrator for the Trust. First Data is a
wholly-owned subsidiary of First Data Corporation. The Administrator generally
assists the Trust in all aspects of its administration and operations,
including the maintenance of financial records and fund accounting.
First Data also serves as the Trust's transfer agent and dividend disbursing
agent ("Transfer Agent"). Shareholder inquiries may be directed to First Data
at P.O. Box 5130, Westborough, Massachusetts 01581-5130.
As compensation for these services, the Administrator is entitled to receive
fees, computed daily and payable monthly, at the rate of .10% of average daily
net assets with a $60,000 minimum fee per annum in the aggregate for the
Funds. The Transfer Agent is entitled to receive fees, based on the aggregate
average daily net assets of the Funds and certain other investment portfolios
that are advised by the Advisor for which they provide services, computed
daily and payable monthly at the rate of .02% of the first $2.8 billion of net
assets, plus .015% of the next $2.2 billion of net assets, plus .01% of all
net assets in excess of $5 billion with a $120,000 minimum fee per annum in
the aggregate for the Funds. The Administrator and Transfer Agent are also
entitled to reimbursement for out-of-pocket expenses. The Administrator has
entered into a Sub-Administration Agreement with the Distributor under which
the Distributor provides certain administrative services with respect to the
Funds. The Administrator pays the Distributor a fee for these services out of
its own resources at no cost to the Funds.
Comerica Bank (the "Custodian"), whose principal business address is One
Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48226, provides
custodial services to the Funds. The Custodian is a wholly-owned subsidiary of
Comerica Incorporated, a publicly-held bank holding company. As compensation
for its services, the Custodian is entitled to receive fees, based on the
aggregate average daily net assets of the Funds and certain other investment
portfolios that are advised by the Advisor, for which the custodian provides
services, computed daily and payable monthly at an annual rate of .03% of the
first $100 million of average daily net assets, .02% of the next $500 million
of net assets and .01% of net assets in excess of $600 million. The Custodian
also receives certain transaction based fees.
For an additional description of the services performed by the
Administrator, Transfer Agent and Custodian, see the Statement of Additional
Information.
16
<PAGE>
TAXES
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code for 1986, as amended (the "Code").
Such qualification relieves a Fund of liability for Federal income taxes to
the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for any
taxable year requires, among other things, that a Fund distribute to its
shareholders an amount equal to at least 90% of its investment company taxable
income and 90% of its net tax-exempt interest income for such year. In general
a Fund's investment company income will be its taxable income (including
dividends, interest, and short-term capital gains) subject to certain
adjustments and excluding the excess of any net long-term capital gain for the
taxable year over the net short-term capital loss, if any, for such year. Each
Fund intends to distribute substantially all of its investment company taxable
income each taxable year. Such distributions will be taxable as ordinary
income to a Fund's shareholders who are not currently exempt from Federal
income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or
qualified retirement plan are deferred under the Code if applicable
requirements are met.) The dividends received deduction for corporations will
apply to such distributions by the Funds to the extent of the total qualifying
dividends received by the distributing Fund from domestic corporations for the
taxable year and if other applicable tax requirements are met.
Substantially all of the Funds' net realized long-term capital gains, if
any, will be distributed at least annually. The Funds will generally have no
Federal income tax liability with respect to such gains, and the distributions
will be taxable to shareholders who are not currently exempt from Federal
income taxes as long-term capital gains, no matter how long the shareholders
have held their shares.
A taxable gain or loss may also be realized by a holder of shares in a Fund
upon the redemption or transfer of shares depending upon the tax basis of the
shares and their price at the time of the transaction.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by a Fund on December 31 of such
year if such dividends are actually paid during January of the following year.
Before purchasing shares in the Funds, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of
the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, may be subject to tax.
On an annual basis, the Trust will send written notices to record owners of
shares regarding the Federal tax status of distributions made by the Funds.
TAXES--FOREIGN INVESTMENTS
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Funds will be
subject to foreign withholding taxes with respect to income received from
sources within foreign countries. If more than 50% of the value of a Fund's
total assets at the close of a taxable year consists of stock or securities of
foreign corporations, the Fund may elect, for U.S. Federal income tax
purposes, to treat certain foreign taxes paid by it, including generally any
withholding taxes and other foreign income taxes, as paid by its shareholders.
If a Fund makes this election, the amount of such foreign taxes paid by the
Fund will be included in its shareholders' income pro rata (in addition to
taxable distributions actually received by them), and the shareholders would
be entitled (a) to credit their proportionate amount of such taxes against
their U.S. Federal income tax liabilities subject to certain limitations
described in the Statement of Additional Information, or (b) if they itemize
their deductions, to deduct such proportionate amount from their U.S. income.
17
<PAGE>
If a Fund invests in certain "passive foreign investment companies"
("PFICs"), it will be subject to Federal income tax (and possibly additional
interest charges) on a portion of any "excess distribution" or gain from the
disposition of such shares even if it distributes such income to its
shareholders. If a Fund elects to treat the PFIC as a "qualified election
fund" ("QEF") and the PFIC furnishes certain financial information in the
required form to such Fund, the Fund will instead be required to include in
income each year its allocable share of the ordinary earnings and net capital
gains on the QEF, regardless of whether received, and such amounts will be
subject to the various distribution requirements described above.
DESCRIPTION OF SHARES
Each Fund operates as one series of the Trust. The Trust was organized as a
Massachusetts business trust on October 30, 1996 and is also registered under
the 1940 Act as an open-end management investment company. The Trust's
declaration of trust authorize the Trustees to classify and reclassify any
unissued shares into one or more classes of shares. Pursuant to such authority
the Trustees have authorized the issuance of shares of beneficial interest
representing interests in the Funds, each of which is classified as a
diversified investment company under the 1940 Act.
The shares of the Funds are offered as five separate classes of shares of
beneficial interest, $.01 par value per share, designated Class A shares,
Class B shares, Class C shares, Class K shares and Class Y shares. All shares
of a Fund represent interests in the same assets of the Fund and are identical
in all respects except that each class bears different service and
distribution expenses and may bear various class-specific expenses (which may
affect performance), and each class has exclusive voting rights with respect
to its service and/or distribution plan, if any. Shares of each Fund issued
are fully paid, non-assessable, fully transferable and redeemable at the
option of the holder. Investors may call the Trust at (800) 438-5789 for more
information concerning other classes of shares of the Funds. This Prospectus
relates only to the Class Y shares of the Funds.
The Trust's shareholders are entitled to one vote for each full share held
and proportionate fractional votes for fractional shares held, and will vote
in the aggregate and not by Fund, except where otherwise required by law or
when the Trustees determine that the matter to be voted upon affects only the
interests of the shareholders of a particular Fund. In addition, shareholders
of a Fund will vote in the aggregate and not by class, except as otherwise
expressly required by law or when the Trustees determine that the matter to be
voted upon affects only the interests of the holders of a particular class of
shares. The Trust is not required and does not currently intend to hold annual
meetings of shareholders for the election of Board members except as required
under the 1940 Act. A meeting of shareholders will be called upon the written
request of at least 10% of the outstanding shares of the Trust. To the extent
required by law, the Trust will assist in shareholder communications in
connection with such a meeting. For further discussion of the voting rights of
shareholders, see "Additional Information Concerning Shares" in the Statement
of Additional Information.
REPORTS TO SHAREHOLDERS
The Trust will seek to eliminate duplicate mailings of prospectuses and
shareholders reports to accounts which have the same primary record owner, and
with respect to joint tenant accounts or tenant in common accounts, accounts
which have the same address. Additional copies of prospectuses and reports to
shareholders are available upon request by calling the Trust at (800) 438-
5789.
PERFORMANCE
From time to time, the Funds may quote performance data for Class Y shares
in advertisements or in communications to shareholders. The total return of a
class of shares in a Fund may be calculated on an average annual total return
basis, and may also be calculated on an aggregate total return basis, for
various periods. Average annual total return of a Fund reflects the average
percentage change in value of an investment in a class
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of shares in the Fund from the beginning date of the measuring period to the
end of the measuring period. Aggregate total return reflects the total
percentage change in value over the measuring period. Both methods of
calculating total return assume that dividends and capital gains distributions
made during the period are reinvested in the same class of shares.
A Fund may compare the performance of its shares to the performance of other
mutual funds with similar investment objectives and to other relevant indices
or to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds, including, for
example, Lipper Analytical Services, Inc., the Lehman Brothers
Government/Corporate Bond Index, a recognized unmanaged index of government
and corporate bonds, the Standard & Poor's 500 Index, an unmanaged index of a
group of common stocks, the Consumer Price Index, or the Dow Jones Industrial
Average, an unmanaged index of common stocks of 30 industrial companies listed
on the New York Stock Exchange. Performance data as reported in national
financial publications such as Morningstar, Inc., Money Magazine, Forbes,
Barron's, The Wall Street Journal and The New York Times, or in publications
of a local or regional nature, may also be used in comparing the performance
of a class of shares in a Fund.
Performance will fluctuate and any quotation of performance should not be
considered as representative of future performance of a class of shares in a
Fund. Shareholders should remember that performance is generally a function of
the kind and quality of the instruments held in a fund, portfolio maturity,
operating expenses, and market conditions. Any fees charged by institutions
directly to their customers' accounts in connection with investments in a Fund
will not be included in calculations of yield and performance.
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