As filed with the Securities and Exchange Commission on
April 18, 1997
Registration Nos. 2-91373
811-4038
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/X/
Pre-Effective Amendment No.
/ /
Post-Effective Amendment No. 22
/X/
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 23
/X/
St. Clair Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
480 Pierce Street Birmingham, Michigan 48009
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (810) 647-9200
Teresa M.R. Hamlin, Esq.
First Data Investor Services Group, Inc.
One Exchange Place, 8th Floor
Boston, Massachusetts 02109
Copies to:
Lisa Anne Rosen, Esq. Paul F. Roye, Esq.
Munder Capital Management Dechert Price & Rhoads
480 Pierce Street 1500 K Street, NW
Birmingham, Michigan 48009 Washington, D.C. 20549
/X/ It is proposed that this filing will become effective
on April 19, 1997 pursuant to paragraph (b) of Rule 485.
The Registrant has elected to register an indefinite number
of shares of all series under the Securities Act of 1933 pursuant
to Rule 24f-2 under the Investment Company Act of 1940. The
Registrant was not required to file a Rule 24f-2 Notice for the
fiscal year ended February 28, 1997 because no shares of common
stock were sold in reliance upon registration pursuant to Rule
24f-2 during such fiscal year.
ST. CLAIR FUNDS, INC.
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for St. Clair Funds, Inc.
(Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund)
Part A
Item Heading
1. Cover Page Cover Page
2. Synopsis Not Applicable
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover
Page; Investment Objectives and
Policies; Investment Limitations; Portfolio Instruments
and Practices and Associated Risk Factors; Description of
Shares
5. Management of the Fund Management;
Investment Objectives and Policies; Dividends and
Distributions; Performance
6. Capital Stock and Other Securities
Management; Purchase and Redemption of Shares;
Description of Shares; Dividends and Distributions; Taxes
7. Purchase of Securities Being Offered Net Asset
Value; Purchase and
Redemption of Shares
8. Redemption or Repurchase Purchase and
Redemption of Shares
9. Pending Legal Proceedings Not Applicable
Part B
Item Heading
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History See Prospectus -
- - "Management";
General; Directors and Officers
13. Investment Objectives and Policies Fund
Investments; Investment
Limitations; Risk Factors and Special Considerations -
Index Funds; Portfolio Transactions
14. Management of the Fund See Prospectus --
"Management";
Directors and Officers; Miscellaneous
15. Control Persons and Principal Holders See
Prospectus -- "Management";
of Securities Miscellaneous; Control Persons
and
Principal Holder of Securities
16. Investment Advisory and Other Services
Investment Advisory and Other
Service Arrangements; See
Prospectus -- "Management"
17. Brokerage Allocation and Other Practices
Portfolio Transactions
18. Capital Stock and Other Securities See
Prospectus -- "Description of
Shares"; and "Management"' Additional Information
Concerning Shares
19. Purchase, Redemption and Pricing Purchase and
Redemption Information;
of Securities Being Offered Net Asset Value;
Additional Information
Concerning Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and Other
Service
Arrangements
22. Calculation of Performance Data Performance
Information
23. Financial Statements Not Applicable
ST. CLAIR FUNDS, INC.
This Post-Effective Amendment No. 22 to the
Registration Statement of St. Clair Funds, Inc. is being
filed for the purpose of responding to SEC staff comments
on Post-Effective Amendment No. 21.
The prospectus and statement of additional
information relating to the Liquidity Plus Money Market
Fund are not included in this filing.
ST. CLAIR FUNDS, INC.
480 Pierce Street
Birmingham, Michigan 48009
Telephone (800) 438-5789
PROSPECTUS
St. Clair Funds, Inc. (the "Company") is an open-end investment company (a
mutual fund) that currently offers a selection of investment portfolios. This
Prospectus describes five of the investment portfolios offered by the Company
(the "Funds"):
Munder S&P 500 Index Equity Fund
Munder S&P MidCap Index Equity Fund
Munder S&P SmallCap Index Equity Fund
Munder Aggregate Bond Index Fund
Munder Foreign Equity Fund
Shares of the Funds are available to the public only through the purchase
of certain variable annuity and variable life insurance contracts, subject to
obtaining regulatory approval ("Contracts") issued by various life insurance
companies (the "Insurers"). The Prospectus(es) for the specific Contract(s)
should be read in conjunction with this Prospectus.
Munder Capital Management (the "Advisor") serves as investment 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 April 19, 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 Company 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 April 19, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
The Funds Page
----
<S> <C>
Investment Objectives and Policies.................................. 3
Portfolio Instruments and Practices and
Associated Risk Factors............................................. 7
Investment Limitations.............................................. 14
Purchase and Redemption of Shares................................... 15
Dividends and Distributions......................................... 15
Other Information
Net Asset Value..................................................... 16
Management.......................................................... 16
Taxes............................................................... 18
Description of Shares............................................... 20
Performance......................................................... 21
</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 Company
or Longrow Securities, Inc. (the "Distributor"). This Prospectus does not
constitute an offering by the Company or by the Distributor in any jurisdiction
in which such offering may not lawfully be made.
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THE COMPANY
Each of the Funds is a series of shares issued by the Company, an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Company'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 Company:
Munder S&P 500 Index Equity Fund ("LargeCap Index Fund"), Munder S&P MidCap
Index Equity Fund ("MidCap Index Fund"), Munder S&P SmallCap Index Equity Fund
("SmallCap Index Fund"), Munder Aggregate Bond Index Fund ("Bond Index Fund")
and Munder Foreign Equity Fund ("Foreign Fund"). Investing in shares of any Fund
should not be considered a complete investment program, but an important segment
of a well-diversified investment program.
LargeCap Index Fund
The investment objective of the LargeCap Index Fund is to provide price
performance and income that is comparable to the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), an index which emphasizes large capitalization
companies. The S&P 500 is an index of 500 common stocks, most of which trade on
the New York Stock Exchange Inc. ("NYSE"). As of December 31, 1996, the S&P 500
represented approximately 72% of the market capitalization of publicly owned
stocks in the United States. Although the Fund may not hold securities of all
500 issuers included in the S&P 500, it will normally hold the securities of at
least 80% of such issuers. Stock selections are based primarily on market
capitalization and industry weightings. The Fund may also invest in Standard &
Poor's Depositary Receipts ("SPDRs"). SPDRs are securities traded on the
American Stock Exchange that represent ownership in the SPDR Trust, a long-term
unit investment trust which is intended to provide investment results that
generally correspond to the price and yield performance of certain S&P indices.
See "Portfolio Instruments and Practices and Associated Risk Factors--
Investment Company Securities." The Fund seeks quarterly performance within a
.95 correlation with the S&P 500. The Fund's ability to achieve performance
comparable to that of the S&P 500 may be affected by, among other things,
transaction costs; administration and other expenses incurred by the Fund;
changes in either the composite of S&P 500 and the timing and amount of separate
account purchases and redemptions.
The Fund is managed through the use of a "quantitative" or "indexing"
investment approach, which attempts to duplicate the investment composition and
performance of the S&P 500 through statistical procedures. As a result, the
Advisor does not employ traditional methods of fund investment management, such
as selecting securities on the basis of economic, financial and market analysis.
In addition to investing in stocks, the LargeCap Index Fund is also
authorized to invest in high quality short-term fixed income securities as cash
reserves or for temporary defensive purposes. The Fund may also invest in stock
index futures contracts and options on stock indices and stock index futures
contracts. See "Portfolio Instruments and Practices and Associated Risk Factors"
for a description of investment practices of the Fund.
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MidCap Index Fund
The investment objective of the MidCap Index Fund is to provide price
performance and income that is comparable to the Standard & Poor's MidCap 400
Index ("S&P MidCap 400"), an index which emphasizes medium capitalization
companies. As of December 31, 1996, the S&P MidCap 400 represented approximately
10% of the market capitalization of publicly owned stocks in the United States.
Although the Fund may not hold securities of all 400 issuers included in the S&P
MidCap 400, it will normally hold the securities of at least 80% of such
issuers. Stock selections are based primarily on market capitalization and
industry weightings. The Fund may also invest in SPDRs. See "Portfolio
Instruments and Practices and Associated Risk Factors--Investment Company
Securities". The Fund seeks quarterly performance within a .95 correlation with
the S&P MidCap 400 Index. The Fund's ability to achieve performance comparable
to that of the S&P MidCap 400 may be affected by, among other things,
transaction costs; administration and other expenses incurred by the Fund;
changes in either the composite of S&P MidCap 400 and the timing and amount of
separate account purchases and redemptions.
The Fund is managed through the use of a "quantitative" or "indexing"
investment approach, which attempts to duplicate the investment composition and
performance of the S&P MidCap 400 through statistical procedures. As a result,
the Advisor does not employ traditional methods of fund investment management,
such as selecting securities on the basis of economic, financial and market
analysis.
Medium capitalization companies typically are subject to a greater degree
of change in earnings and business prospects than larger, more established
companies. In addition, securities of medium capitalization companies are traded
in lower volume than those issued by larger companies and may be more volatile.
As a result, the Fund may be subject to greater price volatility than a fund
consisting of larger capitalization stocks.
In addition to investing in stocks, the MidCap Index Fund is also
authorized to invest in high quality short-term fixed income securities as cash
reserves or for temporary defensive purposes. The Fund may also invest in stock
index futures contracts and options on stock indices and stock index futures
contracts. See "Portfolio Instruments and Practices and Associated Risk Factors"
for a description of investment practices of the Fund.
SmallCap Index Fund
The investment objective of the SmallCap Index Fund is to provide price
performance and income that is comparable to the Standard & Poor's SmallCap 600
Index ("S&P SmallCap 600"), an index which emphasizes small capitalization
companies. As of December 31, 1996, the S&P SmallCap 600 represented
approximately 4% of the market capitalization of publicly owned stocks in the
United States. Although the Fund may not hold securities of all 600 issuers
included in the S&P SmallCap 600, it will normally hold the securities of at
least 80% of such issuers. Stock selections are based primarily on market
capitalization and industry weightings. The Fund seeks quarterly performance
within a .95 correlation with the S&P SmallCap 600 Index. The Fund's ability to
achieve performance comparable to that of the S&P SmallCap 600 may be affected
by, among other things, transaction costs; administration and other expenses
incurred by the Fund; changes in either the composite of S&P SmallCap 600 and
the timing and amount of separate account purchases and redemptions.
The Fund is managed through the use of a "quantitative" or "indexing"
investment approach, which attempts to duplicate the investment composition and
performance of the S&P SmallCap 600 through statistical procedures. As a result,
the Advisor does not employ traditional methods of fund investment management,
such as selecting securities on the basis of economic, financial and market
analysis.
4
<PAGE>
Smaller capitalization companies typically are subject to a greater degree
of change in earnings and business prospects than larger, more established
companies. In addition, securities of smaller capitalization companies are
traded in lower volume than those issued by larger companies and may be more
volatile. As a result, the Fund may be subject to greater price volatility than
a fund consisting of larger capitalization stocks.
In addition to investing in stocks, the SmallCap Index Fund is also
authorized to invest in high quality short-term fixed income securities as cash
reserves or for temporary defensive purposes. The Fund may also invest in stock
index futures contracts and options on stock indices and stock index futures
contracts. See "Portfolio Instruments and Practices and Associated Risk
Factors" for a description of investment practices of the Fund.
Bond Index Fund
The investment objective of the Bond Index Fund is to provide investment
exposure and income which generally correspond to the Lehman Brothers Aggregate
Bond Index ("Aggregate Bond Index"). The Aggregate Bond Index is a broad market
weighted index which encompasses three major classes of investment grade fixed-
income securities in the United States: U.S. Treasury and agency securities,
corporate bonds and international (dollar-denominated) bonds, and mortgage-
backed securities, all with maturities of greater than one year. The Bond Index
Fund will be constructed to approximately match the composition of the Aggregate
Bond Index and seeks performance within a .95 correlation to the Aggregate Bond
Index.
The Aggregate Bond Index includes fixed-rate debt issues rated investment
grade or higher by Moody's Investor Service, Inc. ("Moody's"), Standard and
Poor's Corporation, or Fitch Investors' Service. 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.
The Fund is managed through the use of a "quantitative" or "indexing"
investment approach, which attempts to duplicate the investment composition and
performance of the Aggregate Bond Index through statistical procedures. As a
result, the Advisor does not employ traditional methods of fund investment
management, such as selecting securities on the basis of economic, financial and
market analysis. The Fund may temporarily hold securities in other categories,
including bankers acceptances, certificates of deposit and commercial paper that
the Advisor may determine to be a suitable investment to achieve the stated
objective for the Fund. The Fund may also invest in bond index futures contracts
and options on bond indices and bond index futures contracts. The Fund is
authorized to invest in high quality short-term fixed income securities as cash
reserves or for temporary defensive purposes. See "Portfolio Investments and
Practices and Associated Risk Factors" for a description of investment practices
of the Fund.
Foreign Fund
The investment objective of the Foreign Fund is to provide long-term
appreciation by investing primarily in the common stock of foreign issuers and
American Depository Receipts ("ADRs"). ADRs are receipts typically issued by a
United States bank or trust company evidencing ownership of the underlying
foreign securities. The Fund will emphasize companies with a market
capitalization of at least $100 million. In selecting issuers, the Advisor may
consider, among other factors, the location of the issuer, its competitive
stature, the issuer's past record and future prospects for growth, and the
marketability of its securities.
5
<PAGE>
The eligible universe of investments for the Fund will consist of common
stock and ADRs of foreign incorporated companies trading in the following
exchanges or markets: NYSE, American Stock Exchange ("AMEX"), NASDAQ National
Market System ("NASDAQ") and the United States over-the-counter market ("OTC")
(the "Eligible Universe").
On a continuing basis, but at least annually, the Advisor creates a list of
securities eligible for purchase by the Fund (the "Eligible List"). The Advisor
then calculates the adjusted market capitalization of all securities in the
Eligible Universe. The securities will then be sorted in descending order of
adjusted market capitalization. The securities in the Eligible Universe with a
market capitalization greater than $100 million will constitute the Eligible
List for the next 12-month period. On a regular basis, securities will be added
to the Eligible Universe as new ADR facilities and exchange listings occur,
provided these new listings meet the other stated eligibility requirements.
There will be no fixed limit as to the number of securities that the Fund can
hold.
The securities purchased by the Fund will be selected from the Eligible
List. These securities will be held in proportion to their individual market
capitalization as a percentage of the market capitalization of the entire Fund
portfolio. Market capitalization of a stock will be computed by multiplying the
market price of the stock by the number of shares outstanding, adjusted for
control blocks. A control block is defined as a block of stock owned by another
corporation. The primary sources of information regarding the existence and size
of control blocks will be the S&P Stock Reports and the Morgan Stanley Capital
International Perspective. Control blocks will be updated each time the Eligible
List of securities is created or an issuer is added to the Eligible Universe. A
security held in the Fund's portfolio may be retained even if such security is
no longer included on the Eligible List.
In addition to investing in stocks, the Fund may, for the purpose of
hedging its portfolio, purchase and write put and call options on foreign stock
indices listed on domestic stock exchanges. The Fund may also invest in
convertible securities, stock index futures contracts, options on stock index
futures contracts and, to a limited extent, warrants. The Fund is also
authorized to invest in high quality short-term fixed income securities as cash
reserves or for temporary defensive purposes. See "Portfolio Instruments and
Practices and Associated Risk Factors--Foreign Securities."
Standard & Poor's Indexes
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500",
"500", "S&P MidCap 400", "Standard & Poor's 400", "400", "S&P SmallCap 600(R)",
"Standard & Poor's 600", and "600" are trademarks of McGraw-Hill Companies, Inc.
("McGraw-Hill") and have been licensed for use by the Company. Standard and
Poor's Ratings Service ("S&P") is a division of McGraw-Hill.
The Funds are not sponsored, endorsed, sold or promoted by S&P. S&P makes
no representation or warranty, express or implied, to the owners of the Funds or
any member of the public regarding the advisability of investing in securities
generally or in the Funds particularly or the ability of the S&P 500, the S&P
MidCap 400 or the S&P SmallCap 600 (together, the "Indexes") to trace general
stock market performance. S&P's only relationship to the Company is the
licensing of certain trademarks and trade names of S&P and of the Indexes which
is determined, composed and calculated by S&P without regard to the Company or
the Fund. S&P has no obligation to take the needs of the Company or the owners
of the Funds into consideration in determining, composing or calculating the
Indexes. S&P is not responsible for and has not participated in the
determination of the prices and amount of the Funds or the timing of the
issuance or sale of the Funds or in the determination or calculation of the
equation by which the Funds are to be converted into cash. S&P has no obligation
or liability in connection with the administration, marketing or trading of the
Funds.
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S&P does not guarantee the accuracy and/or the completeness of the Indexes
or any data included therein and S&P shall have no liability for any errors,
omissions, or interruptions therein. S&P makes no warranty, express or implied,
as to results to be obtained by the Company, owners of the Funds, or any other
person or entity from the use of the Indexes or any data included therein. S&P
makes no express or implied warranties, and expressly disclaims all warranties
of merchantability of fitness for a particular purpose or use with respect to
the Indexes or any data included therein. Without limiting any of the foregoing,
in no event shall S&P have any liability for any special, punitive, indirect, or
consequential damages (including lost profits), even if notified of the
possibility of such damages.
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 futures
contracts and related options. When deemed appropriate by the 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 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. 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 ADRs. 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 (other than the Bond Index 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. Each Fund (other than the Bond Index Fund)
may invest in 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.
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As mutual funds investing primarily in common stocks, the LargeCap Index
Fund, MidCap Index Fund, SmallCap Index Fund and Foreign Fund are subject to
market risk --- i.e., the possibility that common stock prices will decline over
short or even extended periods. Stock markets tend to be cyclical, with periods
when stock prices generally rise and periods when stock prices generally
decline.
Foreign Securities. 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
include the possibility of political instability (including revolution), future
political and economic developments and dependence on foreign economic
assistance. Investments in companies domiciled in foreign countries therefore
may be subject to potentially higher risks than investments in the United
States.
The Bond Index Fund may invest in international dollar-denominated bonds
and non-domestic bank obligations including Yankee bonds, which are dollar
denominated bonds issued in the U.S. by foreign banks and corporations; Yankee
Certificates of Deposit ("Yankee CDs"), which are U.S. dollar denominated
Certificates of Deposit issued by a U.S. branch of a foreign bank and held in
the United States; and Yankee Banker's Acceptances ("Yankee BAs"), which are
U.S. dollar denominated bankers' acceptances issued by a U.S. branch of a
foreign bank and held in the U.S.
The Foreign Fund may invest in foreign securities of companies domiciled in
countries with emerging economies located in the Asia-Pacific region, Eastern
Europe, Latin and South America and Africa. Political and economic structures in
many of these countries may be undergoing significant evolution and rapid
development, and emerging market countries may lack the social, political and
economic stability characteristic of more developed countries.
In addition, many Asian countries may be subject to a greater degree of
social, political and economic instability than is the case in the United States
and European countries. Such instability may result from (i) authoritarian
governments or military involvement in political and economic decision-making;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection.
The economies of most emerging markets and Asian countries are heavily
dependent upon international trade and are accordingly affected by protective
trade barriers and the economic conditions of their trading partners,
principally, the United States, Japan, China and the European Community. The
enactment by the United States or other principal trading partners of
protectionist trade legislation, reduction of foreign investment in the local
economies and general declines in the international securities markets could
have a significant adverse effect upon the securities of issuers domiciled in
such countries.
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. 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
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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.
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-
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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.
When a Fund invests in a derivative instrument, it may be required to
segregate cash and other liquid 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.
Corporate Obligations. The Bond Index Fund may purchase corporate bonds and
commercial paper that meet the applicable quality and maturity limitations. The
Bond Index Fund will purchase only those securities which are considered to be
investment grade or better (within the four highest rating categories of S&P or
Moody's or, if unrated, of comparable quality. Obligations rated "Baa" by
Moody's lack outstanding investment characteristics and have speculative
characteristics. Adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of obligations rated "BBB" by S&P to pay
interest and repay principal than in the case of higher grade obligations. After
purchase by the Fund, a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Fund. Neither event will
require the Fund to sell such security. However, the Advisor will reassess
promptly whether the security presents minimal credit risks and determine
whether continuing to hold the security is in the best interests of the Fund. To
the extent that the ratings given by Moody's, S&P or another nationally
recognized statistical rating organization ("NRSRO") for securities may change
as a result of changes in the rating systems or because of corporate
reorganization of such rating organizations, the Fund will attempt to use
comparable ratings as standards for its investments in accordance with the
investment objective and policies of the Fund. Descriptions of each rating
category are included as Appendix A to the Statement of Additional Information.
Asset-Backed Securities. Subject to applicable credit criteria, the Bond
Index Fund may purchase asset-backed securities (i.e., securities backed by
mortgages, installment sales contracts, credit card receivables or other
assets). The average life of asset-backed securities varies with the maturities
of the underlying instruments which, in the case of mortgages, have maximum
maturities of forty years. The average life of a mortgage-backed instrument, in
particular, is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as the result of unscheduled principal
payments and mortgage prepayments. The rate of such mortgage prepayments, and
hence the life of the certificates, will be primarily a function of current
market rates and current conditions in the relevant housing markets. In
calculating the average weighted maturity of the Bond Index Fund, the maturity
of mortgage-backed instruments will be based on estimates of average life. The
relationship between mortgage prepayment and interest rates may give some high-
yielding mortgage-related securities less potential for growth in value than
conventional bonds with comparable maturities. In addition, in periods of
falling interest rates, the rate of mortgage prepayment tends to increase.
During such periods, the reinvestment of prepayment proceeds by the Fund will
generally be at lower rates than the rates that were carried by the obligations
that have been prepaid. Because of these and other reasons, an asset-backed
security's total
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return may be difficult to predict precisely. To the extent that the Fund
purchases mortgage-related or mortgage-backed securities at a premium, mortgage
prepayments (which may be made at any time without penalty) may result in some
loss of the Fund's principal investment to the extent of premium paid.
Presently there are several types of mortgage-backed securities issued or
guaranteed by U.S. Government agencies, including guaranteed mortgage pass-
through certificates, which provide the holder with a pro rata interest in the
underlying mortgages, and collateralized mortgage obligations ("CMOs"), which
provide the holder with a specified interest in the cash flow of a pool of
underlying mortgages or other mortgage-backed securities. Insurers of CMOs
frequently elect to be taxed as a pass-through entity known as real estate
mortgage investment conduits, or REMICs. CMOs are issued in multiple classes,
each with a specified fixed or floating interest rate and a final distribution
date. The relative payment rights of the various CMO classes may be structured
in many ways. In most cases, however, payments of principal are applied to the
CMO classes in the order of their respective stated maturities, so that no
principal payments will be made on a CMO class until all other classes having an
earlier stated maturity date are paid in full. The classes may include accrual
certificates (also known as "Z-Bonds"), which only accrue interest at a
specified rate until other specified classes have been retired and are converted
thereafter to interest-paying securities. They may also include planned
amortization classes ("PAC") which generally require, within certain limits,
that specified amounts of principal be applied on each payment date, and
generally exhibit less yield and market volatility than other classes. The Fund
will not purchase "residual" CMO interests, which normally exhibit the greatest
price volatility.
Stripped Securities. The Bond Index Fund may purchase participations in
trusts that hold U.S. Treasury and agency securities (such as TIGRs and CATS)
and also may purchase Treasury receipts and other stripped securities, which
represent beneficial ownership interests in either future interest payments or
the future principal payments on U.S. Government obligations. These instruments
are issued at a discount to their "face value" and may (particularly in the case
of stripped mortgage-backed securities) exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors. Stripped securities will normally be
considered illiquid investments and will be acquired subject to the limitation
on illiquid investments unless determined to be liquid under guidelines
established by the Board of Directors.
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 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"). The Foreign Fund
may purchase shares of investment companies investing primarily in foreign
securities, including so called "country funds". The LargeCap Fund and the
MidCap Fund may also invest in SPDRs and shares of other open-end investment
companies that are structured to seek performance that corresponds to that of
the appropriate Index. Securities of other investment companies will be acquired
within limits prescribed by the 1940 Act. These limitations, among other
matters, restrict the purchase or acquisition of any security issued by any
other investment company (the "acquired fund"), if immediately
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after such acquisition, a Fund would own more than 3% of the outstanding voting
securities of the acquired fund; more than 5% of a Fund's assets would be
invested in the securities of the acquired fund; or more than 10% of a Fund's
assets would be invested in securities issued by investment companies in the
aggregate. 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.
Variable and Floating Rate Securities. Each Fund may purchase variable and
floating rate securities which are debt instruments with variable or floating
interest rates. These securities may include variable amount master demand notes
which are typically unsecured instruments that permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate. Unrated variable and floating rate securities will be determined
by the Advisor to be of comparable quality at the time of purchase to rated
securities purchasable by the Fund. The absence of an active secondary market,
however, could make it difficult to dispose of the securities, and the Fund
could suffer a loss if the issuer defaulted or during periods that the Fund is
not entitled to exercise its demand rights. Variable and floating rate
securities held by the Fund will be subject to the Fund's limitation on illiquid
investments when the Fund may not demand payment of the principal amount within
seven days absent a reliable trading market.
Liquidity Management. Pending investment, to meet anticipated redemption
requests, or as a temporary defensive measure if the 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. 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. The Bond Index
Fund may also invest in Yankee BAs and Yankee CDs. 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 NRSROs or be
issued by issuers with such ratings. Unrated instruments purchased by a Fund
will be of comparable quality as determined by the 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 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
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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 will
determine the liquidity of such investments pursuant to guidelines established
by the Company's Board of Directors.
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.
When-Issued Purchases and Forward Commitments. Each Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis. These transactions, which involve a commitment by
a Fund to purchase or sell particular securities with payment and delivery
taking place at a future date (perhaps one or two months later), permit the Fund
to lock-in a price or yield on a security, regardless of future changes in
interest rates. When-issued and forward commitment transactions involve the risk
that the price or yield obtained may be less favorable than the price or yield
available when the delivery takes place. Each Fund will establish a segregated
account consisting of cash, U.S. Government securities or other liquid portfolio
securities in an amount equal to the amount of its when-issued purchases and
forward commitments. Each Fund's when-issued purchases and forward purchase
commitments are not expected to exceed 25% of the value of the particular Fund's
total assets absent unusual market conditions. The Funds do not intend to engage
in when-issued purchases and forward commitments for speculative purposes but
only in furtherance of their investment objectives.
Fixed Income Securities. Generally, the market value of fixed income
securities held by the Funds can be expected to vary inversely to changes in
prevailing interest rates. Investors should also recognize that, in periods of
declining interest rates, the yields of investment portfolios composed primarily
of fixed income securities will tend to be higher than prevailing market rates
and, in periods of rising interest rates, yields will tend to be somewhat lower.
The market value of a Fund's investment will also change in
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response to the relative financial strengths of each issuer. Changes in the
financial strengths of an issuer or charges in the ratings of a particular
security may also affect the value of those investments. Fluctuations in the
market value of fixed income securities subsequent to their acquisitions will
not affect cash income from such securities, but will be reflected in a Fund's
net asset value.
The Funds may purchase zero-coupon bonds (i.e., discount debt obligations
that do not make periodic interest payments). Zero-coupon bonds are subject to
greater market fluctuations from changing interest rates than debt obligations
of comparable maturities which make current distributions of interest.
As a mutual fund investing primarily in fixed-income securities, the Bond
Index Fund is subject to interest rate, income, call, credit and prepayment
risk.
Interest rate risk is the potential for fluctuations in bond prices due to
changing interest rates. Income risk is the potential for a decline in the
Fund's income due to falling market interest rates. Credit risk is the
possibility that a bond issuer will fail to make timely payments of either
interest or principal to the Fund. Prepayment risk (applicable to mortgage-
backed securities) and call risk (applicable to corporate bonds) (is the
likelihood that, during periods of falling interest rates, securities with high
stated interest rates will be prepaid (or "called") prior to maturity, requiring
the Fund to invest proceeds at generally lower interest rates.
In addition, while the Bond Index Fund will have limited exposure to
international bonds, there is no currency risk associated with the investments
since the international bonds invested in by the Fund are all dollar
denominated.
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.
Diversification. Each Fund is classified as a diversified investment
company under the 1940 Act.
Portfolio Transactions and Turnover. All orders for the purchase or sale of
securities on behalf of the Funds are placed by the Advisor with broker/dealers
that the Advisor selects. A high portfolio turnover rate involves larger
brokerage commission expenses or transaction costs which must be borne directly
by the Fund, and may result in the realization of short-term capital gains which
are taxable to shareholders as ordinary income. The 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 the
annual portfolio turnover rate for each Fund will be as follows: less than 10%
for each of the LargeCap Index Fund, MidCap Index Fund and SmallCap Index Fund;
less than 25% for the Bond Index Fund; and from 10% to 15% for the Foreign Fund.
INVESTMENT LIMITATIONS
Each Fund's investment objective and policies may be changed by the
Company's Board of Directors without shareholder approval. No assurance can be
given that any Fund will achieve its investment objective.
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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 by the Distributor on a continuous basis to
separate accounts of the Insurers. The Distributor is a registered broker/dealer
with principal offices at 222 South Central Avenue, St. Louis, Missouri 63105.
Each Fund's shares are continuously offered to each Insurer's separate
accounts at the net asset value per share next determined after a proper
purchase request has been received by the Insurer. The Funds and the Distributor
reserve the right to reject any purchase order for shares of the Funds.
Payments for redeemed shares will ordinarily be made within seven (7)
business days after the Funds receive a redemption order from the relevant
Insurer. The redemption price will be the net asset value per share next
determined after the Insurer receives the Contractowner's request in proper
form. The Company reserves the right to suspend or postpone redemptions during
any period when: (i) trading on the NYSE is restricted, as determined by the
SEC, or the NYSE is closed for other than customary weekend and holiday
closings; (ii) the SEC has by order permitted such suspension or postponement
for the protection of shareholders; or (iii) an emergency, as determined by the
SEC, exists, making disposal of portfolio securities or valuation of net assets
of the Funds not reasonably practicable.
The prospectus for the relevant Insurer's variable annuity or variable life
insurance policy describes the allocation, transfer and withdrawal provisions of
such annuity or policy.
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 quarterly for each Fund (other than the
Foreign Fund). Dividends from net income are declared and paid at least annually
for the Foreign Fund. Each Fund's net realized capital gains (including net
short-term capital gains), if any, are distributed at least annually. All
dividends and capital gains distributions paid by each Fund will be
automatically reinvested, at net asset value, by the Insurers' separate accounts
in additional shares of the Fund. Contractowners who own units in a separate
account which correspond to shares in the Funds will be notified when
distributions are made.
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; shareholder
servicing fees; fees and expenses of officers and Directors; taxes; interest;
legal and auditing fees; brokerage fees and commissions; expenses of preparing
prospectuses and statements of additional information; the expense of reports to
shareholders, shareholders' meetings and proxy solicitations; fidelity bond and
Directors' and officers' liability insurance premiums; the expense of using
independent pricing services; and other expenses which are not assumed by the
Administrator or an Insurer. Any general expenses of the Company that are not
readily identifiable as belonging to a particular fund of the Company are
allocated among all funds of the Company by or under the direction of the Board
of Directors in a manner that the Board determines to be fair and equitable,
taking into consideration whether it is appropriate for expenses to be borne by
the Funds in addition to the Company's other funds. 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
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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 shares in a Fund is calculated by dividing the value of
all securities and other assets belonging to the Fund, less the liabilities
charged, by the number of outstanding shares.
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 NYSE (currently 4:00 p.m., New York time) on each day on which the
NYSE is open for trading (a "Business Day"). With respect to the Funds,
securities traded on a national securities exchange or on NASDAQ 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
NASDAQ 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. 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 Directors. Debt securities with
remaining maturities of 60 days or less are valued at amortized cost, unless the
Board of Directors 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 Company does not accept purchase and redemption orders on days on which
the NYSE is closed. The NYSE 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.
MANAGEMENT
Board of Directors
The Company is managed under the direction of its Board of Directors. The
Statement of Additional Information contains the name and background information
of each Director.
Investment 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 December 31, 1996, the Advisor and its
affiliates had approximately $38 billion in assets under management, of which
$22 billion were invested in equity securities, $7 billion were
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invested in money market or other short-term instruments, and $9 billion were
invested in other fixed income securities.
Subject to the supervision of the Board of Directors of the Company, the
Advisor provides overall investment management for the Funds, provides research
and credit analysis, is responsible for all purchases and sales of portfolio
securities, maintains books and records with respect to the Funds' securities
transactions and provides periodic and special reports to the Board of Directors
as requested.
For the advisory services provided and expenses assumed with regard to the
Funds, the Advisor has agreed to a fee, computed daily and payable monthly, at
an annual rate of .05% of each 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 shareholder.
Portfolio Managers
Todd B. Johnson, Chief Investment Officer of the Advisor is the co-manager
of the Foreign Fund. Mr. Johnson is also the co-manager of the Munder
International Equity Fund (previously, from January, 1996 to October, 1996, was
the portfolio manager,) and the Munder Index 500 Fund (previously, from July,
1992 to October, 1996, was the portfolio manager) of The Munder Funds Trust. Mr.
Johnson previously served as a portfolio manager at Woodbridge Capital
Management (June, 1992 to December, 1994) and Manufacturers Bank (June, 1986 to
June, 1992). Mr. Johnson received a B.A. in Finance from Michigan State
University and an M.B.A. from Wayne State University.
Theodore Miller, Senior Portfolio Manager of the Advisor is the co-manager
of the Foreign Fund. Mr. Miller is also the co-manager of the Munder
International Equity Fund of The Munder Funds Trust (since October, 1996.) Prior
to being appointed co-manager of the Munder International Equity Fund, Mr.
Miller acted as the primary analyst for the Fund, assisting the manager with
portfolio decisions Prior to joining the Advisor, Mr. Miller worked in
Derivatives Marketing for Interacciones Global Inc. (1993-1995), in Equity
Sales/Trader for McDonald & Co. Securities Inc. (1991-1993) and started his
career in 1986 and was a derivative and equity transaction execution specialist
with various New York investment banks. Mr. Miller received his B.S. from the
University of Pittsburgh and his M.B.A. from Indiana University.
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 Company. First Data is a
wholly-owned subsidiary of First Data Corporation. The Administrator generally
assists the Company in all aspects of its administration and operations,
including the maintenance of financial records and fund accounting.
First Data also serves as the Company'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.
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As compensation for these services, the Administrator is entitled to
receive fees, at the annual rate of $20,000 per year, per Fund, plus .03%of
the first $500 million of each Fund's average daily net assets; .02%of the
next $500 million of each Fund's average daily net assets; .01% of the next
$1 billion of each Fund's average daily net assets and .005% of each Fund's
average daily net assets in excess of $1 billion. The Transfer Agent is
entitled to
receive fees, at an annual rate of $12,000 per year with respect to the
Funds. The
Administrator and Transfer Agent are also entitled to reimbursement for out-of-
pocket expenses.
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 average
daily
net assets and .01% of average daily 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.
Shareholder Servicing Arrangements
The Funds have adopted a Shareholder Servicing Plan (the "Plan") that
provides for payment to the Insurers offering the separate accounts, dealers
that offer the Contracts and the Funds' Distributor ("Service Organizations")
for providing shareholder services to Contractowners. The Plan authorizes
payments at an annual rate of up to .25% of each Fund's average daily net
assets.
The services provided by the Service Organizations under the Plan may
include execution and processing of orders from Insurers; processing purchase,
exchange and redemption requests furnished to the Insurers by the
Contractowners; placing orders with the Transfer Agent; processing dividend and
distribution payments from the Funds; providing statements of additional
information and information periodically showing positions in Fund shares and
providing such other similar services as may reasonably be requested.
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.
The Funds serve as the underlying investments for Contracts issued through
separate accounts of life insurance companies which may or may not be
affiliated. Section 817(h) of the code imposes certain diversification standards
on the underlying assets of segregated asset accounts that fund contracts such
as the Contracts (that is, the assets of the Fund's), which are in addition to
the diversification requirements imposed on the Funds by the 1940 Act and
Subchapter M. Failure to satisfy those standards would result
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<PAGE>
in imposition of Federal income tax on a Contract owner with respect to the
increase in the value of the contract. Section 817(h)(2) provides that a
segregated asset account that funds contracts such as the Contracts is treated
as meeting the diversification standards if, as of the close of each calendar
quarter, the assets in the account meet the diversification requirements for a
regulated investment company and no more than 55% of those assets consist of
cash, cash items, U.S. Government securities and securities of other regulated
investment companies.
The Treasury Regulations amplify the diversifications standards set forth
in Section 817(h) and provide an alternative to the provision described above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if (i) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (ii) no more than 70% of such
value is represented by any two investments; (iii) no more than 80% of such
value is represented by any three investments; and (iv) no more than 90% of such
value is represented by any four investments. For purposes of these Regulations
all securities of the same issuer are treated as a single investment, but each
United States government agency or instrumentality shall be treated as a
separate issuer.
Each Fund will be managed with the intention of complying with these
diversification requirements. It is possible that, in order to comply with these
requirements, less desirable investment decisions may be made which would affect
the investment performance of a Fund.
Currently, the State of California imposes diversification requirements on
variable insurance products funds investing in non-U.S. securities. Under these
requirements, a fund investing at least 80% of its assets in non-U.S. securities
must be invested in at least five countries; less than 80% but at least 60%, in
at least four counties; less than 60% but at least 40%, in at least three
countries; and less than 40% but at least 20%, in at least two countries, except
that up to 25% of a fund's assets may be invested in securities of issuers
located in any of the following countries: Australia, Canada, France, Japan, the
United Kingdom or Germany. The Funds intend to comply with the California
diversification requirements, to the extent applicable.
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.
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.
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The prospectus for an Insurer's variable annuity contracts or variable life
insurance polices describes the federal income tax treatment of distributions
from such contracts to Contractowners.
The foregoing is only a brief summary of important tax law provisions that
can affect the Funds. Other Federal, state or local law provisions may also
affect the Funds and their operations. Anyone who is considering allocating,
transferring or withdrawing monies held under an Insurer's variable contract to
or from a Fund should consult a qualified tax advise.
DESCRIPTION OF SHARES
The Company was organized as a Maryland corporation on May 23, 1984 under
the name St. Clair Money Market Fund, Inc. which was changed to St. Clair Fixed
Income Fund, Inc. on December 30, 1986 and to St. Clair Funds, Inc. on September
18, 1996. The Company's Articles of Incorporation authorize the Board of
Directors to classify or reclassify any authorized but unissued shares of the
Company into one or more additional portfolios (or classes of shares within a
portfolio) by setting or changing in any one or more respects their respective
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption. Pursuant to such authority, the Company's Board of Directors has
authorized the issuance of shares of common stock representing interests in
Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index Equity Fund, Munder
S&P SmallCap Index Equity Fund, Munder Aggregate Bond Index Fund, Munder Foreign
Equity Fund, Liquidity Plus Money Market Fund and Institutional Index Equity
Fund, each of which is classified as a diversified investment company under the
1940 Act.
Each share of a Fund has a par value of $.001 and represents an equal
proportionate interest in the Fund and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared at the discretion of the Company's Board of Directors. The
Company's shareholders are entitled to one vote for each full share held and
proportionate fractional votes for fractional shares held. Shareholders will
vote in the aggregate and not by Fund, except where otherwise required by law or
when the Board of Directors determines that the matter to be voted upon affects
only the interests of the shareholders of a particular Fund. Voting rights are
not cumulative and, accordingly, the holders of more than 50% of the aggregate
number of shares can elect 100% of the Directors, if they chose to do so and, in
such event, the holders of the remaining shares would not be able to elect any
person or persons to the Board of Directors. The Company 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 Company. To the extent required by law, the Company
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.
Through their respective separate accounts, the Insurers are the Funds'
sole stockholders of record, and as such under the 1940 Act, the Insurers are
deemed to be in control of the Funds. Nevertheless, when a shareholders' meeting
occurs, each Insurer solicits and accepts voting instructions from its
Contractowners who have allocated or transferred monies for an investment in a
Fund as of the record date of the meeting. Each Insurer then votes each Fund's
shares that are attributable to its Contractowners' interests in the Fund in
proportion to the voting instructions received. Each Insurer will vote any share
that it is entitled to vote directly due to amounts it has contributed or
accumulated in its separate accounts in the manner described in the prospectuses
for its variable annuities and variable life insurance policies.
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<PAGE>
PERFORMANCE
The Funds' performance may be used from time to time in advertisements,
shareholder reports or other communications to existing or prospective owners of
the Insurers' Contracts. When performance information is provided in
advertisements, it will include the effect of all charges deducted under the
terms of the specified contract, as well as all recurring and non-recurring
charges incurred by a Fund. Performance information may include a Fund's
investment results and/or comparisons of its investment results to various
unmanaged indices or results of other mutual funds or investment or savings
vehicles. The Fund's investment results as used in such communications will be
calculated on a total rate of return or yield basis in the manner set forth
below. From time to time, fund rankings may be quoted from various sources, such
as Lipper Analytical Services, Inc., Value Line and Morningstar Inc.
The Company may provide period and average annualized "total return"
quotations for the Funds. A Fund's "total return" refers to the change in the
value of an investment in the Fund over a stated period based on any change in
net asset value per share and including the value of any shares purchasable with
any dividends or capital gains distributed during such period. Period total
return may be annualized. An annualized total return is a compounded total
return which assumes that the period total return is generated over a one-year
period, and that all dividends and capital gain distributions are reinvested. An
annualized total return will be higher than a period total return if the period
is shorter than one year, because of the compounding effect.
The yield of the shares in the Bond Index Fund is computed based on the net
income of the Fund during a 30-day (or one month) period (which period will be
identified in connection with the particular yield quotation). More
specifically, the Fund's yield is computed by dividing the per share net income
during a 30-day (or one-month) period by the maximum offering price per share on
the last day of the period and annualizing the result on a semi-annual basis.
Performance will fluctuate and any quotation of performance should not be
considered as representative of future performance 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.
Shareholders will receive unaudited financial reports semi-annually that
include the Funds' financial statements, including a list of investment
securities held by the Funds' at those dates. Annual reports are audited by
independent accountants.
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<PAGE>
MUNDER S&P 500 INDEX EQUITY FUND
MUNDER S&P MIDCAP INDEX EQUITY FUND
MUNDER S&P SMALLCAP INDEX EQUITY FUND
MUNDER AGGREGATE BOND INDEX FUND
MUNDER FOREIGN EQUITY FUND
STATEMENT OF ADDITIONAL INFORMATION
April 19, 1997
St. Clair Funds, Inc. (the "Company"), currently offers a selection of
investment portfolios, five of which are offered in this Statement of Additional
Information: Munder S&P 500 Cap Index Equity Fund ("LargeCap Index Fund"),
Munder S&P MidCap Index Equity Fund ("MidCap Index Fund"), Munder S&P SmallCap
Index Equity Fund ("SmallCap Index Fund"), Munder Aggregate Bond Index Fund
("Bond Index Fund") and Munder Foreign Equity Fund ("Foreign Fund")
(collectively, the "Funds"). The Fund's investment advisor is Munder Capital
Management (the "Advisor").
Shares of the Funds are available to the public only through the purchase
of certain variable annuity and variable life insurance contracts, subject to
regulatory approval ("Contracts") issued by various life insurance companies
(the "Insurers").
This Statement of Additional Information is intended to supplement the
information provided to investors in the Funds' Prospectus dated April 19, 1997
and has been filed with the Securities and Exchange Commission ("SEC") as part
of the Company's Registration Statement. This Statement of Additional
Information is not a prospectus, and should be read only in conjunction with the
Funds' Prospectus dated April 19, 1997. The contents of this Statement of
Additional Information are incorporated by reference in the Prospectus in their
entirety. A copy of the Prospectus may be obtained through Longrow Securities
Inc. (the "Distributor"), or by calling the Funds at (800) 438-5789. This
Statement of Additional Information is dated April 19, 1997.
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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
General................................................................ 3
Fund Investments....................................................... 3
Risk Factors and Special Considerations - Index Funds.................. 13
Investment Limitations................................................. 15
Directors and Officers................................................. 17
Investment Advisory and Other Service Arrangements..................... 21
Control Person and Principal Holder of Securities...................... 23
Portfolio Transactions................................................. 23
Purchase and Redemption Information.................................... 25
Net Asset Value........................................................ 26
Performance Information................................................ 26
Taxes.................................................................. 28
Additional Information Concerning Shares............................... 30
Miscellaneous.......................................................... 31
Registration Statement................................................. 32
Appendix A............................................................. A-1
Appendix B............................................................. B-1
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectus in connection with the offering made by the Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Funds or the Distributor. The 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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GENERAL
The Company was organized as a Maryland corporation on May 23, 1984 under
the name St. Clair Money Market Fund, Inc. which was changed to St. Clair Fixed
Income Fund, Inc. on December 30, 1986 and to St. Clair Funds, Inc. on September
18, 1996.
As stated in the Prospectus, the investment advisor of the Fund is Munder
Capital Management (the "Advisor"). The principal partners of the Advisor are
Old MCM, Inc. ("Old MCM"), Munder Group LLC, Woodbridge Capital Management, Inc.
("Woodbridge") and WAM Holdings, Inc. ("WAM"). Mr. Lee P. Munder, the Advisor's
Chief Executive Officer, indirectly owns or controls a majority of the
partnership interests of the Advisor. Capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Prospectus.
FUND INVESTMENTS
The following supplements the information contained in the Funds'
Prospectus concerning the investment objective and policies of the Funds. Each
Fund's investment objective is a non-fundamental policy and may be changed
without the authorization of the holders of a majority of the Fund's outstanding
shares. There can be no assurance that any Fund will achieve its objective.
Foreign Securities. The Foreign Fund may invest in common stock of foreign
issuers and American Depositary Receipts ("ADRs") listed on a domestic
securities exchange or included in the NASDAQ National Market System or the
United States Over-the Counter Market ("OTC"). ADRs are receipts typically
issued by a United States bank or trust company evidencing ownership of the
underlying foreign securities. Certain such institutions issuing ADRs may not be
sponsored by the issuer. A non-sponsored depositary may not provide the same
shareholder information that a sponsored depositary is required to provide under
its contractual arrangements with the issuer.
The Bond Index Fund may invest in international dollar-denominated bonds
such as Yankee bonds, which are dollar denominated bonds issued in the U.S. by
foreign banks and corporations.
Income and gains on foreign securities may be subject to foreign
withholding taxes. Investors should consider carefully the substantial risks
involved in securities of companies and governments of foreign nations, which
are in addition to the usual risks inherent in domestic investments.
There may be less publicly available information about foreign domiciled
companies comparable to the reports and ratings published about companies in the
United States. Investments in companies domiciled in foreign countries may be
subject to potentially higher risks than investments in the United States. These
risks include (i) less social, political and economic stability; (ii) certain
national policies which may restrict a Fund's investment opportunities,
including restrictions on investment in issuers or industries deemed sensitive
to national interest; (iii) the absence, until recently in certain Eastern
European countries, of a capital market structure or market-oriented economy;
and (iv) the possibility that recent favorable economic developments in Eastern
Europe may be slowed or reversed by unanticipated political or social events in
such countries.
Many Asian countries may be subject to a greater degree of social,
political and economic instability than is the case in the United States and
European countries. Such instability may result from (i) authoritarian
governments or military involvement in political and economic decision-making;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection. The
economies of most of emerging markets and Asian countries are heavily dependent
upon
3
<PAGE>
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the United
States, Japan, China and the European Community.
Futures Contracts and Related Options. The Funds currently expect that they
may purchase and sell futures contracts on interest-bearing securities or
securities or bond indices, and may purchase and sell call and put options on
futures contracts. For a detailed description of futures contracts and related
options, see Appendix B to this Statement of Additional Information.
Interest Rate Swap Transactions. The Bond Index Fund may enter into
interest rate swap agreements for purposes of attempting to obtain a particular
desired return at a lower cost to the Fund than if the Fund had invested
directly in an instrument that yielded that desired return. Interest rate swap
transactions involve the exchange by the Fund with another party of its
commitments to pay or receive interest, such as an exchange of fixed rate
payments for floating rate payments. Typically, the parties with which the Fund
will enter into interest rate swap transactions will be brokers, dealers or
other financial institutions known as "counterparties." Certain Federal income
tax requirements may, however, limit the Fund's ability to engage in certain
interest rate transactions. Gains from transactions in interest rate swaps
distributed to shareholders of the Fund will be taxable as ordinary income or,
in certain circumstances, as long-term capital gains to the shareholders.
The Bond Index Fund's obligations (or rights) under a swap agreement will
generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). The Fund's obligations under a swap agreement
will be accrued daily (offset against any amounts owed to the Fund). Accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
securities or other high-grade debt securities, to avoid any potential
leveraging of the Fund's portfolio.
The Bond Index Fund will not enter into any interest rate swap transaction
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the other party to the transaction is rated in one of the highest
four rating categories by at least one nationally-recognized statistical rating
organization ("NRSRO") or is believed by the Advisor to be equivalent to that
rating. If the other party to a transaction defaults, the Fund will have
contractual remedies pursuant to the agreements related to the transactions.
The use of interest rate swaps is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Advisor is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of the Fund would be lower than it would have been if
interest rate swaps were not used. The swaps market has grown substantially in
recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As a
result, the swaps market has become relatively liquid in comparison with other
similar instruments traded in the interbank market. The swaps market is a
relatively new market and is largely unregulated. It is possible that
developments in the swaps market, including potential government regulation,
could adversely affect the Fund's ability to terminate existing swap agreements
or to realize amounts to be received under such agreements.
Investment Company Securities. The Funds may invest in securities issued by
other investment companies. The Foreign Fund may purchase shares of investment
companies investing primarily in foreign securities, including so called
"country funds". In addition, the LargeCap Index Fund and the MidCap Index Fund
may invest in Standard & Poor's Depositary Receipts ("SPDRs"). SPDRs are
securities that represent ownership in the SPDR Trust, a long-term unit
investment trust which is intended to provide investment results that generally
correspond to the price and yield performance of certain corresponding
4
<PAGE>
S&P indices. SPDR holders are paid a "Dividend Equivalent Amount" that
corresponds to the amount of cash dividends accruing to the securities in the
SPDR Trust, net of certain fees and expenses charged to the Trust. Because of
these fees and expenses, the dividend yield for SPDRs may be less than that of
the corresponding S&P index. SPDRs are traded on the American Stock Exchange.
As a shareholder of another investment company, a Fund would bear its pro
rata portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the expenses each Fund bears
directly in connection with its own operations. Each Fund currently intends to
limit its investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made: (i)
not more than 5% of the value of the Fund's total assets will be invested in the
securities of any one investment company; (ii) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of investment
companies as a group; and (iii) not more than 3% of the outstanding voting stock
of any one investment company will be owned by the Fund.
Money Market Instruments. As described in the Prospectus, the Funds may
invest from time to time in "money market instruments," a term that includes,
among other things, bank obligations, commercial paper, variable amount master
demand notes and corporate bonds with remaining maturities of 397 days or less.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Funds will invest in obligations of foreign
banks or foreign branches of U.S. banks only when the Advisor deems the
instrument to present minimal credit risks, such investments may nevertheless
entail risks that are different from those of investments in domestic
obligations of U.S. banks due to differences in political, regulatory and
economic systems and conditions. All investments in bank obligations are
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase, and investments by a Fund in the
obligations of foreign banks and foreign branches of U.S. banks will not exceed
25% of such Fund's total assets at the time of purchase.
Investments by a Fund in commercial paper will consist of issues rated at
the time A-1 and/or P-1 by Standard & Poor's Rating Service ("S&P"), a division
of McGraw-Hill Companies, Inc., or Moody's Investor Services, Inc. ("Moody's").
In addition, the Funds may acquire unrated commercial paper and corporate bonds
that are determined by the Advisor at the time of purchase to be of comparable
quality to rated instruments that may be acquired by such Fund as previously
described.
Mortgage-Related Securities. There are a number of important differences
among the agencies and instrumentalities of the U.S. Government that issue
mortgage-related securities and among the securities that they issue. Mortgage-
related securities guaranteed by the Government National Mortgage Association
("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments under
its guarantee. Mortgage-related securities issued by the Federal National
Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely the obligations of
the FNMA and are not backed by or entitled to the full faith and credit of the
United States, but are supported by the right of the issuer to borrow from the
Treasury. FNMA is a government-sponsored organization owned entirely by private
stockholders. Fannie Maes are guaranteed as to timely payment of the principal
and interest by FNMA. Mortgage-related securities issued by the Federal Home
Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
5
<PAGE>
Participation Certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are
not guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of principal, FHLMC may remit the amount due
on account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable.
Options. The Funds may write covered call options, buy put options, buy
call options and write secured put options in an amount not exceeding 5% of
their net assets. Such options may relate to particular securities and may or
may not be listed on a national securities exchange and issued by the Options
Clearing Corporation. Options trading is a highly specialized activity which
entails greater than ordinary investment risk. Options on particular securities
may be more volatile than the underlying securities, and therefore, on a
percentage basis, an investment in options may be subject to greater fluctuation
than an investment in the underlying securities themselves.
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.
The writer of an option that wished to terminate its obligation 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 being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." The cost of such a closing purchase plus transaction costs may be
greater than the premium received upon the original option, in which event each
Fund will have incurred a loss in the transaction. There is no guarantee that
either a closing purchase or a closing sale transaction can be effected.
Effecting a closing transaction in the case of a written call option will
permit the Funds to write another call option on the underlying security with
either a different exercise price or expiration date or both, or in the case of
a written put option, will permit the Funds to write another put option to the
extent that the exercise price thereof is secured by deposited cash or short-
term securities. Also, effecting a closing transaction will permit the cash or
proceeds from the concurrent sale of any securities subject to the option to be
used for other Fund investments. If a Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will effect a
closing transaction prior to or concurrent with the sale of the security.
The Funds may write options in connection with buy-and-write transactions;
that is, the Funds may purchase a security and then write a call option against
that security. The exercise price of the call the Funds determine to write will
depend upon the expected price movement of the underlying security. The exercise
price of a call option may be below ("in-the-money"), equal to ("at-the-money")
or above ("out-of-the-money") the current value of the underlying security at
the time the option is written. Buy-and-write transactions using in-the-money
call options may be used when it is expected that the price of the underlying
security will remain flat or decline moderately during the option period. Buy-
and-write
6
<PAGE>
transactions using out-of-the-money call options may be used when it is expected
that the premiums received from writing the call option plus the appreciation in
the market price of the underlying security up to the exercise price will be
greater than the appreciation in the price of the underlying security alone. If
the call options are exercised in such transactions, the maximum gain to the
relevant Fund will be the premium received by it for writing the option,
adjusted upwards or downwards by the difference between the Fund's purchase
price of the security and the exercise price. If the options are not exercised
and the price of the underlying security declines, the amount of such decline
will be offset in part, or entirely, by the premium received.
In the case of a call option on a security, the option is "covered" if a
Fund owns the security underlying the call or has an absolute and immediate
right to acquire that security without additional cash consideration (or, if
additional cash consideration is required, cash or cash equivalents in such
amount as are held in a segregated account by its custodian) upon conversion or
exchange of other securities held by it. For a call option on an index, the
option is covered if a Fund maintains with its Custodian cash or cash
equivalents equal to the contract value. A call option is also covered if a Fund
holds a call on the same security or index as the call written where the
exercise price of the call held is (i) equal to or less than the exercise price
of the call written, or (ii) greater than the exercise price of the call written
provided the difference is maintained by the portfolio in cash or cash
equivalents in a segregated account with its custodian. The Funds may write call
options that are not covered for cross-hedging purposes. Each of the Funds will
limit its investment in uncovered put and call options purchased or written by
the Fund to 5% of the Fund's total assets. The Funds will write put options only
if they are "secured" by cash or cash equivalents maintained in a segregated
account by the Funds' custodian in an amount not less than the exercise price of
the option at all times during the option period.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the relevant Fund's gain will be limited to the
premium received. If the market price of the underlying security declines or
otherwise is below the exercise price, the Fund may elect to close the position
or take delivery of the security at the exercise price and the Fund's return
will be the premium received from the put option minus the amount by which the
market price of the security is below the exercise price.
Each of the Funds may purchase put options to hedge against a decline in
the value of its portfolio. By using put options in this way, the Funds will
reduce any profit it might otherwise have realized in the underlying security by
the amount of the premium paid for the put option and by transaction costs. Each
of the Funds may purchase call options to hedge against an increase in the price
of securities that it anticipates purchasing in the future. The premium paid for
the call option plus any transaction costs will reduce the benefit, if any,
realized by the Funds upon exercise of the option, and, unless the price of the
underlying security rises sufficiently, the option may expire worthless to the
Fund.
When a Fund purchases an option, the premium paid by it is recorded as an
asset of the Fund. When the Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of this asset or deferred credit will be
subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the average of the closing bid and asked
prices. If an option purchased by the Fund expires unexercised the Fund realizes
a loss equal to the premium paid. If the Fund enters into a closing sale
transaction on an option purchased by it, the Fund will realize a gain if the
premium received by the Fund on the closing transaction is more than the premium
paid to purchase the option, or a loss if it is less. If an option written by
the Fund expires on the stipulated expiration date or if the Fund enters into a
closing
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purchase transaction, it will realize a gain (or loss if the cost of a closing
purchase transaction exceeds the net premium received when the option is sold)
and the deferred credit related to such option will be eliminated. If an option
written by the Fund is exercised, the proceeds of the sale will be increased by
the net premium originally received and the Fund will realize a gain or loss.
There are several risks associated with transactions in options on
securities and indices. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. An option writer, unable to effect a closing purchase transaction,
will not be able to sell the underlying security (in the case of a covered call
option) or liquidate the segregated account (in the case of a secured put
option) until the option expires or the optioned security is delivered upon
exercise with the result that the writer in such circumstances will be subject
to the risk of market decline or appreciation in the security during such
period.
There is no assurance that a Fund will be able to close an unlisted option
position. Furthermore, unlisted options are not subject to the protections
afforded purchasers of listed options by the Options Clearing Corporation, which
performs the obligations of its members who fail to do so in connection with the
purchase or sale of options.
In addition, a liquid secondary market for particular options, whether
traded over-the-counter or on a national securities exchange ("Exchange") may be
absent for reasons which include the following: there may be insufficient
trading interest in certain options; restrictions may be imposed by an Exchange
on opening transactions or closing transactions or both; trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities; unusual or unforeseen
circumstances may interrupt normal operations on an Exchange; the facilities of
an Exchange or the Options Clearing Corporation may not at all times be adequate
to handle current trading value; or 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 that class or series of options)
would cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms.
Rights and Warrants. As stated in the Prospectus, each Fund (other than the
Bond Index Fund) may purchase warrants, which are privileges issued by
corporations enabling the owners to subscribe to and purchase a specified number
of shares of the corporation at a specified price during a specified period of
time. Subscription rights normally have a short life span to expiration. The
purchase of warrants involves the risk that a Fund could lose the purchase value
of a warrant if the right to subscribe to additional shares is not exercised
prior to the warrant's expiration. Also, the purchase of warrants involves the
risk that the effective price paid for the warrant added to the subscription
price of the related security may exceed the value of the subscribed security's
market price such as when there is no movement in the level of the underlying
security. Warrants acquired by a Fund in units or attached to other securities
are not subject to this restriction.
Stock Index Futures, Options on Stock and Bond Indices and Options on Stock
and Bond Index Futures Contracts. The Funds (except the Bond Index Fund) may
purchase and sell stock index futures, and options on stock indices and stock
index futures contracts and the Bond Index Fund may purchase and sell bond index
futures and options on bond indices and bond index futures contracts as a hedge
against movements in the equity and bond markets, respectively.
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A stock index futures contract is an agreement in which one party agrees to
deliver to the other an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of securities is made.
Options on stock and bond indices are similar to options on specific
securities, described above, except that, rather than the right to take or make
delivery of the specific security at a specific price, an option on a stock or
bond index gives the holder the right to receive, upon exercise of the option,
an amount of cash if the closing level of that stock or bond index is greater
than, in the case of a call option, or less than, in the case of a put option,
the exercise price of the option. This amount of cash is equal to such
difference between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple. The writer of the option
is obligated, in return for the premium received, to make delivery of this
amount. Unlike options on specific securities, all settlements of options on
stock or bond indices are in cash, and gain or loss depends on general movements
in the stocks included in the index rather than price movements in particular
stocks.
If the Advisor expects general stock or bond market prices to rise, it
might purchase a stock index futures contract, or a call option on that index,
as a hedge against an increase in prices of particular securities it ultimately
wants to buy. If in fact the index does rise, the price of the particular
securities intended to be purchased may also increase, but that increase would
be offset in part by the increase in the value of the relevant Fund's futures
contract or index option resulting from the increase in the index. If, on the
other hand, the Advisor expects general stock or bond market prices to decline,
it might sell a futures contract, or purchase a put option, on the index. If
that index does in fact decline, the value of some or all of the securities in
the relevant Fund's portfolio may also be expected to decline, but that decrease
would be offset in part by the increase in the value of the Fund's position in
such futures contract or put option.
The Funds (except the Bond Index Fund) may purchase and write call and put
options on stock index futures contracts and the Bond Index Fund may purchase
and write call and put options on bond index futures contracts. Each Fund may
use such options on futures contracts in connection with its hedging strategies
in lieu of purchasing and selling the underlying futures or purchasing and
writing options directly on the underlying securities or indices. For example,
the Funds may purchase put options or write call options on stock and index
futures (bond index futures in the case of the Bond Index Fund), rather than
selling futures contracts, in anticipation of a decline in general stock or bond
market prices or purchase call options or write put options on stock or bond
index futures, rather than purchasing such futures, to hedge against possible
increases in the price of securities which the Funds intend to purchase.
In connection with transactions in stock or bond index futures, stock or
bond index options and options on stock index or bond futures, the Funds will be
required to deposit as "initial margin" an amount of cash and short-term U.S.
Government securities equal to from 5% to 8% of the contract amount. Thereafter,
subsequent payments (referred to as "variation margin") are made to and from the
broker to reflect changes in the value of the option or futures contract. No
Fund may at any time commit more than 5% of its total assets to initial margin
deposits on futures contracts, index options and options on futures contracts.
Stripped Securities. The Bond Index Fund may acquire U.S. Government
obligations and their unmatured interest coupons that have been separated
("stripped") by their holder, typically a custodian bank or investment brokerage
firm. Having separated the interest coupons from the underlying principal of the
U.S. Government obligations, the holder will resell the stripped securities in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" ("TIGRs") and "Certificate of Accrual on Treasury
Securities" ("CATS"). The stripped coupons are sold separately from the
underlying principal, which is usually sold at a deep discount because the buyer
receives only the right
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to receive a future fixed payment on the security and does not receive any
rights to periodic interest (cash) payments. The underlying U.S. Treasury bonds
and notes themselves are held in book-entry form at the Federal Reserve Bank or,
in the case of bearer securities (i.e., unregistered securities which are
ostensibly owned by the bearer or holder), in trust on behalf of the owners.
Counsel to the underwriters of these certificates or other evidences of
ownership of U.S. Treasury securities have stated that, in their opinion,
purchasers of the stripped securities most likely will be deemed the beneficial
holders of the underlying U.S. Government obligations for federal tax and
securities purposes. The Trust is not aware of any binding legislative, judicial
or administrative authority on this issue.
Only instruments which are stripped by the issuing agency will be
considered U.S. Government obligations. Securities such as CATS and TIGRs which
are stripped by their holder do not qualify as U.S. Government obligations.
Within the past several years the Treasury Department has facilitated
transfers of ownership of zero coupon securities by accounting separately for
the beneficial ownership of particular interest coupon and principal payments or
Treasury securities through the Federal Reserve book-entry record-keeping
system. The Federal Reserve program as established by the Treasury Department is
known as "STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities." Under the STRIPS program, a Fund is able to have its beneficial
ownership of zero coupon securities recorded directly in the book-entry record-
keeping system in lieu of having to hold certificates or other evidences of
ownership of the underlying U.S. Treasury securities.
In addition, the Bond Index Fund may invest in stripped mortgage-backed
securities ("SMBS"), which represent beneficial ownership interests in the
principal distributions and/or the interest distributions on mortgage assets.
SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions on a pool of mortgage assets. One
type of SMBS will have one class receiving some of the interest and most of the
principal from the mortgage assets, while the other class will receive most of
the interest and the remainder of the principal. In the most common case, one
class of SMBS will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the principal-
only or "PO" class). SMBS may be issued by FNMA or FHLMC.
The original principal amount, if any, of each SMBS class represents the
amount payable to the holder thereof over the life of such SMBS class from
principal distributions of the underlying mortgage assets, which will be zero in
the case of an IO class. Interest distributions allocable to a class of SMBS, if
any, consist of interest at a specified rate on its principal amount, if any, or
its notional principal amount in the case of an IO class. The notional principal
amount is used solely for purposes of the determination of interest
distributions and certain other rights of holders of such IO class and does not
represent an interest in principal distributions of the mortgage assets.
Yields on SMBS will be extremely sensitive to the prepayment experience on
the underlying mortgage loans, and there are other associated risks. For IO
classes of SMBS and SMBS that were purchased at prices exceeding their principal
amounts there is a risk that a Fund may not fully recover its initial
investment.
The determination of whether a particular government-issued IO or PO backed
by fixed-rate mortgages is liquid may be made under guidelines and standards
established by the Board of Trustees. Such securities may be deemed liquid if
they can be disposed of promptly in the ordinary course of business at a value
reasonably close to that used in the calculation of a Fund's net asset value per
share.
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U.S. Government Obligations. The Funds may purchase obligations issued or
guaranteed by 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 GNMA, 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. Examples of the types of U.S. Government
obligations that may be acquired by the Funds include U.S. Treasury Bills,
Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, FNMA, Government National Mortgage
Association, General Services Administration, Student Loan Marketing
Association, Central Bank for Cooperatives, FHLMC, Federal Intermediate Credit
Banks and Maritime Administration.
Variable and Floating Rate Instruments. Debt instruments may be structured
to have variable or floating interest rates. These instruments may include
variable amount master demand notes that permit the indebtedness to vary in
addition to providing for periodic adjustments in the interest rates. The
Advisor will consider the earning power, cash flows and other liquidity ratios
of the issuers and guarantors of such instruments and, if the instrument is
subject to a demand feature, will continuously monitor their financial ability
to meet payment on demand. Where necessary to ensure that a variable or floating
rate instrument is equivalent to the quality standards applicable to the Fund,
the issuer's obligation to pay the principal of the instrument will be backed by
an unconditional bank letter or line of credit, guarantee or commitment to lend.
The absence of an active secondary market for certain variable and floating
rate notes could make it difficult to dispose of the instruments, and the Bond
Index Fund could suffer a loss if the issuer defaulted or during periods that
the Fund is not entitled to exercise its demand rights.
Variable and floating rate instruments held by the Bond Index Fund will be
subject to the Fund's limitation on illiquid investments when the Fund may not
demand payment of the principal amount within seven days absent a reliable
trading market.
Repurchase Agreements. The Funds may agree to purchase securities from
financial institutions such as member banks of the Federal Reserve System, any
foreign bank or any domestic or foreign broker/dealer that is recognized as a
reporting government securities dealer, subject to the seller's agreement to
repurchase them at an agreed-upon time and price ("repurchase agreements"). The
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 underlying obligations.
The repurchase price under the repurchase agreements described in the
Prospectus generally equals the price paid by a Fund plus interest negotiated on
the basis of current short-term rates (which may be more or less than the rate
on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements will be held by the Company's
custodian (or sub-custodian) in the Federal Reserve/Treasury book-entry system
or by another authorized securities depository. Repurchase agreements are
considered to be loans by a Fund under the Investment Company Act of 1940, as
amended (the "1940 Act").
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Borrowing. Each Fund is authorized to borrow money in an amount up to 5% of
the value of its total assets at the time of such borrowings for temporary
purposes, and is authorized to borrow money in excess of the 5% limit as
permitted by the 1940 Act to meet redemption requests. This borrowing may be
unsecured. The 1940 Act requires a Fund to maintain continuous asset coverage of
300% of the amount borrowed. If the 300% asset coverage should decline as a
result of market fluctuations or other reasons, a Fund may be required to sell
some of its portfolio holdings within three days to reduce the debt and restore
the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. Borrowing may exaggerate
the effect on a Fund's net asset value of any increase or decrease in the market
value of securities purchased with borrowed funds. Money borrowed will be
subject to interest costs which may or may not be recovered by an appreciation
of the securities purchased. A Fund may also be required to maintain minimum
average balances in connection with such borrowing or to pay a commitment or
other fees to maintain a line of credit; either of these requirements would
increase the cost of borrowing over the stated interest rate. Each Fund may, in
connection with permissible borrowings, transfer, as collateral, securities
owned by the Fund.
Reverse Repurchase Agreements. The Funds may borrow funds for temporary or
emergency 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 the
Fund may decline below the repurchase price. A Fund will pay interest on amounts
obtained pursuant to a reverse repurchase agreement. While reverse repurchase
agreements are outstanding, a Fund will maintain, in a segregated account, cash,
U.S. Government securities or other liquid high-grade debt securities of an
amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement.
When-Issued Purchases and Forward Commitments (Delayed-Delivery
Transactions). When-issued purchases and forward commitments (delayed-delivery
transactions) are commitments by a Fund to purchase or sell particular
securities with payment and delivery to occur at a future date (perhaps one or
two months later). These transactions permit a Fund to lock-in a price or yield
on a security, regardless of future changes in interest rates.
When a Fund agrees to purchase securities on a when-issued or forward
commitment basis, the Custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the Custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case the Fund may be required subsequently to
place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of the Fund's commitments. It
may be expected that the market value of the Fund's net assets will fluctuate to
a greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. Because a Fund's liquidity and ability
to manage its portfolio might be affected when it sets aside cash or portfolio
securities to cover such purchase commitments, the Advisor expects that its
commitments to purchase when-issued securities and forward commitments will not
exceed 25% of the value of the Fund's total assets absent unusual market
conditions.
The Funds will purchase securities on a when-issued or forward commitment
basis only with the intention of completing the transaction and actually
purchasing the securities. If deemed advisable as a matter of investment
strategy, however, a Fund may dispose of or renegotiate a commitment after it is
entered into, and may sell securities it has committed to purchase before those
securities are delivered to the Fund on the settlement date. In these cases the
Fund may realize a taxable capital gain or loss.
When a Fund engages in when-issued and forward commitment transactions, it
relies on the other party to consummate the trade. Failure of such party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.
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The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the net asset value
of the Fund starting on the day the Fund agrees to purchase the securities. The
Fund does not earn interest on the securities it has committed to purchase until
they are paid for and delivered on the settlement date.
Lending of Portfolio Securities. To enhance the return on its portfolio,
each Fund may lend securities in its portfolio (subject to a limit of 25% of its
total assets) to securities firms and financial institutions, provided that each
loan is secured continuously by collateral in the form of cash or U.S.
Government securities adjusted daily to have a market value at least equal to
the current market value of the securities loaned. These loans are terminable at
any time, and the Fund will receive any interest or dividends paid on the loaned
securities. In addition, it is anticipated that a Fund may share with the
borrower some of the income received on the collateral for the loan or the Fund
will be paid a premium for the loan. The risk in lending portfolio securities,
as with other extensions of credit, consists of a possible delay in recovery of
the securities or a possible loss of rights in the collateral should the
borrower fail financially. In determining whether a Fund will lend securities,
the Advisor will consider all relevant facts and circumstances. A Fund will only
enter into loan arrangements with broker-dealers, banks or other institutions
which the Advisor has determined are creditworthy under guidelines established
by the Board of Directors.
Yields and Ratings. The yields on certain obligations, including the money
market instruments in which each Fund may invest (such as commercial paper and
bank obligations), are dependent on a variety of factors, including general
money market conditions, conditions in the particular market for the obligation,
the financial condition of the issuer, the size of the offering, the maturity of
the obligation and the ratings of the issue. The ratings of S&P, Moody's, Duff &
Phelps Credit Rating Co., Thomson Bank Watch, Inc., and other nationally
recognized statistical NRSROs represent their respective opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are general
and are not absolute standards of quality. Consequently, obligations with the
same rating, maturity and interest rate may have different market prices.
Other. Subsequent to its purchase by a Fund, a rated security may cease to
be rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Board of Directors or the Advisor, pursuant to
guidelines established by the Board, will consider such an event in determining
whether the Fund involved should continue to hold the security in accordance
with the interests of the Fund and applicable regulations of the SEC.
It is possible that unregistered securities purchased by a Fund in reliance
upon Rule 144A under the Securities Act of 1933, as amended (the "Act"), could
have the effect of increasing the level of a Fund's illiquidity to the extent
that qualified institutional buyers become, for a period, uninterested in
purchasing these securities.
RISK FACTORS AND SPECIAL CONSIDERATIONS -- INDEX FUNDS
Traditional methods of fund investment management typically involve
relatively frequent changes in a portfolio of securities on the basis of
economic, financial and market analysis. Index funds such as the LargeCap Index
Fund, MidCap Index Fund, SmallCap Index Fund (the "Equity Index Funds") and the
Bond Index Fund are not managed in this manner. Instead, with the aid of a
computer program, the Advisor purchases and sells securities for each Fund in an
attempt to produce investment results that substantially duplicate the
investment composition and performance of each Fund's respective
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corresponding Index (the "Corresponding Index"), taking into account
redemptions, sales of additional Fund shares, and other adjustments as described
below.
With respect to the Equity Index Funds, a Fund does not expect to hold at
any particular time all of the stocks included in the Corresponding Index. The
Advisor believes, however, that through the application of capitalization
weighing and sector balancing techniques it will be able to construct and
maintain each Equity Index Fund's investment portfolio so that it reasonably
tracks the performance of its Corresponding Index. The Advisor will compare the
industry sector diversification of the stocks the Fund would acquire solely on
the basis of their weighted capitalizations with the industry sector
diversification of all issuers included in the Corresponding Index. This
comparison is made because the Advisor believes that, unless a Fund holds all
stocks included in the Corresponding Index, the selection of stocks for purchase
by the Fund solely on the basis of their weighted market capitalizations would
tend to place heavier concentration in certain industry sectors. As a result,
events disproportionately affecting such industries could affect the performance
of the Fund differently than the performance of the Corresponding Index.
Conversely, if smaller companies were not purchased by the Fund, the
representation of industries included in the Corresponding Index that are not
dominated by the most heavily market-capitalized companies would be reduced or
eliminated.
For these reasons, the Advisor will identify the sectors which are (or,
except for sector balancing, would be) most underrepresented in a Fund's
portfolio and will purchase balancing securities in these sectors until the
portfolio's sector weightings closely match those of the Corresponding Index.
This process continues until the portfolio is fully invested (except for cash
holdings).
Redemptions of a substantial number of shares of a Fund could reduce the
number of issuers represented in the Fund's investment portfolio, which could,
in turn, adversely affect the accuracy with which the Fund tracks the
performance of the Corresponding Index.
If an issuer drops in ranking, or is eliminated entirely from the
Corresponding Index, the Advisor may be required to sell some or all of the
common stock of such issuer then held by a Fund. Sales of portfolio securities
may be made at times when, if the Advisor were not required to effect purchases
and sales of portfolio securities in accordance with the Corresponding Index,
such securities might not be sold. Such sales may result in lower prices for
such securities than may been realized or in losses that may not have been
incurred if the Advisor were not required to effect the purchases and sales. The
failure of an issuer to declare or pay dividends, the institution against an
issuer of potentially materially adverse legal proceedings, the existence or
threat of defaults materially and adversely affecting an issuer's future
declaration and payment of dividends, or the existence of other materially
adverse credit factors will not necessarily be the basis for the disposition of
portfolio securities, unless such event causes the issuer to be eliminated
entirely from the Corresponding Index. However, although the Advisor does not
intend to screen securities for investment by a Fund by traditional methods of
financial and market analysis, the Advisor will monitor the Fund's investment
with a view towards removing stocks of companies which exhibit extreme financial
distress or which may impair for any reason the Fund's ability to achieve its
investment objective.
The Funds will invest primarily in the common stocks that constitute the
Corresponding Index in accordance with their relative capitalization and sector
weightings as described above. It is possible, however, that a Fund will from
time to time receive, as part of a "spin-off" or other corporate reorganization
of an issuer included in the Corresponding Index, securities that are themselves
outside the Corresponding Index. Such securities will be disposed of by the Fund
in due course consistent with the Fund's investment objective.
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With respect to the Bond Index Fund, the Fund will invest in a group of
fixed income securities selected from the Lehman Brothers Aggregate Bond Index
("Aggregate Bond Index") which are expected to perform similarly to the Index as
a whole. The Bond Index Fund will be unable to hold all of the individual issues
which comprise the Aggregate Bond Index because of the large number of
securities involved. The Fund will however be constructed to approximately match
the composition of the Aggregate Bond Index.
As the Bond Index Fund will invest primarily in fixed-income securities,
the Fund is subject to interest rate, income, call, credit and prepayment risk
(with respect to mortgage-backed securities.) Interest rate risk is the
potential for fluctuations in bond prices due to changing interest rates. Income
risk is the potential for a decline in the Fund's income due to falling market
interest rates. Credit risk is the possibility that a bond issuer will fail to
make timely payments of either interest or principal to the Fund. Prepayment
risk (for mortgage-backed securities) and call risk (for corporate bonds) is the
likelihood that, during periods of falling interest rates, securities with high
stated interest rates will be prepaid (or "called") prior to maturity requiring
the Fund to invest the proceeds at generally lower interest rates.
INVESTMENT LIMITATIONS
Each Fund is subject to the investment limitations enumerated in this
section which may be changed with respect to a particular Fund only by a vote of
the holders of a majority of the Fund's outstanding shares (as defined under
"Miscellaneous - Shareholder Approvals").
Each Fund may not:
1. With respect to 75% of the Fund's assets, invest more than 5% of
the Fund's assets (taken at market value at the time of purchase)
in the outstanding securities of any single issuer or own more
than 10% of the outstanding voting securities of any one issuer,
in each case other than securities issued or guaranteed by the
United States Government, its agencies or instrumentalities;
2. Invest more than 25% of its total assets in the securities of
issuers conducting their principal business activities in any one
industry (securities issued or guaranteed by the United States
Government, its agencies or instrumentalities are not considered
to represent industries);
3. Borrow money or enter into reverse repurchase agreements except
that the Fund may (i) borrow money or enter into reverse
repurchase agreements for temporary purposes in amounts not
exceeding 5% of its total assets and (ii) borrow money for the
purpose of meeting redemption requests, in amounts (when
aggregated with amounts borrowed under clause (i)) not exceeding
33 1/3% of its total assets;
4. Pledge, mortgage or hypothecate its assets other than to secure
borrowings permitted by restriction 3 above (collateral
arrangements with respect to margin requirements for options and
futures transactions are not deemed to be pledges or
hypothecations for this purpose);
5. Make loans of securities to other persons in excess of 25% of the
Fund's total assets, provided the Fund may invest without
limitation in short-term debt obligations (including repurchase
agreements) and publicly distributed debt obligations;
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6. Underwrite securities of other issuers, except insofar as the
Fund may be deemed an underwriter under the Act in selling
portfolio securities;
7. Purchase or sell real estate or any interest therein, but not
including securities issued by companies (including real estate
investment trusts) that invest in real estate or interests
therein;
8. Purchase securities on margin, or make short sales of securities
except for the use of short-term credit necessary for the
clearance of purchase and sales of portfolio securities, but the
Fund may make margin deposits in connection with transactions in
options, futures and options on futures;
9. Make investments for the purpose of exercising control of
management;
10. Invest in commodities or commodity futures contracts, provided
that this limitation shall not prohibit the purchase or sale by
the Fund of financial futures contracts and options on financial
futures contracts, options on securities and securities indices,
as permitted by the Fund's Prospectus; or
11. Issue any senior securities (as such term is defined in Section
18(f) of the 1940 Act) except to the extent the activities
permitted by other enumerated Investment Limitations may be
deemed to give rise to a senior security and as consistent with
interpretations under the 1940 Act.
Additional investment restrictions adopted by each Fund, which may be
changed by the Board of Directors, provide that a Fund may not:
1. Invest more than 15% of its net assets (taken at market value at
the time of purchase) in securities which cannot be readily
resold because of legal or contractual restrictions or which are
not otherwise marketable; or
2. Invest in other investment companies except as permitted under
the 1940 Act.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
a Fund's investments will not constitute a violation of such limitation, except
that any borrowing by a Fund that exceeds the fundamental investment limitations
stated above must be reduced to meet such limitations within the period required
by the 1940 Act (currently three days). In addition, if a Fund's holdings of
illiquid securities exceeds 15% because of changes in the value of the Fund's
investments, the Fund will take action to reduce its holdings of illiquid
securities within a time frame deemed to be in the best interest of the Fund.
Otherwise, a Fund may continue to hold a security even though it causes the Fund
to exceed a percentage limitation because of fluctuation in the value of the
Fund's assets.
16
<PAGE>
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, and their
business addresses and principal occupations during the past five years, are:
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Positions with Company During the Past Five Years
- -------------------------- ---------------------- -----------------------------
<S> <C> <C>
Charles W. Elliott 1/ Chairman of the Board Senior Advisor to the
3338 Bronson Boulevard of Directors President - Western Michigan
Kalmazoo, MI 49008 University since July 1995;
Age: 64 prior to that Executive Vice
President - Administration &
Chief Financial Officer,
Kellogg Company from January
1987 through June 1995;
before that Price Waterhouse.
Board of Directors, Steelcase
Financial Corporation.
John Rakolta, Jr. Director and Vice Chairman, Walbridge Aldinger
1876 Rathmor Chairman of the Board Company. (construction
Bloomfield Hills, MI 48304 of Directors company)
Age: 49
Thomas B. Bender Director Investment Advisor, Financial
7 Wood Ridge Road & Investment Management Group
Glen Arbor, MI 49636 (since April, 1991); Vice
Age: 63 President Institutional
Sales, Kidder, Peabody & Co.
(Retired April, 1991).
David J. Brophy Director Professor, University of
1025 Martin Place Michigan; Director, River
Ann Arbor, MI 48104 Place Financial Corp.;
Age: 60 Trustee, Renaissance Assets
Trust.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C>
Dr. Joseph E. Champagne Director Corporate and Executive
319 Snell Road Consultant since September
Rochester, MI 48306 1995; prior to that
Age: 58 Chancellor, Lamar University
from September 1994 until
September 1995; before that
Consultant to Management,
Lamar University; President
and Chief Executive Officer,
Crittenton Corporation,
(parent holding company that
owns healthcare facilities)
and Crittenton Development
Corporation until August
1993; before that President,
Oakland University of
Rochester, MI, until August
1991; Member, Board of
Directors, Ross Operating
Valve of Troy, MI
Thomas D. Eckert Director President and COO, Mid-
10726 Falls Pointe Drive Atlantic Group of Pulte Home
Great Falls, VA 22066 Corporation. (developer of
Age: 49 residential land and
construction of housing
units)
Jack L. Otto Director Retired; Director of Standard
6532 W. Beech Tree Road Federal Bank; Executive
Glen Arbor, MI 49636 Director, McGregor Fund (a
Age: 70 private philanthropic
foundation) 1981-1985;
Managing Partner, Detroit
office of Ernst & Young,
until 1981.
Arthur DeRoy Rodecker Director President, Rodecker &
4000 Town Center Company, Investment Brokers,
Suite 101 Inc. since November 1976;
Southfield, MI 48075 President, RAC Advisors,
Age: 69 Inc., Registered Investment
Advisor since February 1979;
President and Trustee, Helen
L. DeRoy Foundation, a
charitable foundation; Vice
President and Trustee, DeRoy
Testamentary Foundation, a
charitable foundation;
Trustee, Providence Hospital
Foundation.
</TABLE>
18
<PAGE>
Lee P. Munder President President and CEO of the
480 Pierce Street Advisor; Chief Executive
Suite 300 Officer and President of
Birmingham, MI 48009 Old MCM, Inc.; Chief
Age: 51 Executive Officer of
World Asset Management;
and Director, LPM
Investment Services, Inc.
("LPM").
Terry H. Gardner Vice President, Chief Vice President and Chief
480 Pierce Street Financial Officer and Financial Officer of the
Suite 300 Treasurer Advisor; Vice President
Birmingham, MI 48009 and Chief Financial
Age: 36 Officer of Old MCM, Inc.
(February 1993 to
present); Audit Manager
Arthur Andersen & Co.
(1991 to February 1993);
Secretary of LPM.
Paul Tobias Vice President Executive Vice President
480 Pierce Street and Chief Operating
Suite 300 Officer of the Advisor
Birmingham, MI 48009 (since April 1995) and
Age: 45 Executive Vice President
of Comerica, Inc.
Gerald Seizert Vice President Executive Vice President
480 Pierce Street and Chief Investment
Suite 300 Officer/Equities of the
Birmingham, MI 48009 Advisor (since April
Age: 44 1995); Managing Director
(1991-1995), Director
(1992-1995) and Vice
President (1984-1991) of
Loomis, Sayles and
Company, L.P.
Elyse G. Essick Vice President Vice President and
480 Pierce Street Director of Marketing for
Suite 300 the Advisor; Vice
Birmingham, MI 48009 President and Director of
Age: 38 Client Services of Old
MCM, Inc. (August 1988 to
December 1994).
James C. Robinson Vice President Vice President and Chief
480 Pierce Street Investment Officer/Fixed
Suite 300 Income for the Advisor;
Birmingham, MI 48009 Vice President and
Age: 35 Director of Fixed Income
of Old MCM, Inc.
(1987-1994).
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Leonard J. Barr, II Vice President Vice President and
480 Pierce Street Director of Core Equity
Suite 300 Research of the Advisor;
Birmingham, MI 48009 Director and Senior Vice
Age: 52 President of Old MCM,
Inc. (since 1988);
Director of LPM.
Ann F. Putallaz Vice President Vice President and
480 Pierce Street Director of Fiduciary
Suite 300 Services of the Advisor
Birmingham, MI 48009 (since January 1995);
Age: 51 Director of Client and
Marketing Services of
Woodbridge Capital
Management, Inc.
Richard H. Rose Assistant Treasurer Senior Vice President,
First Data Investor Services Group, Inc. First Data Investor
One Exchange Place Services Group, Inc.
6th Floor (since May 6, 1994).
Boston, MA 02109 Formerly, Senior Vice
Age: 41 President, The Boston
Company Advisors, Inc.
since November 1989.
Lisa A. Rosen Secretary, Assistant General Counsel of the
480 Pierce Street Treasurer Advisor since May, 1996;
Suite 300 Formerly Counsel, First
Birmingham, MI 48009 Data Investor Services
Age: 29 Group, Inc.; Assistant
Vice President and
Counsel with The Boston
Company Advisors, Inc.;
Associate with Hutchins,
Wheeler & Dittmar.
Teresa M. R. Hamlin Assistant Secretary Counsel, First Data
First Data Investor Services Group, Inc. Investor Services Group,
One Exchange Place Inc.; Formerly Paralegal
8th Floor Manager, The Boston
Boston, MA 02109 Company Advisors, Inc.
Age: 33
/1/ Director is an "interested person" of the Company as defined in the 1940
Act.
Directors of the Company receive an aggregate fee from the Company, The
Munder Funds Trust (the "Trust"), The Munder Funds, Inc. ("Munder") and The
Munder Framlington Funds Trust ("Framlington Trust") comprised of an annual
retainer fee and a fee for each Board meeting attended, and are reimbursed for
all out-of-pocket expenses relating to attendance at meetings.
20
</TABLE>
<PAGE>
The following table summarizes the compensation paid by Munder and the
Trust to their respective Directors/Trustees for the fiscal year ended June 30,
1996. Neither the Company nor Framlington Trust had operations during the fiscal
year ended June 30, 1996.
<TABLE>
<CAPTION>
Aggregate Pension
Compensation Retirement Estimated
Name of from the Trust Benefits Accrued Annual Benefits Total from
Person and as Part of upon the Fund
and Position Munder Fund Expenses Retirement Complex
------------ -------------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
Charles W. Elliott $14,000.00 None None $14,000.00
Chairman
John Rakolta, Jr. $14,000.00 None None $14,000.00
Vice Chairman
Thomas B. Bender $14,000.00 None None $14,000.00
Trustee and Director
David J. Brophy $14,000.00 None None $14,000.00
Trustee and Director
Dr. Joseph E. Champagne $14,000.00 None None $14,000.00
Trustee and Director
Thomas D. Eckert $14,000.00 None None $14,000.00
Trustee and Director
Jack L. Otto $14,000.00 None None $14,000.00
Trustee and Director
Arthur DeRoy Rodecker $14,000.00 None None $14,000.00
Trustee and Director
</TABLE>
No officer, director or employee of the Advisor, Comerica, the Distributor,
the Administrator or the Transfer Agent currently receives any compensation from
the Company, the Trust, Munder or Framlington Trust.
The Company will not employ Rodecker & Company, Investment Brokers, Inc. to
effect brokerage transactions for the Funds.
INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS
Investment Advisor. The Advisor of the Fund is Munder Capital Management,
a Delaware general partnership. The general partners of the Advisor are
Woodbridge, WAM, Old MCM, and Munder Group, LLC. Woodbridge and WAM are wholly-
owned subsidiaries of Comerica Bank -- Ann Arbor, which, in turn is a wholly-
owned subsidiary of Comerica Incorporated, a publicly-held bank holding company.
21
<PAGE>
Under the terms of the Investment Advisory Agreement between the Company
and the Advisor with respect to the Funds (the "Advisory Agreement"), the
Advisor furnishes continuing investment supervision to the Funds and is
responsible for the management of each Fund's portfolio. The responsibility for
making decisions to buy, sell or hold a particular security rests with the
Advisor, subject to review by the Company's Board of Directors.
For the advisory services provided and expenses assumed by it, the Advisor
has agreed to a fee from each Fund, computed daily and payable monthly, at an
annual rate of .05% of average daily net assets of the Fund.
The Advisory Agreement will continue in effect for a period of two years
from its effective date. If not sooner terminated, the Advisory Agreement will
continue in effect for successive one year periods thereafter, provided that
each continuance is specifically approved annually by (a) the vote of a majority
of the Board of Directors who are not parties to the Advisory Agreement or
interested persons (as defined in the 1940 Act), cast in person at a meeting
called for the purpose of voting on approval, and (b) either (i) the vote of a
majority of the outstanding voting securities of the Fund, or (ii) the vote of a
majority of the Board of Directors. The Advisory Agreement is terminable by vote
of the Board of Directors, or by the holders of a majority of the outstanding
voting securities of a Fund, at any time without penalty, upon 60 days' written
notice to the Advisor. The Advisor may also terminate its advisory relationship
with a Fund without penalty upon 90 days' written notice to the Company. The
Advisory Agreement terminates automatically in the event of its assignment (as
defined in the 1940 Act).
Distribution Agreement. The Company has entered into a distribution
agreement, under which the Distributor, as agent, sells shares of the Fund on a
continuous basis to separate accounts of the Insurers. The Distributor's
principal offices are located at 222 South Central Avenue, St. Louis, Missouri
63105.
Shareholder Servicing Arrangements. The Funds have adopted a Shareholder
Servicing Plan (the "Plan") under which the Distributor, Insurers, and other
dealers that offer the Contracts may be paid by the Funds in connection with
providing shareholder services to the Contractowners. Under the Plan, each fund
may incur such shareholder servicing expenses in amounts up to an annual rate of
.25% of the average daily net assets of each Fund.
The services provided by the Service Organizations under the Plan may
include execution and processing of orders from Insurers; processing purchase,
exchange and redemption requests furnished to the Insurers by the
Contractowners; placing orders with the Transfer Agent; processing dividend and
distribution payments from the Funds; providing statements of additional
information and information periodically showing positions in Fund shares; and
providing such other personal and account maintenance services as may reasonably
be requested by the Funds.
Administration Agreement. First Data Investor Services Group, Inc. ("First
Data") located at 53 State Street, Boston, Massachusetts 02109 serves as
administrator for the Company pursuant to an administration agreement (the
"Administration Agreement"). First Data has agreed to maintain office facilities
for the Company; provide accounting and bookkeeping services for the Funds,
including the computation of each Fund's net asset value, net income and
realized capital gains, if any; furnish statistical and research data, clerical
services, and stationery and office supplies; prepare and file various reports
with the appropriate regulatory agencies; and prepare various materials required
by the SEC or any state securities commission having jurisdiction over the
Company.
22
<PAGE>
The Administration Agreement provides that the Administrator performing
services thereunder shall not be liable under the Agreement except for its
willful misfeasance, bad faith or gross negligence in the performance of its
duties or from the reckless disregard by it of its duties and obligations
thereunder.
Custodian and Transfer Agency Agreements. Comerica Bank (the "Custodian"),
whose principal business address is One Detroit Center, 500 Woodward Avenue,
Detroit, MI 48226, maintains custody of each Fund's assets pursuant to a
custodian agreement ("Custody Agreement") with the Company. Under the Custody
Agreement, the Custodian (i) maintains a separate account in the name of each
Fund, (ii) holds and transfers portfolio securities on account of each Fund,
(iii) accepts receipts and makes disbursements of money on behalf of each Fund,
(iv) collects and receives all income and other payments and distributions on
account of each Fund's securities and (v) makes periodic reports to the Board of
Directors concerning each Fund's operations. The Custodian is authorized to
select one or more domestic or foreign banks or trust companies to serve as sub-
custodian on behalf of the Funds.
First Data also serves as the transfer and dividend disbursing agent for
the Funds pursuant to a transfer agency agreement (the "Transfer Agency
Agreement") with the Company, under which First Data (i) issues and redeems
shares of each Fund, (ii) addresses and mails all communications by each Fund to
its record owners, including reports to shareholders, dividend and distribution
notices and proxy materials for its meetings of shareholders, (iii) maintains
shareholder accounts, (iv) responds to correspondence by shareholders of each
Fund and (v) makes periodic reports to the Board of Directors concerning the
operations of the Funds.
Other Information Pertaining to Administration, Custodian and Transfer
Agency Agreements. As stated in the Prospectus, the Administrator, the
Transfer Agent and the Custodian each receive a separate fee for its services.
In approving the Administration Agreement and Transfer Agency Agreement, the
Board of Directors did consider the services that are to be provided under their
respective agreements, the experience and qualifications of the respective
service contractors, the reasonableness of the fees payable by the Company in
comparison to the charges of competing vendors, the impact of the fees on the
estimated total ordinary operating expense ratio of each Fund and the fact that
neither the Administrator nor the Transfer Agent is affiliated with the Company
or the Advisor. The Board also considered its responsibilities under federal and
state law in approving these agreements.
CONTROL PERSON AND PRINCIPAL HOLDER OF SECURITIES
The separate accounts of the Insurers are the sole shareholders of the
Funds and therefore are considered to be control persons of the Funds.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Directors, the
Advisor makes decisions with respect to and places orders for all purchases and
sales of portfolio securities for each Fund.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Transactions on foreign
stock exchanges involve payment for brokerage commissions which are generally
fixed.
Over-the-counter issues, including corporate debt and government
securities, are normally traded on a "net" basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. With respect to over-the-counter transactions, the Advisor will
normally deal directly with dealers who make a market in the instruments
involved except in those circumstances where
23
<PAGE>
more favorable prices and execution are available elsewhere. The cost of foreign
and domestic securities purchased from underwriters includes an underwriting
commission or concession, and the prices at which securities are purchased from
and sold to dealers include a dealer's mark-up or mark-down.
The Funds may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Funds will engage in this practice, however, only when the Advisor believes
such practice to be in each Fund's interests.
The portfolio turnover rate of each Fund is calculated by dividing the
lesser of the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases or sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of the
securities held by the Fund during the year. Each Fund may engage in short-term
trading to achieve its investment objective. Portfolio turnover may vary greatly
from year to year as well as within a particular year.
In the Advisory Agreement, the Advisor agrees to select broker-dealers
in accordance with guidelines established by the Company's Board of Directors
from time to time and in accordance with applicable law. In assessing the terms
available for any transaction, the Advisor shall consider all factors it deems
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker-dealer,
and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In addition, the Advisory Agreement
authorizes the Advisor, subject to the prior approval of the Company's Board of
Directors, to cause each Fund to pay a broker-dealer which furnishes brokerage
and research services a higher commission than that which might be charged by
another broker-dealer for effecting the same transaction, provided that the
Advisor determines in good faith that such commission is reasonable in relation
to the value of the brokerage and research services provided by such broker-
dealer, viewed in terms of either the particular transaction or the overall
responsibilities of the Advisor to the Fund. Such brokerage and research
services might consist of reports and statistics on specific companies or
industries, general summaries of groups of bonds and their comparative earnings
and yields, or broad overviews of the securities markets and the economy.
Supplementary research information so received is in addition to, and
not in lieu of, services required to be performed by the Advisor and does not
reduce the advisory fees payable to the Advisor by the Funds. It is possible
that certain of the supplementary research or other services received will
primarily benefit one or more other investment companies or other accounts for
which investment discretion is exercised. Conversely, the Funds may be the
primary beneficiary of the research or services received as a result of
portfolio transactions effected for such other account or investment company.
Portfolio securities will not be purchased from or sold to the
Advisor, the Distributor or any affiliated person (as defined in the 1940 Act)
of the foregoing entities except to the extent permitted by SEC exemptive order
or by applicable law.
Investment decisions for each Fund and for other investment accounts
managed by the Advisor are made independently of each other in the light of
differing conditions. However, the same investment decision may be made for two
or more of such accounts. In such cases, simultaneous transactions are
inevitable. Purchases or sales are then averaged as to price and allocated as to
amount in a manner deemed equitable to each such account. While in some cases
this practice could have a detrimental effect on the price or value of the
security as far as the Funds are concerned, in other cases it is believed to be
beneficial to the Funds. To the extent permitted by law, the Advisor may
aggregate the securities to be sold or purchased for the Funds with those to be
sold or purchased for other investment companies or accounts in executing
transactions.
24
<PAGE>
The Funds will not purchase securities during the existence of any
underwriting or selling group relating to such securities of which the Advisor
or any affiliated person (as defined in the 1940 Act) thereof is a member except
pursuant to procedures adopted by the Company's Board of Directors in accordance
with Rule 10f-3 under the 1940 Act.
Except as noted in the Prospectus and this Statement of Additional
Information the Funds' service contractors bear all expenses in connection with
the performance of its services and each Fund bears the expenses incurred in its
operations. These expenses include, but are not limited to, fees paid to the
Advisor, Administrator, Custodian and Transfer Agent; shareholder servicing
fees; fees and expenses of officers and directors; taxes; interest; legal and
auditing fees; brokerage fees and commissions; certain fees and expenses in
registering and qualifying each Fund and its 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 directors' 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 Company
that are not readily identifiable as belonging to a particular investment
portfolio of the Company are allocated among all investment portfolios of the
Company by or under the direction of the Board of Directors in a manner that the
Board of Directors determines to be fair and equitable, taking into
consideration whether it is appropriate for expenses to be borne by the Funds in
addition to the Company's other funds. The Advisor, Administrator, Custodian and
Transfer Agent may voluntarily waive all or a portion of their respective fees
from time to time.
PURCHASE AND REDEMPTION INFORMATION
Purchases and redemptions are discussed in the Funds' Prospectus and
such information is incorporated herein by reference.
Purchases. Each Fund's shares are continuously offered to the
Insurers' separate accounts at the net asset value per share next determined
after a proper purchase request has been received by the Insurer. The Funds and
the Distributor reserve the right to reject any purchase order for shares of the
Funds.
Redemptions. Payments for redeemed shares will ordinarily be made
within seven (7) business days after the Funds receive a redemption order from
the relevant Insurer. The redemption price will be the net asset value per share
next determined after the Insurer receives the Contractowner's request in proper
form. The Company reserves the right to suspend or postpone redemptions during
any period when: (i) trading on the New York Stock Exchange is restricted, as
determined by the SEC, or the New York Stock Exchange is closed for other than
customary weekend and holiday closings; (ii) the SEC has by order permitted such
suspension or postponement for the protection of shareholders; or (iii) an
emergency, as determined by the SEC, exists, making disposal of portfolio
securities or valuation of net assets of the Funds not reasonably practicable.
Redemption proceeds are normally paid in cash; however, each Fund may
pay the redemption price in whole or part by a distribution in kind of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the SEC. If shares are redeemed in kind, the redeeming
Shareholder might incur transaction costs in converting the assets into cash.
Each Fund is obligated to redeem Shares solely in cash up to the lesser of
$250,000 or 1% of its net assets during any 90-day period for any one
Shareholder.
The prospectus(es) for the Insurers' variable annuities describe the
allocation, transfer and withdrawal provisions of such annuities.
25
<PAGE>
NET ASSET VALUE
In determining the approximate market value of portfolio investments,
the Company may employ outside organizations, which may use matrix or formula
methods that take into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula methods not been used. All cash, receivables and current payables are
carried on the Company's books at their face value. Other assets, if any, are
valued at fair value as determined in good faith under the supervision of the
Board of Directors.
PERFORMANCE INFORMATION
From time to time, quotations of a Fund's performance may be included
in advertisements, sales literature, or reports to existing or prospective
owners of the Insurers' Contracts. These performance figures are calculated in
the following manner:
Yield
The Bond Index Fund's 30-day (or one month) standard yield described
in the Prospectus is calculated for the Fund in accordance with the method
prescribed by the SEC for mutual funds:
YIELD = 2[((a - b)+1)6 - 1]
-----
cd
Where: a = dividends and interest earned by a Fund during the period;
b = expenses accrued for the period (net of reimbursements and
waivers);
c = average daily number of shares outstanding during the period
entitled to receive dividends; and
d = maximum offering price per share on the last day of the
period.
For the purpose of determining interest earned on debt obligations
purchased by the Fund at a discount or premium (variable "a" in the formula),
the Fund computes the yield to maturity of such instrument based on the market
value of the obligation (including actual accrued interest) at the close of
business on the last business day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual accrued interest).
Such yield is then divided by 360 and the quotient is multiplied by the market
value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is in the portfolio. It is assumed in the above
calculation that each month contains 30 days. The maturity of a debt obligation
with a call provision is deemed to be the next call date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. For the
purpose of computing yield on equity securities held by the Fund, dividend
income is recognized by accruing 1/360 of the stated dividend rate of the
security for each day that the security is held by the Fund.
26
<PAGE>
With respect to mortgage or other receivables-backed debt obligations
purchased at a discount or premium, the formula generally calls for amortization
of the discount or premium. The amortization schedule will be adjusted monthly
to reflect changes in the market value of such debt obligations. Expenses
accrued for the period (variable "b" in the formula) include all recurring fees
charged by the Fund to all shareholder accounts in proportion to the length of
the base period and the Fund's mean (or median) account size. Undeclared earned
income will be subtracted from the offering price per share (variable "d" in the
formula).
Average Annual Total Return
A Fund may advertise its "average annual total return" and will compute
such return by determining the average annual compounded rate of return during
specified periods that equates the initial amount invested to the ending
redeemable value of such investment according to the following formula:
P (1 + T)/n/ = ERV
Where: T = average annual total return;
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year (or other)
periods at the end of the applicable period (or a
fractional portion thereof);
P = hypothetical initial payment of $1,000; and
n = period covered by the computation, expressed in years.
Aggregate Total Return
A Fund may advertise its "aggregate total return" and will compute such
return by determining the aggregate compounded rates of return during specified
periods that likewise equate the initial amount invested to the ending
redeemable value of such investment. The formula for calculating aggregate total
return is as follows:
(ERV) = 1
-----
Aggregate Total Return = P
The calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per share
existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all non-recurring charges at the end of the
measuring period.
The performance of any investment is generally a function of portfolio
quality and maturity, type of investment and operating expenses.
27
<PAGE>
From time to time, in advertisements or in reports to shareholders, the
Funds' yields or total returns may be quoted and compared to those of other
mutual funds with similar investment objectives and to stock or other relevant
indices. For example, the Funds' yield may be compared to the IBC/Donoghue's
Money Fund Average, which is an average compiled by Donoghue's MONEY FUND REPORT
of Holliston, MA 01746, a widely recognized independent publication that
monitors the performance of money market funds, or to the data prepared by
Lipper Analytical Services, Inc., a widely recognized independent service that
monitors the performance of mutual funds.
TAXES
The following summarizes certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Fund's Prospectuses. No attempt is made to present a detailed explanation of the
tax treatment of the Fund or its shareholders, and the discussion here and in
the Prospectuses is not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisors with specific reference to
their own tax situations.
Each Fund will elect to be taxed separately as a regulated investment
company under Subchapter M, of the Internal Revenue Code of 1986, as amended
(the "Code"). As a regulated investment company, a Fund generally is exempt from
Federal income tax on its net investment income and realized capital gains which
it distributes to the separate accounts, provided that it distributes an amount
equal to the sum of (a) at least 90% of its investment company taxable income
(net investment income and the excess of net short-term capital gain over net
long-term capital loss), if any, for the year and (b) at least 90% of its net
tax-exempt interest income, if any, for the year (the "Distribution
Requirement") and satisfies certain other requirements of the Code that are
described below. Distributions of investment company taxable income and net tax-
exempt interest income made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year will
satisfy the Distribution Requirement.
In addition to satisfaction of the Distribution Requirement, each Fund
must derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement") and derive less than
30% of its gross income from the sale or other disposition of securities and
certain other investments held for less than three months (the "Short-Short Gain
Test"). Interest (including original issue discount and "accrued market
discount") received by a Fund at maturity or on disposition of a security held
for less than three months will not be treated (in contrast to other income
which is attributable to realized market appreciation) as gross income from the
sale or other disposition of securities held for less than three months for this
purpose.
In addition to the foregoing requirements, at the close of each
quarter of its taxable year, at least 50% of the value of each Fund's assets
must consist of cash and cash items, U.S. Government securities, securities of
other regulated investment companies, and securities of other issuers (as to
which the Fund has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which the Fund does not hold more than 10%
of the outstanding voting securities of such issuer) and no more than 25% of the
value of each Fund's total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses. Repurchase
agreements collateralized by U.S. treasury securities are not treated for
purposes of the diversification requirement described in this paragraph as U.S.
Government securities.
28
<PAGE>
Certain debt instruments acquired by a Fund may include "original
issue discount" or "market discount". As a result, a Fund may be deemed under
tax law rules to have earned discount income in taxable periods in which it does
not actually receive any payments on the particular debt instruments involved.
This income, however, will be subject to the Distribution Requirements and must
also be distributed in accordance with the excise tax distribution rules
discussed above, which may cause the Fund to have to borrow or liquidate
securities to generate cash in order to timely meet these requirements (even
though such borrowing or liquidating securities at that time may be detrimental
from the standpoint of optimal portfolio management). Gain from the sale of a
debt instrument having market discount may be treated for tax purposes as
ordinary income to the extent that market discount accrued during the Fund's
ownership of that instrument.
Distributions of net investment income received by a Fund from
investments in debt securities and any net realized short-term capital gains
distributed by the Fund will be taxable to the separate accounts as ordinary
income and will not be eligible for the dividends received deduction for
corporations.
Each Fund intends to distribute to shareholders any excess of net
long-term capital gain over net short-term capital loss ("net capital gain") for
each taxable year. Such gain is distributed as a capital gain dividend and is
taxable to shareholders as long-term capital gain, regardless of the length of
time the shareholder has held the shares, whether such gain was recognized by
the Fund prior to the date on which a shareholder acquired shares of the Fund
and whether the distribution was paid in cash or reinvested in shares.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to shareholders.
The Code imposes a non-deductible 4% excise tax on regulated
investment companies that fail to currently distribute an amount equal to
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and capital gain net income each calendar year to avoid liability for this
excise tax.
To comply with regulations under Section 817(h) of the Code, each Fund
will be required to diversify its investments so that on the last day of each
calendar quarter no more than 55% of the value of its assets is represented by
any one investment, no more than 70% is represented by any two investments, no
more than 80% is represented by any three investments and no more than 90% is
represented by any four investments. Generally, all securities of the same
issuer are treated as a single investment. For the purposes of Section 817(h) of
the Code, obligations of the U.S. Treasury and each U.S. Government
instrumentality are treated as securities of separate issuers. The Treasury
Department has indicated that it may issue future pronouncements addressing the
circumstances in which a variable annuity contract owner's control of the
investments of a separate account may cause the variable contract owner, rather
than the separate account's sponsoring insurance company, to be treated as the
owner of the assets held by the separate account. If the variable annuity
contract owner is considered the owner of the securities underlying the separate
account, income and gains produced by those securities would be included
currently in the variable annuity contract owner's gross income. It is not known
what standards will be set forth in such pronouncements or when, if at all,
these pronouncements may be issued. In the event that rules or regulations are
adopted, there can be no assurance that a Fund will be able to operate as
described currently in the Prospectus or that the Fund will not have to change
its investment policies or goals.
29
<PAGE>
The foregoing general discussion of Federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the date
of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Although each Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all Federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, the Fund may be subject
to the tax laws of such states or localities.
ADDITIONAL INFORMATION CONCERNING SHARES
The Company is a Maryland corporation. The Company's Articles of
Incorporation authorize the Board of Directors to classify or reclassify any
authorized but unissued shares of the Company into one or more additional
portfolios (or classes of shares within a portfolio) by setting or changing in
any one or more respects their respective preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption. Pursuant to such authority, the
Company's Board of Directors have authorized the issuance of shares of common
stock representing interests in Munder S&P 500 Index Equity Fund, Munder S&P
MidCap Index Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Aggregate Bond Index Fund, Munder Foreign Equity Fund, Liquidity Plus Money
Market Fund and Institutional Index Equity Fund.
Shares of the Funds have no subscription or pre-emptive rights and only
such conversion or exchange rights as the Board may grant in its discretion.
When issued for payment as described in the applicable Prospectus and Statement
of Additional Information, shares will be fully paid and non-assessable by the
Company. In the event of a liquidation or dissolution of the Company or an
individual Fund, shareholders of a particular Fund would be entitled to receive
the assets available for distribution belonging to such Fund, and a
proportionate distribution, based upon the relative net asset values of the Fund
and the Company's other Funds, of any general assets not belonging to any
particular Fund which are available for distribution. Shareholders of a Fund are
entitled to participate in the net distributable assets of the particular Fund
involved, based on the number of shares of the Fund that are held by each
shareholder.
Shareholders of the Funds, as well as those of any other investment
portfolio now or hereafter offered by the Company, will vote together in the
aggregate and not separately on a Fund-by-Fund basis, except as otherwise
required by law or when permitted by the Board of Directors. Rule 18f-2 under
the 1940 Act provides that any matter required to be submitted to the holders of
the outstanding voting securities of an investment company such as the Company
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each Fund affected by the
matter. A Fund is affected by a matter unless it is clear that the interests of
such Fund in the matter are substantially identical to the interests of other
Funds of the Company or that the matter does not affect any interest of such
Fund. Under the Rule, the approval of an investment advisory agreement or any
change in a fundamental investment policy would be effectively acted upon with
respect to a Fund only if approved by a majority of the outstanding shares of
such Fund. However, the Rule also provides that the ratification of the
appointment of independent auditors, the approval of principal underwriting
contracts and the election of directors may be effectively acted upon by
shareholders of the Company voting together in the aggregate without regard to a
particular Fund.
30
<PAGE>
Shareholder meetings to elect directors will not be held unless and until
such time as required by law. At that time, the directors then in office will
call a shareholders' meeting to elect directors. Except as set forth above, the
directors will continue to hold office and may appoint successor directors.
Meetings of the shareholders of the Company shall be called by the directors
upon the written request of shareholders owning at least 10% of the outstanding
shares entitled to vote.
Notwithstanding any provision of Maryland law requiring a greater vote of
the Company's shares (or of any class voting as a class) in connection with any
corporate action, unless otherwise provided by law (for example, by Rule 18f-2)
or the Company's Articles of Incorporation, the Company may take or authorize
such action upon the favorable vote of the holders of more than 50% of the
outstanding Common Stock of the Funds and the Company's other Funds, if any
(voting together without regard to class).
MISCELLANEOUS
Counsel. The law firm of Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, DC 20005, has passed upon certain legal matters in connection with
the shares offered by the Funds and serves as counsel to the Company.
Independent Auditors. Ernst & Young LLP, 200 Clarendon Street, Boston,
Massachusetts, 02116, serves as the Company's independent auditors.
Shareholder Approvals. As used in this Statement of Additional
Information and in the Prospectuses, a "majority of the outstanding shares" of
the Fund means the lesser of (a) 67% of the shares of the Fund represented at a
meeting at which the holders of more than 50% of the outstanding shares of the
Fund are present in person or by proxy, or (b) more than 50% of the outstanding
shares of the Fund.
Banking Laws. Banking laws and regulations currently prohibit a bank
holding company registered under the Federal Bank Holding Company Act of 1956 or
any bank or non-bank affiliate thereof from sponsoring, organizing, controlling
or distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from underwriting securities, but such banking laws and regulations do not
prohibit such a holding company or affiliate or banks generally from acting as
investment advisor, administrator, transfer agent or custodian to such an
investment company, or from purchasing shares of such a company as agent for and
upon the order of customers. The Advisor and the Custodian are subject to such
banking laws and regulations.
The Advisor and the Custodian believe they may perform the services for the
Company contemplated by their respective agreements with the Company without
violation of applicable banking laws or regulations. It should be noted,
however, that there have been no cases deciding whether bank and non-bank
subsidiaries of a registered bank holding company may perform services
comparable to those that are to be performed by these companies, and future
changes in either Federal or state statutes and regulations relating to
permissible activities of banks and their subsidiaries or affiliates, as well as
future judicial or administrative decisions or interpretations of current and
future statutes and regulations, could prevent these companies from continuing
to perform such service for the Company.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of such companies in connection with the provision of
services on behalf of the Company, the Company might be required to alter
materially or discontinue its arrangements with such companies and change its
method of operations. It is not anticipated, however, that any change in the
Company's method of operations would affect the net asset value per share of the
Funds or result in a financial loss to any shareholder of the Funds.
31
<PAGE>
REGISTRATION STATEMENT
This Statement of Additional Information and the Funds' Prospectus do not
contain all the information included in the Funds' registration statement filed
with the SEC under the 1933 Act with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The registration statement, including the exhibits filed
therewith, may be examined at the offices of the SEC in Washington, D.C.
Statements contained herein and in the Funds' Prospectus as to the contents
of any contract or other documents referred to are not necessarily complete,
and, in such instance, reference is made to the copy of such contract or other
documents filed as an exhibit to the Funds' registration statement, each such
statement being qualified in all respect by such reference.
32
<PAGE>
APPENDIX A
----------
- Rated Investments -
Corporate Bonds
- ---------------
Excerpts from Moody's Investors Services, Inc. ("Moody's") description of
its bond ratings:
"Aaa": Bonds that 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 by an
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 that 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 that 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 sometime in the future.
"Baa": Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appears 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 that 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 that are rated "B" generally lack characteristics of desirable
investments. 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 that are rated "Caa" are of poor standing. These issues may be
in default or present elements of danger may exist with respect to principal or
interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated "Aa" through "B". The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
A-1
<PAGE>
Excerpts from Standard & Poor's Corporation ("S&P") description of its bond
ratings:
"AAA": Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
"AA": Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from "AAA" issues by a small degree.
"A": Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
"BBB": Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
"BB", "B" and "CCC": Bonds rated "BB" and "B" are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. "BB" represents a
lower degree of speculation than "B" and "CCC" the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
To provide more detailed indications of credit quality, the "AA" or "A"
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Commercial Paper
- ----------------
The rating "Prime-1" is the highest commercial paper rating assigned by
Moody's. These issues (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issues rated "Prime-2" (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics of "Prime-1" rated issues, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P 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 "A-1+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1."
A-2
<PAGE>
APPENDIX A
----------
- Rated Investments -
Commercial Paper
- ----------------
Rated commercial paper purchased by a Fund must have (at the time of
purchase) the highest quality rating assigned to short-term debt securities or,
if not rated, or rated by only one agency, are determined to be of comparative
quality pursuant to guidelines approved by a Fund's Boards of Trustees and
Directors. Highest quality ratings for commercial paper for Moody's and S&P are
as follows:
Moody's: The rating "Prime-1" is the highest commercial paper rating
category assigned by Moody's. These issues (or related supporting institutions)
are considered to have a superior capacity for repayment of short-term
promissory obligations.
S&P: Commercial paper ratings of S&P are current assessments of the
likelihood of timely payment of debts having original maturities of no more than
365 days. Commercial paper rated in the "A-1" category by S&P 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 "A-1+".
A-3
<PAGE>
APPENDIX B
As stated in the Prospectus, the Funds may enter into certain futures
transactions and options for hedging purposes. Such transactions are described
in this Appendix.
I. Interest Rate Futures Contracts
Use of Interest Rate Futures Contracts. Bond prices are established in both
the cash market and the futures market. In the cash market, bonds are purchased
and sold with payment for the full purchase price of the bond being made in
cash, generally within five business days after the trade. In the futures
market, only a contract is made to purchase or sell a bond in the future for a
set price on a certain date. Historically, the prices for bonds established in
the futures markets have tended to move generally in the aggregate in concert
with the cash market prices and have maintained fairly predictable
relationships. Accordingly, the Funds may use interest rate futures contracts as
a defense, or hedge, against anticipated interest rate changes and not for
speculation. As described below, this would include the use of futures contract
sales to protect against expected increases in interest rates and futures
contract purchases to offset the impact of interest rate declines.
The Funds presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Funds, through using futures contracts.
Description of Interest Rate Futures Contracts. An interest rate futures
contract sale would create an obligation by a Fund, as seller, to deliver the
specific type of financial instrument called for in the contract at a specific
future time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specific future time at a specific price. The specific
securities delivered or taken, respectively, at settlement date, would not be
determined until or at near that date. The determination would be in accordance
with the rules of the exchange on which the futures contract sale or purchase
was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without making or taking of delivery of securities.
Closing out a futures contract sale is effected by the Fund's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of the sale
exceeds the price of the offsetting purchase, the Fund is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the Fund entering into
a futures contract sale. If the offsetting sale price exceeds the purchase
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. The Funds would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.
B-1
<PAGE>
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. The Funds may trade in any interest rate futures contracts for
which there exists a public market, including, without limitation, the foregoing
instruments.
Example of Futures Contract Sale. The Funds would engage in an interest
rate futures contract sale to maintain the income advantage from continued
holding of a long-term bond while endeavoring to avoid part or all of the loss
in market value that would otherwise accompany a decline in long-term securities
prices. Assume that the market value of a certain security held by a particular
Fund tends to move in concert with the futures market prices of long-term United
States Treasury bonds ("Treasury Bonds"). The Advisor wishes to fix the current
market value of the portfolio security until some point in the future. Assume
the portfolio security has a market value of 100, and the Advisor believes that,
because of an anticipated rise in interest rates, the value will decline to 95.
The fund might enter into futures contract sales of Treasury bonds for an
equivalent of 98. If the market value of the portfolio security does indeed
decline from 100 to 95, the equivalent futures market price for the Treasury
bonds might also decline from 98 to 93.
In that case, the five point loss in the market value of the portfolio
security would be offset by the five point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The Advisor could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example might
incur a loss of 2 points (which might be reduced by an offsetting transaction
prior to the settlement date). In each transaction, transaction expenses would
also be incurred.
Example of Futures Contract Purchase. The Funds would engage in an interest
rate futures contract purchase when they are not fully invested in long-term
bonds but wish to defer for a time the purchase of long-term bonds in light of
the availability of advantageous interim investments, e.g., shorter term
securities whose yields are greater than those available on long-term bonds. A
Fund's basic motivation would be to maintain for a time the income advantage
from investing in the short-term securities; the Fund would be endeavoring at
the same time to eliminate the effect of all or part of an expected increase in
market price of the long-term bonds that the Fund may purchase.
For example, assume that the market price of a long-term bond that the Fund
may purchase, currently yielding 10%, tends to move in concert with futures
market prices of Treasury bonds. The Advisor wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example) when it may purchase the bond. Assume the long-term bond
has a market price of 100, and the Advisor believes that, because of an
anticipated fall in interest rates, the price will have risen to 105 (and the
yield will have dropped to about 9-1/2%) in four months. The Fund might enter
into futures contracts purchases of Treasury bonds for an equivalent price of
98. At the same time, the Fund would assign a pool of investments in short-term
securities that are either maturing in four months or earmarked for sale in four
months, for purchase of the long-term bond at an assumed market price of 100.
Assume these short-term securities are yielding 15%. If the market price of the
long-term bond does indeed rise from 100 to 105, the equivalent futures market
price for Treasury bonds might also rise from 98 to 103. In that case, the 5
point
B-2
<PAGE>
increase in the price that the Fund pays for the long-term bond would be offset
by the 5 point gain realized by closing out the futures contract purchase.
The Advisor could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or below,
it is possible that the Fund would continue with its purchase program for long-
term bonds. The market price of available long-term bonds would have decreased.
The benefit of this price decrease, and thus yield increase, will be reduced by
the loss realized on closing out the futures contract purchase.
If, however, short-term rates remained above available long-term rated, it
is possible that the Fund would discontinue its purchase program for long-term
bonds. The yield on short-term securities in the portfolio, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued incremental
income will be reduced by the loss realized on closing out the futures contract
purchase. In each transaction, expenses would also be incurred.
II. Index Futures Contracts
General. A bond index assigns relative values of the bonds included in the
index bind and the index fluctuates with changes in the market values of the
bonds included. The Chicago Board of Trade has designed a futures contract based
on the Bond Buyer Municipal Bond Index. This Index is composed of 40 term
revenue and general obligation bonds and its composition is updated regularly as
new bonds meeting the criteria of the Index are issued and existing bonds
mature. The Index is intended to provide an accurate indicator of trends and
changes in the municipal bond market. Each bond in the Index is independently
priced by six dealer-to-dealer municipal bond brokers daily. The 40 prices then
are averaged and multiplied by a coefficient. The coefficient is used to
maintain the continuity of the Index when its composition changes.
A stock index assigns relative values to the stocks included in the index
and the index fluctuates with changes in the market values of the stocks
included. Some stock index futures contracts are based on broad market indexed,
such as the Standard & Poor's 500 or the New York Stock Exchange Composite
Index. In contrast, certain exchanges offer futures contracts on narrower market
indexes, such as the Standard & Poor's 100 or indexes based on an industry or
market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated by the
Commodity Futures Trading Commission. Transactions on such exchanges are cleared
through a clearing corporation, which guarantees the performance of the parties
to each contract.
A Fund will sell index futures contracts in order to offset a decrease in
market value of its portfolio securities that might otherwise result from a
market decline. A Fund will purchase index futures contracts in anticipation of
purchases of securities. In a substantial majority of these transactions, a Fund
will purchase such securities upon termination of the long futures position, but
a long futures position may be terminated without a corresponding purchase of
securities.
In addition, a Fund may utilize index futures contracts in anticipation of
changes in the composition of its portfolio holdings. For example, in the event
that a Fund expects to narrow the range of industry groups represented in its
holdings it may, prior to making purchases of the actual securities, establish a
long futures position based on a more restricted index, such as an index
comprised of securities of a particular industry group. A Fund may also sell
futures contracts in connection with this strategy, in order to protect against
the possibility that the value of the securities to be sold as part of the
restructuring of the portfolio will decline prior to the time of sale.
B-3
<PAGE>
Examples of Stock Index Futures Transactions. The following are examples of
transactions in stock index futures (net of commissions and premiums, if any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
<TABLE>
<CAPTION>
Portfolio Futures
--------- -------
<S> <C>
-Day Hedge is Placed-
Anticipate buying $62,500 in Equity Buying 1 Index Futures at 125
Securities Value of Futures = $62,500/Contract
-Day Hedge is Lifted-
Buy Equity Securities with Actual Cost Sell 1 Index Futures at 130
= $65,000 Value of Futures = $65,000/Contract
Increase in Purchase Price = $2,500 Gain on Futures = $2,500
</TABLE>
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 X $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
<TABLE>
<CAPTION>
Portfolio Futures
--------- -------
<S> <C>
-Day Hedge is Placed-
Anticipate Selling $1,000,000 in Equity Sell 16 Index Futures at 125
Securities Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Securities - Own Stock Buy 16 Index Futures at 120
with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
</TABLE>
III. Margin Payments
Unlike purchase or sales of portfolio securities, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the broker or in a segregated account
with the Custodian an amount of cash or cash equivalents, known as initial
margin, based on the value of the contract. The nature of initial margin in
futures transactions is different from that of margin in security transactions
in that futures contract margin does not involve the borrowing of funds by the
customer to finance the transactions. Rather, the initial margin is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract assuming all
contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying instruments fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
marking-to-the-market. For
B-4
<PAGE>
example, when a particular Fund has purchased a futures contract and the price
of the contract has risen in response to a rise in the underlying instruments,
that position will have increased in value and the Fund will be entitled to
receive from the broker a variation margin payment equal to that increase in
value. Conversely, where the Fund has purchased a futures contract and the price
of the futures contract has declined in response to a decrease in the underlying
instruments, the position would be less valuable and the Fund would be required
to make a variation margin payment to the broker. At any time prior to
expiration of the futures contract, the Advisor may elect to close the position
by taking an opposite position, subject to the availability of a secondary
market, which will operate to terminate the Fund's position in the futures
contract. A final determination of variation margin is then made, additional
cash is required to be paid by or released to the Fund, and the Fund realizes a
loss or gain.
IV. Risks of Transactions in Futures Contracts
There are several risks in connection with the use of futures by the Funds
as hedging devices. One risk arises because of the imperfect correlation between
movements in the price of the futures and movements in the price of the
instruments which are the subject of the hedge. The price of the future may move
more than or less than the price of the instruments being hedged. If the price
of the futures moves less than the price of the instruments which are the
subject of the hedge, the hedge will not be fully effective but, if the price of
the instruments being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price of
the instruments being hedged has moved in a favorable direction, this advantage
will be partially offset by the loss on the futures. If the price of the futures
moves more than the price of the hedged instruments, the Fund involved will
experience either a loss or gain on the futures which will not be completely
offset by movements in the price of the instruments which are the subject of the
hedge. To compensate for the imperfect correlation of movements in the price of
instruments being hedged and movements in the price of futures contracts, the
Fund may buy or sell futures contracts in a greater dollar amount than the
dollar amount of instruments being hedged if the volatility over a particular
time period of the prices of such instruments has been greater than the
volatility over such time period of the futures, or if otherwise deemed to be
appropriate by the Advisor. Conversely, the Funds may buy or sell fewer futures
contracts if the volatility over a particular time period of the prices of the
instruments being hedged is less than the volatility over such time period of
the futures contract being used, or if otherwise deemed to be appropriate by the
Advisor. It is also possible that, when the Fund had sold futures to hedge its
portfolio against a decline in the market, the market may advance and the value
of instruments held in the Fund may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value in its
portfolio securities.
Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest its cash at that time because
of concern as to possible further market decline or for other reasons, the Funds
will realize a loss on the futures contract that is not offset by a reduction in
the price of the instruments that were to be purchased.
In instances involving the purchase of futures contracts by the Funds, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Custodian and/or
in a margin account with a broker to collateralize the position and thereby
insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which
B-5
<PAGE>
could distort the normal relationship between the cash and futures markets.
Second, with respect to financial futures contracts, the liquidity of the
futures market depends on participants entering into off-setting transactions
rather than making or taking delivery. To the extent participants decide to make
or take delivery, liquidity in the futures market could be reduced thus
producing distortions. Third, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market may also cause temporary price distortions. Due to the
possibility of price distortion in the futures market, and because of the
imperfect correlation between the movements in the cash market and movements in
the price of futures, a correct forecast of general market trends or interest
rate movements by the Advisor may still not result in a successful hedging
transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures investment position, and in the event of adverse price
movements, the Funds would continue to be required to make daily cash payments
of variation margin. However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Funds is also subject to the Advisor's
ability to predict correctly movements in the direction of the market. For
example, if a particular Fund has hedged against the possibility of a decline in
the market adversely affecting securities held by it and securities prices
increase instead, the Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. The Funds may have to
sell securities at a time when they may be disadvantageous to do so.
V. Options on Futures Contracts
The Funds may purchase and write options on the futures contracts described
above. A futures option gives the holder, in return for the premium paid, the
right to buy (call) from or sell (put) to the writer of the option a futures
contract at a specified price at any time during the period of the option. Upon
exercise, the writer of, the option is obligated to pay the difference between
the cash value of the futures contract and the exercise price. Like the buyer or
seller of a futures contract, the holder, or writer, of an option has the right
to terminate its position prior to the scheduled expiration of the option by
selling, or purchasing an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss. A Fund
B-6
<PAGE>
will be required to deposit initial margin and variation margin with respect to
put and call options on futures contracts written by it pursuant to brokers'
requirements similar to those described above. Net option premiums received will
be included as initial margin deposits.
Investments in futures options involve some of the same considerations that
are involved in connection with investments in future contracts (for example,
the existence of a liquid secondary market). In addition, the purchase or sale
of an option also entails the risk that changes in the value of the underlying
futures contract will not correspond to changes in the value of the option
purchased. Depending on the pricing of the option compared to either the futures
contract upon which it is based, or upon the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. In general, the market prices of options can be
expected to be more volatile than the market prices on underlying futures
contract. Compared to the purchase or sale of futures contracts, however, the
purchase of call or put options on futures contracts may frequently involve less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
VII. Other Matters
Accounting for futures contracts will be in accordance with generally
accepted accounting principes
B-7
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------------
(a) Financial Statements
Not applicable.
(b) Exhibits:
(1) (a) Articles of Incorporation dated May 22,
1984 are incorporated herein by reference to Post-
Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A filed with the Commission on
November 15, 1996.
(b) Articles Supplementary to Registrant's Articles
of Incorporation are incorporated herein by reference to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on November 15, 1996.
(c) Articles of Amendment to Registrant's Articles
of Incorporation are incorporated herein by reference to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on November 15, 1996.
(d) Articles Supplementary to Registrant's Articles
of Incorporation are incorporated herein by reference to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on November 15, 1996.
(e) Certificate of Correction is incorporated herein
by reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A filed
with the Commission on November 15, 1996.
(f) Articles Supplementary to Registrant's Articles
of Incorporation are incorporated herein by reference to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on November 15, 1996.
(g) Certificate of Correction is incorporated herein
by reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A filed
with the Commission on November 15, 1996.
(h) Articles of Amendment to Registrant's Articles
of Incorporation are incorporated herein by reference to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on November 15, 1996.
(i) Articles Supplementary to Registrant's Articles
of Incorporation are incorporated herein by reference to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on November 15, 1996.
(j) Articles Supplementary to Registrant's Articles
of Incorporation are filed herein.
(k) Articles Supplementary to Registrant's Articles
of Incorporation relating to Munder S&P 500 Index Equity
Fund, Munder S&P MidCap Index Equity Fund, Munder S&P
SmallCap Index Equity Fund, Munder Foreign Equity Fund and
Munder Aggregate Bond Index Fund are filed herein.
(l) Certificate of Correction relating to the
Liquidity Plus Money Market Fund is filed herein.
(2) (a) By-Laws as amended, restated and adopted
by Registrant's Board of Directors on March 2, 1990 are
incorporated herein by reference to Exhibit 2(a) of Post-
Effective Amendment No. 9 to Registrant's Registration
Statement on Form N-1A, filed on November 29, 1990.
(3) Not applicable.
(4) Not applicable.
(5) (a) Form of Investment Advisory Agreement
between Registrant and Munder Capital Management with
respect to the Liquidity Plus Money Market Fund is
incorporated herein by reference to Post-Effective
Amendment No. 20 to Registrant's Registration Statement on
Form N-1A filed with the Commission on November 15, 1996.
(b) Form of Investment Advisory Agreement between
Registrant and Munder Capital Management with respect to
Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund
is filed herein.
(6) (a) Form of Distribution Agreement between
Registrant and Funds Distributor Inc., with respect to the
Liquidity Plus Money Market Fund is incorporated herein by
reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A filed
with the Commission on November 15, 1996.
(b) Form of Distribution Agreement between
Registrant and Longrow Securities Inc., with respect to
Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund
is filed herein.
(7) Not applicable.
(8) Form of Custody Agreement between
Registrant and Comerica Bank with respect to Liquidity
Plus Money Market Fund, Munder S&P 500 Index Equity Fund,
Munder S&P MidCap Index Equity Fund, Munder S&P SmallCap
Index Equity Fund, Munder Foreign Equity Fund and Munder
Aggregate Bond Index Fund is filed herein.
(9) (a) Administration Agreement between
Registrant and The Shareholder Services Group, Inc. is
incorporated herein by reference to Post-Effective
Amendment No. 20 to Registrant's Registration Statement on
Form N-1A filed with the Commission on November 15, 1996.
(b) Form of Notice to Administration Agreement with
respect to the Liquidity Plus Money Market Fund is
incorporated herein by reference to Post-Effective
Amendment No. 20 to Registrant's Registration Statement on
Form N-1A filed with the Commission on November 15, 1996.
(c) Form of Amended and Restated Administration
Agreement between Registrant and First Data Investor
Services Group, Inc. with respect to Liquidity Plus Money
Market Fund, Munder S&P 500 Index Equity Fund, Munder S&P
MidCap Index Equity Fund, Munder S&P SmallCap Index Equity
Fund, Munder Foreign Equity Fund and Munder Aggregate Bond
Index Fund is filed herein.
(d) Form of Transfer Agency and Registrar Agreement
between Registrant and First Data Investor Services Group,
Inc. with respect to Liquidity Plus Money Market Fund,
Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund
is filed herein.
(e) Form of Participation Agreement between
Registrant, Zurich-Kemper and Longrow Securities Inc.,
with respect to Munder S&P 500 Index Equity Fund, Munder
S&P MidCap Index Equity Fund, Munder S&P SmallCap Index
Equity Fund, Munder Foreign Equity Fund and Munder
Aggregate Bond Index Fund is filed herein.
(f) Form of Shareholder Servicing Plan with respect
to Munder S&P 500 Index Equity Fund, Munder S&P MidCap
Index Equity Fund, Munder S&P SmallCap Index Equity Fund,
Munder Foreign Equity Fund and Munder Aggregate Bond Index
Fund is filed herein.
(10)(a) Opinion and consent of counsel with respect to
Munder S&P Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund
is filed herein.
(b) Opinion and consent of counsel for
Liquidity Plus Money Market Fund is incorporated herein by
reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A filed
with the Commission on November 15, 1996.
(11) Powers of Attorney are filed herein.
(12) Not Applicable
(13) Not Applicable.
(14) Not Applicable.
(15) Form of Service and Distribution Plan of the
Liquidity Plus Money Market Fund is incorporated herein by
reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A filed
with the Commission on November 15, 1996.
(16)(a) Schedules for computation of annualized
and effective yields of the Liquidity Plus Money Market
Fund is incorporated herein by reference to Post-Effective
Amendment No. 20 to Registrant's Registration Statement on
Form N-1A filed with the Commission on November 15, 1996.
(b) Schedules for computation of annualized and
effective yields with respect to Munder S&P 500 Index
Equity Fund, Munder S&P MidCap Index Equity Fund, Munder
S&P SmallCap Index Equity Fund, Munder Foreign Equity Fund
and Munder Aggregate Bond Index Fund is incorporated
herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A filed
with the Commission on February 3, 1997.
(17) Not Applicable.
(18) Not Applicable.
- ------------------------------------------
* To be filed by amendment.
- ------------------------------------------
Item 25. Persons Controlled by or under Common
Control with Registrant.
------------------------------------------
- ----------------------------------
Not Applicable.
Item 26. Number of Holders of Securities
--------------------------------------
No record holders as of April 1, 1997.
Item 27. Indemnification
------------------
Article VII, Section 3 of the Registrant's Articles of
Incorporation ("Section 3") provides that the Registrant,
including its successors and assigns, shall indemnify its
directors and officers and make advance payment of related
expenses to the fullest extent permitted, and in
accordance with the procedures required, by the General
Laws of the State of Maryland and the Investment Company
Act of 1940. Such indemnification shall be in addition
to any other right or claim to which any director,
officer, employee or agent may otherwise be entitled. In
addition, Article VI, Section 2 of the Registrant's By-
laws provides that any person who was or is a party or is
threatened to be made a party in any threatened, pending
or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of
the fact that such person is a current or former director
or officer of the Corporation, is or was serving while a
director or officer of the Corporation at the request of
the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, enterprise or employee
benefit plan, shall be indemnified by the Corporation
against judgments, penalties, fines, excise taxes,
settlements and reasonable expenses (including attorney's
fees) actually incurred by such person in connection with
such action, suit or proceeding to the full extent
permissible under General Laws of the State of Maryland
and the Investment Company Act of 1940, as such statutes
are now or hereafter in force, except that such indemnity
shall not protect any such person against any liability to
the Corporation or any stockholder thereof to which such
person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office.
The indemnification provided by this Section 2 shall not
be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such
indemnification may be entitled under any issuance or
other agreement, vote of shareholders or disinterested
directors or otherwise, both as to action by a director or
officer of the Corporation in his official capacity and as
to action by such person in another capacity while holding
such office or position, and shall continue as to a person
who has ceased to be a director or officer and shall inure
to the benefit of the heirs, executors and administrators
of such a person.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted
to directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Fund's
Articles of Incorporation, its By-Laws or otherwise, the
Registrant is aware that in the opinion of the Securities
and Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore, is
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
directors, officers or controlling persons of the
Registrant in connection with the successful defense of
any act, suit or proceeding) is asserted by such
directors, officers or controlling persons in connection
with 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 Act and
will be governed by the final adjudication of such issues.
Item 28. Business and Other Connections of
Investment Adviser
------------------------------------------
- -----------------------
Munder Capital Management
Position
Name with Adviser
Old MCM, Inc. Partner
Munder Group LLC Partner
WAM Holdings, Inc. Partner
Woodbridge Capital Partner
Management, Inc.
Lee P. Munder President and Chief Executive Officer
Leonard J. Barr, II Senior Vice President and
Director of Research
Ann J. Conrad Vice President and Director of
Special Equity Products
Terry H. Gardner Vice President and Chief
Financial Officer
Elyse G. Essick Vice President and Director of
Client Services
Sharon E. Fayolle Vice President and Director of
Money Market Trading
Otto G. Hinzmann Vice President and Director of
Equity Portfolio Management
Anne K. Kennedy Vice President and Director of
Corporate Bond Trading
Ann F. Putallaz Vice President and Director
of Fiduciary Services
Peter G. Root Vice President and Director of
Government Securities Trading
Lisa A. Rosen General Counsel and Director
of Mutual Fund Operations
James C. Robinson Vice President and Chief
Investment Officer/Fixed Income
Gerald L. Seizert Executive Vice President and Chief
Investment Officer/Equity
Paul D. Tobias Executive Vice President and
Chief Operating Officer
For further information relating to the Investment
Adviser's officers, reference is made to Form ADV filed
under the Investment Advisers Act of 1940 by Munder
Capital Management. See File No. 801-32415.
Item 29. Principal Underwriters.
---------------------------
(a) With respect to Liquidity Plus Money Market
Fund: Funds Distributor, Inc. ("FDI"), located at 60
State Street, Boston, Massachusetts 02109, is the
principal underwriter of the Funds. FDI is an indirectly
wholly-owned subsidiary of Boston Institutional Group,
Inc. a holding company, all of whose outstanding shares
are owned by key employees. FDI is a broker dealer
registered under the Securities Exchange Act of 1934, as
amended. FDI acts as principal underwriter of the
following investment companies:
Harris Insight Funds Trust Skyline Funds
The Munder Funds Trust Fremont Mutual Funds, Inc.
St. Clair Funds, Inc. RCM Capital Funds, Inc.
BJB Investment Funds Burridge Funds
PanAgora Funds The JPM Series Trust
RCM Equity Funds, Inc. The JPM Series Trust II
Waterhouse Investors Cash Management Fund, Inc. Monetta Funds, Inc.
LKCM Fund The Munder Framlington Funds Trust
Pierpont Funds The Munder Funds, Inc.
JPM Institutional Funds
With respect to the Munder S&P 500 Index Equity Fund,
Munder S&P MidCap Index Equity Fund, Munder S&P SmallCap
Index Equity Fund, Munder Foreign Equity Fund and Munder
Aggregate Bond Index Fund: Longrow Securities Inc.
("Longrow"), located at 222 South Central Avenue, St.
Louis, Missouri 63105. Longrow does not act as principal
underwriter to any other investment company other than the
Registrant.
(b) The information required by this Item 29(b) with
respect to each director, officer or partner of FDI is
incorporated by reference to Schedule A of Form BD filed
by FDI with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 (SEC File
No. 8-20518).
The information required by this Item 29(b) with respect
to each director, officer or partner of Longrow is
incorporated by reference to Schedule A of Form BD filed
by Longrow with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 (SEC File
No. 2-21442).
(c) Not Applicable
Item 30. Location of Accounts and Records
-----------------------------------------
The account books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder
will be maintained at the offices of:
(1) Munder Capital Management, 480 Pierce Street or 255
East Brown Street, Birmingham, Michigan 48009 (records
relating to its function as investment advisor)
(2) First Data Investor Services Group, Inc., 53 State
Street, Exchange Place, Boston, Massachusetts 02109 or
4400 Computer Drive, Westborough, Massachusetts 01581
(records relating to its functions as administrator and
transfer agent)
(3) Funds Distributor, Inc., 60 State Street, Boston,
Massachusetts 02109 (records relating to its function as
distributor of Liquidity Plus Money Market Fund)
(4) Longrow Securities Inc., 222 South Central Avenue,
St. Louis, Missouri 63105 (records relating to its
function as distributor of the Munder S&P Index Equity
Fund, Munder S&P MidCap Index Equity Fund, Munder S&P
SmallCap Index Equity Fund, Munder Foreign Equity Fund and
Munder Aggregate Bond Index Fund)
(5) Comerica Bank, 1 Detroit Center, 500 Woodward Avenue,
Detroit, Michigan 48226 (records relating to its function
as custodian)
Item 31. Management Services
--------------------------
None.
Item 32. Undertakings
----------------
(1) Registrant hereby undertakes to call a meeting of its
shareholders for the purpose of voting upon the question
of removal of a director or directors of Registrant when
requested in writing to do so by the holders of at least
10% of Registrant's outstanding shares. Registrant
undertakes further, in connection with the meeting, to
comply with the provisions of Section 16(c) of the
Investment Company Act of 1940, as amended, relating to
communications with the shareholders of certain common-law
trusts.
(2) Registrant hereby undertakes to furnish each person
to whom a prospectus is delivered a copy of the
Registrant's most recent annual report to shareholders,
upon request without charge.
(3) Registrant undertakes to file a Post-Effective
Amendment, using reasonably current financial statements
which need not be certified, within four to six months
from the effective date of the Registration Statement with
respect to the Liquidity Plus Money Market Fund, Munder
S&P 500 Index Equity Fund, Munder S&P MidCap Index Equity
Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940,
as amended, the Registrant certifies that this Post-
Effective Amendment No. 22 to the Registrant's
Registration Statement meets the requirements for
effectiveness pursuant to Rule 485(b) of the Securities
Act of 1933, as amended, and the Registrant has duly
caused this Post-Effective Amendment No. 22 to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
Boston and the Commonwealth of Massachusetts, on the 18th
day of April, 1997.
ST. CLAIR FUNDS, INC.
By: *
Lee P. Munder
* By: /s/ Teresa M.R. Hamlin
Teresa M.R. Hamlin
as Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, this Registration Statement has been
signed by the following persons in the capacities and on
the date indicated:
Signatures Title Date
* President and Chief April 18, 1997
Lee P. Munder Executive Officer
* Director April 18, 1997
Charles W. Elliott
* Director April 18, 1997
Joseph E. Champagne
* Director April 18, 1997
Arthur DeRoy Rodecker
* Director April 18, 1997
Jack L. Otto
* Director April 18, 1997
Thomas B. Bender
* Director April 18, 1997
Thomas D. Eckert
* Director April 18, 1997
John Rakolta, Jr.
* Director April 18, 1997
David J. Brophy
* Vice President, April 18, 1997
Terry H. Gardner Treasurer and
Chief Financial Officer
*By: /s/ Teresa M.R. Hamlin
Teresa M.R. Hamlin
as Attorney-in-Fact
* The Powers of Attorney are filed herein.
EXHIBIT INDEX
Exhibit Description
1(j) Articles Supplementary to Registrant's Articles of
Incorporation.
1(k) Articles Supplementary to Registrant's Articles of
Incorporation relating to Munder S&P 500 Index Equity
Fund, Munder S&P MidCap Index Equity Fund, Munder S&P
SmallCap Index Equity Fund, Munder Foreign Equity Fund and
Munder Aggregate Bond Index Fund.
1(l) Certificate of Correction relating to the Liquidity
Plus Money Market Fund.
5(b) Form of Investment Advisory Agreement between
Registrant and Munder Capital Management with respect to
Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund.
6(b) Form of Distribution Agreement between Registrant and
Longrow Securities Inc., with respect to Munder S&P 500
Index Equity Fund, Munder S&P MidCap Index Equity Fund,
Munder S&P SmallCap Index Equity Fund, Munder Foreign
Equity Fund and Munder Aggregate Bond Index Fund.
8 Form of Custody Agreement between Registrant and
Comerica Bank with respect to Liquidity Plus Money Market
Fund, Munder S&P 500 Index Equity Fund, Munder S&P MidCap
Index Equity Fund, Munder S&P SmallCap Index Equity Fund,
Munder Foreign Equity Fund and Munder Aggregate Bond Index
Fund.
9(c) Form of Amended and Restated Administration Agreement
between Registrant and First Data Investor Services Group,
Inc. with respect to Liquidity Plus Money Market Fund,
Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund.
EXHIBIT INDEX
Exhibit Description
9(d) Form of Transfer Agency and Registrar Agreement
between Registrant and First Data Investor Services Group,
Inc. with respect to Liquidity Plus Money Market Fund,
Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund.
9(e) Form of Participation Agreement between Registrant,
Zurich-Kemper and Longrow Securities Inc., with respect to
Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund.
9(f) Form of Shareholder Servicing Plan with respect to
Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund.
10(a) Opinion and Consent of Counsel with respect to Munder
S&P 500 Index Equity Fund, Munder S&P MidCap Index Equity
Fund, Munder S&P SmallCap Index Equity Fund, Munder
Foreign Equity Fund and Munder Aggregate Bond Index Fund.
11 Powers of Attorney.
Exhibit 1(j)
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
ST. CLAIR MONEY MARKET FUND, INC.
ST. CLAIR MONEY MARKET FUND, INC., a Corporation organized under
the laws of the State of Maryland, having its principal office in
Maryland at c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202 (hereinafter the "Corporation"), does hereby
certify to the State Department of Assessments and Taxation that:
FIRST: Pursuant to Section 2-208 of the Maryland General
Corporation Law, the Board of Directors of the Corporation, by
resolutions unanimously adopted by such Board on September 11, 1986, has
classified all of the One Billion (1,000,000,000) authorized and
previously unclassified shares of capital stock of the Corporation (par
value One Mill ($.001) per share) into two classes, designated as Class
A Common Stock and Class B Common Stock, each such class of Common Stock
having allocated to it Five Hundred Million (500,000,000) shares of
capital stock of the Corporation.
Each share of Class A Common Stock and Class B Common Stock shall
have all of the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption that are set forth in the Articles of
Incorporation of the Corporation with respect to its shares of capital
stock.
SECOND: The shares of Class A Common Stock and Class B Common
Stock of the Corporation classified as described in Article FIRST of
these Articles Supplementary have been classified by the Corporation's
Board of Directors under the authority contained in the charter of the
Corporation.
IN WITNESS WHEREOF, ST. CLAIR CORPORATE DIVIDEND FUND, INC., has
caused these presents to be signed in its name and on its behalf by its
President and its corporate seal to be hereunto affixed and attested by
its Secretary on this 19th day of December 1986.
ST. CLAIR MONEY MARKET FUND, INC.
By: /s/ Francis J. Bruzda
President
[SEAL]
Attest:
/s/ James W. Jennings
Secretary
CERTIFICATE
THE UNDERSIGNED, President of ST. CLAIR MONEY MARKET FUND, INC.,
who executed on behalf of said Corporation the attached Articles
Supplementary to Articles of Incorporation of said Corporation, of which
this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the attached Articles Supplementary to be
the corporate act of said Corporation, and certifies that to the best of
his knowledge, information and belief the matters and facts set forth in
the attached Articles Supplementary with respect to authorization and
approval are true in all material respects, under the penalties for
perjury.
/s/ Francis J. Bruzda
Dated: December 19th, 1986
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Exhibit 1(k)
ST. CLAIR FUNDS, INC.
ARTICLES SUPPLEMENTARY
ST. CLAIR FUNDS, INC., a Maryland corporation registered as
an open-end investment company under the Investment Company Act of
1940 as amended, (the "1940 Act"), and having its principal office
in the State of Maryland in Baltimore City, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: In accordance with procedures established in the
Corporation's Charter, the Board of Directors of the Corporation,
by resolution dated February 4, 1997 pursuant to Section 2-208 of
Maryland General Corporate Law, duly classified 1,750,000,000
shares of the authorized capital stock of the Corporation into the
following additional series, designated as follows:
Name of Series Number of Shares Allocated
Liquidity Plus Money Market Fund 1,000,000,000 shares
Institutional Index Equity Fund 500,000,000 shares
Munder S&P 500 Index Equity Fund 50,000,000 shares
Munder S&P MidCap Index Equity Fund 50,000,000 shares
Munder S&P SmallCap Index Equity Fund 50,000,000 shares
Munder Foreign Equity Fund 50,000,000 shares
Munder Aggregate Bond Index Fund 50,000,000 shares
SECOND: The shares of the Corporation classified pursuant
to Article First of these Articles Supplementary have been so
classified by the Board of Directors under the authority contained
in the Charter of the Corporation. The number of Shares of
capital stock of the various series that the Corporation has
authority to issue has been established by the Board of Directors
in accordance with Section 2-105(c) of the Maryland General
Corporation Law.
THIRD: Immediately prior to the effectiveness of the
Articles Supplementary of the Corporation as hereinabove set
forth, the Corporation had the authority to issue two billion
(2,000,000,000) shares of Common Stock of the par value of $.001
per share and of the aggregate par value of two million dollars
($2,000,000), of which the Board of Directors had designated nine
hundred million (900,000,000) shares into Series and classified
the shares of each Series as follows:
Previously Classified Shares
Name of Shares Authorized Shares
(in millions)
St. Clair Liquidity Plus Money Market Fund 600
Institutional Index Equity Fund 300
As amended hereby, the Corporation's Articles of
Incorporation authorize the issuance of two billion
(2,000,000,000) shares of Common Stock of the par value of $0.001
per share and having an aggregate par value of two million dollars
($2,000,000), of which the Board of Directors has designated one
billion, seven hundred and fifty million (1,750,000,000) shares
into Series and classified the shares of each Series as follows:
Current Classification of Shares
Name of Series Authorized Shares
Liquidity Plus Money Market Fund 1,000,000,000 shares
Institutional Index Equity Fund 500,000,000 shares
Munder S&P 500 Index Equity Fund 50,000,000 shares
Munder S&P MidCap Index Equity Fund 50,000,000 shares
Munder S&P SmallCap Index Equity Fund 50,000,000 shares
Munder Foreign Equity Fund 50,000,000 shares
Munder Aggregate Bond Index Fund 50,000,000 shares
FOURTH: The preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of each share of the Liquidity
Plus Money Market Fund, Institutional Index Equity Fund, Munder
S&P 500 Index Equity Fund, Munder S&P MidCap Index Equity Fund,
Munder S&P SmallCap Index Equity Fund, Munder Foreign Equity Fund
and the Munder Aggregate Bond Index Fund shall be as set forth in
the Corporation's Articles of Incorporation and shall be subject
to all provisions of the Articles of Incorporation relating to
shares of the Corporation generally.
IN WITNESS WHEREOF, St. Clair Funds, Inc. has caused these
Articles Supplementary to be signed in its name on its behalf by
its authorized officers who acknowledge that these Articles
Supplementary are the act of the Corporation, that to the best of
their knowledge, information and belief, all matters and facts set
forth herein relating to the authorization and approval of these
Articles Supplementary are true in all material respects and that
this statement is made under the penalties of perjury.
Date: February 4, 1997
ST. CLAIR FUNDS, INC.
[CORPORATE SEAL]
By: : /s/ Terry H. Gardner
Terry H. Gardner
Vice President
Attest:
/s/ Lisa Anne Rosen
Lisa Anne Rosen
Secretary
3
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Exhibit 1(l)
CERTIFICATE OF CORRECTION
ST. CLAIR FUNDS, INC.
ST. CLAIR FUNDS, INC., a Maryland corporation (the
"Corporation"), DOES HEREBY CERTIFY, pursuant to Section 1-207 of
the Maryland General Corporation Law, as follows:
l. The title of the document being corrected (the
"Articles Supplementary") is:
Articles Supplementary to St. Clair Funds, Inc., dated
November 7, l996.
2. The Articles Supplementary were filed with the
Maryland State Department of Assessments and Taxation (the "SDAT")
on November 12, 1996. The Articles Supplementary require
correction as permitted under the provisions of Section 1-207 of
the Maryland General Corporation Law to bring them into conformity
with the resolutions of the Board of Directors of the Corporation
duly adopted on November 7, 1996. The Board of Directors, by
resolutions duly adopted on February 4, 1997, ratified and
affirmed the November 7, 1996 resolutions and authorized and
approved the filing of this Certificate of Correction. The
required corrections do not affect the relative rights of the
stockholders of the various classes of common stock of the
Corporation, and this Certificate of Correction has therefore not
been submitted to a vote of the stockholders for their approval.
3. Article FIRST of the Articles Supplementary as
previously filed provides as follows:
FIRST: In accordance with procedures established in the
Corporation's Charter, the Board of Directors of the Corporation,
by resolution dated November 7, 1996, changed the name of the
following, previously designated series of the Corporation,
pursuant to Section 2-605(a)(4) of Maryland General Corporate Law:
Previously Designated Series New Name
1. Class A-Money Market-Fiduciary Portfolio St. Clair
Liquidity Plus
Money Market Fund
Article FIRST of the Articles Supplementary as filed on
November 7, 1996 is hereby corrected and restated in its entirety
to read as follows:
FIRST: In accordance with procedures established in the
Corporation's Charter, the Board of Directors of the Corporation,
by resolution dated November 7, 1996, changed the name of the
following, previously designated series of the Corporation,
pursuant to Section 2-605(a)(4) of Maryland General Corporate Law:
Previously Designated Series New Name
1. Class A-Money Market-Fiduciary Portfolio Liquidity
Plus
Money Market Fund
4. Article THIRD of the Articles Supplementary as
previously filed provides as follows:
THIRD: Immediately prior to the effectiveness of the
Articles Supplementary of the Corporation as herein above set
forth, the Corporation had the authority to issue two billion
(2,000,000,000) shares of Common Stock of the par value of $.001
per share and of the aggregate par value of two million dollars
($2,000,000), of which the Board of Directors had designated one
billion nine hundred million (1,900,000,000) shares into Series
and classified the shares of each Series as follows:
Previously Classified Shares
Authorized
Name of Series Shares (in millions)
St. Clair Class A-Money Market-Fiduciary Portfolio
600
Class B-Money Market-Prime Portfolio
500
Class C-Intermediate Bond Portfolio 500
Class D-Institutional Index Equity Fund
300
As amended hereby, the Corporation's Articles of
Incorporation authorize the issuance of two billion
(2,000,000,000) shares of Common Stock of the par value of $0.001
per share and having an aggregate par value of two million dollars
($2,000,000), of which the Board of Directors has designated nine
hundred million (900,000,000) shares into Series and classified
the shares of each Series as follows:
Current Classification of Shares
Name of Series Authorized
Shares
(in millions)
St. Clair Liquidity Plus Money Market Fund 600
Institutional Index Equity Fund 300
Article THIRD of the Articles Supplementary as filed on
November 7, 1996 is hereby corrected and restated in its entirety
to read as follows:
THIRD: Immediately prior to the effectiveness of the
Articles Supplementary of the Corporation as herein above set
forth, the Corporation had the authority to issue two billion
(2,000,000,000) shares of Common Stock of the par value of $.001
per share and of the aggregate par value of two million dollars
($2,000,000), of which the Board of Directors had designated one
billion nine hundred million (1,900,000,000) shares into Series
and classified the shares of each Series as follows:
Previously Classified Shares
Authorized
Name of Series Shares (in millions)
Class A-Money Market-Fiduciary Portfolio 600
Class B-Money Market-Prime Portfolio 500
Class C-Intermediate Bond Portfolio 500
Class D-Institutional Index Equity Fund 300
As amended hereby, the Corporation's Articles of
Incorporation authorize the issuance of two billion
(2,000,000,000) shares of Common Stock of the par value of $0.001
per share and having an aggregate par value of two million dollars
($2,000,000), of which the Board of Directors has designated nine
hundred million (900,000,000) shares into Series and classified
the shares of each Series as follows:
Current Classification of Shares
Name of Series Authorized
Shares
(in millions)
Liquidity Plus Money Market Fund 600
Institutional Index Equity Fund 300
IN WITNESS WHEREOF, ST. CLAIR FUNDS, INC. has caused this
Certificate of Correction to be signed in its corporate name and
on its behalf by its authorized officers who acknowledge that this
Certificate of Correction are the act of the Corporation, that to
the best of their knowledge, information and belief, all matters
and facts set forth herein relating to the authorization and
approval of these Articles Supplementary are true in all material
respects and that this statement is made under the penalties of
perjury on this 4th day of February, 1997.
ST. CLAIR FUNDS, INC.
By: /s/ Terry H. Gardner
Terry Gardner
Vice President
ATTEST:
/s/ Lisa Anne Rosen
Lisa Anne Rosen
Secretary
3
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Exhibit 5(b)
FORM OF
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made this 4th day of February, 1997, between St.
Clair Funds, Inc. ("St. Clair") on behalf of the Munder S&P 500
Index Equity Fund, Munder S&P MidCap Index Equity Fund, Munder S&P
SmallCap Index Equity Fund, Munder Foreign Equity Fund and Munder
Aggregate Bond Index Fund (each, a "Fund" and collectively, the
"Funds") and Munder Capital Management (the "Advisor"), a Delaware
partnership.
WHEREAS, St. Clair is a Maryland corporation authorized to
issue shares in series and is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and each Fund is a series of St. Clair;
WHEREAS, the Advisor is registered as an investment advisor
under the Investment Advisers Act of 1940, as amended ("Advisers
Act"); and
WHEREAS, St. Clair wishes to retain the Advisor to render
investment advisory services to the Funds, and the Advisor is
willing to furnish such services to the Funds;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between St. Clair and the
Advisor as follows:
1. Appointment
St. Clair hereby appoints the Advisor to act as investment
advisor to the Funds for the periods and on the terms set forth
herein. The Advisor accepts the appointment and agrees to furnish
the services set forth herein for the compensation provided
herein.
2. Services as Investment Advisor
Subject to the general supervision and direction of the
Board of Directors of St. Clair, the Advisor will (a) manage each
Fund in accordance with the Fund's investment objective and
policies as stated in the Fund's Prospectus and the Statement of
Additional Information filed with the Securities and Exchange
Commission, as they may be amended from time to time; (b) make
investment decisions for the Funds; (c) place purchase and sale
orders on behalf of the Funds; and (d) employ professional
portfolio managers and securities analysts to provide research
services to the Funds. In providing those services, the Advisor
will provide the Funds with ongoing research, analysis, advice and
judgments regarding individual investments, general economic
conditions and trends and long-range investment policy. In
addition, the Advisor will furnish the Funds with whatever
statistical information the Funds may reasonably request with
respect to the securities that the Funds may hold or contemplate
purchasing.
The Advisor further agrees that, in performing its duties
hereunder, it will:
(a) comply with the 1940 Act and all rules and regulations
thereunder the Advisers Act, the Internal Revenue Code of 1986, as
amended (the "Code"), and all other applicable federal and state
laws and regulations, and with any applicable procedures adopted
by the Directors;
(b) use reasonable efforts to manage each Fund so that it
will qualify, and continue to qualify, as a regulated investment
company under Subchapter M of the Code and regulations issued
thereunder;
(c) maintain books and records with respect to the Funds'
securities transactions, render to the Board of Directors of St.
Clair such periodic and special reports as the Board may
reasonably request, and keep the Directors informed of
developments materially affecting the Funds' portfolios;
(d) make available to the Funds' administrator and St.
Clair, promptly upon their request, such copies of its investment
records and ledgers with respect to the Funds as may be required
to assist the administrator and St. Clair in their compliance with
applicable laws and regulations. The Advisor will furnish the
Directors with such periodic and special reports regarding the
Funds as they may reasonably request; and
(e) immediately notify St. Clair in the event that the
Advisor or any of its affiliates: (1) becomes aware that it is
subject to a statutory disqualification that prevents the Advisor
from serving as investment advisor pursuant to this Agreement; or
(2) becomes aware that it is the subject of an administrative
proceeding or enforcement action by the Securities and Exchange
Commission or other regulatory authority. The Advisor further
agrees to notify St. Clair immediately of any material fact known
to the Advisor respecting or relating to the Advisor that is not
contained in St. Clair's Registration Statement regarding the
Funds, or any amendment or supplement thereto, but that is
required to be disclosed therein, and of any statement contained
therein that becomes untrue in any material respect.
3. Documents
St. Clair has delivered properly certified or authenticated
copies of each of the following documents to the Advisor and will
deliver to it all future amendments and supplements thereto, if
any:
(a) certified resolution of the Board of Directors of St.
Clair authorizing the appointment of the Advisor and approving the
form of this Agreement;
(b) the Registration Statement as filed with the
Securities and Exchange Commission and any amendments thereto; and
(c) exhibits, powers of attorneys, certificates and any
and all other documents relating to or filed in connection with
the Registration Statement described above.
4. Brokerage
In selecting brokers or dealers to execute transactions on
behalf of the Funds, the Advisor will use its best efforts to seek
the best overall terms available. In assessing the best overall
terms available for any Fund transaction, the Advisor will
consider all factors it deems relevant, including, but not limited
to, 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
selecting brokers or dealers to execute a particular transaction,
and in evaluating the best overall terms available, the Advisor is
authorized 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 (the "1934 Act")) provided to the
Funds and/or other accounts over which the Advisor or its
affiliates exercise investment discretion. In accordance with
Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder and
subject to any other applicable laws and regulations, the Advisor
and its affiliates are authorized to effect portfolio transactions
for the Funds and to retain brokerage commissions on such
transactions.
5. Records
The Advisor agrees to maintain and to preserve for the
periods prescribed under the 1940 Act any such records as are
required to be maintained by the Advisor with respect to the Funds
by the 1940 Act. The Advisor further agrees that all records
which it maintains for the Funds are the property of the Funds and
it will promptly surrender any of such records upon request.
6. Standard of Care
The Advisor shall exercise its best judgment in rendering
the services under this Agreement. The Advisor shall not be
liable for any error of judgment or mistake of law or for any loss
suffered by a Fund or a Fund's shareholders in connection with the
matters to which this Agreement relates, provided that nothing
herein shall be deemed to protect or purport to protect the
Advisor against any liability to a Fund or to its shareholders to
which the Advisor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Advisor's reckless
disregard of its obligations and duties under this Agreement. As
used in this Section 6, the term "Advisor" shall include any
officers, directors, employees, or other affiliates of the Advisor
performing services with respect to the Funds.
7. Compensation
In consideration of the services rendered pursuant to this
Agreement, each Fund will pay the Advisor a fee at an annual rate
equal to .05% of the average daily net assets of each Fund. This
fee shall be computed and accrued daily and payable monthly. For
the purpose of determining fees payable to the Advisor, the value
of a Fund's average daily net assets shall be computed at the
times and in the manner specified in the Fund's Prospectus or
Statement of Additional Information.
8. Expenses
The Advisor will bear all expenses in connection with the
performance of its services under this Agreement. Each Fund will
bear certain other expenses to be incurred in its operation,
including: taxes, interest, brokerage fees and commissions, if
any, fees of Directors of St. Clair who are not officers,
directors, or employees of the Advisor; Securities and Exchange
Commission fees and state blue sky fees; charges of custodians and
transfer and dividend disbursing agents; shareholder servicing
fees; the Fund's proportionate share of insurance premiums;
outside auditing and legal expenses; costs of maintenance of the
Fund's existence; costs attributable to investor services,
including, without limitation, telephone and personal expenses;
charges of an independent pricing service; costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders;
costs of shareholders' reports and meetings of the shareholders of
the Fund and of the officers of Board of Directors of St. Clair;
and any extraordinary expenses.
9. Services to Other Companies or Accounts
The investment advisory services of the Advisor to the Funds
under this Agreement are not to be deemed exclusive, and the
Advisor, or any affiliate thereof, shall be free to render similar
services to other investment companies and the clients (whether or
not their investment objectives and policies are similar to those
of the Funds) and to engage in the activities, so long as it
services hereunder are not impaired thereby.
10. Duration and Termination
This Agreement shall become effective on the date of this
Agreement and shall continue in effect with respect to a Fund,
unless sooner terminated as provided herein, for two years from
such date and shall continue from year to year thereafter,
provided each continuance is specifically approve at least
annually by (i) the vote of a majority of the Board of Directors
of St. Clair or (ii) a vote of a "majority" (as defined in the
1940 Act) of the Fund's outstanding voting securities, provided
that in either event the continuance is also approved by a
majority of the Board of Directors who are not "interested
persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable
with respect to a Fund, without penalty, on sixty (60) days'
written notice by the Board of Directors of St. Clair or by vote
of holders of a "majority" (as defined in the 1940 Act) of the
Fund's shares or upon ninety (90) days' written notice by the
Advisor. This Agreement will be terminated automatically in the
event of its "assignment" (as defined in the 1940 Act).
11. Amendment
No provision of this Agreement shall be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no
amendment of this Agreement with respect to a Fund shall be
effective until approved by an affirmative vote of (i) a majority
of the outstanding voting securities of the Fund, and (ii) a
majority of the Directors of St. Clair, including a majority of
Directors who are not "interested persons" (as defined in the 1940
Act) of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such
approval is required by applicable law.
12. Use of Name
It is understood that the name of Munder Capital Management
or any derivative thereof or logo associated with that name is the
valuable property of the Advisor and its affiliates, and that each
Fund has the right to use such name (or derivable or logo) only so
long as this Agreement shall continue with respect to the Fund.
Upon termination of this Agreement, each Fund shall forthwith
cease to use such name (or derivative or logo) and St. Clair shall
promptly amend its Articles of Incorporation to change the Funds'
names to comply herewith.
13. Miscellaneous
(a) This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter
hereof.
(b) Titles or captions of sections contained in this
Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any provisions thereof.
(c) This Agreement may be executed in several
counterparts, all of which together shall for all purposes
constitute one Agreement, binding on all the parties.
(d) This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and interpreted, construed
and enforced in accordance with the laws of the State of Michigan.
(e) If any provisions of this Agreement or the application
thereof to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid or unenforceable to
any extent, the remainder of this Agreement or the application of
such provision to such person circumstance, other than these as to
which it is so determined to be invalid or unenforceable, shall
not be affected thereby, and each provision hereof shall be valid
and shall be enforced to the fullest extent permitted by law.
(f) Notices of any kind to be given to the Advisor by St.
Clair shall be in writing and shall be duly given if mailed or
delivered to the Advisor at 480 Pierce Street, Birmingham,
Michigan 48009, or at such other address or to such individual as
shall be specified by the Advisor to St. Clair. Notices of any
kind to be given to St. Clair by the Advisor shall be in writing
and shall be duly given if mailed or delivered to 480 Pierce
Street, Birmingham, Michigan 48009, or at such the address or to
such individual as shall be specified by St. Clair to the Advisor.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below on
the day and year first above written.
ST. CLAIR FUNDS, INC.
By:
MUNDER CAPITAL MANAGEMENT
By:
5
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Exhibit 6(b)
FORM OF
DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of this 4th day of
February, 1997 by and between ST. CLAIR FUNDS, INC. a Maryland
corporation (the "Fund"), and LONGROW SECURITIES, INC., a Missouri
corporation ("Longrow Securities").
WHEREAS, the Fund is an open-end management investment
company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain Longrow Securities as
Distributor for the Fund's shares of common stock in the Fund's
five separate portfolios, Munder S&P 500 Index Equity Fund, Munder
S&P MidCap Index Equity Fund, Munder S&P SmallCap Index Equity
Fund, Munder Foreign Equity Fund and the Munder Aggregate Bond
Index Fund (individually, a "Portfolio" and collectively, the
"Portfolios"), to provide for the sale and distribution of shares
of the Portfolios (the "Shares"), and Longrow Securities is
willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein and intending to be legally bound
hereby, the parties hereto agree as follows:
I. DELIVERY OF DOCUMENTS
The Fund has delivered to Longrow Securities copies of each
of the following documents and will deliver to it all future
amendments and supplements thereto, if any:
(a) Resolutions of the Fund's Board of Directors
authorizing the execution and delivery of this Agreement;
(b) The Fund's Articles of Incorporation as filed with the
State of Maryland Department of Assessments and Taxation on May
23, 1984;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange
Commission ("SEC");
(e) The Fund's Registration Statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933 (the
"1933 Act") and the 1940 Act, as filed with the SEC; and
(f) The Fund's most recent Prospectus(es) and Statements
of Additional Information and all amendments and supplements
thereto (collectively, the "Prospectuses").
II. DISTRIBUTION
1. Appointment of Distributor. The Fund hereby appoints
Longrow Securities as distributor of the Portfolios' Shares and
Longrow Securities hereby accepts such appointment and agrees to
render the services and duties set forth in Section 2. In the
event that the Fund establishes one or more additional portfolios
or classes of shares other than the Portfolios and the Shares with
respect to which it decides to retain Longrow Securities to act as
distributor hereunder, the Fund shall notify Longrow Securities in
writing. If Longrow Securities is willing to render such
services, it shall so notify the Fund in writing whereupon such
portfolio and such shares shall become a Portfolio and Shares
hereunder and shall be subject to the provisions of this
Agreement, except to the extent that said provision is modified
with respect to such portfolio or shares in writing by the Fund
and Longrow Securities at the time.
2. Services and Duties.
(a) The Fund agrees to sell through Longrow Securities, as
agent, from time to time during the term of this Agreement, Shares
(whether authorized but unissued or treasury shares, in the Fund's
sole discretion) upon the terms and at the current offering price
as described in the applicable Prospectus. Longrow Securities
will act only in its own behalf as principal in making agreements
with selected dealers or others for the sale and redemption of
Shares, and shall sell Shares only at the offering price thereof
as set forth in the applicable Prospectus. Longrow Securities
shall devote appropriate efforts to effect sales of Shares of each
of the Portfolios, but shall not be obligated to sell any certain
number of Shares.
(b) In all matters relating to the sale and redemption of
Shares, Longrow Securities will act in conformity with the Fund's
Articles of Incorporation, By-Laws and applicable Prospectuses and
with the instructions and directions of the Board of Directors of
the Fund and will conform to and comply with the requirements of
the 1933 Act, the 1940 Act, the regulations of the National
Association of Securities Dealers, Inc. and all other applicable
Federal or state laws and regulations.
(c) All Shares of the Portfolios offered for sale by
Longrow Securities shall be offered for sale at a price per share
(the "offering price") equal to their net asset value (determined
in the manner set forth in the applicable Prospectuses). The
offering price, if not an exact multiple of one cent, shall be
adjusted to the nearest cent.
(d) In consideration of its services hereunder and pursuant
to the Shareholder Servicing Agreement dated February 4, 1997, the
Fund shall pay to Longrow Securities a fee of 0.10 percent of the
average daily net assets of the Funds.
3. Sales and Redemptions.
(a) The Fund shall pay all costs and expenses in connection
with the registration of the Shares under the 1933 Act, and all
expenses in connection with maintaining facilities for the issue
and transfer of the Shares and for supplying information, prices
and other data to be furnished by the Fund hereunder, and all
expenses in connection with preparing, printing and distributing
the Prospectuses which are not covered by insurance companies
which have entered into participation agreements with the Fund.
(b) The Fund shall execute all documents, furnish all
information and otherwise take all actions which may be reasonably
necessary in the discretion of the Fund's officers in connection
with the sale of the Shares in such states as Longrow Securities
may designate to the Fund and the Fund may approve, and the Fund
shall pay all filing fees which may be incurred in connection with
such sales. Longrow Securities shall pay all other expenses
incurred by Longrow Securities in connection with the sale of the
Shares, except as otherwise specifically provided in this
Agreement.
(c) The Fund shall have the right to suspend the sale of
Shares at any time in response to conditions in the securities
markets or otherwise, and to suspend the redemption of Shares of
any Portfolio at any time permitted by the 1940 Act or the rules
of the SEC ("Rules").
(d) The Fund reserves the right to reject any order for
Shares, but will not do so arbitrarily or without reasonable
cause.
III. LIMITATIONS OF LIABILITY
Longrow Securities shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or
any Portfolio in connection with the matters to which this
Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
IV. CONFIDENTIALITY
Longrow Securities will treat confidentially and as
proprietary information of the Fund all records and other
information relative to the Fund, to the Fund's prior or current
shareholders and to those persons or entities who respond to
Longrow Securities' inquiries concerning investment in the Fund,
and, except as provided below, will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder. Any other use by Longrow
Securities of the information and records referred to above may be
made only after prior notification to and approval in writing by
the Fund. Such approval shall not be unreasonably withheld and
may not be withheld where: (i) Longrow Securities may be exposed
to civil or criminal contempt proceedings for failure to divulge
such information; (ii) Longrow Securities is requested to divulge
such information by duly constituted authorities; or (iii) Longrow
Securities is so requested by the Fund.
V. INDEMNIFICATION
1. Fund Representation. The Fund represents and warrants
to Longrow Securities that at all times the Registration Statement
and Prospectuses will in all material respects conform to the
applicable requirements of the 1933 Act, the 1940 Act, and the
Rules thereunder and will not include any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not
misleading, except that no representation or warranty in this
subsection shall apply to statements or omissions made in reliance
upon and in conformity with written information furnished to the
Fund by or on behalf of and with respect to Longrow Securities
expressly for use in the Registration Statement or Prospectuses.
2. Longrow Securities Representation. Longrow Securities
represents and warrants to the Fund that it is duly organized as a
Missouri corporation and is and at all times will remain duly
authorized and licensed to carry out its services as contemplated
herein.
3. Fund Indemnification. The Fund, on behalf of each
Portfolio, agrees that each Portfolio will indemnify, defend and
hold harmless Longrow Securities, its several officers and
directors, and any person who controls Longrow Securities within
the meaning of Section 15 of the 1933 Act, from and against any
losses, claims, damages or liabilities, joint or several, to which
any of them may become subject under the 1933 Act, the 1940 Act,
other securities laws, or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained
in the Registration Statement, the Prospectuses, the sales
literature or other promotional material of the Fund or in any
application or other document executed by or on behalf of a
Portfolio, or arise out of or based upon, information furnished by
or on behalf of a Portfolio, filed in any state in order to
qualify the Shares under the securities or blue sky laws thereof
("Blue Sky Application"), or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or arise out of, or are based upon any
breach of or failure to perform any obligation of the Fund under
the Participation Agreement of even date and will reimburse
Longrow Securities, its several officers and directors, and any
person who controls Longrow Securities within the meaning of
Section 15 of the 1933 Act, for any legal or other expenses
reasonably incurred by any of them in investigating, defending or
preparing to defend any such action, proceeding or claim;
provided, however, that neither the Fund nor any Portfolio shall
be liable in any case to the extent that such loss, claim, damage
or liability arises out of, or is based upon, any untrue
statement, alleged untrue statement, or omission or alleged
omission made in the Registration Statement, the Prospectuses, any
Blue Sky Application or any application or other document executed
by or on behalf of the Fund in reliance upon and in conformity
with written information furnished to the Fund by or on behalf of
Longrow Securities specifically for inclusion therein.
A Portfolio shall not indemnify any person pursuant to this
subsection 3 unless the court or other body before which the
proceeding was brought has rendered a final decision on the merits
that such person was not liable by reason of his willful
misfeasance, bad faith or gross negligence in the performance of
his duties, or his reckless disregard of his obligations and
duties, under this Agreement ("disabling conduct") or, in the
absence of such a decision, a reasonable determination (based upon
a review of the facts) that such person was not liable by reason
of disabling conduct has been made by the vote of a majority of a
quorum of Directors of the Fund who are neither "interested
parties" of the Fund (as defined in the 1940 Act) nor parties to
the proceeding, or by an independent legal counsel in a written
opinion.
Each Portfolio shall advance attorneys' fees and other
expenses incurred by any person in defending any claim, demand,
action or suit which is the subject of a claim for indemnification
pursuant to this subsection 3, so long as: (i) such person shall
undertake to repay all such advances unless it is ultimately
determined that he or she is entitled to indemnification
hereunder; and (ii) such person shall provide security for such
undertaking, or the Portfolio shall be insured against losses
arising by reason of any lawful advances, or a majority of a
quorum of the disinterested, non-party Directors of the Fund (or
an independent legal counsel in a written opinion) shall determine
based on a review of readily available facts (as opposed to a full
trial-type inquiry) that there is reason to believe that such
person ultimately will be found entitled to indemnification
hereunder.
The obligations of each Portfolio under this subsection 3
shall be the several (and not joint or joint and several)
obligation of each Portfolio.
4. Longrow Securities Indemnification. Longrow
Securities will indemnify, defend and hold harmless the Fund, each
Portfolio, the Fund's several officers and Directors and any
person who controls the Fund or any Portfolio within the meaning
of Section 15 of the 1933 Act, from and against any losses,
claims, damages or liabilities, joint or several, to which any of
them may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or
proceedings in respect hereof) arise out of, or are based upon,
any breach of its representations, warranties and agreements
herein, or which arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained
in the Registration Statement, the Prospectuses, any Blue Sky
Application or any application or other documents executed by or
on behalf of the Fund or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, which statement or
omission was made in reliance upon and in conformity with
information furnished in writing to the Fund or any of its several
officers and Directors by or on behalf of Longrow Securities
specifically for inclusion therein, and will reimburse the Fund,
each Portfolio, the Fund's several officers and Directors, and any
person who controls the Fund or any Portfolio within the meaning
of Section 15 of the 1933 Act, for any legal or other expenses
reasonably incurred by any of them in investigating, defending or
preparing to defend any such action, proceeding or claim.
5. General Indemnity Provision. No indemnifying party
shall be liable under its indemnity agreement contained in
subsection 3 or 4 hereof with respect to any claim made against
such indemnifying party unless the indemnified party shall have
notified the indemnifying party in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon
the indemnified party (or after the indemnified party shall have
received notice of such service on any designated agent), but
failure to notify the indemnifying party of any such claim shall
not relieve it from any liability which it may otherwise have to
the indemnified party. The indemnifying party will be entitled to
participate at its own expense in the defense or, if it so elects,
to assume the defense of any suit brought to enforce any such
liability, and if the indemnifying party elects to assume the
defense, such defense shall be conducted by counsel chosen by it
and reasonably satisfactory to the indemnified party. In the
event the indemnifying party elects to assume the defense of any
such suit and retain such counsel, the indemnified party shall
bear the fees and expenses of any additional counsel retained by
the indemnified party.
VI. DURATION AND TERMINATION
This Agreement shall become effective as of the date first
above written, and, unless sooner terminated as provided herein,
shall continue until February 4, 1998. Thereafter, if not
terminated, this Agreement shall continue automatically for
successive terms of one year, provided that such continuance is
specifically approved at least annually by a vote of the majority
of the Board of Directors of the Fund, including a majority of the
Directors who are not "interested persons" of the Fund and have no
direct or indirect financial interest in the operation of the
Plan, this Agreement, or in any agreement relating to the Plan
(the "Plan Directors"), by vote cast in person at a meeting called
for the purpose of voting on such approval; provided, however,
that this Agreement may be terminated with respect to any
Portfolio by the Fund at any time, without the payment of any
penalty, by vote of a majority of the Plan Directors or by a vote
of a "majority of the outstanding voting securities" of such
Portfolio on 60 days' written notice to Longrow Securities, or by
Longrow Securities at any time, without the payment of any
penalty, on 60 days' written notice to the Fund. This Agreement
will automatically and immediately terminate in the event of its
"assignment." (As used in this Agreement, the terms "majority of
the outstanding voting securities," "interested person" and
"assignment" shall have the same meanings as such terms have in
the 1940 Act.)
VII. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived,
discharged or terminated except by an instrument in writing signed
by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
VIII. NOTICES
Notices of any kind to be given to the Fund hereunder by
Longrow Securities shall be in writing and shall be duly given if
mailed or delivered to the Fund at 480 Pierce Street, Suite 300,
Birmingham, Michigan 48009, Attention: Lee Munder, with a copy to
Paul F. Roye, Esq., Dechert Price & Rhoads, 1500 K Street N.W.,
Washington, D.C. 20005-1208, or at such other address or to such
individual as shall be so specified by the Fund to Longrow
Securities. Notices of any kind to be given to Longrow Securities
hereunder by the Fund shall be in writing and shall be duly given
if mailed or delivered to Longrow Securities at 10845 Olive
Boulevard, Suite 100, St. Louis, MO 63141 Attention: James
Winkelman or at such other address or to such individual as shall
be so specified by Longrow Securities to the Fund.
IX. MISCELLANEOUS
The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section VI hereof, this Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be
governed by Maryland Law; provided, however, that nothing herein
shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation of the SEC thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of
the day and year first above written.
ST. CLAIR FUNDS, INC.
By:
Name: Lee P. Munder
Title: President
Attest:
LONGROW SECURITIES, INC.
By:
Name:
Title:
Attest:
7
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g:/shared/bankgrp/stclr/pea22/exh6b.doc
Exhibit 8
FORM OF
CUSTODY AGREEMENT
AGREEMENT dated as of February 4, 1997 between St. Clair
Funds, Inc. ("St. Clair"), a Maryland Corporation with its
principal place of business at 480 Pierce Street, Birmingham, MI
48009, on behalf of the investment portfolios of St. Clair
identified on Schedule A attached hereto (which may be amended
from time to time by attaching to Schedule A a revised list of
portfolios, dated and signed by an authorized representative of
each party hereto) (individually, a "Fund" and collectively, the
"Funds"), and Comerica Bank (the "Custodian"), a Michigan banking
corporation and a wholly-owned subsidiary of Comerica
Incorporated, with its principal place of business at One Detroit
Center, 500 Woodward Avenue, Detroit, Michigan.
W I T N E S S E T H:
That for and in consideration of the mutual promises
hereinafter set forth, St. Clair and the Custodian agree as
follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this
Agreement, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the Chairman
of the Board of Directors, the President, and any Vice President,
the Secretary, the Treasurer or any other person, whether or not
any such person is an officer or employee of St. Clair, duly
authorized by the Board of Directors of St. Clair to give Oral
Instructions and Written Instructions on behalf of a Fund and
listed in the certification annexed hereto as Appendix A or such
other certification as may be received by the Custodian from time
to time.
(b) "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities,
its successor or successors and its nominee or nominees.
(c) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement to
be given to the Custodian, which is actually received by the
Custodian and signed on behalf of St. Clair by any two Authorized
Persons or any two officers thereof.
(d) "Articles of Incorporation" shall mean the Articles of
Incorporation of St. Clair filed with the State of Maryland -
Department of Assessments and Taxation on May 23, 1984 as now in
effect and as the same may be amended from time to time.
(e) "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission under Section 17(a) of the Securities Exchange
Act of 1934, as amended, its successor or successors and its
nominee or nominees, in which the Custodian is hereby specifically
authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in a Certificate
authorized to act as a depository under the 1940 Act, its
successor or successors and its nominee or nominees.
(f) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest
and principal by the Government of the United States or agencies
or instrumentalities thereof, commercial paper, bank certificates
of deposit, bankers' acceptances and short-term corporate
obligations, where the purchase or sale of such securities
normally requires settlement in federal funds on the same day as
such purchase or sale, and repurchase and reverse repurchase
agreements with respect to any of the foregoing types of
securities.
(g) "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from a person reasonably believed by the
Custodian to be an Authorized Person.
(h) "Prospectus" shall mean a Fund's current prospectus and
statement of additional information relating to the registration
of the Fund's Shares under the Securities Act of 1933, as amended.
(i) "Shares" refers to the shares of beneficial interest $.001
par value per share of a Fund, as may be issued by the Fund from
time to time.
(j) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness,
options and other securities, commodity interests and investments,
including currency, from time to time of a Fund, including futures
contracts, forward contracts and options on futures contracts and
forward contracts.
(k) "Transfer Agent" shall mean the person which performs as the
transfer agent, dividend disbursing agent and shareholder
servicing agent functions for St. Clair.
(l) "Written Instructions" shall mean a written communication
actually received by the Custodian signed by two Authorized
Persons or from two persons reasonably believed by the Custodian
to be Authorized Persons by telex or facsimile machine or any
other such system whereby the receiver of such communication is
able to verify through codes or otherwise with a reasonable degree
of certainty the authenticity of the sender of such communication;
however, "Written Instructions" from St. Clair's Administrator,
First Data Investor Services Group, Inc., to the Custodian shall
mean an electronic communication transmitted by fund accountants
and their managers (who have been provided an access code by the
Administrator) and actually received by the Custodian.
(m) The "1940 Act" refers to the Investment Company Act of 1940,
and the rules and regulations thereunder, all as amended from time
to time.
2. Appointment of Custodian.
(a) St. Clair hereby constitutes and appoints the Custodian as
custodian of all the Securities and monies at the time owned by or
in the possession of the Funds during the period of this
Agreement.
(b) The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
(c) The Custodian understands and acknowledges that St. Clair
intends to issue Shares of separate series and classes, and may
classify and reclassify Shares of such series and classes. The
Custodian shall identify to each such series or class the property
belonging to such series or class and in such reports,
confirmations and notices to St. Clair called for under this
Agreement shall identify the series or class to which such report,
confirmation or notice pertains. In the event St. Clair
establishes one or more portfolios other than the Funds with
respect to which St. Clair wishes to retain the Custodian to act
as custodian, St. Clair shall so notify the Custodian in writing.
If the Custodian is willing to render such services, the Custodian
shall notify St. Clair in writing whereupon each such portfolio
shall be deemed to be a Fund hereunder.
3. Compensation.
(a) St. Clair will compensate the Custodian for its services
rendered under this Agreement in accordance with the fees set
forth in the Fee Schedule annexed hereto as Schedule B and
incorporated herein.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule B of this Agreement a
revised Fee Schedule, dated and signed by an Authorized Officer or
authorized representative of each party hereto.
(c) The Custodian will bill St. Clair as soon as practicable
after the end of each calendar month, and said billings will be
detailed in accordance with the Fee Schedule for St. Clair. St.
Clair will promptly pay to the Custodian the amount of such
billing. The Custodian may charge against any monies held on
behalf of a Fund pursuant to this Agreement such compensation and
any expenses incurred by the Custodian (and reimbursable by the
Fund) in the performance of its duties pursuant to this Agreement.
The Custodian shall also be entitled to charge against any money
held on behalf of a Fund pursuant to this Agreement the amount of
any loss, damage, liability or expense incurred with respect to
the Fund, including reasonable counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agreement.
The expenses which the Custodian may charge against such
account include, but are not limited to, the expenses of Sub-
Custodians and foreign branches of the Custodian incurred in
settling transactions outside of Detroit, Michigan or New York
City, New York involving the purchase and sale of Securities.
(d) Each Fund will use reasonable efforts to avoid cash
overdrafts in its account and will provide offsetting balances
with respect to any cash overdrafts that may occur from time to
time.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets.
St. Clair will deliver or cause to be delivered to the Custodian
all Securities and monies owned by the Funds, including cash
received from the issuance of Shares, at any time during the
period of this Agreement. The Custodian will not be responsible
for such Securities and monies until actually received by it. St.
Clair shall instruct the Custodian from time to time in its sole
discretion, by means of Written Instructions, or, in connection
with the purchase or sale of Money Market Securities, by means of
Oral Instructions or Written Instructions, as to the manner in
which and in what amounts Securities and monies are to be
deposited on behalf of the Funds in the Book-Entry System or a
Depository and specifically allocated on the books of the
Custodian to the Funds; provided, however, that prior to the
initial deposit of Securities of the Funds in the Book-Entry
System or a Depository, including a deposit in connection with the
settlement of a purchase or sale, the Custodian shall have
received a Certificate or Written Instructions specifically
approving such deposits by the Custodian in the Book-Entry System
or a Depository. Securities and monies of the Funds deposited in
the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for
customers, including but not limited to accounts which the
Custodian acts in a fiduciary or representative capacity.
(b) Accounts and Disbursements. The Custodian shall establish
and maintain a separate account for each Fund and shall credit to
the separate account all monies received by it for the account of
the Fund and shall disburse the same only:
1. In payment for Securities purchased for the Fund, as
provided in Section 5 hereof;
2. Pursuant to Written Instructions, for the payment of any
expense or liability incurred by the Fund, including but not
limited to the following payments for the account of the Fund:
interest, taxes, management, accounting, transfer agent and legal
fees and operating expenses of the Fund whether or not such
expenses are, in whole or in part, to be capitalized or treated as
deferred expenses;
3. In payment of dividends or distributions with respect to the
Shares of the Fund, as provided in Section 7 hereof;
4. In payment of original issue or other taxes with respect to
the Shares of the Fund, as provided in Section 8 hereof;
5. In payment for Shares which have been redeemed by the Fund,
as provided in Section 8 hereof;
6. Pursuant to Written Instructions, setting forth the name and
address of the Fund and the person to whom the payment is to be
made, the amount to be paid and the purpose for which payment is
to be made;
7. In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Fund, as provided
in Section 3(a) and Section 11(h) hereof; or
8. To a sub-custodian pursuant to Section 11(f) hereof.
(c) Confirmation and Statements. Promptly after the close of
business on each day, the Custodian shall furnish each Fund with
confirmations and a summary of all transfers to or from the
account of the Fund during said day. Where securities purchased
by the Funds are in a tangible bulk of securities registered in
the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of a Depository or the Book-Entry
System, the Custodian shall by book entry or otherwise identify
the quantity of those securities belonging to the Funds. At least
monthly, the Custodian shall furnish each Fund with a detailed
statement of the Securities and monies held for the Fund under
this Agreement. The Custodian shall also furnish St. Clair with
such periodic and special reports as St. Clair may reasonably
request, and such other information as may be agreed upon from
time to time.
(d) Registration of Securities and Physical Separation. All
Securities held for the Funds which are issued or issuable only in
bearer form, except such Securities as are held in the Book-Entry
System, shall be held by the Custodian in that form; all other
Securities held for the Fund may be registered in the name of the
Fund, in the name of any duly appointed registered nominee of the
Custodian as the Custodian may from time to time determine, or in
the name of the Book-Entry System or a Depository or their
successor or successors, or their nominee or nominees. St. Clair
reserves the right to instruct the Custodian as to the method of
registration and safekeeping of the Securities of the Funds. St.
Clair agrees to furnish to the Custodian appropriate instruments
to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee or
in the name of the Book-Entry System or a Depository, any
Securities which it may hold for the account of the Funds and
which may from time to time be registered in the name of the
Funds. The Custodian shall hold all such Securities specifically
allocated to a Fund which are not held in the Book-Entry System or
a Depository in a separate account for the Fund in the name of the
Fund physically segregated at all times from those of any other
person or persons.
(e) Segregated Accounts. Upon receipt of a Written Instruction
the Custodian will establish segregated accounts on behalf of the
Funds to hold liquid or other assets as it shall be directed by a
Written Instruction and shall increase or decrease the assets in
such segregated accounts only as it shall be directed by
subsequent Written Instruction.
(f) Collection of Income and Other Matters Affecting Securities.
Unless otherwise instructed to the contrary by a Written
Instruction, the Custodian by itself, or through the use of the
Book-Entry System or a Depository with respect to Securities
therein deposited, shall with respect to all Securities held for
the Funds in accordance with this Agreement:
1. Collect all income due or payable;
2. Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed or retired, or
otherwise become payable. Notwithstanding the foregoing, the
Custodian shall have no responsibility to a Fund for monitoring or
ascertaining any call, redemption or retirement dates with respect
to put bonds which are owned by a Fund and held by the Custodian
or its nominees. Nor shall the Custodian have any responsibility
or liability to a Fund for any loss by a Fund for any missed
payment or other defaults resulting therefrom; unless the
Custodian received timely notification from the Fund specifying
the time, place and manner for the presentment of any such put
bond owned by a Fund and held by the Custodian or its nominee.
The Custodian shall not be responsible and assumes no liability to
a Fund for the accuracy or completeness of any notification the
Custodian may furnish to a Fund with respect to put bonds;
3. Surrender Securities in temporary form for definitive
Securities;
4. Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect;
5. Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the
account of the Funds all rights and similar Securities issued with
respect to any Securities held by the Custodian hereunder for the
Funds;
6. Transmit promptly to St. Clair any proxy statement, proxy
materials, notice of a call or conversion or similar communication
received by it as Custodian; and
7. Receive and hold for the account of each Fund all securities
received as a distribution on the Fund's portfolio of securities
as a result of a stock dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement or
distribution of rights or similar securities issued with respect
to any portfolio securities belonging to the Fund.
(g) Delivery of Securities and Evidence of Authority. Upon
receipt of Written Instructions and not otherwise, except for
subparagraphs 5, 6, and 7 of this section 4(g) which may be
effected by Oral or Written Instructions, the Custodian, directly
or through the use of the Book-Entry System or a Depository,
shall:
1. Execute and deliver or cause to be executed and delivered to
such persons as may be designated in such Written Instructions,
proxies, consents, authorizations, and any other instruments
whereby the authority of a Fund as owner of any Securities may be
exercised;
2. Deliver or cause to be delivered any Securities held for a
Fund in exchange for other Securities or cash issued or paid in
connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege;
3. Deliver or cause to be delivered any Securities held for a
Fund to any protective committee, reorganization committee or
other person in connection with the reorganization, refinancing,
merger, consolidation or recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement in the separate account for the Fund certificates of
deposit, interim receipts or other instruments or documents as may
be issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of a Fund
and take such other steps as shall be stated in Written
Instructions to be for the purpose of effecting any duly
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
5. Deliver Securities owned by a Fund upon sale of such
Securities for the account of the Fund pursuant to Section 5;
6. Deliver Securities owned by a Fund upon the receipt of
payment in connection with any repurchase agreement related to
such Securities entered into by the Fund;
7. Deliver Securities owned by a Fund to the issuer thereof, or
its agent, for transfer into the name of the Fund or into the name
of any nominee or nominees of the Custodian into the name or
nominee name of any sub-custodian appointed pursuant to Section
11(f); or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided, however, that in any
such case, the new Securities are to be delivered to the
Custodian;
8. Deliver Securities owned by a Fund to the broker for
examination in accordance with "street delivery" custom;
9. Deliver Securities owned by a Fund in accordance with the
provisions of any agreement among the Fund, the Custodian and any
broker-dealer or any similar organization or organizations
relating to compliance with the rules of any options clearing
entity or securities or commodities exchange, regarding escrow or
other arrangements in connection with transactions by the Fund;
10. Deliver Securities owned by a Fund in accordance with the
provisions of any agreement among the Fund, the Custodian, and a
futures commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
11. Deliver Securities owned by a Fund for delivery in
connection with any loans of securities made by the Fund but only
against receipt of adequate collateral as agreed upon from time to
time by the Custodian and the Fund which may be in the form of
cash or obligations issued by the United States government, its
agencies or instrumentalities;
12. Deliver Securities owned by a Fund for delivery as security
in connection with any borrowings by the Fund requiring a pledge
of Fund assets, but only against receipt of amounts borrowed;
13. Deliver Securities owned by a Fund upon receipt of Written
Instructions from the Fund for delivery to the Transfer Agent or
to the holders of Shares in connection with distributions in kind,
as may be described from time to time in the Fund's Prospectus, in
satisfaction of requests by holders of Shares for repurchase or
redemption;
14. Deliver Securities as collateral in connection with short
sales of securities by a Fund;
15. Deliver Securities for any purpose expressly permitted by
and in accordance with procedures described in a Fund's Prospectus
or resolution adopted by its Board of Directors signed by an
Authorized Person and certified by the Secretary of St. Clair; and
16. Deliver Securities owned by a Fund for any other proper
business purpose, but only upon receipt of, in addition to Written
Instructions, a certified copy of a resolution of the Board of
Directors signed by an Authorized Person and certified by the
Secretary of St. Clair, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper business purpose, and naming
the person or persons to whom delivery of such Securities shall be
made.
(h) Endorsement and Collection of Checks, Etc. The Custodian is
hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received by the Custodian
for the account of a Fund; provided, however, that the Custodian
shall not be liable pursuant to this Agreement for any money,
whether or not represented by check, draft, or other instrument
for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money
directly or by the final crediting of the account representing the
Fund's interest in the Book-Entry System or the Depository.
5. Purchase and Sale of Investments of a Fund.
(a) Promptly after each purchase of Securities for a Fund, the
Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities,
Written Instructions and (ii) with respect to each purchase of
Money Market Securities, either Written Instructions or Oral
Instructions, in either case specifying with respect to each
purchase: (1) the name of the issuer and the title of the
Securities; (2) the number of shares or the principal amount
purchased and accrued interest, if any; (3) the date of purchase
and settlement; (4) the purchase price per unit; (5) the total
amount payable upon such purchase; (6) the name of the person from
whom or the broker through whom the purchase was made, if any; (7)
whether or not such purchase is to be settled through the Book-
Entry System or a Depository; and (8) whether the Securities
purchased are to be deposited in the Book-Entry System or a
Depository. The Custodian shall receive the Securities purchased
by or for the Fund and upon receipt of Securities or, as
appropriate, a copy of the broker's or dealer's confirmation or
payee's invoice, shall pay out of the monies held for the account
of the Fund the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set forth in
such Written or Oral Instructions.
(b) Promptly after each sale of Securities of a Fund, the Fund
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, Written
Instructions, and (ii) with respect to each sale of Money Market
Securities, either Written Instructions or Oral Instructions, in
either case specifying with respect to such sale: (1) the name of
the issuer and the title of the Securities; (2) the number of
shares or principal amount sold, and accrued interest, if any; (3)
the date of sale; (4) the sale price per unit; (5) the total
amount payable to the Fund upon such sale; (6) the name of the
broker through whom or the person to whom the sale was made; and
(7) whether or not such sale is to be settled through the Book-
Entry System or a Depository. The Custodian shall deliver or
cause to be delivered the Securities to the broker or other person
designated by the Fund upon receipt of the total amount payable to
the Fund upon such sale, provided that the same conforms to the
total amount payable to the Fund as set forth in such Written or
Oral Instructions. Subject to the foregoing, the Custodian may
accept payment in such form as shall be satisfactory to it, and is
customary among dealers in Securities, and may deliver Securities
and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
6. Lending of Securities.
(a) If St. Clair is permitted by the terms of its Articles of
Incorporation and, as disclosed in its Prospectus, to lend
Securities, within 24 hours after each loan of Securities, a Fund,
shall deliver to the Custodian Written Instructions specifying
with respect to each such loan: (i) the name of the issuer and
the title of the Securities; (ii) the number of shares or the
principal amount loaned; (iii) the date of loan and delivery; (iv)
the total amount to be delivered to the Custodian and specifically
allocated against the loan of the Securities, including the amount
of cash collateral and the premium, if any, separately identified;
(v) the name of the broker, dealer or financial institution to
which the loan was made; and (vi) whether the Securities loaned
are to be delivered through the Book-Entry System or a Depository.
(b) Promptly after each termination of a loan of Securities, a
Fund shall deliver to the Custodian Written Instructions
specifying with respect to each such loan termination and return
of Securities: (i) the name of the issuer and the title of the
Securities to be returned; (ii) the number of shares or the
principal amount to be returned; (iii) the date of termination;
(iv) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting
credits as described in said Written Instructions); (v) the name
of the broker, dealer or financial institution from which the
Securities will be returned; and (vi) whether such return is to be
effected through the Book-Entry System or a Depository. The
Custodian shall receive all Securities returned from the broker,
dealer or financial institution to which such Securities were
loaned and upon receipt thereof shall pay the total amount payable
upon such return of Securities as set forth in the Written
Instructions. Securities returned to the Custodian shall be held
as they were prior to such loan.
7. Payment of Dividends or Distributions.
(a) St. Clair shall furnish to the Custodian Written
Instructions (i) authorizing the declaration of dividends or
distributions with respect to a Fund on a specified periodic basis
and specifying the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, and
the total amount payable to the Transfer Agent on the payment
date, or (ii) setting forth the date of declaration of any
distribution by the Fund, the date of payment thereof, the record
date as of which shareholders entitled to payment shall be
determined, and the total amount payable to the Transfer Agent on
the payment date.
(b) Upon the payment date specified in such Written
Instructions, the Custodian shall pay to the Transfer Agent out of
monies specifically allocated to and held for the account of a
Fund the total amount payable to the Transfer Agent. In lieu of
paying the Transfer Agent cash dividends and distributions, the
Custodian may arrange for the direct payment of cash dividends and
distributions to Shareholders by the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time
to time by and among St. Clair, the Custodian and the Transfer
Agent.
8. Sale and Redemption of Shares of St. Clair.
(a) Whenever a Fund shall sell any Shares, the Fund shall
deliver or cause to be delivered to the Custodian Written
Instructions duly specifying:
1. The number of Shares sold, trade date, and price; and
2. The amount of money to be received by the Custodian for the
sale of such Shares.
The Custodian understands and agrees that Written
Instructions may be furnished subsequent to the purchase of Shares
of the Fund and that the information contained therein will be
derived from the sales of Shares as reported to the Fund by the
Transfer Agent.
(b) Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account of the
Fund.
(c) Upon issuance of any Shares in accordance with the foregoing
provisions of this Section 8, the Custodian shall pay all original
issue or other taxes required to be paid in connection with such
issuance upon the receipt of Written Instructions specifying the
amount to be paid.
(d) Except as provided hereafter, whenever any Shares are
redeemed, the Fund shall cause the Transfer Agent to promptly
furnish to the Custodian Written Instructions, specifying:
1. The number of Shares redeemed; and
2. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information
contained in such Written Instructions will be derived from the
redemption of Shares as reported to the Fund by the Transfer
Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth
the number of Shares received by the Transfer Agent for redemption
and that such Shares are valid and in good form for redemption,
the Custodian shall make payment to the Transfer Agent of the
total amount specified in Written Instructions issued pursuant to
paragraph (d) of this Section 8. In lieu of paying the Transfer
Agent said redemption proceeds as stated, the Custodian may
arrange for the direct payment of said proceeds to Shareholders by
the Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time by and among St. Clair,
the Custodian and the Transfer Agent.
(f) Notwithstanding the above provisions regarding the
redemption of Shares, whenever such Shares are redeemed pursuant
to any check redemption privilege which may from time to time be
offered by the Fund, the Custodian, unless otherwise instructed by
Written Instructions, shall honor the check presented as part of
such check redemption privilege out of the monies specifically
allocated to the Fund in such advice for such purpose.
9. Indebtedness.
(a) St. Clair will cause to be delivered to the Custodian by any
bank (excluding the Custodian) from which a Fund borrows money, a
notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the
Fund and the amount of collateral, if any, required for such loan.
St. Clair shall promptly deliver to the Custodian Written
Instructions stating with respect to each such borrowing: (i) the
name of the bank; (ii) the amount and terms of the borrowing,
which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Fund, or other loan
agreement or evidence of indebtedness; (iii) the time and date, if
known, on which the loan is to be entered into (the "Borrowing
Date"); (iv) the date on which the loan becomes due and payable;
(v) the total amount payable to the Fund on the Borrowing Date;
(vi) the market value of Securities, if any, to be delivered as
collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal or other amount of
any particular Securities; (vii) whether the Custodian is to
deliver such collateral through the Book-Entry System or a
Depository; and (viii) a statement that such loan is in
conformance with the 1940 Act and the Fund's Prospectus.
(b) Upon receipt of the Written Instructions referred to in
subparagraph (a) above, the Custodian shall deliver on the
Borrowing Date the specified collateral (if any) against delivery
by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set
forth in the Written Instructions. The Custodian may, at the
option of the lending bank (unless the lending bank has not been
appointed a custodian or sub-custodian of the Fund's assets, in
which case the Custodian must), keep any such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or
loan agreement. The Custodian shall deliver as additional
collateral in the same manner as directed by the Fund from time to
time such Securities specifically allocated to such Fund as may be
specified in Written Instructions to collateralize further any
transaction described in this Section 9. The Fund shall cause all
Securities released from collateral status to be returned directly
to the Custodian, and the Custodian shall receive from time to
time such return of collateral as may be tendered to it. In the
event that St. Clair fails to specify in Written Instructions all
of the information required by this Section 9, the Custodian shall
not be under any obligation to deliver any Securities. Collateral
returned to the Custodian shall be held hereunder as it was prior
to being used as collateral.
10. Persons Having Access to Assets of the Fund.
(a) No Trustee, officer, employee or agent of St. Clair, and no
officer, director, employee or agent of a Fund's investment
advisers, or any sub-investment adviser of a Fund, or of a Fund's
administrator, shall have physical access to the assets of the
Fund held by the Custodian or be authorized or permitted to
withdraw any investments of the Fund, nor shall the Custodian
deliver any assets of the Fund to any such person. No officer,
director, employee or agent of the Custodian who holds any similar
position with a Fund's investment advisers, with any sub-
investment adviser of a Fund or with a Fund's administrator shall
have access to the assets of the Fund.
(b) The individual employees of the Custodian duly authorized by
the Board of Directors of the Custodian to have access to the
assets of the Funds are listed in the certification annexed hereto
as Appendix A. The Custodian shall advise the Funds of any change
in the individuals authorized to have access to the assets of the
Fund by written notice to the Fund accompanied by a certified copy
of the authorizing resolution of the Custodian's Board of
Directors approving such change.
(c) Nothing in this Section 10 shall prohibit any officer,
employee or agent of the Company, or any officer, director,
employee or agent of the investment advisers, of any sub-
investment adviser of the Funds or of the Funds' administrator,
from giving Oral Instructions or Written Instructions to the
Custodian or executing a Certificate so long as it does not result
in delivery of or access to assets of a Fund prohibited by
paragraph (a) of this Section 10.
11. Concerning the Custodian.
(a) Standard of Conduct. In the performance of its duties
hereunder, the Custodian shall be obligated to exercise care and
diligence and to act in good faith and to use its best efforts
within reasonable limits to insure the accuracy and completeness
of all services under this Agreement. Except as otherwise
provided herein, neither the Custodian nor its nominee shall be
liable for any loss or damage, including counsel fees, resulting
from its action or omission to act or otherwise, except for any
such loss or damage arising out of its negligence, misfeasance or
willful misconduct or that of its employees or agents. The
Custodian may, with respect to questions of law, apply for and
obtain the advice and opinion of counsel to St. Clair or of its
own counsel, at the expense of St. Clair, and shall be fully
protected with respect to anything done or omitted by it in good
faith in conformity with such advice or opinion. The Custodian
shall be liable to the Funds for any loss or damage resulting from
the use of the Book-Entry System or a Depository arising by reason
of any negligence, misfeasance or willful misconduct on the part
of the Custodian or any of its employees or agents.
(b) Limit of Duties. Without limiting the generality of the
foregoing, the Custodian shall be under no duty or obligation to
inquire into, and shall not be liable for:
1. The validity of the issue of any Securities purchased by the
Funds, the legality of the purchase thereof, or the propriety of
the amount paid therefor;
2. The legality of the sale of any Securities by the Funds or
the propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any
distribution of any Fund; or
6. The legality of any borrowing.
(c) No Liability Until Receipt. The Custodian shall not be
liable for, or considered to be the Custodian of, any money,
whether or not represented by any check, draft, or other
instrument for the payment of money, received by it on behalf of a
Fund until the Custodian actually receives and collects such money
directly or by the final crediting of the account representing the
Fund's interest in the Book-Entry System or a Depository.
(d) Amounts Due from Transfer Agent. The Custodian shall not be
under any duty or obligation to take action to effect collection
of any amount due to the Funds from the Transfer Agent nor to take
any action to effect payment or distribution by the Transfer Agent
of any amount paid by the Custodian to the Transfer Agent in
accordance with this Agreement.
(e) Collection Where Payment Refused. The Custodian shall not
be under any duty or obligation to take action to effect
collection of any amount, if the Securities upon which such amount
is payable are in default, or if payment is refused after due
demand or presentation, unless and until (i) it shall be directed
to take such action by a Certificate and (ii) it shall be assured
to its satisfaction of reimbursement of its costs and expenses in
connection with any such action. The Custodian shall give the
Funds prompt notice of each such event.
(f) Appointment of Sub-Custodians. In connection with its
duties under this Agreement, the Custodian may, at its own
expense, enter into sub-custodian agreements with other domestic
banks or trust companies for the receipt of certain securities and
cash to be held by the Custodian for the accounts of the Funds
pursuant to this Agreement; provided that each such bank or trust
company complies with all relevant provisions of the 1940 Act,
applicable state securities laws and the rules and regulations
thereunder. The Custodian shall remain responsible for the
performance of all of its duties under this Agreement and shall
hold St. Clair harmless from the acts and omissions, under the
standards of care provided for herein, of any domestic bank or
trust company that it might choose pursuant to this Section. The
parties hereto acknowledge that they intend to enter into a Sub-
Custodian Agreement with Morgan Stanley Trust Company or another
institution agreeable to them providing for the custody of certain
Securities outside the United States in accordance with Rule 17f-5
under the 1940 Act.
(g) No Duty to Ascertain Authority. The Custodian shall not be
under any duty or obligation to ascertain whether any Securities
at any time delivered to or held by it for the Fund are such as
may properly be held by the Fund under the provisions of the
Articles of Incorporation and the Prospectus.
(h) Reliance on Certificates and Instructions. The Custodian
shall be entitled to rely upon any Certificate, notice or other
instrument in writing received by the Custodian and reasonably
believed by the Custodian to be genuine and to be signed by two
officers of St. Clair or Authorized Persons. The Custodian shall
be entitled to rely upon any Written or Oral Instructions actually
received by the Custodian pursuant to the applicable Sections of
this Agreement and reasonably believed by the Custodian to be
genuine and to be given by an Authorized Person in the case of
Oral Instructions or two Authorized Persons in the case of Written
Instructions. St. Clair agrees to forward to the Custodian
Written Instructions from two Authorized Persons confirming such
Oral Instructions in such manner so that such Written Instructions
are received by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business on the same day that such Oral
Instructions are given to the Custodian. St. Clair agrees that
the fact that such confirming instructions are not received by the
Custodian shall in no way affect the validity of the transactions
or enforceability of the transactions hereby authorized by St.
Clair. St. Clair agrees that the Custodian shall incur no
liability to St. Clair in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided such
instructions reasonably appear to have been received from a duly
Authorized Person.
(i) Books and Records. The books and records pertaining to St.
Clair which are now or hereafter in the possession of the
Custodian shall be the property of St. Clair. Such books and
records shall be prepared and maintained as required by the 1940
Act and other applicable securities laws and regulations and
shall, to the extent practicable, be maintained separately for
each Fund of St. Clair. St. Clair, St. Clair's authorized
representatives and auditors shall have access to such books and
records at all times during the Custodian's normal business hours.
Upon the reasonable request of St. Clair, copies of any such books
and records shall be provided by the Custodian to St. Clair or St.
Clair's authorized representatives at St. Clair's expense.
The Custodian shall provide St. Clair with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System or a Depository and with such
reports on its own systems of internal accounting control in
accordance with the requirements of the 1940 Act and as St. Clair
may reasonably request from time to time.
(j) Cooperation with Accountants. The Custodian shall cooperate
with St. Clair's independent public accountants and shall take all
reasonable action in the performance of its obligations under this
Agreement to assure that the necessary information is made
available to such accountants for the expression of their
opinions, as such may be required from time to time by St. Clair.
(k) Compliance with Governmental Rules and Regulations. The
Custodian shall comply with all applicable requirements of the
federal securities and commodities laws, and any other laws, rules
and regulations of governmental authorities having jurisdiction
with respect to the duties to be performed by the Custodian
hereunder. Except as specifically set forth herein, the Custodian
assumes no responsibility for such compliance by St. Clair.
12. Term and Termination.
(a) This Agreement shall become effective on the date first set
forth above (the "Effective Date") and shall continue in effect
thereafter until terminated pursuant to paragraph (b) of this
Section 12.
(b) Either of the parties hereto may terminate this Agreement at
any time by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than 60 days after the date of receipt of such notice. In the
event such notice is given by St. Clair, it shall be accompanied
by a certified resolution of the Board of Directors of St. Clair,
electing to terminate this Agreement and designating a successor
custodian or custodians, which shall be a person qualified to so
act under the 1940 Act.
In the event such notice is given by the Custodian, St.
Clair shall, on or before the termination date, deliver to the
Custodian a certified resolution of the Board of Directors of St.
Clair, designating a successor custodian or custodians. In the
absence of such designation by St. Clair, the Custodian may
designate a successor custodian, which shall be a person qualified
to so act under the 1940 Act. If St. Clair fails to designate a
successor custodian, St. Clair shall upon the date specified in
the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in
the Book-Entry System and other securities held in uncertificated
form which cannot be delivered to St. Clair) and monies then owned
by St. Clair, be deemed to be its own custodian and the Custodian
shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement, other than the duty with respect to
Securities held in the Book-Entry System and other uncertificated
securities which cannot be delivered to St. Clair.
(c) Upon the date set forth in such notice under paragraph (b)
of this Section 12, this Agreement shall terminate to the extent
specified in such notice, and the Custodian shall upon receipt of
a notice of acceptance by the successor custodian deliver directly
to the successor custodian on that date all Securities and monies
then held by the Custodian on behalf of St. Clair, after deducting
all fees, expenses and other amounts the payment or reimbursement
of which it shall then be entitled.
13. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by
two of the present officers of St. Clair setting forth the names
and the signatures of the present Authorized Persons. St. Clair
agrees to furnish to the Custodian a new certification in similar
form in the event that any such present Authorized Person ceases
to be such an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until
such new certification shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Authorized
Persons as set forth in the last delivered certification.
(b) Annexed hereto as Appendix B is a certification signed by
the present officers of St. Clair setting forth the names and the
signatures of the three present officers of St. Clair. St. Clair
agrees to furnish to the Custodian a new certification in similar
form in the event any such present officer ceases to be an officer
of St. Clair or in the event that other or additional officers are
elected or appointed. Until such new certification shall be
received, the Custodian shall be fully protected in acting under
the provisions of this Agreement upon the signature of the
officers as set forth in the last delivered certification.
(c) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at 411 West Lafayette, 2nd Floor
MasterTrust Mail Code 3438, Detroit, Michigan 48226, Attn: Julie
Elya or at such other place as the Custodian may from time to time
designate in writing.
(d) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to St. Clair, shall be
sufficiently given if addressed to the Company and mailed or
delivered to Lee P. Munder, President, St. Clair Funds, Inc., 480
Pierce Street, Suite 300, Birmingham, Michigan 48009, or to such
other place as St. Clair may from time to time designate in
writing.
(e) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the
same formality as this Agreement, (i) authorized and approved by a
resolution of the Board of Directors of St. Clair, including a
majority of the members of the Board of Directors of the Company
who are not "interested persons" of St. Clair (as defined in the
1940 Act), or (ii) authorized and approved by such other
procedures as may be permitted or required by the 1940 Act.
(f) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
St. Clair without the written consent of the Custodian, or by the
Custodian without the written consent of St. Clair authorized or
approved by a resolution of the Board of Directors of St. Clair,
and any attempted assignment without such written consent shall be
null and void.
(g) This Agreement shall be construed in accordance with the
laws of the State of Maryland.
(h) The captions of the Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
(i) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but
such counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective representatives
duly authorized as of the day and year first above written.
ST. CLAIR FUNDS, INC.
By:
Name:
Title:
COMERICA BANK
By:
Name:
Title:
SCHEDULE A
List of Funds
Liquidity Plus Money Market Fund
Munder S&P 500 Index Equity Fund
Munder S&P MidCap Index Equity Fund
Munder S&P SmallCap Index Equity Fund
Munder Foreign Equity Fund
Munder Aggregate Bond Index Fund
ST. CLAIR FUNDS, INC.
By:
Title:
COMERICA BANK
By:
Title:
SCHEDULE B
Fee Schedule
Computed daily and payable monthly based on the aggregate average
daily net assets of St. Clair Funds, Inc.
First $100 million of net assets .03%
Next $500 million of net assets .02%
Over $600 million of net assets .01%
Transaction Charges
DTC Trades $2.00 per trade
Fed Book Entry Trade $12.00 per trade
U.S. Physical Trade $25.00 per trade
APPENDIX A
I, Lisa A. Rosen, Secretary of St. Clair Funds, Inc., a
Maryland Corporation ("St. Clair") do hereby certify that:
The individuals shown on Exhibit A attached hereto have been
duly authorized as Authorized Persons to give Oral Instructions
and Written Instructions on behalf of St. Clair and the signatures
set forth opposite their respective names are their true and
correct signatures.
St. Clair Funds, Inc.
Lisa A. Rosen, Secretary
Exhibit A
Name Signature
Steven Albrecht
Joseph Aceto
Leonard J. Barr II
Kristopher Belken
Stephanie Benson
Chelia Cicione
Ann Conrad
Philip D. Dano
Patti DePace
John E. Dicker
Arnold K. Douville
Edward Eberle
Sharon Fayolle
Terry H. Gardner
Cheryl Z. Germeroth
Michael Georgio
Mike Gura
Allan Harris
Otto G. Hinzmann, Jr.
Peter Hoglund
Brian T. Jeffries
Todd Johnson
Julie Kahan
Anne Kennedy
Theodore Miller
Francis Murphy
Lee P. Munder
Greg Prost
Ronald Reed
David Rever
D. Gary Richardson
James Robinson
Lisa A. Rosen
Peter Root
Robert Samrah
Kenneth Schluchter
Gerald Seizert
Susan Verdun
Joseph A. Viselli
Jeffrey A. Wrona
Carl Wilk
APPENDIX B
I, Lisa A. Rosen, Secretary of St. Clair Funds, Inc., a
Maryland Corporation ("St. Clair"), do hereby certify that:
The following individuals serve in the following positions
with St. Clair and each individual has been duly elected or
appointed to each such position and qualified therefor in
conformity with St. Clair's Articles of Organization and the
signatures set forth opposite their respective names are their
true and correct signatures:
Name Position Signature
Charles W. Elliott Chairman of the Board
of Directors
John D. Rakolta, Jr. Vice Chairman
Lee P. Munder President ________________________
Terry H. Gardner Vice President
Chief Financial Officer
and Treasurer
Leonard J. Barr II Vice President
Ann F. Putallaz Vice President
James C. Robinson Vice President
Gerald L. Seizert Vice President
Paul D. Tobais Vice President
Elyse G. Essick Vice President
Richard H. Rose Assistant Treasurer
Lisa A. Rosen Secretary and
Assistant Treasurer
Teresa M.R. Hamlin Assistant Secretary
Julie A. Tedesco Assistant Secretary
23
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g:/shared/bankgrp/stclr/pea22/exh8.doc
Exhibit 9(c)
FORM OF
ADMINISTRATION AGREEMENT
THE ADMINISTRATION AGREEMENT dated as of May 1, 1995 by and
between FIRST DATA INVESTOR SERVICES GROUP, INC., a Massachusetts
corporation ("FDISG") (then known as The Shareholder Services
Group, Inc.), and ST. CLAIR FUNDS, INC., a Maryland corporation
(the "Company"), is hereby amended and restated as of __________,
1997 to read in its entirety as follows:
WHEREAS, the Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company desires to retain FDISG to render
certain administrative services to the portfolios of the Company
listed on Schedule A attached hereto (which may be amended from
time to time by attaching to Schedule A a revised list of
portfolios, signed and dated by an authorized representative of
each party hereto) (each, a "Fund" and collectively, the "Funds")
and FDISG is willing to render such services,
WITNESSETH:
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between the parties
hereto as follows:
1. Appointment. The Company hereby appoints FDISG to act as
Administrator of the Company on the terms set forth in this
Agreement. FDISG accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided for
in the Fee Schedule.
In the event that the Company establishes one or more
portfolios other than the Funds with respect to which the Company
decides to retain FDISG to act as administrator and accounting
services provider, the Company shall so notify FDISG in writing.
If FDISG is willing to render such services, FDISG shall notify
the Company in writing whereupon such portfolio shall be deemed to
be a Fund hereunder. Without limiting the foregoing, it is
understood that the Company will from time to time issue separate
series or classes of shares and may classify and reclassify shares
of any such series or class. FDISG shall identify to each such
series or class property belonging to such series or class and in
such reports, confirmations and notices to the Company called for
under this Agreement shall identify the series or class to which
such report, confirmation or notice pertains.
2. Delivery of Documents. The Company has furnished FDISG
with copies properly certified or authenticated of each of the
following:
(a) Resolutions of the Company's Board of Directors authorizing
the appointment of FDISG to provide administrative services to the
Company and approving this Agreement;
(b) The Company's Articles of Incorporation filed with the
Secretary of State of the state of Maryland on March 29, 1993 and
all amendments thereto (the "Charter"),
(c) The Company's By-Laws and all amendments thereto (the
"By-Laws");
(d) The Investment Advisory Agreement between Munder Capital
Management (the "Adviser") and the Company dated January 31, 1995;
(e) The Custody Agreement between Comerica Bank (the "Custodian")
and the Company dated June 13, 1994 (the "Custody Agreement");
(f) The Transfer Agency and Registrar Agreement between FDISG (the
"Transfer Agent") and the Company dated ____________, 1997;
(g) The Company's Registration Statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933 and
under the 1940 Act as filed with the Securities and Exchange
Commission ("SEC") on November 27, 1987 relating to the Company's
shares of beneficial interest, and all amendments thereto; and
(h) The Company's most recent prospectuses and statement of
additional information (together, the "Prospectus").
The Company will furnish FDISG from time to time with
copies, properly certified or authenticated, of all amendments of
or supplements to the foregoing. Furthermore, the Company will
provide FDISG with any other documents that FDISG may reasonably
request and will notify FDISG as soon as possible of any matter
materially affecting the performance by FDISG of its services
under this Agreement.
3. Duties as Administrator. Subject to the supervision and
direction of the Board of Directors of the Company, FDISG, as
Administrator, will use its best judgment in supervising various
aspects of the Company's administrative operations and undertakes
to perform the following specific services:
(a) Maintaining office facilities (which may be in the offices of
FDISG or a corporate affiliate);
(b) Furnishing statistical and research data, data processing
services, clerical services, internal legal, executive and
administrative services and stationery and office supplies in
connection with the foregoing;
(c) Furnishing corporate secretarial services including
preparation and distribution of materials for Board of Directors
meetings;
(d) Assisting in the preparation of the Company's Registration
Statement and any Pre-Effective and Post-Effective Amendments to
the Company's Registration Statement, Notices of Annual or Special
Meetings of Shareholders and Proxy materials relating to such
Meetings;
(e) Assisting in the determination of the jurisdictions in which
the Company's shares will be registered or qualified for sale and,
in connection therewith, shall be responsible for the initial
registration or qualification and the maintenance of such
registration or qualification of such shares for sale under the
securities laws of any state. Payment of share registration fees
and any fees for qualifying or continuing the qualification of any
Fund as a dealer or broker shall be made by that Fund;
(f) Providing the services of certain persons who may be appointed
as officers of the Company by the Company's Board of Directors;
(g) Providing legal advice and counsel to the Company with respect
to regulatory matters, including monitoring regulatory and
legislative developments which may affect the Company and
assisting in the strategic response to such developments,
counseling and assisting the Company in routine regulatory
examinations or investigations of the Company, and working closely
with outside counsel to the Company in response to any litigation
or non-routine regulatory matters;
(h) Accounting and bookkeeping services (including the maintenance
of such accounts, books and records of the Company as may be
required by Section 31(a) of the 1940 Act and the rules thereunder
and agrees that all records that it maintains for the Company are
the property of the Company and further agrees to surrender
promptly to the Company any such records at the Company's
request);
(i) Internal auditing and treasury services;
(j) Valuing the Company's assets and calculating the net asset
value of the shares of each Fund on each business day;
(k) Accumulating information for and, subject to approval by the
Company's Treasurer, preparing reports to the Company's
shareholders of record and the SEC including, but not necessarily
limited to, Annual and Semi-Annual Reports, Semi-Annual Reports on
Form N-SAR and Notices pursuant to Rule 24f-2;
(l) Reviewing and providing advice and counsel on all sales and
advertising materials prepared on behalf of the Company;
(m) Preparing, signing and filing the Company's tax returns;
(n) Assisting the Adviser, at its request, in monitoring and
developing compliance procedures for the Company which will
include, among other matters, procedures to assist them in
monitoring compliance with each Fund's investment objective,
policies, restrictions, tax matters and applicable laws and
regulations and performing certain monthly compliance tests; and
(o) Preparing and furnishing the Company (at the Company's
request) with performance information (including yield and total
return information) calculated in accordance with applicable U.S.
securities laws and reporting to external databases such
information as may reasonably be requested.
Without limiting the foregoing services, it is agreed that
FDISG will perform the following accounting functions on an
ongoing basis:
(a) Journalize each Fund's investment, capital share and income
and expense activities;
(b) Maintain individual ledgers for investment securities;
(c) Maintain historical tax lots for each security;
(d) Maintain financial records in accordance with the 1940 Act and
the Rules and Regulations thereunder;
(e) Reconcile on a daily basis cash and on a weekly basis
investment balances c)f the Company with the custodian:
(f) Post to and prepare each Fund's Statement of Assets and
Liabilities and Statement of Operations;
(g) Calculate various contractual expenses (e.g., advisory and
administration, transfer agency and custody fees):
(h) Monitor the expense accruals and notify Company management of
any proposed adjustments;
(i) Control all disbursements from the Company and authorize such
disbursements upon proper instructions;
(j) Calculate capital gains and losses;
(k) Determine each Fund's net income;
(l) Obtain security market quotes from independent pricing
services approved by the Adviser and the Company's Board of
Directors, or if such quotes are unavailable, then obtain such
prices from the Adviser, and in either case calculate the market
value of each Fund's investments;
(m) Transmit or mail a copy of the daily portfolio valuation to
the Adviser, if requested;
(n) Compute the net asset value of each Fund;
(o) Compute the Fund's yields, total return, expense ratios,
portfolio turnover rate, and portfolio average dollar-weighted
maturity;
(p) Mark securities to market based upon quotes furnished by the
Adviser, an independent pricing agent approved by the Company's
Board of Directors or based upon values derived from yield data
relating to classes of instruments obtained from reputable
sources, provided that any pricing system based on yield data for
selected instruments must be based upon market quotations for
sufficient numbers and types of instruments to be a representative
sample of each class of instrument held by each Fund, as
applicable, both in terms of the types of instruments as well as
the differing quality of instruments;
(q) Assist in monitoring compliance and assist in the development
of compliance procedures for each Fund which will include, among
other matters, monitoring compliance with each Fund's investment
objectives, policies, restrictions, tax matters and applicable
laws and regulations;
(r) As appropriate, transmit to the Custodian instructions
received from the Adviser;
(s) Prepare semi-annual financial statements for each Fund, which
will include but not be limited to, the following items (the form
and content of such statements shall be in accordance with
generally accepted accounting principles):
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement, if applicable;
(t) Prepare monthly broker security transactions summaries;
(u) Prepare monthly security transaction listings;
(v) Supply various Company statistical date as reasonably
requested on an ongoing basis;
(w) Keep all books and records with respect to the Company's books
of account;
(x) Keep records of the Company's securities transactions,
portfolio valuations and securities positions; and
(y) Act as liaison with the Company's independent public
accountants and provide account analyses, fiscal year summaries,
and other audit related schedules. FDISG will take all reasonable
action in the performance of its obligations under this Agreement
to assure that the necessary information is made available to such
accountants for the expression of their opinions, as such may be
required by the Company from time to time.
In performing its duties as Administrator of the Company,
FDISG (a) will act in accordance with the Articles of
Incorporation, By-Laws, Prospectus and with the instructions and
directions of the Board of Directors of the Company and will
conform to and comply with the requirements of the 1940 Act and
all other applicable federal or state laws and regulations and (b)
will consult with legal counsel to the Company, as necessary and
appropriate.
4. Allocation of Expenses. FDISG shall bear all expenses in
connection with the performance of its services under this
Agreement.
(a) FDISG will from time to time employ or associate with itself
such person or persons as FDISG may believe to be particularly
suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are
employed by both FDISG and the Company. The compensation of such
person or persons shall be paid by FDISG and no obligation shall
be incurred on behalf of the Company in such respect.
(b) FDISG shall not be required to pay any of the following
expenses incurred by the Company: membership dues in the
Investment Company Institute or any similar organization;
investment advisory expenses; costs of printing and mailing stock
certificates, prospectuses, reports and notices; interest on
borrowed money; brokerage commissions; taxes and fees payable to
Federal, state and other governmental agencies; fees of Directors
of the Company who are not affiliated with FDISG; outside auditing
expenses; outside legal expenses; or other expenses not specified
in this Section 4 which may be properly payable by the Company.
(c) For the services to be rendered, the facilities to be
furnished and the payments to be made to FDISG, as provided for in
this Agreement, the Company shall compensate FDISG for its
services rendered pursuant to this Agreement in accordance with
the fees set forth in the Fee Schedule, annexed hereto and
incorporated herein. Such fees do not include out-of-pocket
disbursements of FDISG for which FDISG will be entitled to bill
separately. Out-of-pocket disbursements shall include, but shall
not be limited to, the items specified in Schedule B annexed
hereto and incorporated herein, which schedule may be modified by
mutual consent of the parties hereto.
(d) FDISG will bill the Company as soon as practicable after the
end of each calendar month, and said billings will be detailed in
accordance with the out-of-pocket schedule. The Company will
promptly pay to FDISG the amount of such billing.
5. Limitation of Liability. FDISG shall not be liable for any
error of judgment or mistake of law or for any loss suffered by
the Company in connection with the performance of its obligations
and duties under this Agreement, except a loss resulting from
FDISG's willful misfeasance, bad faith or gross negligence in the
performance of such obligations and duties, or by reason of its
reckless disregard of its obligations and duties under this
Agreement. The Company will indemnify FDISG against and hold it
harmless from any and all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses)
resulting from any claim, demand, action or suit not resulting
from the willful misfeasance, bad faith or gross negligence in the
performance of such obligations and duties or by reason of its
reckless disregard thereof FDISG will indemnify the Company
against and hold it harmless from any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel
fees and expenses) resulting from any claim, demand, action or
suit, based on FDISG's willful misfeasance, bad faith or gross
negligence in the performance of such obligations and duties or by
reason its reckless disregard thereof
6. Consequential Damages. In no event and under no circumstances
shall either party under this Agreement be liable to the other
party for consequential or indirect loss of profits, reputation or
business or any special damages under any provision of this
Agreement or for any act or failure to act hereunder.
7. Termination of Agreement.
(a) This Agreement shall become effective on the date hereof and
shall remain in force from year to year unless terminated pursuant
to the provision of sub-section (b) of this Section 7.
(b) This Agreement may be terminated with respect to any Fund at
any time without payment of any penalty, upon 60 days' written
notice, by vote of the holders of a majority of the outstanding
voting securities of such Fund, or by vote of a majority of the
Board of Directors of the Company, or by FDISG.
(c) Section 10 shall survive the termination of this Agreement.
(d) In the event of equipment failures beyond FDISG's control,
FDISG shall, at no additional expense to the Company, take
reasonable steps to minimize service interruptions but shall have
no liability with respect thereto. The foregoing obligation shall
not extend to computer terminals located outside of premises
maintained by FDISG. FDISG shall enter into and shall maintain in
effect with appropriate parties one or more agreements making
reasonable provision for emergency use of electronic data
processing equipment to the extent appropriate equipment is
available.
8. Amendment to this Agreement. No provision of this Agreement
may be changed, discharged or terminated orally, but only by an
instrument in writing signed by the party against which
enforcement of the change, discharge or termination is sought.
9. Miscellaneous.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Company or FDISG shall be
sufficiently given if addressed to the party and received by it at
its office set forth below or at such other place as it may from
time to time designate in writing.
To the Company:
ST. Clair Funds
480 Pierce Street, Suite 300
Birmingham, MI 48009
Attention: President
To FDISG:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, Massachusetts 01585
Attention: President
with a copy to FDISG's General Counsel
(b) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns,
provided that this Agreement shall not be assignable without the
written consent of the other party.
(c) This Agreement shall be construed in accordance with the laws
of the Commonwealth of Massachusetts.
(d) This Agreement may be executed in any number of counterparts
each of which shall be deemed to be an original and which
collectively shall be deemed to constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
(f) This Agreement and the fee schedule hereto constitute the
entire agreement between the parties hereto with respect to the
matters described herein.
10. Confidentiality. All books, records, information and data
pertaining to the business of the Company that are exchanged or
received pursuant to the performance of FDISG's duties under this
Agreement shall remain confidential and shall not be voluntarily
disclosed to any other person, except as specifically authorized
by the Company or as may be required by law, and shall not be used
by FDISG for any purpose other than the performance of its
responsibilities and duties hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be duly executed and delivered by their duly authorized
officers as of the date, first written above.
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
Name:
Title
ST. CLAIR FUNDS, INC.
By:
Name:
Title:
FEE SCHEDULE FOR
ADMINISTRATION AND
FUND ACCOUNTING SERVICES
Liquidity Plus Money Market Fund
A. FEES FOR ADMINISTRATION SERVICES -- (Fund
Administration and Fund Accounting)
The following annual Fund Administration fees apply:
.12% of the first $2.8 billion of the average daily net assets of
the Companies (as defined below); and
.105% of the next $2.2 billion of the Companies average daily net
assets; and
.10% of the Companies average daily net assets over $5 billion.
"Companies" shall include Munder Funds Trust, the Liquidity Plus
Money Market Fund of St. Clair Funds, Inc., The Munder Funds, Inc.
(other than the Munder Conservative Allocation Fund, Munder
Aggressive Allocation Fund and Munder Moderate Allocation Fund)
and The Munder Framlington Fund Trust.
B. MINIMUM FEES
For Fund Administration Services, a minimum fee of $1.2
million per annum will apply in the aggregate for all funds of the
Companies.
Munder S&P 500 Index Equity Fund, Munder S&P Mid-Cap Index Equity
Fund,
Munder S&P Small-Cap Index Equity Fund, Munder Foreign Equity Fund
and Munder Aggregate Bond Index Fund (the "Variable Annuity
Funds")
A. FEES FOR ADMINISTRATION SERVICES -- (Fund
Administration and Fund Accounting)
The following annual Fund Administration fees apply:
$20,000 per annum, per each Variable Annuity Fund
plus: .03% of the first $500 million of each Fund's
average daily net assets;
.02% of the next $500 million of each Fund's
average daily net assets;
.01% of the next $1 billion of each Fund's
average daily net assets; and
.005% of each Fund's average daily net assets in
excess of $1 billion.
B. MINIMUM FEES
For Fund Administration Services, a minimum fee of
$____________ per annum will apply in the aggregate for the
Variable Annuity Funds.
The fees payable under this Agreement will be re-evaluated
on or after the first anniversary date of this Agreement.
SCHEDULE A
FUNDS
Liquidity Plus Money Market Fund
Munder S&P 500 Index Equity Fund
Munder S&P Mid-Cap Index Equity Fund
Munder S&P Small-Cap Index Equity Fund
Munder Foreign Equity Fund
Munder Aggregate Bond Index Fund
SCHEDULE B
OUT-OF- POCKET EXPENSES
Out-of-pocket expenses include, but are not limited to, the
following:
- Postage (including overnight courier services)
- Telephone
- Telecommunications charges (including FAX)
- Duplicating
- Pricing services
- Forms and supplies
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Exhibit 9(d)
FORM OF
TRANSFER AGENCY AND REGISTRAR AGREEMENT
AGREEMENT, dated as of __________, 1997 between ST. CLAIR
FUNDS, INC. (the "Company"), a Maryland corporation having its
offices at 480 Pierce Street, Suite 300, Birmingham, Michigan
48009, and FIRST DATA INVESTOR SERVICES GROUP, INC. (the "Transfer
Agent"), a Massachusetts corporation with principal offices at
4400 Computer Drive, Westborough, Massachusetts 02109.
WITNESSETH
WHEREAS, the Company is authorized to issue Shares in
separate series, with each such series representing interests in a
separate portfolio of securities and other assets;
WHEREAS, the Company initially intends to offer shares in
those Portfolios identified in the attached Exhibit 1, and each
such Portfolio, together with all other Portfolios subsequently
established by the Company, shall be subject to this Agreement in
accordance with Section 17; and
WHEREAS, the Company on behalf of the Portfolios, desires to
appoint the Transfer Agent as its transfer agent, dividend
disbursing agent and agent in connection with certain other
activities and the Transfer Agent desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants and
promises hereinafter set forth, the Company and the Transfer Agent
agree as follows:
1. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise
requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the
Articles of Incorporation, Declaration of Trust, Partnership
Agreement, or similar organizational document as the case may be,
of the Company as the same may be amended from time to time.
(b) "Authorized Person" shall be deemed to include
any person, whether or not such person is an officer or employee
of the Company, duly authorized to give Oral Instructions or
Written Instructions on behalf of the Company as indicated in a
certificate furnished to the Transfer Agent pursuant to Section
4(c) hereof as may be received by the Transfer Agent from time to
time.
(c) "Board of Directors" shall mean the Board of
Directors, Board of Trustees or, if the Company is a limited
partnership, the General Partner(s) of the Company, as the case
may be.
(d) "Commission" shall mean the Securities and
Exchange Commission.
(e) "Company" shall mean the entity executing this
Agreement, and each Portfolio listed on Exhibit 1 or hereafter
created and made subject to this Agreement in accordance with
Section 17.
(f) "Custodian" refers to any custodian or
subcustodian of securities and other property which the Company
may from time to time deposit, or cause to be deposited or held
under the name or account of such a custodian pursuant to a
Custodian Agreement.
(g) "1940 Act" shall mean the Investment Company Act
of 1940.
(h) "Oral Instructions" shall mean instructions,
other than Written Instructions, actually received by the Transfer
Agent from a person reasonably believed by the Transfer Agent to
be an Authorized Person.
(i) "Prospectus" shall mean the most recently dated
Company Prospectuses and Statements of Additional Information,
including any supplements thereto if any, which have become
effective under the Securities Act of 1933 and the 1940 Act.
(j) "Shares" refers collectively to such shares of
capital stock, beneficial interest or limited partnership
interests, as the case may be, of the Company as may be issued
from time to time and, if the Company is a closed-end or a series
Company, as such terms are used in the 1940 Act any other classes
or series of stock, shares of beneficial interest or limited
partnership interests that may be issued from time to time.
(k) "Shareholder" shall mean a holder of shares of
capital stock, beneficial interest or any other class or series,
and also refers to partners of limited partnerships.
(l) "Written Instructions" shall mean a written
communication signed by a person reasonably believed by the
Transfer Agent to be an Authorized Person and actually received by
the Transfer Agent. Written Instructions shall include manually
executed originals and authorized electronic transmissions,
including telefacsimile of a manually executed original or other
process.
2. Appointment of the Transfer Agent. The Company hereby
appoints and constitutes the Transfer Agent as transfer agent,
registrar and dividend disbursing agent for Shares of the Company
and as shareholder servicing agent for the Company. The Transfer
Agent accepts such appointments and agrees to perform the duties
hereinafter set forth.
3. Compensation.
(a) The Company will compensate or cause the
Transfer Agent to be compensated for the performance of its
obligations hereunder in accordance with the fees set forth in the
written schedule of fees annexed hereto as Schedule A and
incorporated herein. The Transfer Agent will transmit an invoice
to the Company as soon as practicable after the end of each
calendar month which will be detailed in accordance with Schedule
A, and the Company will pay to the Transfer Agent the amount of
such invoice within fifteen (15) days after the Company's receipt
of the Invoice.
In addition, the Company agrees to pay, and will be
billed separately for, out-of-pocket expenses incurred by the
Transfer Agent in the performance of its duties hereunder.
Out-of-pocket expenses shall include, but shall not be limited to,
the items specified in the written schedule of out-of-pocket
charges annexed hereto as Schedule B and incorporated herein.
Schedule B may be modified by the Transfer Agent upon mutual
consent of the parties hereto. Unspecified out-of-pocket expenses
shall be limited to those out-of-pocket expenses reasonably
incurred by the Transfer Agent in the performance of its
obligations hereunder. Reimbursement by the Company for expenses
incurred by the Transfer Agent in any month shall be made as soon
as practicable but no later than 15 days after the receipt of an
itemized bill from the Transfer Agent.
(b) Any compensation agreed to hereunder may be
adjusted from time to time by attaching to Schedule A, a revised
fee schedule executed and dated by the parties hereto.
4. Documents. In connection with the appointment of the
Transfer Agent the Company shall deliver or caused to be delivered
to the Transfer Agent the following documents on or before the
date this Agreement goes into effect, but in any case within a
reasonable period of time for the Transfer Agent to prepare to
perform its duties hereunder:
(a) If applicable, specimens of the certificates for Shares of
the Company;
(b) All account application forms and other documents relating
to Shareholder accounts or to any plan, program or service offered
by the Company;
(c) A signature card bearing the signatures of any officer of
the Company or other Authorized Person who will sign Written
Instructions or is authorized to give Oral Instructions;
(d) A certified copy of the Articles of Incorporation, as
amended;
(e) A certified copy of the By-laws of the Company, as amended;
(f) A copy of the resolution of the Board of Directors
authorizing the execution and delivery of this Agreement;
(g) A certified list of Shareholders of the Company with the
name, address and taxpayer identification number of each
Shareholder, and the number of Shares of the Company held by each,
certificate numbers and denominations (if any certificates have
been issued), lists of any accounts against which stop transfer
orders have been placed, together with the reasons therefor, and
the number of Shares redeemed by the Company; and
(h) An opinion of counsel for the Company with respect to the
validity of the Shares and the status of such Shares under the
Securities Act of 1933, as amended.
5. Further Documentation. The Company will also furnish
the Transfer Agent with copies of the following documents promptly
after the same shall become available:
(a) each resolution of the Board of Directors
authorizing the issuance of Shares;
(b) any registration statements filed on behalf of
the Company and all pre-effective and post-effective amendments
thereto filed with the Commission;
(c) a certified copy of each amendment to the
Articles of Incorporation or the By-laws of the Company;
(d) certified copies of each resolution of the Board
of Directors or other authorization designating Authorized
Persons; and
(e) such other certificates, documents or opinions
as the Transfer Agent may reasonably request in connection with
the performance of its duties hereunder.
6. Representations of the Company. The Company
represents to the Transfer Agent that all outstanding Shares are
validly issued, fully paid and non-assessable. When Shares are
hereafter issued in accordance with the terms of the Company's
Articles of Incorporation and its Prospectus, such Shares shall be
validly issued, fully paid and non-assessable.
7. Distributions Payable in Shares. In the event that
the Board of Directors of the Company shall declare a distribution
payable in Shares, the Company shall deliver or cause to be
delivered to the Transfer Agent written notice of such declaration
signed on behalf of the Company by an officer thereof, upon which
the Transfer Agent shall be entitled to rely for all purposes,
certifying (i) the identity of the Shares involved, (ii) the
number of Shares involved, and (iii) that all appropriate action
has been taken.
8. Duties of the Transfer Agent. The Transfer Agent
shall be responsible for administering and/or performing those
functions typically performed by a transfer agent; for acting as
service agent in connection with dividend and distribution
functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with
the Custodian) of Shares in accordance with the terms of the
Prospectus, applicable law and this Agreement including without
limitation, those duties specified in Schedule C attached hereto.
In addition, the Company shall deliver to the Transfer Agent all
notices issued by the Company with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation or
By-laws of the Company or as required by law and shall perform
such other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required
thereby.
9. Record Keeping and Other Information. The Transfer
Agent shall create and maintain all records required of it
pursuant to its duties hereunder and as set forth in Schedule C in
accordance with all applicable laws, rules and regulations,
including records required by Section 31(a) of the 1940 Act. All
such records shall be the property of the Company and shall be
available during regular business hours for inspection, copying
and use by the Company. Where applicable, such records shall be
maintained by the Transfer Agent for the periods and in the places
required by Rule 31a-2 under the 1940 Act. Upon termination of
this Agreement, the Transfer Agent shall deliver all such records
to the Company or such person as the Company may designate.
Upon reasonable notice by the Company, the Transfer Agent
shall make available during regular business hours such of its
facilities and premises employed in connection with the
performance of its duties under this Agreement for reasonable
visitation by the Company, or any person retained by the Company
as may be necessary for the Company to evaluate the quality of the
services performed by the Transfer Agent pursuant hereto.
10. Other Duties. In addition to the duties set forth in
Schedule C, the Transfer Agent shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from
time to time be agreed upon in writing between the Company and the
Transfer Agent. The compensation for such other duties and
functions shall be reflected in a written amendment to Schedule A
or B and the duties and functions shall be reflected in an
amendment to Schedule C, both dated and signed by authorized
persons of the parties hereto.
11. Reliance by Transfer Agent; Instructions.
(a) Provided the standard of care in Section 13 has
been met, the Transfer Agent will have no liability when acting
upon Written or Oral Instructions believed to have been executed
or orally communicated by an Authorized Person and will not be
held to have any notice of any change of authority of any person
until receipt of a Written Instruction thereof from the Company
pursuant to Section 4(c). Provided the standard of care in Section
13 has been met, the Transfer Agent will also have no liability
when processing Share certificates which it reasonably believes to
bear the proper manual or facsimile signatures of the officers of
the Company and the proper countersignature of the Transfer Agent.
(b) At any time, the Transfer Agent may apply to any
Authorized Person of the Company for Written Instructions and may
seek advice from legal counsel for the Company, or its own legal
counsel, with respect to any matter arising in connection with
this Agreement, and provided the standard of care in Section 13
has been met, it shall not be liable for any action taken or not
taken or suffered by it in good faith in accordance with such
Written Instructions or in accordance with the opinion of counsel
for the Company or for the Transfer Agent. Written Instructions
requested by the Transfer Agent will be provided by the Company
within a reasonable period of time. In addition, the Transfer
Agent, its officers, agents or employees, shall accept Oral
Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Company only if said
representative is an Authorized Person. The Company agrees that
all Oral Instructions shall be followed within one business day by
confirming Written Instructions, and that the Company's failure to
so confirm shall not impair in any respect the Transfer Agent's
right to rely on Oral Instructions. The Transfer Agent shall have
no duty or obligation to inquire into, nor shall the Transfer
Agent be responsible for, the legality of any act done by it upon
the request or direction of a person reasonably believed by the
Transfer Agent to be an Authorized Person.
(c) Notwithstanding any of the foregoing provisions
of this Agreement, the Transfer Agent shall be under no duty or
obligation to inquire into, and shall not be liable for: (i) the
legality of the issuance or sale of any Shares or the sufficiency
of the amount to be received therefor; (ii) the legality of the
redemption of any Shares, or the propriety of the amount to be
paid therefor; (iii) the legality of the declaration of any
dividend by the Board of Directors, or the legality of the
issuance of any Shares in payment of any dividend; or (iv) the
legality of any recapitalization or readjustment of the Shares.
12. Acts of God, etc. The Transfer Agent will not be
liable or responsible for delays or errors by acts of God or by
reason of circumstances beyond its control, including acts of
civil or military authority, national emergencies, labor
difficulties, mechanical breakdown, insurrection, war, riots, or
failure or unavailability of transportation, communication or
power supply, fire, flood or other catastrophe.
In the event of equipment failures beyond the Transfer
Agent's control, the Transfer Agent shall, at no additional
expense to the Company, take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
The foregoing obligation shall not extend to computer terminals
located outside of premises maintained by the Transfer Agent. The
Transfer Agent shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable
provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
13. Duty of Care and Indemnification. The Transfer Agent
shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within commercially
reasonable limits to insure the accuracy and completeness of all
services performed under this Agreement. The Company will
indemnify the Transfer Agent against and hold it harmless from any
and all losses, claims, damages, liabilities or expenses of any
sort or kind (including reasonable counsel fees and expenses)
resulting from any claim, demand, action or suit or other
proceeding (a "Claim") arising directly or indirectly from any
action or thing which the Transfer Agent takes or does or omits to
take or do (i) at the request or on the direction of or in
reliance on the advice of the Company; (ii) upon Oral or Written
Instructions; (iii) in reliance on any records or documents
received from the Company or any Agent of the Company, including
the prior transfer agent; (iv) under the terms of this Agreement;
and (v) the offer or sale of Shares in violation of any
requirement under Federal or State Securities Laws, provided that
neither the Transfer Agent nor any of its nominees or
sub-contractors shall be indemnified against any liability to the
Company or to its Shareholders (or any expenses incident to such
liability) arising out of the Transfer Agent's or such nominee's
or such sub-contractor's own willful misfeasance, bad faith or
negligence or reckless disregard of its duties in connection with
the performance of its duties and obligations specifically
described in this Agreement.
In any case in which the Company may be asked to indemnify
or hold the Transfer Agent harmless, the Company shall be advised
of all pertinent facts concerning the situation in question. The
Transfer Agent will notify the Company promptly after identifying
any situation which it believes presents or appears likely to
present a claim for indemnification against the Company although
the failure to do so shall not prevent recovery by the Transfer
Agent except and to the extent the Company has been prejudiced
thereby. The Company shall have the option to defend the Transfer
Agent against any Claim which may be the subject of this
indemnification, and, in the event that the Company so elects,
such defense shall be conducted by counsel chosen by the Company
and reasonably satisfactory to the Transfer Agent, and thereupon
the Company shall take over complete defense of the Claim and the
Transfer Agent shall sustain no further legal or other expenses in
respect of such Claim. The Transfer Agent will not confess any
Claim or make any compromise in any case in which the Company will
be asked to provide indemnification, except with the Company's
prior written consent. The obligations of the parties hereto under
this Section shall survive the termination of this Agreement.
14. Consequential Damages. In no event and under no
circumstances shall either party under this Agreement be liable to
the other party for consequential or indirect loss of profits,
reputation or business or any other special damages under any
provision of this Agreement or for any act or failure to act
hereunder.
15. Term and Termination.
(a) This Agreement shall be effective as of the
dates first written above with respect to the Company's respective
series and shall continue until _________, 1998 except as provided
in subparagraph (b) of this Section and except that the Company
may terminate this Agreement if the Transfer Agent breaches its
duty of care set forth in Section 13 and such breach is not cured
within ninety (90) days after written notice of the breach has
been received by the Transfer Agent from the Company. After
__________, 1998, this Agreement shall continue indefinitely until
terminated by either party, with or without cause, upon written
notice to the other party given at least ninety (90) days prior to
such date, except that the Agreement may be terminated at any time
as provided in subparagraph (b) of this Section.
(b) The Transfer Agent represents that it is
currently registered with the appropriate Federal agency for the
registration of Transfer Agents, and that it will remain so
registered for the duration of this Agreement. The Transfer Agent
agrees that it will promptly notify the Company in the event of
any material change in its status as a registered Transfer Agent.
Should the Transfer Agent fail to be registered with the
appropriate Federal agency as a Transfer Agent at any time during
this Agreement, the Company may, on written notice to the Transfer
Agent, immediately terminate this Agreement.
(c) Upon termination of this Agreement and (unless
this Agreement is terminated pursuant to subparagraph (b) of this
Section 15, or unless the Transfer Agent has breached the standard
of care in Section 13 and such breach is incurred on the date
notice of termination is given) at the expense of the Company, the
Transfer Agent will deliver to such successor a certified list of
shareholders of the Company (with names and addresses), and all
other relevant books, records, correspondence and other Company
records or data in the possession of the Transfer Agent, and the
Transfer Agent will cooperate with the Company and any successor
transfer agent or agents in the substitution process.
16. Confidentiality. Both parties hereto agree that any
non public information obtained hereunder concerning the other
party is confidential and may not be disclosed to any other person
without the consent of the other party, except as may be required
by applicable law or at the request of the Commission or other
governmental agency. The Transfer Agent agrees that it shall not
use any non-public information for any purpose other than
performance of its duties or obligations hereunder. The
obligations of the parties under this Section shall survive the
termination of this Agreement. The parties further agree that a
breach of this Section would irreparably damage the other party
and accordingly agree that each of them is entitled, without bond
or other security, to an injunction or injunctions to prevent
breaches of this provision. Without limiting the foregoing, the
Transfer Agent agrees on behalf of itself and its nominees,
sub-contractors and employees to treat confidentially all records
and other information relative to the Company and its prior,
present or potential Shareholders.
17. Additional Portfolios. In the event that the Company
establishes one or more Portfolios in addition to those identified
in Exhibit 1, with respect to which the Company desires to have
the Transfer Agent render services as transfer agent under the
terms hereof, the Company shall so notify the Transfer Agent in
writing, and if the Transfer Agent agrees in writing to provide
such services, Exhibit 1 shall be amended to include such
additional Portfolios.
18. Amendment. This Agreement may only be amended or
modified by a written instrument executed by both parties.
19. Subcontracting. On thirty (30) days prior written
notice to the Company, the Transfer Agent may assign its rights
and delegate its duties hereunder to any wholly-owned direct or
indirect subsidiary of First Data Corporation provided that (i)
the delegate agrees with the Transfer Agent to comply with all
relevant provisions of the 1940 Act; (ii) the Transfer Agent and
such delegate shall promptly provide such information as the
Company may request, and respond to such question as the Company
may ask, relative to the delegation, including (without
limitation) the capabilities of the delegate; (iii) the delegation
of such duties shall not relieve the Transfer Agent of any of its
duties hereunder;
20. Miscellaneous.
(a) Notices. Any notice or other instrument
authorized or required by this Agreement to be given in writing to
the Company or the Transfer Agent, shall be sufficiently given if
addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate
in writing.
To the Company:
Lee P. Munder
President, St. Clair Funds, Inc.
480 Pierce Street - Suite 300
Birmingham, Michigan 48009
To the Transfer Agent:
First Data Investor Services Group, Inc..
4400 Computer Drive
Westborough, Massachusetts 01581
Attention: President
with a copy to: the Transfer Agents General Counsel (same
address)
(b) Successors. This Agreement shall extend to and
shall be binding upon the parties hereto, and their respective
successors.
(c) Governing Law. This Agreement shall be governed
exclusively by the laws of the Commonwealth of Massachusetts
without reference to the choice of law provisions thereof.
(d) Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an
original; but such counterparts shall, together, constitute only
one instrument.
(e) Captions. The captions of this Agreement are
included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their
construction or effect.
(f) Use of Transfer Agent's Name. The Company shall
not use the name of the Transfer Agent in any Prospectus,
Statement of Additional Information, shareholders' report, sales
literature or other material relating to the Company in a manner
not approved prior thereto in writing; provided, that the Transfer
Agent need only receive notice of all reasonable uses of its name
which merely refer in accurate terms to its appointment and
services hereunder or which are required by any Government agency
or applicable law or rule.
(g) Use of Company's Name. The Transfer Agent shall
not use the name of the Company or material relating to the
Company on any documents or forms for other than internal use in a
manner not approved prior thereto in writing; provided, that the
Company need only receive notice of all reasonable uses of its
name which merely refer in accurate terms to the appointment of
the Transfer Agent or which are required by any government agency
or applicable law or rule.
(h) Independent Contractors. The parties agree that
they are independent contractors and not partners or co-venturers.
(i) Entire Agreement; Severability. This Agreement
and the Schedules attached hereto constitute the entire agreement
of the parties hereto relating to the matters covered hereby and
supersede any previous agreements. If any provision is held to be
illegal, unenforceable or invalid for any reason, the remaining
provisions shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as of
the day and year first above written.
ST. CLAIR FUNDS, INC.
By: _______________________________
Title: Vice President & Chief Financial Officer
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: ______________________________
Title: Executive Vice President
Exhibit 1
LIST OF PORTFOLIOS
dated as of ____________, 1997
Liquidity Plus Money Market Fund
Munder S&P 500 Index Equity Fund
Munder S&P MidCap Index Equity Fund
Munder S&P SmallCap Index Equity Fund
Munder Foreign Equity Fund
Munder Aggregate Bond Index Fund
Schedule A
TRANSFER AGENT FEES
Liquidity Plus Money Market Fund
1) Asset
Based Charge:
Based on the total net assets of the
companies (as defined below*)
First $2.8 billion of net assets @ 2.0
basis points
Next $2.2 billion of aggregate net
assets @ 1.5 basis points
Over $5 billion of aggregate net assets
@ 1.0 basis points
Other
Fees:
IRA accounts will be charged $10.00 per
annum
NSCC Transaction Charge is $.15 per
financial transaction
2) One-Time
Conversion
Fee:
The conversion expenses are estimated
at $150,000 of which Transfer Agent
will absorb 50%
3) System
Development:
Client defined system enhancements will
be agreed upon by Transfer Agent and
Munder Capital and billed at a rate of
$100.00 per hour
* Companies shall include The Munder Funds Trust, The Munder
Funds, Inc. (other than the Munder All-Season Conservative Fund,
Munder All-Season Aggressive Fund and Munder All-Season Moderate
Fund) and the Liquidity Plus Money Market Fund of St. Clair Funds,
Inc.
Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index Equity
Fund, Munder S&P SmallCap Index Equity Fund, Munder Foreign Equity
Fund and Munder Aggregate Bond Index Fund (the "Variable Annuity
Funds")
$1,000 per month with respect to the Variable Annuity Funds.
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for
applicable out-of-pocket expenses, including, but not limited to
the following items:
* Microfiche/microfilm production
* Magnetic media tapes and freight
* Printing costs, including certificates, envelopes, checks
and stationery
* Postage (bulk, pre-sort, ZIP+4, barcoding, first class)
direct pass through to the Fund
* Due diligence mailings
* Telephone and telecommunication costs, including all lease,
maintenance and line costs
* Ad hoc reports
* Proxy solicitations, mailings and tabulations
* Daily & Distribution advice mailings
* Shipping, Certified and Overnight mail and insurance
* Year-end form production and mailings
* Terminals, communication lines, printers and other equipment
specifically required by the Fund
* Duplicating services
* Courier services
* Incoming and outgoing wire charges
* Overtime, as approved by the Fund
* Temporary staff, as approved by the Fund
* Travel and entertainment, as approved by the Fund
* Federal Reserve charges for check clearance
* Record retention, retrieval and destruction costs
* Third party audit reviews
* Customized systems development after the conversion at the
rate of $100.00 per hour
* Insurance
* Such other miscellaneous expenses reasonably incurred by the
Transfer Agent in performing its duties and responsibilities under
this Agreement as approved by the Fund
The Company agrees that postage and mailing expenses will be
paid on the day of or prior to mailing as agreed with the Transfer
Agent. In addition, the Company will promptly reimburse the
Transfer Agent for any other unscheduled expenses incurred by the
Transfer Agent whenever the Company and the Transfer Agent
mutually agree that such expenses are not otherwise properly borne
by the Transfer Agent as part of its duties and obligations under
the Agreement.
Schedule C
DUTIES OF THE TRANSFER AGENT
1. Shareholder Information. The Transfer Agent or
its agent shall maintain a record of the number of Shares held by
each holder of record which shall include name, address, taxpayer
identification and which shall indicate whether such Shares are
held in certificates or uncertificated form, and if in
certificated form shall include certificate numbers and
denominations; historical information regarding the account of
each Shareholder, including dividends and distributions paid and
the date and price for all transactions on a Shareholder's
account; any stop or restraining order placed against
Shareholder's account; any correspondence relating to the current
maintenance of a Shareholder's account; information with respect
to withholdings; and, any information required in order for the
Transfer Agent to perform any calculations contemplated or
required by its Agreement with the Company. The Transfer Agent
shall keep a record of all redemption checks and dividend checks
returned by postal authorities, and shall maintain such records as
are required for the Company to comply with the escheat laws of
any State or other authority; shall keep a record of all
redemption checks and dividend checks returned by the postal
authorities for the period of time they are the Transfer Agent of
record and for any records provided by and receipt acknowledged by
both parties from any prior Transfer Agent by means of a records
certification letter; otherwise the Transfer Agent is not
responsible for the said records. The Transfer Agent shall
maintain such records as are required for The Company to comply
with the escheat laws of any state or other authority for the
period they are Transfer Agent. The Company will be responsible
for notifying and instructing the Transfer Agent to commence the
escheatment process on their behalf, for any or all states.
2. Shareholder Services. The Transfer Agent or its
agent will investigate all inquiries from Shareholders of the
Company relating to Shareholder accounts and will respond to all
communications from Shareholders and others relating to its duties
hereunder and such other correspondence as may from time to time
be mutually agreed upon between the Transfer Agent and the
Company.
3. Share Certificates.
(a) At the expense of the Company, it shall supply
the Transfer Agent or its agent with an adequate supply of blank
share certificates to meet the Transfer Agent or its agent's
requirements therefor. Such Share certificates shall be properly
signed by facsimile. The Company agrees that, notwithstanding the
death, resignation, or removal of any officer of the Company whose
signature appears on such certificates, the Transfer Agent or its
agent may continue to countersign certificates which bear such
signatures until otherwise directed by Written Instructions.
(b) The Transfer Agent or its agent shall issue
replacement Share certificates in lieu of certificates which have
been lost, stolen or destroyed, upon receipt by the Transfer Agent
or its agent of properly executed affidavits and lost certificate
bonds, in form satisfactory to the Transfer Agent or its agent,
with the Company and the Transfer Agent or its agent as obligees
under the bond.
(c) The Transfer Agent or its agent shall also
maintain a record of each certificate issued and/or canceled the
number of Shares represented thereby and the holder of record.
With respect to Shares held in open accounts or uncertificated
form, i.e., no certificate being issued with respect thereto, the
Transfer Agent or its agent shall maintain comparable records of
the record holders thereof, including their names, addresses and
taxpayer identification. The Transfer Agent or its agent shall
further maintain a stop transfer record on lost and/or replaced
certificates.
4. Mailing Communications to Shareholders; Proxy
Materials. The Transfer Agent or its agent will address and mail
to Shareholders of the Company, all communicators by the Company
to such Shareholders, including without limitation, confirmations
of purchases and sales of Company shares, monthly statements, all
reports to Shareholders, dividend and distribution notices and
proxy material for the Company's meetings of Shareholders. In
connection with meetings of Shareholders, the Transfer Agent or
its Agent will prepare Shareholder lists, mail and certify as to
the mailing of proxy materials, process and tabulate returned
proxy cards, report on proxies voted prior to meetings, act as
inspector of election at meetings and certify Shares voted at
meetings.
5. Sales of Shares.
(a) Issuance of Shares. Upon receipt of a
purchase order from or on behalf of an investor for the purchase
of Shares and sufficient information to enable the Transfer Agent
to establish a Shareholder account (if it is a new account) and to
determine which class of Shares the investor wishes to purchase,
and after confirmation of receipt of payment in the form described
in the Prospectus for the class of Shares involved, the Transfer
Agent shall issue and credit the account of the investor or other
record holder with Shares in the manner described in the
Prospectus relating to such Shares and shall prepare and mail the
appropriate confirmation in accordance with legal requirements.
(b) Suspension of Sale of Shares. The Transfer
Agent or its agent shall not be required to issue any Shares of
the Company where it has received a Written Instruction from the
Company or official notice from any appropriate authority that the
sale of the Shares of the Company has been suspended or
discontinued. The existence of such Written Instructions or such
official notice shall be conclusive evidence of the right of the
Transfer Agent or its agent to rely on such Written Instructions
or official notice.
(c) Returned Checks. In the event that any check or
other order for the payment of money is returned unpaid for any
reason, the Transfer Agent or its agent will: (i) give prompt
notice of such return to the Company or its designee; (ii) place a
stop transfer order against all Shares issued as a result of such
check or order; and (iii) take such actions as the Transfer Agent
may from time to time deem appropriate.
6. Transfer and Redemption.
(a) Requirements for Transfer or Redemption of
Shares. The Transfer Agent or its agent shall process all
requests to transfer or repurchase Shares in accordance with the
transfer or redemption procedures set forth in the Company's
Prospectus.
The Transfer Agent or its agent will transfer or
redeem Shares upon receipt of Oral or Written Instructions or
otherwise pursuant to the Prospectus and Share certificates, if
any, properly endorsed for transfer or redemption, accompanied by
such documents as the Transfer Agent or its agent reasonably may
deem necessary.
The Transfer Agent or its agent reserves the right to
refuse to transfer or redeem Shares until it is satisfied that the
endorsement on the instructions is valid and genuine. The Transfer
Agent or its agent also reserves the right to refuse to transfer
or redeem Shares until it is satisfied that the requested transfer
or redemption is legally authorized, and it shall incur no
liability for the refusal, in good faith, to make transfers or
redemptions which the Transfer Agent or its agent, in its good
judgment, deems improper or unauthorized, or until it is
reasonably satisfied that there is no basis to any claims adverse
to such transfer or redemption.
(b) Notice to Custodian and Company. When Shares
are redeemed, the Transfer Agent shall, upon receipt of the
instructions and documents in proper form, deliver to the
Company's Custodian and to the Company or its designee a
notification setting forth the number of Shares to be redeemed.
Such redeemed Shares shall be reflected on appropriate accounts
maintained by the Transfer Agent reflecting outstanding Shares of
the Company involved and Shares attributed to individual accounts.
(c) Payment of Redemption Proceeds. The Transfer
Agent shall, upon receipt of the moneys paid to it by the
Custodian for the redemption of Shares, pay such moneys as are
received from the Custodian, all in accordance with the procedures
described in the Written Instruction received by the Transfer
Agent from the Company. It is understood that the Transfer Agent
may arrange for the direct payment of redemption proceeds to
Shareholders by the Company's Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to
time by the Company, the Transfer Agent and the Company's
Custodian.
The Transfer Agent shall not process or effect any
redemption with respect to Shares of the Company after receipt by
the Transfer Agent of notification of the suspension of the
determination of the net asset value of the Company, provided the
Transfer Agent has had a reasonable time to act on such
notification.
7. Dividends.
(a) Notice to Agent and Custodian. Upon the
declaration of each dividend and each capital gains distribution
by the Board of Directors of the Company with respect to Shares of
the Company, the Company shall furnish or cause to be furnished to
the Transfer Agent or its agent a copy of a resolution of the
Company's Board of Directors certified by the Secretary of the
Company setting forth the date of the declaration of such dividend
or distribution, the ex-dividend date, the date of payment
thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share to the
shareholders of record as of that date, the total amount payable
to the Transfer Agent or its agent on the payment date and whether
such dividend or distribution is to be paid in Shares of such
class at net asset value.
On or before the payment date specified in such
resolution of the Board of Directors, the Custodian of the Company
will pay to the Transfer Agent sufficient cash to make payment to
the shareholders of record as of such payment date.
After deducting any amount required to be withheld by
any applicable tax laws, rules and/or regulations and/or other
applicable laws, the Transfer Agent shall in accordance with the
instructions in proper form from a Shareholder and the provisions
of the applicable dividend resolutions and Prospectus issue and
credit the Account of the Shareholder with Shares, or, if the
Shareholder so elects, pay such dividends or distributions in
cash.
In lieu of receiving from the Company's Custodian and
paying to Shareholders cash dividends or distributions, the
Transfer Agent may arrange for the direct payment of cash
dividends and distributions to Shareholders by the Company's
Custodian, in accordance with such procedures and controls as are
mutually agreed upon from time to time by and among the Company,
the Transfer Agent and the Company's Custodian.
The Transfer Agent shall prepare, file with the
Internal Revenue Services and other appropriate taxing
authorities, and address and mail to Shareholders such returns,
forms and information relating to dividends and distributions paid
by the Company as are required to be so prepared, filed and mailed
by applicable laws, rules and/or resolutions. On behalf of the
Company, the Transfer Agent shall mail certain requests for
Shareholders' certifications under penalties of perjury and pay on
a timely basis to the appropriate Federal authorities any taxes to
be withheld on dividends and distributions paid by the Company,
all as required by applicable Federal tax laws and regulations.
(b) Insufficient Funds for Payments. If the
Transfer Agent or its agent does not receive sufficient cash from
the Custodian to make total dividend and/or distribution payments
to all shareholders of the Company as of the record date, the
Transfer Agent or its agent will, upon notifying the Company,
withhold payment to all Shareholders of record as of the record
date until sufficient cash is provided to the Transfer Agent or
its agent.
8. Cooperation with Accountants. The Transfer
Agent shall cooperate with the Company's independent public
accountants and shall take all reasonable action in the
performance of its obligations under its agreement with the
Company to assure that the necessary information is made available
to such accountants for the expression of their opinions as such
as may be required by the Company from time to time.
9. Other Services. In accordance with the
Prospectus and such procedures and controls as are mutually agreed
upon from time to time by and among the Company, the Transfer
Agent and the Company's Custodian, the Transfer Agent shall (a)
arrange for issuance of Shares obtained through (i) transfers of
Trusts from Shareholders' accounts at financial institutions, (ii)
a pre-authorized check plan, if any and (iii) a right of
accumulation, if any; (b) arrange for the exchange of Shares for
shares of such other funds designated by the Company from time to
time; and (c) arrange for systematic withdrawals from the account
of a Shareholder participating in a systematic withdrawal plan, if
any.
Exhibit 1 to Schedule C
SUMMARY OF SERVICES
The services to be performed by the Transfer Agent or its
agent shall include the following:
A. DAILY RECORDS
Maintain daily the following information with respect
to each Shareholder account as received:
* Name and Address (Zip Code)
* Class of Shares
* Taxpayer Identification Number
* Balance of Shares held by Agent
* Beneficial owner code: i.e., male, female, joint tenant,
etc.
* Dividend code (reinvestment)
* Number of Shares held in certificate form
B. OTHER DAILY ACTIVITY
* Answer written inquiries relating to Shareholder accounts
(matters relating to portfolio management, distribution of Shares
and other management policy questions will be referred to the
Company).
* Process additional payments into established Shareholder
accounts in accordance with Written Instruction.
* Upon receipt of proper instructions and all required
documentation, process requests for repurchase of Shares.
* Identify redemption requests made with respect to accounts
in which Shares have been purchased within an agreed-upon period
of time for determining whether good funds have been collected
with respect to such purchase and process as agreed by the
Transfer Agent in accordance with Written Instructions set forth
by the Company.
* Examine and process all transfers of Shares, ensuring that
all transfer requirements and legal documents have been supplied.
* Issue and mail replacement checks.
* Open new accounts and maintain records of exchanges between
accounts.
* Furnish daily requests of transactions in Shares.
* Calculate sales load or compensation payment (front-end and
deferred) and provide such information to the Company, if any.
* Calculate dealer commissions for the Company, if any.
* Provide toll-free lines for direct Shareholder use, plus
customer liaison staff with on-line inquiry capacity.
* Mail duplicate confirmations to dealers of their client's
activity, whether executed through the dealer or directly with the
Transfer Agent, if any.
* Identify to each series or class of Shares property
belonging to such series or class, and in such reports,
confirmations and notices to the Company called for under this
Agreement identify the series or class to which such report,
confirmation or notice pertains.
C. DIVIDEND ACTIVITY
* Calculate and process Share dividends and distributions as
instructed by the Company.
* Compute, prepare and mail all necessary reports to
Shareholders or various authorities as requested by the Company.
Report to the Company reinvestment plan share purchases and
determination of the reinvestment price.
D. MEETINGS OF SHAREHOLDERS
* Cause to be mailed proxy and related material for all
meetings of Shareholders. Tabulate returned proxies (proxies must
be adaptable to mechanical equipment of the Transfer Agent or its
agents) and supply daily reports when sufficient proxies have been
received.
* Prepare and submit to the Company an Affidavit of Mailing.
* At the time of the meeting, furnish a certified list of
Shareholders, hard copy, microfilm or microfiche and, if requested
by the Company, Inspection of Election.
E. PERIODIC ACTIVITIES
* Cause to be mailed reports, Prospectuses, and any other
enclosures requested by the Company (material must be adaptable to
mechanical equipment of Transfer Agent or its agents).
* Receive all notices issued by the Company with respect to
the Shares in accordance with and pursuant to the Articles of
Incorporation and By-Laws and perform such other specific duties
as are set forth in the Articles of Incorporation and By-Laws
including a giving of notice of a special meeting and notice of
redemption in the circumstances and otherwise in accordance with
all relevant provisions of the Articles of Incorporation and
By-Laws.
* Furnish monthly reports of transactions in shares by type
(custodial, trust, Keogh, IRA, other) including numbers of
accounts.
* Furnish state-by-state registration and sales reports to the
Administrator.
* Provide detail for underwriter or broker confirmations and
other participating dealer Shareholder accounting, in accordance
with such procedures as may be agreed upon between the Company and
the Transfer Agent, if any.
* Provide Shareholder lists and statistical information
concerning accounts to the Company.
* Provide timely notification of Company activity and such
other information as may be agreed upon from time to time between
the Transfer Agent and the Custodian, to the Company or the
Custodian.
g:/shared/bankgrp/stclr/pea22/exh9d.doc
g:/shared/bankgrp/stclr/pea22/exh9d.doc
Exhibit 9(e)
FORM OF
PARTICIPATION AGREEMENT
AMONG
ST. CLAIR FUNDS, INC.,
AND
ZURICH-KEMPER LIFE INSURANCE COMPANY
AND
LONGROW SECURITIES INC.
THIS AGREEMENT, made and entered into this day of
__________ 1997 by and among St. Clair Funds, Inc. a Maryland
corporation (the "Fund"); [Zurich-Kemper], a
corporation (the "Company"), on its own behalf and on behalf of
each separate account of the Company named in Schedule 1 to this
Agreement as in effect at the time this Agreement is executed and
such other separate accounts that may be added to Schedule 1 from
time to time in accordance with the provisions of Article XI of
this Agreement (each such account referred to as the "Account");
and Longrow Securities Inc., a corporation organized under the
laws of (the "Distributor").
WHEREAS, the Fund is engaged in business as an open-end
management investment company and certain series of the Fund were
established for the purpose of serving as the investment vehicle
for separate accounts established for variable annuity contracts
(referred to as "Variable Insurance Products," the owners of such
products being referred to as "Product Owners") to be offered by
insurance companies which have entered into participation
agreements with the Fund ("Participating Insurance Companies");
and
WHEREAS, the common stock of the Fund (the "Fund shares")
consists of separate series ("Series"), each such series
representing an interest in a particular managed portfolio of
securities and other assets; and
WHEREAS, the Fund has filed or will file with the Securities
and Exchange Commission (the "SEC") and the SEC has declared or
will declare effective a registration statement (referred to
herein as the "Fund Registration Statement" and the prospectus
contained therein, or filed pursuant to Rule 497 under the
Securities Act of 1933, as amended (the "1933 Act"), referred to
herein as the "Fund Prospectus") on Form N-1A to register the
Series as open-end management investment companies under the
Investment Company Act of 1940, as amended (the "1940 Act"), and
the Fund shares under the 1933 Act; and
WHEREAS, the Company has filed or will file a registration
statement with the SEC to register under the 1933 Act interests in
certain variable annuity contracts described in Schedule 2 to this
Agreement as in effect at the time this Agreement is executed and
such other variable annuity contracts which may be added to
Schedule 2 from time to time in accordance with the terms and
provisions of the Agreement (such policies and contracts shall be
referred to herein collectively as the "Contracts," each such
registration statement for a class or classes of contracts listed
on Schedule 2 being referred to as the "Contracts Registration
Statement," and the prospectus with respect to the offering of the
Contracts being referred to as the "Prospectus" and the owners of
such contracts, as distinguished from all Product Owners, being
referred to as "Contract Owners"); and
WHEREAS, the Accounts, validly existing separate accounts,
duly authorized by resolution of the Board of Directors of the
Company, set aside and invest assets attributable to the
Contracts; and
WHEREAS, the Company has registered or will register the
Accounts with the SEC each as a unit investment trust under the
1940 Act before certain Contracts are issued by the Account; and
WHEREAS, the Distributor is registered as a broker-dealer
with the SEC under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Distributor and the Fund have entered into an
agreement (the "Fund Distribution Agreement") pursuant to which
the Distributor will distribute Fund shares; and
WHEREAS, to the extent permitted by applicable insurance
laws and regulation, the Company intends to purchase Series shares
of the Series named in Schedule 3 to this Agreement on behalf of
the Accounts to fund the Contracts and the Distributor is
authorized to sell such Series shares to the Accounts at net asset
value;
NOW, THEREFORE, in consideration of their mutual promises,
the Company, the Fund and the Distributor agree as follows:
Article I. Sale of Fund Shares
1.1 The Distributor agrees to sell to the Company those
Series shares which the Company orders on behalf of the Account,
executing such orders on a daily basis in accordance with Section
1.4 of this Agreement.
1.2 The Fund agrees to make the shares of its Series
available for purchase by the Company on behalf of the Account at
the then applicable net asset value per share on Business Days as
defined in Section 1.4 of this Agreement, and the Fund shall use
best efforts to calculate such net asset value on each such
Business Day. Notwithstanding any other provision in this
Agreement to the contrary, the Board of Directors of the Fund (the
"Fund Board") may suspend or terminate the offering of Series
shares, if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of
the Fund Board acting in good faith and in light of its fiduciary
duties under Federal and any applicable state laws, suspension or
termination is necessary and in the best interests of the
shareholders of any Series (it being understood that
"shareholders" for this purpose shall mean Product Owners).
1.3 The Fund agrees to redeem, at the Company's request,
any full or fractional shares of the Fund held by the Account or
the Company, executing such requests at the net asset value on a
daily basis in accordance with Section 1.4 of this Agreement, the
applicable provisions of the 1940 Act and the then currently
effective Prospectus. Notwithstanding the foregoing, the Fund may
delay redemption of Fund shares to the extent permitted by the
1940 Act, any rules, regulations or orders thereunder, or the then
currently effective Prospectus.
1.4 (a) For purposes of Sections 1.1, 1.2 and 1.3, the
Company shall be the agent of the Fund for the limited purpose of
receiving redemption and purchase requests from the Account (but
not from the general account of the Company) based on transactions
in the Account's securities or units, and receipt on any Business
Day by the Company as such limited agent of the Fund prior to the
time prescribed in the current Prospectus (which as of the date of
execution of this Agreement is 4:00 p.m., Eastern Time) shall
constitute receipt by the Fund on that same Business Day, provided
that the Fund receives notice of such redemption or purchase
request by 9:00 a.m., Eastern Time, on the next following Business
Day. For purposes of this Agreement, "Business Day" shall mean
any day on which the New York Stock Exchange is open for trading
and on which the Series calculate their respective net asset
values pursuant to rules of the SEC.
(b) The Company shall pay for shares of each Series
on the same day that it places an order with the Fund to purchase
those Series shares. Payment for Series shares will be made by
the Account or the Company in Federal Funds transmitted to the
Fund by wire to be received no later than 4:00 p.m., Eastern Time,
on the day the Fund is properly notified of the purchase order for
Series shares (unless sufficient proceeds are available from
redemption of shares of other Series). The Fund will, upon
receipt of notice of the purchase order, inform the Investment
Advisor of such order. In the event that the payment is not
received by the Fund by 4:00 p.m., Eastern Time, on the same day
the Company places an order with the Fund, the Company will
reimburse the Fund for all interest, charges, costs, fees or other
expenses, if any, imposed on the Fund, and for all losses, if any,
incurred by the Fund as a result of such delayed payment.
(c) Payment for Series shares redeemed by the
Account or the Company will be made in Federal Funds transmitted
to the Company by wire on the next Business Day after the Fund is
notified of the redemption order of Series shares provided such
notification is received by the Fund by 4:00 p.m., Eastern Time
(unless redemption proceeds are applied to the purchase of shares
of other Series), except that the Fund reserves the right to
redeem shares in assets other than cash in accordance with the
Fund Registration Statement and to delay payment of redemption
proceeds, but in no event may such payment be delayed longer than
the period permitted under Section 22(e) of the 1940 Act. Neither
the Fund nor the Distributor shall bear any responsibility
whatsoever for the proper disbursement or crediting of redemption
proceeds; the Company alone shall be responsible for such action.
1.5 Issuance and transfer of Fund shares will be by book
entry only. Stock certificates will not be issued to the Company
or the Accounts. Purchase and redemption orders for Fund shares
will be recorded in an appropriate ledger for the Accounts or the
appropriate subaccount of the Accounts.
1.6 The Fund shall furnish notice as soon as reasonably
practicable to the Company of any income dividends or capital gain
distributions payable on any Series shares. The Company, on its
behalf and on behalf of the Accounts, hereby elects to receive all
such dividends and distributions as are payable on any Series
shares in the form of additional shares of that Series. The
Company reserves the right, on its behalf and on behalf of the
Accounts, to revoke this election and to receive all such
dividends in cash. The Fund shall notify the Company of the
number of Series shares so issued as payment of such dividends and
distributions.
1.7 The Fund shall use its best efforts to make the net
asset value per share for each Series available to the Company by
6:00 p.m., Eastern Time, each Business Day, and in any event, as
soon as reasonably practicable after the net asset value per share
for such Series is calculated, and shall calculate such net asset
value in accordance with the then currently effective Prospectus.
Neither the Fund, any Series, the Distributor, nor any of their
affiliates shall be liable for any information provided to the
Company pursuant to the Agreement which information is based on
incorrect information supplied by the Company or other
Participating Insurance Company to the Fund or the Distributor.
1.8 The Fund and the Distributor agree that Fund shares
will be sold only to Participating Insurance Companies and their
separate accounts or such other persons, including qualified
pension plans, as are permitted under applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and
regulations promulgated thereunder, the sale to which will not
impair the tax treatment currently afforded the Contracts. The
Fund and the Distributor will not sell Fund shares to any
insurance company, separate account or other persons unless an
agreement complying with Article VII of this Agreement is in
effect to govern such sales. No Fund shares of any Series will be
sold directly to the general public.
1.9 (a) Until this Agreement is terminated pursuant to
Article X, the Company shall promote the Fund on the same basis as
other funding vehicles available under the Contracts. Funding
vehicles other than those listed on Schedule 3 to this Agreement
may be available for the investment of the cash value of the
Contracts, provided, however, (i) any such vehicle or series
thereof, has investment objectives and policies that are
substantially different from the investment objectives and
policies of the Series available hereunder; (ii) the Company gives
the Fund and the Distributor 45 days written notice of its
intention to make such other investment vehicle available as a
funding vehicle for the Contracts; and (iii) unless such other
investment company was available as a Fund vehicle for the
Contracts prior to the date of this Agreement and the Company has
so informed the Fund and the Distributor prior to their signing
this Agreement, the Fund or Distributor consents in writing to the
use of such other vehicle, such consent not to be unreasonably
withheld.
(b) The Company shall not, without prior notice to
the Distributor (unless otherwise required by applicable law) take
any action to operate the Accounts as management investment
companies under the 1940 Act.
(c) The Company shall not, without prior notice to
the Distributor (unless otherwise required by applicable law),
induce Contract Owners to change or modify the Fund or change the
Fund's distributor or investment adviser.
Article II. Representations and Warranties
2.1 The Company represents and warrants (a) that the
Contracts are registered under the 1933 Act or will be so
registered before the issuance thereof, (b) that the Contracts
will be issued in compliance in all material respects with all
applicable Federal securities and state insurance and securities
laws, and (c) that the Company will require of every person
distributing the Contracts (i) that the Contracts be offered and
sold in compliance in all material respects with all applicable
Federal and state laws and regulations promulgated thereunder, and
(ii) that at the time it is issued each Contract is a suitable
purchase for the applicant therefor under applicable state
insurance laws. The Company further represents and warrants that
it is an insurance company duly organized, validly existing and in
good standing under applicable law and that it has legally and
validly authorized the accounts as separate accounts under
applicable state insurance laws and regulations. The Company
further represents that for Accounts which are governed by the
1940 Act, the Company has registered or, prior to the issuance of
any Contracts, will register such Accounts as such unit investment
trusts in accordance with the provisions of the 1940 Act (unless
exempt therefrom) to serve as separate Accounts for the Contracts
so requiring a registered account, and that it will maintain such
registration for so long as such Contracts are outstanding.
2.2 The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act
and duly authorized for issuance in accordance with applicable law
and that the Fund is and shall remain registered under the 1940
Act for so long as the Fund shares are sold. The Fund further
represents and warrants that it is a Maryland corporation duly
organized, validly existing and in good standing under the laws of
Maryland.
2.3 The Fund represents that it currently qualifies and
will make every effort to continue to qualify as a Regulated
Investment Company under Subchapter M of the Code, and to maintain
such qualification (under Subchapter M or any successor or similar
provision), and that it will notify the Company immediately upon
having a reasonable basis for believing that it has ceased to so
qualify or that it might not so qualify in the future.
2.4 The Fund represents that it will comply with Section
817(h) of the Code, and all regulations issued thereunder.
2.5 The Company represents that the Contracts are currently
and at the time of issuance will be treated as annuity contracts,
under applicable provisions of the Code. The Company shall make
every effort to maintain such treatment and shall notify the Fund
and the Distributor immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that
they might not be so treated in the future.
2.6 The Fund makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and
expenses and investment policies) complies with the insurance laws
or regulations of any state. The Company alone shall be
responsible for informing the Fund of any investment restrictions
imposed by state insurance law and applicable to the Fund;
provided, however, that upon being so informed by the Company, the
Fund shall abide by such investment restrictions.
2.7 The Distributor represents and warrants that the
Distributor is duly registered as a broker-dealer under the 1934
Act, a member in good standing with the NASD, and duly registered
as a broker-dealer under applicable state securities laws; its
operations are in compliance with applicable law, and it will
distribute the Fund shares according to applicable law. The
Distributor represents and warrants that it shall remain duly
registered in all material respects under all applicable federal
and state securities laws as required to perform its obligations
under this Agreement.
2.8 Each party to this Agreement represents and warrants
that it is not aware of any pending or threatened litigation
matter or claim or regulatory proceeding, investigation or
inquiry, involving such party or any of its affiliates, the
outcome of which would have a material adverse effect on this
Agreement or the transactions completed thereunder.
2.9 The Company represents and warrants that all of its
directors, officers, employees, and other individuals or entities
dealing with the money and/or securities of the Accounts are and
shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Accounts in an
amount not less than [$5 million]. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued
by a reputable bonding company. The Company agrees to hold for
the benefit of the Fund and to pay to the Fund any amounts lost
from larceny, embezzlement or other events covered by the
aforesaid bond to the extent such amounts properly belong to the
Fund pursuant to the terms of this Agreement. The Company agrees
to make all reasonable efforts to see that this bond or another
bond containing these provisions is always in effect, and agrees
to notify the Fund and the Distributor in the event that such
coverage no longer applies.
Article III. Prospectuses and Proxy Statements; Sales Materials
and Other Information
3.1 The Distributor shall provide the Company with as many
copies of the current Fund Prospectus (describing only the Series
listed on Schedule 3 attached hereto) as the Company may
reasonably request. The Company shall bear the expense of
printing copies of the current prospectus for the Contracts that
will be distributed to existing Contract Owners, and the Company
shall bear the expense of printing copies of the Fund Prospectus
that is used in connection with offering the contracts issued by
the Company. If requested by the Company in lieu thereof, the
Fund shall provide such documentation (including a final copy of
the new prospectus on diskette at the Fund's expense) and other
assistance as is reasonably necessary in order for the Company
once each year (or more frequently if the prospectus for the Fund
is amended) to have the prospectus for the Contracts and the Fund
Prospectus printed together in one document (such printing to be
at the Company's expense).
3.2 The Fund Prospectus shall state that the Statement of
Additional Information for the Fund is available from the
Distributor (or, in the Fund's discretion, the Fund Prospectus
shall state that such Statement is available from the Fund), and
the Distributor (or the Fund) shall provide such Statement free of
charge to the Company and to any outstanding or prospective
Contract Owner who requests such Statement.
3.3 The Fund shall provide the Company (at the Fund's
expense) with copies of its proxy material, shareholder reports
and other communications to shareholders in such quantities as the
Company shall reasonably request for distributing to Product
Owners.
3.4 The Company shall furnish each piece of sales
literature or other promotional material, if any, in which a
Series, the Fund or the Distributor is named. No such material
shall be used until approved by the Fund (or its designee) or the
Distributor, as applicable, at least ten business days prior to
its use. No such material shall be used, except with the prior
permission of the party or parties named therein. The Fund or its
designee reserves the right to reasonably object to the continued
use of any such sales literature or other promotional material in
which the Fund (or a Series thereof) or the Distributor is named,
and no such material shall be used if the Fund or its designee so
object.
3.5 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning
the Fund other than the information or representations contained
in the Fund Registration Statement or Fund Prospectus, as such
Fund Registration Statement, Fund Prospectus, as applicable, may
be amended or supplemented from time to time, or in reports or
proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or its designee, except
with the prior permission of the Fund or its designee.
3.6 The Fund and the Distributor shall not give any
information or make any representations on behalf of the Company
or concerning the Company, the Account or the Contracts other than
the information or representations contained in the Prospectus, as
such Prospectus may be amended or supplemented from time to time,
or in published reports of the Accounts which are in the public
domain or approved by the Company for distribution to Contract
Owners, or in sales literature or other promotional material
approved by the Company, except with the prior permission of the
Company.
3.7 The Fund will upon request of the Company provide to
the Company at least one complete copy of all Fund Registration
Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports,
proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action
letters, and all amendments or supplements to any of the above,
that relate to the Fund or Fund shares, promptly after the filing
of such document with the SEC or other regulatory authorities.
3.8 The Company will upon request of the Fund provide to
the Fund at least one complete copy of all Fund Registration
Statements, the Fund Prospectus, Statements of Additional
Information, reports, sales literature and other promotional
materials, if any, applications for exemptions, requests for
no-action letters, and all amendments or supplements to any of the
above, that relate to the Contracts or those Sub-Accounts of the
Accounts to which Contract purchase payments and value are
allocable, promptly after the filing of such document with the SEC
or other regulatory authorities.
3.9 For purposes of this Article III, the phrase "sales
literature or other promotional material" includes, but is not
limited to, advertisements (such as material published, or
designed for use, in a newspaper, magazine or other periodical,
radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures or other public media), sales
literature (i.e., any written communication distributed or made
generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, or reprints or excerpts of any other
advertisement, sales literature, or published article),
educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, Statements of
Additional Information, shareholder reports and proxy materials,
and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
Article IV. Voting
To the extent required by law, the Company shall:
(a) solicit voting instructions from Contract Owners;
(b) vote Fund shares of each Series attributable to Contract
Owners in accordance with instructions or proxies timely received
from such Contract Owners;
(c) vote Fund shares of each Series attributable to Contract
Owners for which no instructions have been received in the same
proportion as Fund shares of such Series for which instructions
have been timely received; and
(d) vote Fund shares of each Series held by the Company on its
own behalf or on behalf of the Account that are not attributable
to Contract Owners in the same proportion as Fund shares of such
Series for which instructions have been timely received.
Article V. Fees and Expenses
5.1 The Fund and Distributor shall pay no fee or other
compensation to the Company under this Agreement, except that if
the Fund or any Series adopts and implements a plan pursuant to
Rule 12b-1 under the 1940 Act to finance distribution expenses,
then the Distributor may make payments to the Company in amounts
agreed to by the Company and the Distributor in writing.
Currently, no such payments are contemplated. The Fund currently
does not intend to make any payments to finance distribution
expenses pursuant to Rule 12b-1 under the 1940 Act or in the
contravention of such rule, although it may make payments pursuant
to Rule 12b-1 in the future.
5.2 All expenses incident to performance by the Fund under
this Agreement (including expenses expressly assumed by the Fund
pursuant to this Agreement) shall be paid by the Fund to the
extent permitted by law. Except as otherwise provided in Section
3.1, the Company shall not bear any of the expenses for the cost
of preparation and filing of the Fund Prospectus and Fund
Registration Statement, Fund proxy materials and reports, the
preparation of all statements and notices required by any Federal
or state securities law, all taxes on the issuance or transfer of
Fund shares, and any expenses permitted to be paid or assumed by
the Fund pursuant to a plan, if any, under Rule 12b-1 under the
1940 Act. The Company shall bear the expenses for the costs of
setting the Prospectus in type and setting in type, printing and
distributing reports to shareholders. The Company shall also bear
the expenses for the cost of registration and qualification of the
Fund's shares.
Article VI. Compliance Undertakings
6.1 The Fund undertakes to comply with Subchapter M and
Section 817(h) of the Code, and all regulations issued thereunder.
6.2 The Fund shall amend the Fund Registration Statement
under the 1933 Act and the 1940 Act from time to time as required
in order to effect for so long as Fund shares are sold the
continuous offering of Fund shares as described in the then
currently effective Fund Prospectus.
6.3 To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have the
Fund Board and a majority of Fund Directors who are not interested
persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
6.4 The Company represents that the Contracts are
currently, and at the time of issuance shall be, treated as life
insurance or annuity insurance contracts, under applicable
provisions of the Code, and that it will make every effort to
maintain such treatment, and that it will notify the Fund and the
Distributor immediately upon having a reasonable basis for
believing the Contracts have ceased to be so treated or that they
might not be so treated in the future. The Company agrees that
any prospectus offering a contract that is a "modified endowment
contract" as that term is defined in Section 7702A of the Code (or
any successor or similar provision), shall identify such contract
as a modified endowment contract.
Article VII. Potential Conflicts
The parties to this Agreement acknowledge that the Fund has filed
or will file an application with the SEC to request an order
granting relief from various provisions of the 1940 Act and the
rules thereunder to the extent necessary to permit Fund shares to
be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated
Participating Insurance Companies. The parties to this Agreement
agree that the conditions or undertakings specified in such
application and that may be imposed on the Company, the Fund
and/or the Distributor by virtue of such order shall be
incorporated herein by this reference, as of the date such order
is granted, as though set forth herein in full, and such parties
agree to comply with such conditions and undertakings to the
extent applicable to each such party. The Fund and the
Distributor will not enter into a participation agreement with any
other Participating Insurance Company unless it imposes the same
material conditions and undertakings incorporated by reference
herein on the parties to such agreement.
Article VIII. Indemnification
8.1 Indemnification by the Company
The Company agrees to indemnify and hold harmless the Fund
and the Distributor, and each person who controls or is affiliated
with the Fund or the Distributor, within the meaning of such terms
under the federal securities laws, and any officer, trustee,
director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted), to
which they or any of them may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or settlements):
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Fund Registration Statement, the Fund Prospectus, the Statement of
Additional Information, sales literature or other promotional
material for the Contracts or the Contracts themselves (or any
amendment or supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or
omission or such alleged statement or alleged omission was made in
reliance upon and in conformity with information furnished in
writing to the Company by the Fund or the Distributor, or any
person controlling or affiliated with such entities (or a person
authorized in writing to do so on behalf of such entities) for use
in the Fund Registration Statement, the Fund Prospectus, the
Statement of Additional Information, or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact by or on behalf of the
Company (other than statements or representations made by the Fund
or the Distributor, or any person controlling or affiliated with
such entities, or contained in the Fund Registration Statement,
Fund Prospectus or sales literature or other promotional material
of the Fund not supplied by the Company or persons under its
control) or wrongful conduct of the Company or persons under its
control with respect to the sale or distribution of the Contracts
or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund Registration
Statement, Fund Prospectus, Statement of Additional Information,
or sales literature or other promotional material of the Fund or
any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made,
if such statement or omission was made in reliance upon and in
conformity with information furnished to the Fund by or on behalf
of the Company; or
(d) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the qualification
requirements specified in Article VI of this Agreement); or
(e) arise out of any material breach by the Company of this
Agreement, including but not limited to a breach of any of the
representations and/or warranties made by Company hereunder, or
any failure to transmit a request for redemption or purchase of
Fund shares on a timely basis in accordance with the procedures
set forth in Article I.
This indemnification will be in addition to any liability which
the Company may otherwise have; provided, however, that no party
shall be entitled to indemnification if such loss, claim, damage
or liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the party seeking
indemnification.
8.2 Indemnification by the Fund and the Distributor
The Fund and the Distributor, jointly and severally, agree
to indemnify and hold harmless the Company and each person who
controls or is affiliated with the Company, within the meaning of
such terms under the federal securities laws, and any officer,
director, employee or agent of the Company, against any and all
losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted), to
which they or any of them may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Fund Registration Statement, Fund Prospectus (or any amendment or
supplement thereto), Statement of Additional Information or sales
literature or other promotional material of the Fund, or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or
omission or alleged statement or alleged omission was made in
reliance upon and in conformity with information furnished in
writing to the Fund or the Distributor, by the Company or any
person controlling or affiliated with the Company (or a person
authorized in writing to do so on behalf of the Company) for use
in the Fund Registration Statement, Fund Prospectus (or any
amendment or supplement thereto), Statement of Additional
Information or sales literature for the Fund or otherwise for use
in connection with the sale of the Contracts or Fund shares: or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact by the Distributor or
the Fund (other than statements or representations made by the
Company or any person controlling or affiliated with the Company
or contained in the Fund Registration Statement, Fund Prospectus,
Statement of Additional Information or sales literature or other
promotional material of the Fund not supplied by the Distributor
or the Fund or persons under their control) or wrongful conduct of
the Distributor or persons under its control with respect to the
sale or distribution of the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund Registration
Statement, Fund Prospectus, Statement of Additional Information or
sales literature or other promotional material for the Contracts
(or any amendment or supplement thereto), or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made,
if such statement or omission was made in reliance upon
information furnished in writing by the Distributor or the Fund to
the Company (or a person authorized in writing to do so on behalf
of the Fund or the Distributor; or
(d) arise out of any material breach by the Distributor or the
Fund of this Agreement, including but not limited to a breach of
any of the representations and/or warranties made by the
Distributor or the Fund hereunder.
This indemnification will be in addition to any liability which
the Fund may otherwise have; provided, however, that no party
shall be entitled to indemnification if such loss, claim, damage
or liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the party seeking
indemnification.
8.3 Indemnification Procedures
After receipt by a party entitled to indemnification
("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be
made by the indemnified party against any person obligated to
provide indemnification under this Article VIII ("indemnifying
party"), such indemnified party will notify the indemnifying party
in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the
indemnifying party will not relieve it from any liability under
this Article VIII, except to the extent that the omission results
in a failure of actual notice to the indemnifying party and such
indemnifying party is damaged solely as a result of the failure to
give such notice. The indemnifying party, upon the request of the
indemnified party, shall retain counsel reasonably satisfactory to
the indemnified party to represent the indemnified party and any
others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying
party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or
judgment.
A successor by law of the parties to the Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this
Article VIII shall survive any termination of this Agreement.
Article IX. Applicable Law
9.1 This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the
state of _______, without giving effect to the principles of
conflicts of laws.
9.2 This Agreement shall be subject to the provisions of
the 1933, 1934 and 1940 Acts, where applicable, and the rules and
regulations and rulings thereunder, including such exemptions from
those statutes, rules and regulations as the SEC may grant, and
the terms hereof shall be limited, interpreted and construed in
accordance therewith.
Article X. Termination
10.1 This Agreement shall terminate:
(a) at the option of any party upon six months'
advance written notice to the other parties, such termination to
be effective no earlier than one year following the date on which
the first Contract is issued; or
(b) at the option of the Company, if the
Company reasonably determines in good faith that shares of the
Fund are not registered, issued or sold in accordance with
applicable federal or state law in such a way as to be reasonably
available to meet requirements of the Contracts; or
(c) at the option of the Fund upon institution
of formal proceedings against the Company by the NASD, the SEC,
the insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related to
the sale of the Contracts, the operation of the Account, the
administration of the Contracts or the purchase of Fund shares, or
an expected or anticipated ruling, judgment or outcome which
would, in the Fund's reasonable judgment, materially impair the
Company's ability to meet and perform the Company's obligations
and duties hereunder; or
(d) at the option of the Company upon
institution of formal proceedings against the Fund by the NASD,
the SEC, or any state securities or insurance commission or any
other regulatory body; or
(e) at the option of the Fund in the event any
of the Contracts are not issued or sold in accordance with
applicable Federal and/or state law; or
(f) termination by the Fund by written notice to the
Company in the event that the Contracts fail to meet the
qualifications specified in Article VI hereof; or
(g) by either the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority of
disinterested Fund Board members, that an irreconcilable material
conflict exists among the interests of (i) all Product Owners or
(ii) the interests of the Participating Insurance Companies
investing in the Fund.
10.2 Notice Requirement Except as otherwise provided in
Section 10.1, no termination of this Agreement shall be effective
unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its
intent to terminate which notice shall set forth the basis for
such termination. Furthermore:
(a) in the event that any termination is based upon
the provisions of Article VII or the provisions of Section 10.1(a)
of this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such
provisions; and
(b) in the event that any termination is based upon
the provisions of Section 10.1(c) or 10.1(d) of this Agreement,
such prior written notice shall be given at least ninety (90) days
before the effective date of termination; and
(c) in the event that any termination is based upon
the provisions of Section 10.1(e) or 10.1(f) of this Agreement,
such prior written notice shall be given at least sixty (60) days
before the date of any proposed vote to replace the Fund's shares.
10.3 Except as necessary to implement Contract Owner
initiated transactions, or as required by state insurance laws or
regulations, the Company shall not redeem Fund shares attributable
to the Contracts (as opposed to Fund shares attributable to the
Company's assets held in the Account).
10.4 Effect of Termination
(a) Notwithstanding any termination of this
Agreement pursuant to Section 10.1 of this Agreement, the Fund
may, at its option, or, in the event of termination of this
Agreement by the Fund pursuant to Section 10.1(a) of this
Agreement, the Company may require the Fund and the Distributor
to, continue to make available additional Fund shares for so long
after the termination of this Agreement as the Company desires
pursuant to the terms and conditions of this Agreement as provided
in paragraph (b) below, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"); provided, however, that the
obligation to make such additional Fund shares available shall
continue only for two years after the termination of this
Agreement. Specifically, without limitation, if the Fund or
Company so elects to make additional Fund shares available, the
owners of the Existing Contracts or the Company, whichever shall
have legal authority to do so, shall be permitted to reallocate
investments in the Fund, redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments
under the Existing Contracts.
(b) In the event of a termination of this Agreement
pursuant to Section 10.1 of this Agreement, the Fund and the
Distributor shall promptly notify the Company whether the
Distributor and the Fund will continue to make Fund shares
available after such termination. If Fund shares continue to be
made available after such termination, the provisions of this
Agreement shall remain in effect except for Section 10.1(a) and
thereafter the Fund, the Distributor, or the Company may terminate
the Agreement, as so continued pursuant to this Section 10.4, upon
prior written notice to the other party, such notice to be for a
period that is reasonable under the circumstances but, if given by
the Fund or Distributor, need not be for more than six months.
(c) The parties agree that this Section 10.4 shall
not apply to any termination made pursuant to Article VII or any
conditions or undertakings incorporated by reference in Article
VII, and the effect of such Article VII termination shall be
governed by the provisions set forth or incorporated by reference
therein.
ARTICLE XI. Applicability to New Accounts and New Contracts
The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to
the Contracts and to add new classes of variable annuity contracts
to be issued by the Company through a Separate Account investing
in the Fund. The provisions of this Agreement shall be equally
applicable to each such class of contracts or policies, unless the
context otherwise requires.
ARTICLE XII. Notices
Any notice shall be sufficiently given when sent by
registered or certified mail to the other party at the address of
such party set forth below or at such other address as such party
may from time to time specify in writing to the other party.
If to the Fund:
c/o Munder Capital Management
480 Pierce Street
Birmingham, MI 48009
Attn: Lee Munder
If to the Company:
If to the Distributor:
Longrow Securities Inc.
_________________
_________________
Attn:
ARTICLE XIII. Miscellaneous
13.1 The captions in this Agreement are included for
convenience of reference only and in no way define or delineate
any of the provisions hereof or otherwise affect their
construction or effect
13.2 This Agreement may be executed simultaneously in two
or more counterparts. each of which together shall constitute one
and the same instrument.
13.3 If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby
13.4 The Company, the Fund and the Distributor shall
cooperate with each other party and all appropriate governmental
authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
13.5 Each party represents that the execution and delivery
of this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all necessary
corporate or trust action, as applicable, by such party, and when
so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with
its terms.
ST. CLAIR FUNDS,
INC.
By:
Name:
Title:
[ZURICH-KEMPER]
By:
Name:
Title:
LONGROW SECURITIES
INC.
By:
Name:
Title:
SCHEDULE 1
SEPARATE ACCOUNTS
SCHEDULE 2
VARIABLE ANNUITY CONTRACTS
SCHEDULE 3
SERIES
Munder S&P 500 Index Equity Fund
Munder S&P MidCap Index Equity Fund
Munder S&P SmallCap Index Equity Fund
Munder Aggregate Bond Index Fund
Munder Foreign Equity Fund
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Exhibit 9(f)
ST. CLAIR FUNDS, INC.
FORM OF
SERVICE PLAN
Section 1. Upon the recommendation of First Data
Investor Services Group, Inc. ("FDISG"), the administrator of St.
Clair Funds, Inc. (the "Company"), any officer of the Company is
authorized to execute and deliver, in the name and on behalf of
the Company, written agreements based on the form attached hereto
as Appendix A or any other form duly approved by the Company's
Board of Directors ("Agreements") with insurance companies
offering variable insurance contracts for which certain series of
the Company identified in Appendix B hereto (the "Funds") serve as
funding vehicles ("Contracts") and the Principal Underwriter of
the Funds' shares or other organizations through whom Contacts are
sold ("Shareholder Organizations"). Pursuant to such Agreements,
Shareholder Organizations shall provide support services as set
forth therein to persons who own Contracts, in consideration of a
fee, computed monthly in the manner set forth in the Agreements,
at an annual rate of up to 0.25% of the average daily net asset
value of each of the Funds. Comerica Bank and its affiliates are
eligible to become Shareholder Organizations and to receive fees
under this Plan.
Section 2. FDISG shall monitor the arrangements
pertaining to the Company's Agreements with Shareholder
Organizations in accordance with the terms of FDISG's agreement
with the Company. FDISG shall not, however, be obligated by this
Plan to recommend, and the Company shall not be obligated to
execute, any Agreement with any qualifying Shareholder
Organization.
Section 3. So long as this Plan is in effect, FDISG
shall provide to the Company's Board of Directors, and the
Directors shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan and the purposes for
which such expenditures were made.
Section 4. This Plan shall become effective
immediately with respect to the Funds upon the approval of the
Plan (and the form of Agreement attached hereto) by a majority of
the Company's Board of Directors, including a majority of the
Directors who are not "interested persons," as defined in the
Investment Company Act of 1940, as amended (the "Act"), of the
Company and who have no direct or indirect financial interest in
the operation of this Plan or in any Agreement related to this
Plan (the "Disinterested Directors"), pursuant to a vote case in
person at a meeting called for the purpose of voting on the
approval of this Plan and form of Agreement.
Section 5. Unless sooner terminated, this Plan shall
continue in effect for so long as its continuance is approved at
least annually in the manner set forth in Section 4.
Section 6. This Plan may be amended at any time with
respect to any Fund by the Company's Board of Directors, provided
that any material amendment of the terms of this Plan shall become
effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time with
respect to any Fund by vote of a majority of the Disinterested
Directors.
Section 8. While this Plan is in effect, the
selection and nomination of those Directors who are not
"interested persons" (as defined in the Act) of the Company shall
be committed to the discretion of such non-interested Directors.
Adopted by the Board: February 4, 1997
APPENDIX A
ST. CLAIR FUNDS, INC.
FORM OF SERVICING AGREEMENT
To: [Shareholder Organization]
We wish to enter into this Servicing Agreement with you
concerning the provision of support services to persons
("Contractowners") who own variable insurance contracts
("Contracts") with insurance companies for which certain series
("Funds") of St. Clair Funds, Inc. identified on Schedule A
attached hereto serve as funding vehicles.
The terms and conditions of this Servicing Agreement are as
follows:
1. You agree to provide the following support services to
Contractowners who may from time to time indirectly own shares of
the Funds ("Shares"): (i) establishing and maintaining accounts
and records relating to such Contractowners; (ii) processing
dividend and distribution payments from us on behalf of
Contractowners; (iii) providing information periodically to
Contractowners showing their indirect positions in Shares and
integrating such statements with those of other transactions and
balances in Contractowner's other accounts serviced by you; (iv)
responding to Contractowner inquiries relating to the services
performed by you; (v) responding to routine inquiries from
Contractowners concerning the Shares; (vi) forwarding shareholder
communications from us (such as proxies, shareholder reports,
annual and semi-annual financial statements) to Contractowners;
(vii) providing Contractowners with a service that invests the
assets of their accounts in Shares under Contracts pursuant to
specific or pre-authorized instructions; and (viii) providing such
other similar services as we may reasonably request to the extent
you are permitted to do so under applicable statutes, rules and
regulations.
Section 2. You will provide such office space and
equipment, telephone facilities and personnel (which may be any
part of the space, equipment and facilities currently used in your
business, or any personnel employed by you) as may be reasonably
necessary or beneficial in order to provide the aforementioned
services and assistance to Contractowners.
Section 3. Neither you nor any of your officers, employees
or agents are authorized to make any representations concerning us
or the Shares except those contained in our then current
prospectuses and statement of additional information for Shares,
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. For all purposes of this Agreement you will be
deemed to be an independent contractor, and will have no authority
to act as agent for us in any matter or in any respect. 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 or
the purchase, redemption, transfer or registration of Shares (or
orders relating to the same) by or on behalf of Contractowners.
You and your employees will, upon request, be available during
normal business hours to consult with us or our designees
concerning the performance of your responsibilities under this
Agreement.
Section 5. In consideration of the services and facilities
provided by you hereunder, we will pay to you, and you will accept
as full payment therefor, a fee at the annual rate of ____ of 1%
of the average daily net asset value of the Shares beneficially
owned by the Contractowners for whom you provide services
hereunder (the "Contractowners' Shares"), which fee will be
computed daily and payable monthly. For purposes of determining
the fees payable under this Section 5, the average daily net asset
value of the Contractowners' 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 Shares for purposes of purchases and redemptions.
The fee rate stated above may be prospectively increased or
decreased by us, in our sole discretion, at any time upon notice
to you. Further, we may, in our discretion and without notice,
suspend or withdraw the sale of Shares.
Section 6. You will furnish us or our designees with such
information as we or they may reasonably request (including,
without limitation, periodic certifications confirming the
provision to Contractowners of the services described herein), 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 Servicing
Agreements with any other 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 hereunder will be disclosed by you to
the Contractowners for whom you provide services hereunder and
will not be excessive; (ii) the services provided by you under
this Agreement will in no event be primarily intended to result in
the sale of Shares; and (iii) in the event an issue pertaining to
our Service Plan is submitted for shareholder approval, you will
vote any shares held for your own account in the same proportion
as the vote of those shares held for your Contractowner's
accounts.
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
until __________, 1998, and thereafter will continue automatically
for successive annual periods provided such continuance is
specifically approved at least annually by us in the manner
described in Section 12. This Agreement is terminable with
respect to the Shares, without penalty, at any time by us (which
termination may be by vote or a majority of the Disinterested
Directors as defined in Section 12) or by you upon written notice
to the other party hereto.
Section 10. All notices and other communications to either
you or us will be duly given if mailed, telegraphed, telexed or
transmitted by similar telecommunications 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 Massachusetts and is non-assignable
by the parties hereto.
Section 12. This Agreement has been approved by 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) of us and have no direct or indirect
financial interest in the operation of the Service Plan adopted by
us regarding the provision of support services to the beneficial
owners of Shares or in any agreement related thereto cast in
person at a meeting called for the purpose of voting on such
approval ("Disinterested Directors").
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, c/o First Data Investor Services
Group, Inc. One Exchange Place, 8th Floor, Boston, Massachusetts
02109-2873.
Very truly yours,
THE MUNDER FUNDS, INC.
Date: By:
(Authorized Officer)
Accepted and Agreed to:
[SHAREHOLDER
ORGANIZATION]
By:
Date: _____________________ (Authorized
Officer)
Address of Shareholder Organization:
___________________________
___________________________
___________________________
APPENDIX B
SERIES
Munder S&P 500 Index Equity Fund
Munder S&P MidCap Index Equity Fund
Munder S&P SmallCap Index Equity Fund
Munder Foreign Equity Fund
Munder Aggregate Bond Index Fund
Services may be modified or omitted in the particular case and items
renumbered.
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Exhibit 10(a)
April 17, 1997
St. Clair Funds, Inc.
480 Pierce Street
Birmingham, MI 48009
Dear Sirs and Madams:
In connection with the registration under the Securities Act
of 1933 of an indefinite number of shares of common stock (the
"Shares") of the Munder S&P 500 Index Equity Fund, the Munder
MidCap Equity Index Fund, the Munder S&P SmallCap Index Equity
Fund, the Munder Foreign Equity Fund and the Munder Aggregate Bond
Index Fund, each a series of St. Clair Funds, Inc. (the
"Company"), we have examined such documents and matters as we have
deemed necessary, and we are of the opinion that, as permitted by
its Articles of Incorporation, and assuming that the Company or
its agent receives consideration for such Shares in accordance
with the provisions of its Articles of Incorporation, the Shares
will be legally and validly issued, will be fully paid, and will
be non-assessable by the Company.
We hereby consent to the use of this opinion as an exhibit
to the Company's Registration Statement on Form N-1A filed with
the Securities and Exchange Commission (File No. 2-91373) for the
registration under the Securities Act of 1933 of an indefinite
number of the Shares, and to the use of our name in the prospectus
and statement of additional information continued therein, and any
amendments thereto.
Very truly yours,
/s/ Dechert Price & Rhoads
Dechert Price & Rhoads
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Exhibit 11
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Charles W. Elliott, whose signature appears
below, does hereby constitute and appoint Lisa Anne Rosen, Julie
A. Tedesco, Teresa M.R. Hamlin and Paul F. Roye his true and
lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St.
Clair Funds, Inc. ("St. Clair"), the Registration Statement of St.
Clair on Form N-1A, any amendments thereto, and all instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said
attorneys shall have full power of substitution and re-
substitution; and said attorneys shall have full power and
authority to do and perform in the name and on the behalf of the
undersigned director and/or officer of St. Clair, in any and all
capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do
in person, said acts of said attorney being hereby ratified and
approved.
/s/ Charles W. Elliott
Charles W. Elliott
Dated: February 4, 1997
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Joseph E. Champagne, whose signature
appears below, does hereby constitute and appoint Lisa Anne Rosen,
Julie A. Tedesco, Teresa M.R. Hamlin and Paul F. Roye his true and
lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St.
Clair Funds, Inc. ("St. Clair"), the Registration Statement of St.
Clair on Form N-1A, any amendments thereto, and all instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said
attorneys shall have full power of substitution and re-
substitution; and said attorneys shall have full power and
authority to do and perform in the name and on the behalf of the
undersigned director and/or officer of St. Clair, in any and all
capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do
in person, said acts of said attorney being hereby ratified and
approved.
/s/ Joseph E. Champagne
Joseph E. Champagne
Dated: February 4, 1997
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Arthur D. Rodecker, whose signature appears
below, does hereby constitute and appoint Lisa Anne Rosen, Julie
A. Tedesco, Teresa M.R. Hamlin and Paul F. Roye his true and
lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St.
Clair Funds, Inc. ("St. Clair"), the Registration Statement of St.
Clair on Form N-1A, any amendments thereto, and all instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said
attorneys shall have full power of substitution and re-
substitution; and said attorneys shall have full power and
authority to do and perform in the name and on the behalf of the
undersigned director and/or officer of St. Clair, in any and all
capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do
in person, said acts of said attorney being hereby ratified and
approved.
/s/ Arthur D. Rodecker
Arthur D. Rodecker
Dated: February 4, 1997
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Jack L. Otto, whose signature appears
below, does hereby constitute and appoint Lisa Anne Rosen, Julie
A. Tedesco, Teresa M.R. Hamlin and Paul F. Roye his true and
lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St.
Clair Funds, Inc. ("St. Clair"), the Registration Statement of St.
Clair on Form N-1A, any amendments thereto, and all instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said
attorneys shall have full power of substitution and re-
substitution; and said attorneys shall have full power and
authority to do and perform in the name and on the behalf of the
undersigned director and/or officer of St. Clair, in any and all
capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do
in person, said acts of said attorney being hereby ratified and
approved.
/s/ Jack L. Otto
Jack L. Otto
Dated: February 4, 1997
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Thomas B. Bender, whose signature appears
below, does hereby constitute and appoint Lisa Anne Rosen, Julie
A. Tedesco, Teresa M.R. Hamlin and Paul F. Roye his true and
lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St.
Clair Funds, Inc. ("St. Clair"), the Registration Statement of St.
Clair on Form N-1A, any amendments thereto, and all instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said
attorneys shall have full power of substitution and re-
substitution; and said attorneys shall have full power and
authority to do and perform in the name and on the behalf of the
undersigned director and/or officer of St. Clair, in any and all
capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do
in person, said acts of said attorney being hereby ratified and
approved.
/s/ Thomas B. Bender
Thomas B. Bender
Dated: February 4, 1997
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, David J. Brophy, whose signature appears
below, does hereby constitute and appoint Lisa Anne Rosen, Julie
A. Tedesco, Teresa M.R. Hamlin and Paul F. Roye his true and
lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St.
Clair Funds, Inc. ("St. Clair"), the Registration Statement of St.
Clair on Form N-1A, any amendments thereto, and all instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said
attorneys shall have full power of substitution and re-
substitution; and said attorneys shall have full power and
authority to do and perform in the name and on the behalf of the
undersigned director and/or officer of St. Clair, in any and all
capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do
in person, said acts of said attorney being hereby ratified and
approved.
/s/ David J. Brophy
David J. Brophy
Dated: February 4, 1997
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Thomas D. Eckert, whose signature appears
below, does hereby constitute and appoint Lisa Anne Rosen, Julie
A. Tedesco, Teresa M.R. Hamlin and Paul F. Roye his true and
lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St.
Clair Funds, Inc. ("St. Clair"), the Registration Statement of St.
Clair on Form N-1A, any amendments thereto, and all instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said
attorneys shall have full power of substitution and re-
substitution; and said attorneys shall have full power and
authority to do and perform in the name and on the behalf of the
undersigned director and/or officer of St. Clair, in any and all
capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do
in person, said acts of said attorney being hereby ratified and
approved.
/s/ Thomas D. Eckert
Thomas D. Eckert
Dated: February 4, 1997
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Terry H. Gardner, whose signature appears
below, does hereby constitute and appoint Lisa Anne Rosen, Julie
A. Tedesco, Teresa M.R. Hamlin and Paul F. Roye his true and
lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St.
Clair Funds, Inc. ("St. Clair"), the Registration Statement of St.
Clair on Form N-1A, any amendments thereto, and all instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said
attorneys shall have full power of substitution and re-
substitution; and said attorneys shall have full power and
authority to do and perform in the name and on the behalf of the
undersigned director and/or officer of St. Clair, in any and all
capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do
in person, said acts of said attorney being hereby ratified and
approved.
/s/ Terry H. Gardner
Terry H. Gardner
Dated: February 4, 1997
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Lee P. Munder, whose signature appears
below, does hereby constitute and appoint Lisa Anne Rosen, Julie
A. Tedesco, Teresa M.R. Hamlin and Paul F. Roye his true and
lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St.
Clair Funds, Inc. ("St. Clair"), the Registration Statement of St.
Clair on Form N-1A, any amendments thereto, and all instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said
attorneys shall have full power of substitution and re-
substitution; and said attorneys shall have full power and
authority to do and perform in the name and on the behalf of the
undersigned director and/or officer of St. Clair, in any and all
capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do
in person, said acts of said attorney being hereby ratified and
approved.
/s/ Lee P. Muner
Lee P. Munder
Dated: February 4, 1997
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, John Rakolta, Jr., whose signature appears
below, does hereby constitute and appoint Lisa Anne Rosen, Julie
A. Tedesco, Teresa M.R. Hamlin and Paul F. Roye his true and
lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St.
Clair Funds, Inc. ("St. Clair"), the Registration Statement of St.
Clair on Form N-1A, any amendments thereto, and all instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said
attorneys shall have full power of substitution and re-
substitution; and said attorneys shall have full power and
authority to do and perform in the name and on the behalf of the
undersigned director and/or officer of St. Clair, in any and all
capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do
in person, said acts of said attorney being hereby ratified and
approved.
/s/ John Rakolta, Jr.
John Rakolta, Jr.
Dated: February 4, 1997
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