As filed with the Securities and Exchange Commission on
July 23, 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. 24 /X/
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 25 /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 immediately
upon filing 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.
<PAGE>
ST. CLAIR FUNDS, INC.
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for St. Clair Funds, Inc.
(Munder Institutional S&P 500 Index Equity Fund, Munder Institutional S&P
MidCap Index Equity Fund, Munder Institutional S&P SmallCap Index Equity
Fund, Munder Institutional Short Term Treasury Fund and Munder
Institutional Money Market Fund)
Part A
Item Heading
1. Cover Page Cover Page
2. Synopsis Expense Table
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
<PAGE>
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; 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
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
of Securities Being Offered Information; 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
<PAGE>
ST. CLAIR FUNDS, INC.
The purpose of this Post-Effective Amendment filing is to respond to SEC
staff comments on Post-Effective Amendment No. 23, to make other non-material
language changes that the Registrant deems appropriate, and to add exhibits to
the Registration Statement as required by Form N-1A.
The prospectus and statement of additional information relating to (i)
Liquidity Plus Money Market Fund and (ii) 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 are not included
in this filing.
<PAGE>
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 Institutional S&P 500 Index Equity Fund
Munder Institutional S&P MidCap Index Equity Fund
Munder Institutional S&P SmallCap Index Equity Fund
Munder Institutional Short Term Treasury Fund
Munder Institutional Money Market Fund
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 July 23, 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.
Although the Munder Institutional Money Market Fund seeks to maintain a
constant net asset value of $1.00 per share, there can be no assurance that the
Fund can do so on a continuing basis.
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 July 23, 1997.
<PAGE>
TABLE OF CONTENTS
THE FUNDS
EXPENSE TABLE.................................. 3
INVESTMENT OBJECTIVES AND POLICIES............. 4
PORTFOLIO INSTRUMENTS AND PRACTICES AND
ASSOCIATED RISK FACTORS........................ 8
INVESTMENT LIMITATIONS......................... 15
PURCHASE AND REDEMPTION OF SHARES.............. 15
DIVIDENDS AND DISTRIBUTIONS.................... 16
OTHER INFORMATION
NET ASSET VALUE................................ 17
MANAGEMENT..................................... 18
TAXES.......................................... 19
DESCRIPTION OF SHARES.......................... 20
PERFORMANCE.................................... 21
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 Fund or
Funds Distributor, Inc. (the "Distributor"). This Prospectus does not constitute
an offering by the Fund or by the Distributor in any jurisdiction in which such
offering may not lawfully be made.
<PAGE>
EXPENSE TABLE
The following table sets forth certain costs and expenses that an
investor will incur either directly or indirectly as a shareholder of the Funds
based on estimated operating expenses for the current fiscal year. Shares of the
Funds are sold without an initial or contingent deferred sales charge to
fiduciary and discretionary accounts of institutions, "institutional investors"
(as defined herein), directors, officers and employees of the Company, the
Advisor and the Distributor, the Advisor's investment advisory clients and
family members of employees of the Advisor.
<TABLE>
<CAPTION>
Munder Munder
Munder Institutional Institutional Munder Munder
Institutional S&P S&P Institutional Institutional
S&P 500 MidCap SmallCap Short Term Money
Index Equity Index Equity Index Equity Treasury Market
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Annual Fund Operating Expenses:
(as a percentage of average daily net assets)
Advisory Fees.......................... .07% .15% .15% .20% .20%
Other Expenses (after expense
reimbursements)........................ .03%* .03%* .03%* .0%* .0%*
----- ----- ----- ---- ----
Total Fund Operating Expenses
(after expense reimbursements)......... .10%* .18%* .18%* .20%* .20%*
===== ===== ===== ===== =====
.........
*The Advisor has voluntarily agreed to reimburse expenses to limit "Other
Expenses" to .03% with respect to the Munder Institutional S&P 500 Index
Equity Fund, Munder Institutional S&P MidCap Index Equity Fund and Munder
Institutional S&P SmallCap Index Equity Fund and .0% with respect to Munder
Institutional Short Term Treasury Fund and Munder Institutional Money
Market Fund. In the absence of such expense reimbursements, it is estimated
that total fund operating expenses would be as follows: ____% for Munder
Institutional S&P 500 Index Equity Fund, ______% for Munder Institutional
S&P MidCap Index Equity Fund, _______% for Munder Institutional S&P
SmallCap Index Equity Fund, ______% for Munder Institutional Short Term
Treasury Fund and _______% for Munder Institutional Money Market Fund.
</TABLE>
"Other expenses" in the above table include administration fees,
custodial fees, legal and accounting fees, printing costs, registration fees,
fees for any portfolio valuation service, the cost of regulatory compliance, the
costs of maintaining the Funds' legal existence and the costs involved with
communicating with shareholders. The amount of "Other expenses" in the expense
table above is based on estimated expenses and projected assets for the current
fiscal year. The nature of the services for which the Funds are obligated to pay
advisory fees is described under "Management." Any fees charged by institutions
directly to customer accounts for services provided in connection with
investments in shares of the Funds are in addition to the expenses shown in the
above Expense Table and the Example shown below.
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Funds. These amounts are based on payment by
the Funds of operating expenses at the levels set forth in the above table, and
are also based on the following assumptions:
<PAGE>
An investor would pay the following expenses on a $1,000 investment,
assuming (1) a hypothetical 5% annual return and (2) redemption at the end of
the following time periods:
1 Year 3 Years
------ -------
Munder Institutional S&P 500 Index Equity Fund $2 $5
Munder Institutional S&P MidCap Index Equity Fund $2 $7
Munder Institutional S&P SmallCap Index Equity Fund $2 $7
Munder Institutional Short Term Treasury Fund $3 $8
Munder Institutional Money Market Fund $3 $8
The foregoing Expense Table and Example are intended to assist
investors in understanding the various shareholder transaction expenses and
operating expenses of the Funds that investors bear directly or indirectly.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL INVESTMENT RETURN AND
OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
THE COMPANY
Each of the Funds is a diversified portfolio 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 Institutional S&P 500 Index Equity Fund ("LargeCap 500 Index Fund"),
Munder Institutional S&P MidCap Index Equity Fund ("MidCap Index Fund"), Munder
Institutional S&P SmallCap Index Equity Fund ("SmallCap Index Fund"), Munder
Institutional Short Term Treasury Fund ("Short Term Treasury Fund") and Munder
Institutional Money Market Fund ("Money Market 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 500 Index Fund
The investment objective of the LargeCap 500 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 85% 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 the composition of S&P 500; and the timing and amount of investor
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.
The Fund invests substantially all, and at least 65%, of its total
assets in the securities of issuers included in the S&P 500. In addition to
investing in stocks, the LargeCap 500 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.
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. The market capitalization of an issuer in the S&P MidCap 400
generally ranges from $100 million to $9 billion. 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. 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 the composition of the S&P MidCap 400; and the timing and
amount of investor 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.
The Fund invests substantially all, and at least 65%, of its total
assets in the securities of issuers included in the S&P MidCap 400. 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 5% 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. 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 the composition of the S&P SmallCap 600; and
the timing and amount of investor 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.
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.
The Fund invests substantially all, and at least 65%, of its total
assets in the securities of issuers included in the S&P SmallCap 600. 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.
Short Term Treasury Fund
The Fund's investment objective is to provide shareholders with a high
level of current income consistent with capital preservation. The Fund seeks to
achieve its objective by investing only in U.S. Treasury securities and
repurchase agreements fully collateralized by U.S. Treasury securities. Under
normal market conditions, the Fund will invest 100% of its total assets in these
securities. Under normal circumstances, the Fund will enter into repurchase
agreements with maturities of seven days or less and will invest in securities
with remaining maturities of three years or less. The dollar-weighted average
maturity of the Fund's portfolio is not expected to exceed two years. The Fund
also may borrow money for temporary purposes and to meet redemption requests and
may enter into reverse repurchase agreements. In addition, the Fund may lend
portfolio securities, purchase securities on a "when-issued" basis and purchase
or sell securities on a "forward commitment" basis. See "Portfolio Instruments
and Practices and Associated Risk Factors." There can be no assurance that the
Fund's investment objective will be achieved.
The Fund is not a money market fund and, although it seeks to maintain
minimum fluctuation of principal value, no assurance can be given that, when an
investor desires to redeem Fund shares, the then-current net asset value per
share will be at or greater than the net asset value per share at the time of
purchase.
The value of the portfolio securities held by the Fund will vary inversely
to changes in prevailing interest rates. Thus, if interest rates have increased
from the time a security was purchased, such security, if sold, might be sold at
a price less than its cost. Similarly, if interest rates have declined from the
time a security was purchased, such security, if sold, might be sold at a price
greater than its cost. In either instance, if the security was purchased at face
value and held to maturity, no gain or loss would be realized.
<PAGE>
Money Market Fund
The investment objective of the Money Market Fund is to provide as high a
level of current interest income as is consistent with maintaining liquidity and
stability of principal.
The Fund seeks to maintain a stable net asset value of $1.00 per share,
although there is no assurance that it will be able to do so on a continuous
basis. In pursuing its investment objective, the Money Market Fund may invest in
a broad range of short-term, high quality, U.S. dollar-denominated instruments,
such as bank, commercial and other obligations (including Federal, state and
local government obligations) that are available in the money markets. The
instruments in which the Fund may invest are described below under "Portfolio
Instruments and Practices and Associated Risk Factors."
Securities acquired by the Fund will be "Eligible Securities" as defined by
the SEC. Eligible Securities consist of securities that are determined by the
Advisor, under guidelines established by the Board of Directors, to present
minimal credit risks.
Assets of the Fund will be invested solely in U.S. dollar-denominated debt
securities with remaining maturities of 397 days or less as defined by the SEC
(although securities subject to repurchase agreements, variable and floating
rate securities and certain other securities may bear longer maturities), and
the dollar-weighted average portfolio maturity of the Fund will not exceed 90
days.
Although the Money Market Fund expects under normal market conditions to be
as fully invested as possible, the Fund may hold uninvested cash pending
investment of late payments for purchase orders (or other payments) or during
temporary defensive periods. Uninvested cash will not earn income. In general,
investments in the Fund will not earn as high a level of current income as
longer-term or lower quality securities. Longer-term and lower quality
securities, however, generally have less liquidity, greater market risk and more
fluctuation in market value.
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 Funds. 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.
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. In addition, each
Fund (other than Short Term Treasury Fund and the Money Market 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
(other than the Short Term Treasury Fund) may invest cash balances in repurchase
agreements and each Fund (other than the Short Term Treasury Fund) may invest in
other money market investments to maintain liquidity in an amount to meet
redemptions or for day-to-day operating purposes. In addition, the Short Term
Treasury Fund may invest in repurchase agreements fully collateralized by U.S.
Treasury securities. 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 (other
than Short Term Treasury 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. 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 of the LargeCap 500 Index Fund, MidCap Index Fund and SmallCap
Index Fund (collectively, the "Index Funds") 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 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.
As mutual funds investing primarily in common stocks, the Index Funds
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.
Depositary Receipts. American 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 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 Index 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 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 Index 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 Index Funds may write covered call options, buy put
options, buy call options and write secured put options on particular securities
or various stock indices for investment or hedging purposes. Options trading is
a highly specialized activity which entails greater than ordinary investment
risks. A call option for a particular security gives the purchaser of the option
the right to buy, and a writer the obligation to sell, the underlying security
at the stated exercise price at any time prior to the expiration of the option,
regardless of the market price of the security. The premium paid to the writer
is in consideration for undertaking the obligations under the option contract. A
put option for a particular security gives the purchaser the right to sell the
underlying security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security.
In contrast to an option on a particular security, an option on a stock index
provides the holder with the right to make or receive a cash settlement upon
exercise of the option.
The use of derivative instruments exposes a Fund to additional
risks and transaction costs. Risks inherent in the use of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the direction that a portfolio manager anticipates; (2)
imperfect correlation between the price of derivative instruments and movements
in the prices of the securities, interest rates or currencies being hedged; (3)
the fact that skills needed to use these strategies are different than those
needed to select portfolio securities; (4) inability to close out certain hedged
positions to avoid adverse tax consequences; (5) the possible absence of a
liquid secondary market for any particular instrument and possible
exchange-imposed price fluctuation limits, either of which may make it difficult
or impossible to close out a position when desired; (6) leverage risk, that is,
the risk that adverse price movements in an instrument can result in a loss
substantially greater than a Fund's initial investment in that instrument (in
some cases, the potential loss is unlimited); and (7) particularly in the case
of privately-negotiated instruments, the risk that the counterparty will fail to
perform its obligations, which could result in a loss to the Fund.
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 "Fund Investments" and Appendix B to the
Statement of Additional Information.
Repurchase Agreements. The Funds may agree to purchase securities
from financial institutions subject to the seller's agreement to repurchase them
at an agreed-upon time and price ("repurchase agreements"). The Short Term
Treasury Fund will invest only in repurchase agreements fully collateralized by
U.S. Treasury securities. With respect to the Money Market Fund, the securities
held subject to a repurchase agreement may have stated maturities exceeding 397
days, provided the repurchase agreement itself matures in 397 days. 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
LargeCap 500 Index Fund and the MidCap Index 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 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 (other than the Short
Term Treasury 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 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 a Fund. The absence of an active
secondary market, however, could make it difficult to dispose of the securities,
and a 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 a 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.
Corporate Obligations. The Money Market Fund may purchase commercial
paper, other short-term obligations, bond debentures and notes. See Appendix A
to the Statement of Additional Information for a description of the ratings for
corporate obligations.
Bank Obligations. The Funds (other than the Short Term Treasury
Fund) may purchase U.S. dollar-denominated bank obligations, including
certificates of deposit, bankers' acceptances, bank notes, deposit notes 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. For this purpose, the assets of a bank or savings institution include
the assets of both its domestic and foreign branches. See "Foreign Securities"
for a discussion of the risks associated with investments in obligations of
foreign banks and foreign branches of domestic banks. The Money Market Fund will
invest in the obligations of domestic banks and savings institutions only if
their deposits are federally insured. Investments by a Fund (other than the
Money Market Fund) in (i) obligations of domestic banks and (ii) obligations of
foreign banks and foreign branches of domestic banks each will not exceed 25% of
the Fund's total assets at the time of investment. Foreign bank obligations
include Eurodollar Certificates of Deposit ("ECDs"), Eurodollar Time Deposits
("ETDs"), Canadian Time Deposits ("CTDs"), Schedule Bs, Yankee Certificates of
Deposit ("Yankee CDs") and Yankee Bankers' Acceptances ("Yankee BAs"). A
discussion of these obligations appears in the Statement of Additional
Information under "Fund Investments - Non-Domestic Bank Obligations."
Asset-Backed Securities. Subject to applicable credit criteria, the
Money Market 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 Money Market 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 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 the
premium paid.
Stripped Securities. The Money Market 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 illiquid under guidelines
established by the Board of Directors.
Illiquid Securities. Each Fund (other than the Money Market Fund and
the Short Term Treasury Fund) may invest up to 15% of the value of its net
assets (determined at time of acquisition) in securities which are illiquid. The
Money Market Fund may invest up to 10% of the value of its net assets
(determined at time of acquisition) in securities which are illiquid. Illiquid
securities would generally include securities for which there is a limited
trading market, 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 (other than the Short Term Treasury Fund) 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 who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors through or with the assistance of the
issuer or investment dealers which make a market in the Section 4(2) paper, thus
providing liquidity. Rule 144A securities generally must be sold only to other
qualified institutional buyers. If a particular investment in Section 4(2) paper
or Rule 144A securities is not determined to be liquid, that investment will be
included within the Fund's limitation on investment in illiquid securities. The
Advisor 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 by the U.S. Government and U.S. Government agencies and
instrumentalities, except that the Short Term Treasury Fund will only purchase
obligations issued by the U.S. Treasury. 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.
U.S. Treasury Securities. Securities purchased by the Short Term Treasury
Fund are direct obligations of the U.S. Treasury and are guaranteed by the full
faith and credit of the U.S. government. These securities presently consist of
U.S. Treasury bills, U.S. Treasury notes and U.S. Treasury bonds. U.S. Treasury
securities differ in their interest rates, maturities and times of issuance.
Treasury bills have initial maturities of one year or less; Treasury notes have
initial maturities of one to ten years; and Treasury bonds generally have
initial maturities greater than ten years.
Zero Coupon Treasury Securities. A portion of the U.S. Treasury
securities purchased by the Short Term Treasury Fund may be "zero coupon"
Treasury securities. These are U.S. Treasury notes and bonds which have been
stripped of their unmatured interest coupons and receipts or which are
certificates representing interests in such stripped debt obligations and
coupons. Such securities are purchased at a discount from their face amount,
giving the purchaser the right to receive their full value at maturity. A zero
coupon security pays no interest to its holder during its life. Its value to an
investor consists of the difference between its face value at the time of
maturity and the price for which it was acquired, which is generally an amount
significantly less than its face value (sometimes referred to as a "deep
discount" price).
The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant rate
eliminates the risk of receiving lower yields upon reinvestment of interest if
prevailing interest rates decline, the owner of a zero coupon security will be
unable to participate in higher yields upon reinvestment of interest received if
prevailing interest rates rise. For this reason, zero coupon securities are
subject to substantially greater market price fluctuations during periods of
changing prevailing interest rates than are comparable debt securities which
make current distributions of interest. Current federal tax law requires that a
holder (such as a Fund) of a zero coupon security accrue a portion of the
discount at which the security was purchased as income each year even though the
Fund receives no interest payments in cash on the security during the year.
Certain banks and brokerage firms have separated ("stripped") the
principal portions ("corpus") from the coupon portions of the U.S. Treasury
bonds and notes and sell them separately in the form of receipts or certificates
representing undivided interests in these instruments (which instruments are
generally held by a bank in a custodial or trust account). The Short Term
Treasury Fund will not purchase any such receipts or certificates representing
stripped corpus or coupon interests in U.S. Treasury securities sold by banks
and brokerage firms. The Fund will only purchase zero coupon Treasury securities
which have been stripped by the Federal Reserve Bank.
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.
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.
Guaranteed Investment Contracts. The Money Market Fund may make limited
investments in guaranteed investment contracts ("GICs") issued by the U.S.
insurance companies. Pursuant to such contracts, the Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the Fund on a monthly basis interest which is
based on an index (in most cases this index is expected to be the Salomon
Brothers CD Index), but is guaranteed not to be less than a certain minimum
rate. A GIC is normally a general obligation of the issuing insurance company
and not funded by a separate account. The purchase price paid for a GIC becomes
part of the general assets of the insurance company, and the contract is paid
from the company's general assets. The Fund will only purchase GICs from
insurance companies which, at the time of purchase, have assets of $1 billion or
more and meet quality and credit standards established by the Advisor pursuant
to guidelines approved by the Board of Directors. Generally, GICs are not
assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Therefore, GICs will normally be considered illiquid investments, and will be
acquired subject to the limitation on illiquid investments.
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 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 (other than the Money Market Fund) 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.
Lending of Portfolio Securities. To enhance the return of the
portfolio, each 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 (only cash and short-term U.S. Government securities in
the case of the Short Term Treasury Fund) 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 each Fund's (other than the Money Market Fund) annual portfolio turnover
rate will range from 12% to 15%. With respect to the Short Term Treasury Fund,
it is anticipated that the Fund's annual portfolio turnover rate will range from
100% to 200%.
Liquidity Management. Pending investment, to meet anticipated
redemption requests, or as a temporary defensive measure if the Advisor
determines that market conditions warrant, the Index 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. Short-term obligations purchased by the Funds will either have
short-term debt ratings at the time of purchase in the top two categories by one
or more unaffiliated nationally recognized statistical rating organizations
("NRSROs") or be issued by issuers with such ratings. Unrated instruments
purchased by a Fund will be of comparable quality as determined by the Advisor.
INVESTMENT LIMITATIONS
The investment objective and policies of each Fund 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.
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
for the Fund. The Distributor is a registered broker/dealer with principal
offices at 60 State Street, Boston, Massachusetts 02109.
Purchase of Shares. Shares of the Funds are sold on a continuous basis
without an initial or contingent deferred sales charge to fiduciary and
discretionary accounts of institutions, "institutional investors", directors,
officers and employees of the Company, the Advisor and the Distributor, the
Advisor's investment advisory clients and family members of employees of the
Advisor. "Institutional investors" may include financial institutions (such as
banks, savings institutions and credit unions); pension and profit sharing and
employee benefit plans and trusts and insurance companies, investment companies,
investment advisors and broker-dealers acting for their own accounts or for the
accounts of institutional investors. A minimum initial investment of $1,000,000
for each Fund is required for fiduciary and discretionary accounts of
institutions and institutional investors.
Shares of the Funds are sold at net asset value per share next
determined after a purchase order is received. Purchase orders by an institution
for shares of the Funds must be received by the Distributor or the Transfer
Agent before the close of regular trading hours (currently 4:00 p.m. Eastern
time) on the NYSE on any Business Day (as defined below). Payment for such
shares may be made by institutions in federal funds or other funds immediately
available to the Custodian no later than 4:00 p.m. (Eastern time) on the next
Business Day following the receipt of the purchase order.
It is the responsibility of each institution to transmit orders for
purchases by its customers and to deliver required funds on a timely basis. If
funds are not received within the periods described above, the order will be
canceled, notice thereof will be given, and the institution will be responsible
for any loss to the Funds or their shareholders. Institutions may charge certain
account fees depending on the type of account the investor has established with
the institution. In addition, an institution may receive fees from the Funds as
described below under "Management." Payments for shares of the Funds may, in the
discretion of the Advisor, be made in the form of securities that are
permissible investments for the Funds. For further information see "Purchase and
Redemption Information" in the Statement of Additional Information.
Purchases may be effected on days on which the NYSE is open for
business (each, a "Business Day"). The Funds reserve the right to reject any
purchase order. Payment for orders which are not received or accepted will be
returned after prompt inquiry. The issuance of shares is recorded on the books
of the Funds, and share certificates are not issued unless expressly requested
in writing. Certificates are not issued for fractional shares.
Neither the Company, the Distributor nor the Transfer Agent will be
responsible for the authenticity of telephone instructions for the purchase or
redemption of shares where such instructions are reasonably believed to be
genuine. Accordingly, the institution will bear the risk of loss. The Company
will attempt to confirm that telephone instructions are genuine and will use
such procedures as are considered reasonable. If the Company fails to use
reasonable procedures to verify the genuineness of the telephone instructions,
it or its service providers may be liable for such instructions that prove to be
fraudulent or unauthorized.
Redemption of Shares. Redemption orders are effected at the net asset
value per share next determined after receipt of the order by the Transfer
Agent. Shares held by an institution on behalf of its customers must be redeemed
in accordance with instructions and limitations pertaining to the account at the
institution. The Company intends to pay cash for all shares redeemed, but in
unusual circumstances may make payment wholly or partly in portfolio securities
at their then market value equal to the redemption price. In such cases, an
investor may incur transaction costs in converting such securities to cash. For
further information see "Purchase and Redemption Information" in the Statement
of Additional Information.
Share balances may be redeemed pursuant to arrangements between
institutions and investors. It is the responsibility of an institution to
transmit redemption orders to the Transfer Agent and to credit its Customers'
accounts with the redemption proceeds on a timely basis. If a redemption order
for shares of the Funds is received by the Transfer Agent before 4:00 p.m.
Eastern time on a Business Day, payment is normally wired to the redeeming
institution on the following Business Day after receipt of the order by the
Transfer Agent. The Company reserves the right to delay the wiring of redemption
proceeds for up to seven days after it receives a redemption order if, in the
judgment of the Advisor, an earlier payment could adversely affect a Fund.
DIVIDENDS AND DISTRIBUTIONS
Each Fund expects to pay dividends and distributions from the net
income and net realized capital gains, if any, earned on investments held by the
Fund. Dividends from net income are declared and paid quarterly for each Fund
(except the Money Market Fund and the Short Term Treasury Fund). Dividends from
net income are declared daily and paid monthly with respect to the Money Market
Fund and are declared and paid monthly with respect to the Short Term Treasury
Fund. Each Fund's net realized capital gains (including net short-term capital
gains), if any, are distributed at least annually. Dividends and capital gains
are paid in the form of additional shares of the same Fund unless a shareholder
requests that dividends and capital gains be paid in cash. In the absence of
this request on the Account Application Form, each purchase of shares is made on
the understanding that the Transfer Agent is automatically appointed to receive
the dividends upon all shares in the shareholder's account and to reinvest them
in full and fractional shares of the same Fund at the net asset value in effect
at the close of business on the reinvestment date. Dividends are automatically
paid in cash (along with any redemption proceeds) not later than seven business
day after a shareholder closes an account with a Fund.
Shareholders of the Money Market Fund whose purchase orders are
received and become effective by 3:00 p.m. (Eastern Time) on any day on which
the NYSE is open for business receive dividends for that day. Shareholders of
the Money Market Fund whose redemption orders have been received by 3:00 p.m.
(Eastern Time) on a Business Day will not receive dividends for that day, while
shareholders whose redemption orders are received after 3:00 p.m. (Eastern Time)
on a Business Day will receive that day's dividends. Shareholders of Funds other
than the Money Market Fund will not receive dividends for the day purchase
orders are received, but will receive dividends for the day redemption orders
are received. The above-stated dividend determination time with respect to
redemptions is also applicable with respect to expedited redemption orders
received by telephone.
A Fund's expenses are deducted from the income of the Fund before
dividends are declared and paid. These expenses include, but are not limited to,
fees paid to the Advisor, Administrator, Custodian and Transfer Agent; fees and
expenses of officers and 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 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 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 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 (except the Money Market
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 Business Day. 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 net asset value per share of the Money Market Fund for the purpose
of pricing purchase and redemption orders is determined as of 3:00 p.m. (Eastern
time) and as of the close of regular trading on the NYSE on each Business Day.
In seeking to maintain a stable net asset value of $1.00 per share with respect
the Fund, the Company values the Fund's portfolio securities according to the
amortized cost method of valuation. Under this method, securities are valued
initially at cost on the date of purchase. Thereafter, absent unusual
circumstances, the Fund assumes a constant proportionate amortization of any
discount or premium until maturity of the security.
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 regarding 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 June 30, 1997, the Advisor and its affiliates
had approximately $41 billion in assets under management, of which $22
billion were invested in equity securities, $8 billion were invested in
money market or other short-term instruments, and $11 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 from each Fund, computed daily and
payable monthly on a separate Fund-by-Fund basis, at an annual rate of .07% of
the average daily net assets of the LargeCap 500 Index Fund, .15% of the average
daily net assets of each of the MidCap Index Fund and SmallCap Index Fund and
.20% of the average daily net assets of each of the Short Term Treasury Fund and
Money Market Fund.
The Advisor may, from time to time, make payments to banks,
broker-dealers or other financial institutions for certain services to the Funds
and/or their shareholders, including sub-administration, sub-transfer agency and
shareholder servicing. Such payments are made out of the Advisor's own resources
and do not involve additional costs to the Funds or their shareholders.
Administrator, Custodian and Transfer Agent
First Data Investor Services Group, Inc. ("Investor Services Group"),
whose principal business address is 53 State Street, Boston, Massachusetts
02109, serves as administrator for the Company. Investor Services Group 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.
Investor Services Group also serves as the Company's transfer agent and
dividend disbursing agent. Shareholder inquiries may be directed to Investor
Services Group at P.O. Box 5130, Westborough, Massachusetts 01581-5130.
As compensation for these services, the Administrator is entitled to
receive fees at an annual rate of $20,000 per Fund plus .01% of the first $1
billion of the Funds' aggregate net assets and .005% of the Funds' aggregate net
assets in excess of $1 billion. The Transfer Agent is entitled to receive fees
at an annual rate of $10,000 per Fund plus .025% of the Funds' aggregate average
daily net assets in excess of $5 billion. The Administrator and Transfer Agent
are also entitled to reimbursement for out-of-pocket expenses.
Comerica Bank, whose principal business address is One Detroit Center,
500 Woodward Avenue, Detroit, Michigan 48226, provides custodial services to the
Funds. The Custodian is a wholly owned subsidiary of Comerica Incorporated, a
publicly-held bank holding company. As compensation for its services, the
Custodian is entitled to receive fees, based on the aggregate average daily net
assets of the Funds and certain other investment portfolios that are advised by
the Advisor for which the custodian provides services, computed daily and
payable monthly at an annual rate of .03% of the first $100 million of average
daily net assets, .02% of the next $500 million of net assets and .01% of net
assets in excess of $600 million. The Custodian also receives certain
transaction based fees.
For an additional description of the services performed by the
Administrator, Transfer Agent and Custodian, see the Statement of Additional
Information.
TAXES
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Fund of liability for Federal income or excise taxes to
the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for any
taxable year requires, among other things, that a Fund distribute to its
shareholders an amount equal to at least 90% of its investment company taxable
income and 90% of its net tax-exempt interest income for such year. In general a
Fund's investment company income will be its taxable income (including
dividends, interest, and short-term capital gains) subject to certain
adjustments and excluding the excess of any net long-term capital gain for the
taxable year over the net short-term capital loss, if any, for such year. Each
Fund intends to distribute substantially all of its investment company taxable
income each taxable year. Such distributions will be taxable as ordinary income
to the Fund's shareholders who are not currently exempt from Federal income
taxes, whether such income is received in cash or reinvested in additional
shares. (Federal income taxes for distributions to an IRA or qualified
retirement plan are deferred under the Code if applicable requirements are met.)
The dividends received deduction for corporations will apply to such
distributions by the Funds to the extent of the total qualifying dividends
received by the distributing fund from domestic corporations for the taxable
year and if other applicable requirements are met.
Substantially all of each of the Funds' net realized long-term capital
gains, if any, will be distributed at least annually. The Funds will generally
have no tax liability with respect to such gains, and the distributions will be
taxable to shareholders who are not currently exempt from Federal income taxes
as long-term capital gains, no matter how long the shareholders have held their
shares.
A taxable gain or loss may be realized by a holder of shares in the
Funds upon the redemption or transfer of shares depending upon the tax basis of
the shares and their price at the time of the transaction. Such gain or loss
will be long-term or short-term, generally depending upon the shareholders
holding period for the shares.
Dividends declared in October, November, or December of any year
payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by a Fund on December 31
of such year if such dividends are actually paid during January of the following
year.
Before purchasing shares in the Funds, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, may be subject to tax.
Investments in zero coupon securities will result in income to a Fund
each year equal to a portion of the excess of the face value of the securities
over their issue price, even though the Fund receives no cash interest payments
from the securities.
Each Fund may be required to withhold U.S. federal income tax at the
rate of 31% of all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the IRS that they are
subject to backup withholding. Backup withholding is not an additional tax. Any
amounts withheld may be credited against the shareholder's U.S. federal income
tax liability.
On an annual basis, each Fund will send written notices to record
owners of shares regarding the Federal tax status of distributions made by the
Fund. Since this is not an exhaustive description of applicable tax
consequences, and since state and local taxes may be different than the Federal
taxes described below, investors may wish to contact their tax advisors
concerning investments in the Funds.
Further information relating to tax consequences is contained in the
Statement of Additional Information.
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, S&P
SmallCap Index Equity Fund, Munder Aggregate Bond Index Fund, Munder Foreign
Equity Fund, Liquidity Plus Money Market Fund, Munder Institutional S&P 500
Index Equity Fund, Munder Institutional S&P MidCap Index Equity Fund and Munder
Institutional S&P SmallCap Index Equity Fund.
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 choose 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.
PERFORMANCE
From time to time, the Funds may quote performance and yields for
shares in advertisements or in communications to shareholders. The total return
of shares in the Funds may be calculated on an average annual total return
basis, and may also be calculated on an aggregate total return basis, for
various periods. Average annual total return reflects the average percentage
change in value of an investment of shares in the Funds from the beginning date
of the measuring period to the end of the measuring period. Aggregate total
return reflects the total percentage change in value over the measuring period.
Both methods of calculating total return assume that dividends and capital gains
distributions made during the period are reinvested in the same class of shares.
The yield of shares in the Short Term Treasury Fund are computed based
on the net income of such Fund during a 30-day (or one month) period (which
period will be identified in connection with the particular yield quotation).
More specifically, the yield is computed by dividing the per share net income
for the class 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.
The yield of shares in the Money Market Fund refers to the income
generated by an investment the Fund over a seven-day period (which period will
be stated in the advertisement). This income is then "annualized;" that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. "Effective yield" is calculated similarly but, when annualized, the
income earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Funds may compare the performance of their shares to the
performance of other mutual funds with similar investment objectives and to
other relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds,
including, for example, Lipper Analytical Services, Inc., the Lehman Brothers
Government/Corporate Bond Index, a recognized unmanaged index of government and
corporate bonds, the Standard & Poor's 500 Index, an unmanaged index of a group
of common stocks, the Consumer Price Index, or the Dow Jones Industrial Average,
an unmanaged index of common stocks of 30 industrial companies listed on the New
York Stock Exchange. Performance and yield data as reported in national
financial publications such as Morningstar, Inc., Money Magazine, Forbes,
Barron's, The Wall Street Journal and The New York Times, or in publications of
a local or regional nature, may also be used in comparing the performance of a
class of shares in the Fund.
Performance will fluctuate and any quotation of performance should not
be considered as representative of future performance of shares in the Funds.
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 the
Funds will not be included in calculations of yield and performance.
<PAGE>
MUNDER INSTITUTIONAL S&P 500 INDEX EQUITY FUND
MUNDER INSTITUTIONAL S&P MIDCAP INDEX EQUITY FUND
MUNDER INSTITUTIONAL S&P SMALLCAP INDEX EQUITY FUND
MUNDER INSTITUTIONAL SHORT TERM TREASURY FUND
MUNDER INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
July 23, 1997
St. Clair Funds, Inc. (the "Company") currently offers a selection of
investment portfolios, five of which are discussed in this Statement of
Additional Information: Munder Institutional S&P 500 Index Equity Fund
("LargeCap 500 Index Fund"), Munder Institutional S&P MidCap Index Equity Fund
("MidCap Index Fund"), Munder Institutional S&P SmallCap Index Equity Fund
("SmallCap Index Fund") (collectively, the "Index Funds"), Munder Institutional
Short Term Treasury Fund ("Short Term Treasury Fund") and Munder Institutional
Money Market Fund ("Money Market Fund") (collectively with the Index Funds, the
"Funds"). The Funds' investment advisor is Munder Capital Management (the
"Advisor").
This Statement of Additional Information is intended to supplement
the information provided to investors in the Funds' Prospectus dated July 23,
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 July 23, 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 Funds Distributor,
Inc. (the "Distributor"), or by calling the Funds at (800) 438-5789. This
Statement of Additional Information is dated July 23, 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
Page
GENERAL........................................................ 3
FUND INVESTMENTS............................................... 3
RISK FACTORS AND SPECIAL CONSIDERATIONS ....................... 11
INVESTMENT LIMITATIONS......................................... 12
DIRECTORS AND OFFICERS......................................... 14
INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS............. 19
PORTFOLIO TRANSACTIONS......................................... 20
PURCHASE AND REDEMPTION INFORMATION............................ 22
NET ASSET VALUE................................................ 23
PERFORMANCE INFORMATION........................................ 23
TAXES ......................................................... 26
ADDITIONAL INFORMATION CONCERNING SHARES....................... 30
MISCELLANEOUS.................................................. 31
REGISTRATION STATEMENT......................................... 31
APPENDIX A..................................................... A-1
APPENDIX B..................................................... B-1
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.
<PAGE>
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.
Investment Company Securities. The Funds may invest in securities
issued by other investment companies. The LargeCap 500 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 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.
Non-Domestic Bank Obligations. 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
(other than Short Term Treasury Fund) 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.
Commercial Paper. Investments by a Fund (other than the Money Market
Fund) in commercial paper will consist of issues rated at the time in one of the
highest four rating categories by at least one nationally-recognized statistical
rating organization ("NRSRO"). Investments by the Money Market Fund will consist
of issues rated at the time of issuers having at the time, a quality rating
within the two highest rating categories of an NRSRO. 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.
Variable Master Demand Notes. The Funds (other than Short Term Treasury
Fund) may also purchase variable amount master demand notes which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate. Although the notes are not normally
traded and there may be no secondary market in the notes, the Fund may demand
payment of the principal of the instrument at any time. The notes are not
typically rated by credit rating agencies, but issuers of variable amount master
demand notes must satisfy the same criteria as set forth above for issuers of
commercial paper. If an issuer of a variable amount master demand note defaulted
on its payment obligation, the Fund might be unable to dispose of the note
because of the absence of a secondary market and might, for this or other
reasons, suffer a less to the extent of the default. The Funds invest in
variable amount master demand notes only when the Advisor deems the investment
to involve minimal credit risk.
Options. The Index 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 for investment or hedging purposes. 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 the
relevant 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 Index 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 such 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 Index Funds may write options in connection with buy-and-write
transactions; that is, the Index Funds may purchase a security and then write a
call option against that security. The exercise price of the call such 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 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 Index Funds may
write call options that are not covered for cross-hedging purposes. Each of the
Index 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 Index
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 Index Funds may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in this way, a Fund
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 Index 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 relevant Fund 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 a 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 a Fund expires unexercised the Fund realizes a
loss equal to the premium paid. If a 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 a Fund
expires on the stipulated expiration date or if the Fund enters into a closing
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 a 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 volume; 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 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 Indices and Options on Stock
Index Futures Contracts. The Index Funds may purchase and sell stock index
futures, options on stock indices and options on stock index futures contracts
as a hedge against movements in the equity markets.
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 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 index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of that stock 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 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 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 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 Index Funds may purchase and write call and put options on stock
index futures contracts. Each Index 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 Index Funds may purchase put
options or write call options on stock index futures, rather than selling
futures contracts, in anticipation of a decline in general stock market prices
or purchase call options or write put options on stock index futures, rather
than purchasing such futures, to hedge against possible increases in the price
of securities which such Funds intend to purchase.
In connection with transactions in stock index futures, stock index
options and options on stock index 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. For a
detailed description of futures contracts and related options, see Appendix B to
this Statement of Additional Information.
U.S. Government Obligations. The Funds may purchase obligations
issued or guaranteed by the U.S. Government and U.S. Government agencies and
instrumentalities, except that the Short Term Treasury Fund will only purchase
obligations issued by the U.S. Treasury. 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. 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, Federal National Mortgage Association,
Government National Mortgage Association, General Services Administration,
Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks and Maritime
Administration.
Stripped Securities. The Money Market 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 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 Company 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, the Money Market 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.
Variable and Floating Rate Instruments. Debt instruments purchased by a
Fund 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 relevant 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 a
Fund could suffer a loss if the issuer defaulted or during periods when the Fund
is not entitled to exercise its demand rights.
Variable and floating rate instruments held by a 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. With respect to the Money Market Fund,
the securities held subject to a repurchase agreement may have stated maturities
exceeding thirteen months, provided that the repurchase agreement itself matures
in one year.
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 Comerica
Bank (the "Custodian") or a 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").
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. 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 portfolio securities of an amount at
least equal to the market value of the securities, plus accrued interest,
subject to the agreement.
Guaranteed Investment Contracts. The Money Market Fund may make limited
investments in guaranteed investment contracts ("GICs") issued by U.S. insurance
companies. Pursuant to such contracts, a Fund makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the Fund on a monthly basis interest which is based on an index
(in most cases this index is expected to be the Salomon Brothers CD Index), but
is guaranteed not to be less than a certain minimum rate. A GIC is normally a
general obligation of the issuing insurance company and not funded by a separate
account. The purchase price paid for a GIC becomes part of the general assets of
the insurance company, and the contract is paid from the company's general
assets. A Fund will only purchase GICs from insurance companies which, at the
time of purchase, have assets of $1 billion or more and meet quality and credit
standards established by the Advisor pursuant to guidelines approved by the
Board of Trustees. Generally, GICs are not assignable or transferable without
the permission of the issuing insurance companies, and an active secondary
market in GICs does not currently exist. Therefore, GICs will normally be
considered illiquid investments, and will be acquired subject to the limitation
on illiquid investments.
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 a 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 a 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 a 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 a Fund's incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.
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 a Fund starting on the day the Fund agrees to purchase the securities. A 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 rating organizations 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.
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.
Other. 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
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. The Index Funds are not managed in this
manner. Instead, with the aid of a computer program, the Advisor purchases and
sells securities for each Index Fund in an attempt to produce investment results
that substantially duplicate the investment composition and performance of each
Index Fund's respective corresponding index (the "Corresponding Index"), taking
into account redemptions, sales of additional Fund shares, and other adjustments
as described below.
An Index 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 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 an Index Fund would acquire solely on the basis of
their weighted capitalizations with the industry sector diversification of all
issuers included in the relevant Corresponding Index. This comparison is made
because the Advisor believes that, unless an Index Fund holds all stocks
included in its 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 an Index 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 an Index 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 an Index
Fund's Corresponding Index, the Advisor may be required to sell some or all of
the common stock of such issuer then held by the 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 an Index Fund by traditional
methods of financial and market analysis, the Advisor will monitor each Index
Fund's investment with a view towards removing stocks of companies which may
impair for any reason the Fund's ability to achieve its investment objective.
The Index Funds will invest primarily in the common stocks that
constitute their Corresponding Indexes 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 a 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.
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.
However, as an operating policy the Money Market Fund intends to adhere to the
5% limitation (with respect to the Fund's investment in the outstanding
securities of any one issuer) with regard to 100% of its portfolio to the extent
required under applicable regulations under the 1940 Act;
2. Purchase securities if more than 25% of the value of the Fund's total
assets would be invested in the securities of issuers conducting their principal
business activities in the same industry; provided that: (i) there is no limit
on investments in U.S. Government Securities or, with respect to the Money
Market Fund, obligations of domestic commercial banks (including U.S. branches
of foreign banks subject to regulations under U.S. laws applicable to domestic
banks and, to the extent that its parent is unconditionally liable for the
obligation, foreign branches of U.S. banks); (ii) there is no limit on
investments in issuers domiciled in a single country; (iii) financial service
companies are classified according to the end users of their services (for
example, automobile finance, bank finance and diversified finance are each
considered to be a separate industry); and (iv) utility companies are classified
according to their services (for example, gas, gas transmission, electric, and
telephone are each considered to be a separate industry);
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;
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. Make investments for the purpose of exercising control of management;
9. Invest in commodities or commodity futures contracts, provided that
this limitation shall not prohibit the purchase or sale by a Fund of financial
futures and stock index futures contracts, options on futures contracts, options
on securities and securities indices, as permitted by the Fund's Prospectus;
or
10. 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.
Although not a matter of fundamental policy, the Funds consider
securities which are issued or guaranteed by the same foreign government to be
issued by the same industry for purposes of the 25% asset limitation on
investments in securities of issuers conducting their principal business
activity in the same industry.
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 (10% of net
assets for the Money Market Fund) (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;
2. Invest in other investment companies except as permitted under the 1940
Act; or
3. 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 a Fund may make margin
deposits in connection with transactions in options,
futures and options on futures.
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% (10% for the Money
Market Fund) 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.
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, and their business
addresses and principal occupations during the past five years, are:
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 of Directors Senior Advisor to the President -
3338 Bronson Boulevard Western Michigan University since
Kalamazoo, MI 49008 July 1995; prior to that Executive
Age: 64 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 of the Chairman, Walbridge Aldinger
1876 Rathmor Board of Directors Company (construction company).
Bloomfield Hills, MI 48304
Age: 49
Thomas B. Bender Director Investment Advisor, Financial &
7 Wood Ridge Road Investment Management Group (since
Glen Arbor, MI 49636 April, 1991); Vice President
Age: 63 Institutional Sales, Kidder,
Peabody & Co. (Retired April, 1991).
David J. Brophy Director Professor, University of Michigan;
1025 Martin Place Director, River Place Financial
Ann Arbor, MI 48104 Corp.; Trustee, Renaissance Assets
Age: 60 Trust.
Dr. Joseph E. Champagne Director Corporate and Executive Consultant
319 Snell Road since September 1995; prior to that
Rochester, MI 48306 Chancellor, Lamar University from
Age: 58 September 1994 until September 1995;
before that Consultant to Management,
Lamar University; President and
Chief Executive Officer, Crittenton
Corporation (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-Atlantic
10726 Falls Pointe Drive Group of Pulte Home Corporation
Great Falls, VA 22066 (developer of residential land and
Age: 49 construction of housing units).
Lee P. Munder President President and CEO of the Advisor;
480 Pierce Street Chief Executive Officer and
Suite 300 President of Old MCM, Inc.; Chief
Birmingham, MI 48009 Executive Officer of World Asset
Age: 51 Management; and Director, LPM
Investment Services, Inc. ("LPM").
Terry H. Gardner Vice President, Chief Financial Vice President and Chief Financial
480 Pierce Street Officer and Treasurer Officer of the Advisor; Vice
Suite 300 President and Chief Financial
Birmingham, MI 48009 Officer of Old MCM, Inc. (February
Age: 36 1993 to present); Audit Manager
Arthur Andersen & Co. (1991 to
February 1993); Secretary of LPM.
Paul Tobias Vice President Executive Vice Presidentand Chief
480 Pierce Street Operating Officer of the Advisor
Suite 300 (since April 1995) and Executive
Birmingham, MI 48009 Vice President of Comerica, Inc.
Age: 45
Gerald Seizert Vice President Executive Vice President and Chief
480 Pierce Street Investment Officer/Equities of the
Suite 300 Advisor (since April 1995);
Birmingham, MI 48009 Managing Director (1991-1995),
Age: 44 Director (1992-1995) and Vice
President (1984-1991) of Loomis,
Sayles and Company, L.P.
Elyse G. Essick Vice President Vice President and Director of
480 Pierce Street Marketing for the Advisor; Vice
Suite 300 President and Director of Client
Birmingham, MI 48009 Services of Old MCM, Inc. (August
Age: 38 1988 to December 1994).
James C. Robinson Vice President Vice President and Chief Investment
480 Pierce Street Officer/Fixed Income for the
Suite 300 Advisor; Vice President and
Birmingham, MI 48009 Director of Fixed Income of Old
Age: 35 MCM, Inc. (1987-1994).
Leonard J. Barr, II Vice President Vice President and Director of Core
480 Pierce Street Equity Research of the Advisor;
Suite 300 Director and Senior Vice President
Birmingham, MI 48009 of Old MCM, Inc. (since 1988);
Age: 52 Director of LPM.
Ann F. Putallaz Vice President Vice President and Director of
480 Pierce Street Fiduciary Services of the Advisor
Suite 300 (since January 1995); Director of
Birmingham, MI 48009 Client and Marketing Services of
Age: 51 Woodbridge Capital Management, Inc.
Richard H. Rose Assistant Treasurer Senior Vice President, First Data
First Data Investor Services Investor Services Group, Inc.
Group, Inc. (since May 6, 1994). Formerly,
One Exchange Place Senior Vice President, The Boston
8th Floor Company Advisors, Inc. since
Boston, MA 02109 November 1989.
Age: 41
Lisa A. Rosen Secretary, Assistant Treasurer General Counsel of the Advisor
480 Pierce Street since May, 1996; Formerly Counsel,
Suite 300 First Data Investor Services Group,
Birmingham, MI 48009 Inc.; Assistant Vice President and
Age: 29 Counsel with The Boston Company
Advisors, Inc.; Associate with
Hutchins, Wheeler & Dittmar.
Teresa M. R. Hamlin Assistant Secretary Counsel, First Data Investor
First Data Investor Services Services Group, Inc. (since 1995);
Group, Inc. Formerly Paralegal Manager, The
One Exchange Place Boston Company Advisors, Inc.
8th Floor
Boston, MA 02109
Age: 33
Julie A. Tedesco Assistant Secretary Counsel, First Data Investor
First Data Investor Services Services Group, Inc. (since May,
Group, Inc. 1994); Formerly, Assistant Vice
One Exchange Place President and Counsel of The Boston
8th Floor Company Advisors, Inc. since July,
Boston, MA 02109 1992.
Age: 39
<FN>
1/ Director is an "interested person" of the Company as defined in the 1940 Act.
</FN>
</TABLE>
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.
The following table summarizes the compensation paid by the Company,
Munder, the Trust and Framlington Trust to their respective Directors/Trustees
for the year ended June 30, 1997.
<TABLE>
<CAPTION>
Aggregate Pension
Compensation Retirement Estimated
Name of from the Company, the Benefits Accrued Annual Benefits Total from
Person Trust, Munder and as Part of upon the Fund
and Position Framlington Trust Fund Expenses Retirement Complex
<S> <C> <C> <C>
Charles W. Elliott $20,000.00 None None $20,000.00
Chairman
John Rakolta, Jr. $18,500.00 None None $18,500.00
Vice Chairman
Thomas B. Bender $20,000.00 None None $20,000.00
Trustee and Director
David J. Brophy $20,000.00 None None $20,000.00
Trustee and Director
Dr. Joseph E. Champagne $20,000.00 None None $20,000.00
Trustee and Director
Thomas D. Eckert $20,000.00 None None $20,000.00
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.
<PAGE>
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.
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 with regard to
the Funds, the Advisor has agreed to a fee from each Fund, computed daily and
payable monthly on a separate Fund-by-Fund basis, at an annual rate of .07% of
the average daily net assets of the LargeCap 500 Index Fund, .15% of the average
daily net assets of each of the MidCap Index Fund and SmallCap Index Fund and
.20% of the average daily net assets of each of the Short Term Treasury Fund and
Money Market 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. The Distributor has agreed to use appropriate efforts to
solicit orders for the purchase of shares of the Fund although it is not
obligated to sell any particular amount of shares. The Distributor pays the cost
of printing and distributing prospectuses to persons who are not holders of fund
shares (excluding preparation and printing expenses necessary for the continued
registration of the shares) and of printing and distributing all sales
literature. The Distributor's principal offices are located at 60 State Street,
Boston, Massachusetts 02109.
Administration Agreement. First Data Investor Services Group, Inc.
("Investor Services Group"), located at 53 State Street, Boston, Massachusetts
02109, serves as administrator for the Company pursuant to an administration
agreement (the "Administration Agreement"). Investor Services Group 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.
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, 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.
Investor Services Group 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 Investor Services
Group (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 and Transfer Agency
Agreements. As stated in the Prospectus, the Administrator, the Transfer Agent
and the Custodian each receives 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.
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.
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 more favorable prices and execution
are available elsewhere. The cost of 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.
<PAGE>
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.
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 their 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; 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.
Retirement Plans. Shares of any of the Funds may be purchased in
connection with various types of tax deferred retirement plans, including
individual retirement accounts ("IRAs"), qualified plans, deferred compensation
for public schools and charitable organizations (403(b) plans) and simplified
employee pension IRAs. An individual or organization considering the
establishment of a retirement plan should consult with an attorney and/or an
accountant with respect to the terms and tax aspects of the plan. A $10.00
annual custodial fee is also charged on IRAs. This custodial fee is due by
December 15 of each year and may be paid by check or shares liquidated from a
shareholder's account.
The Funds may suspend the right of redemption or postpone the date of
payment for shares during any period when: (a) trading on the New York Stock
Exchange (the "Stock Exchange") is restricted by applicable rules and
regulations of the SEC; (b) the Stock Exchange is closed for other than
customary weekend and holiday closings; (c) the SEC has by order permitted such
suspension; or (d) an emergency exists as determined by the SEC. Upon the
occurrence of any of the foregoing conditions, the Funds may also suspend or
postpone the recordation of the transfer of its Shares.
In addition, the Funds may compel the redemption of, reject any order
for, or refuse to give effect on the Funds' books to the transfer of, its Shares
where the relevant investor or investors have not furnished the Funds with
valid, certified taxpayer identification numbers and such other tax-related
certifications as the Fund may request. The Funds may also redeem shares
involuntarily if it otherwise appears appropriate to do so in light of the
Funds' responsibilities under the 1940 Act or in connection with a failure of
the appropriate person(s) to furnish certified taxpayer identification numbers
and other tax-related certifications.
Payment for shares may, in the discretion of the Advisor, be made in
the form of securities that are permissible investments for the Funds as
described in the Prospectus. For further information about this form of payment
please contact the Transfer Agent. In connection with an in-kind securities
payment, the Funds will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by the
Fund and that the Fund receive satisfactory assurances that (1) it will have
good and marketable title to the securities received by it; (2) that the
securities are in proper form for transfer to the Funds; and (3) adequate
information will be provided concerning the basis and other tax matters relating
to the securities.
Redemption proceeds are normally paid in cash; however, each Fund may
pay the redemption price in whole or in part by a distribution in kind of
securities from the portfolio of the particular 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. The Funds are 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.
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 shareholders or prospective
investors. These performance figures are calculated in the following manner:
Yield of the Money Market Fund
The Money Market Fund's current and effective yields are computed using
standardized methods required by the SEC. The annualized yield is computed by:
(a) determining the net change in the value of a hypothetical account having a
balance of one share at the beginning of a seven-calendar day period; (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared and all dividends declared on both the original share and such
additional shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising the sum to
a power equal to 365/7 and subtracting 1.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of the Fund will fluctuate, it cannot be
compared with yields on savings accounts or other investment alternatives that
provide an agreed to or guaranteed fixed yield for a stated period of time.
However, yield information may be useful to an investor considering temporary
investments in money market instruments. In comparing the yield of one money
market fund to another, consideration should be given to the Fund's investment
policies including the types of investments made, lengths of maturities of the
portfolio securities, and whether there are any special account charges which
may reduce the effective yield.
<PAGE>
Yield of the Short Term Treasury Fund
The Short Term Treasury Fund's 30-day SEC yield (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:
a - b
YIELD = 2[(-----+1)6 - 1]
cd
Where: a = dividends and interest earned by a Fund during the period;
b = expenses accrued for the period (net of expense reimbursements
and waivers);
c = average daily number of shares outstanding during the period
entitled to receive dividends;
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.
Interest earned on tax-exempt obligations that are issued without
original issue discount and have a current market discount is calculated by
using the coupon rate of interest instead of the yield to maturity. In the case
of tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original issue discount (market discount), the yield to maturity
is the imputed rate based on the original issue discount calculation. On the
other hand, in the case of tax-exempt obligations that are issued with original
issue discount but which have the discounts based on current market value that
are less than the then-remaining portion of the original issue discount (market
premium), the yield to maturity is based on the market value.
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 a 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).
<PAGE>
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
and of any CDSC deduction (or a
fractional portion thereof);
P = hypothetical initial payment of $1,000;
n = number of years and portion of a year
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.
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 Money Market Fund's 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.
<PAGE>
TAXES
The following summarizes certain additional tax considerations
generally affecting each Fund and its shareholders that are not described in the
Funds' Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Funds or its shareholders, and the discussion here and in
the Prospectus 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 intends to elect and qualify annually to be taxed 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 its shareholders, 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").
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.
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
below, 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 and any net
realized short-term capital gains distributed by the Fund will be taxable to
shareholders as ordinary income. If a portion of a Fund's income consists of
dividends paid by U.S. corporations, a portion of the dividends paid by the Fund
may 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. Any such gain which a Fund designates as a capital gain
dividend is taxable to shareholders as long-term capital gain, regardless of the
length of time the shareholder has held the shares, and is not eligible for the
dividends received deduction.
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. In such
event, all distributions (whether or not derived from exempt-interest income)
would be taxable as ordinary income and would be eligible for the dividends
received deduction in the case of corporate shareholders to the extent of the
Fund's current and accumulated earnings and profits.
Shareholders will be advised annually as to the Federal income tax
consequences of distributions made by the Fund each year.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent imposition of the excise tax, each Fund must distribute during each
calendar year an amount equal to the sum of (1) at least 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (2) at least 98% of its capital gains in excess of its capital losses
(adjusted for certain ordinary losses, as prescribed by the Code) for the
one-year period ending on October 31 of the calendar year, and (3) any ordinary
income and capital gains for previous years that was not distributed during
those years. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by a Fund in October, November or
December with a record date in such a month and paid by the Fund during January
of the following calendar year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received. To
prevent application of the excise tax, each Fund intends to make its
distributions in accordance with the calendar year distribution requirement.
The taxation of equity options and over-the-counter options on debt
securities is governed by Code section 1234. Pursuant to Code section 1234, the
premium received by a Fund for selling a put or call option is not included in
income at the time of receipt. If the option expires, the premium is short-term
capital gain to the Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its position and the premium
received is short-term capital gain or loss. If a call option written by a Fund
is exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by a Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term,
depending upon the holding period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is added to the basis of the
purchased security and, in the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Certain options and futures contracts in which a Fund may invest are
"section 1256 contracts." Gains or losses on section 1256 contracts generally
are considered 60% long-term and 40% short-term capital gains or losses;
however, foreign currency gains or losses (as discussed below) arising from
certain section 1256 contracts may be treated as ordinary income or loss. Also,
section 1256 contracts held by a Portfolio at the end of each taxable year (and,
generally, for purposes of the 4% excise tax, on October 31 of each year) are
"marked-to-market" (that is, treated as sold at fair market value), resulting in
unrealized gains or losses being treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Funds of engaging in hedging
transactions are not entirely clear. Hedging transactions may increase the
amount of short-term capital gain realized by the Funds which is taxed as
ordinary income when distributed to shareholders.
Each Fund may make one or more of the elections available under the
Code which are applicable to straddles. If a Fund makes any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because the straddle rules may affect the character of gains or losses,
defer losses and/or accelerate the recognition of gains or losses from the
affected straddle positions, the amount which may be distributed to
shareholders, and which will be taxed to them as ordinary income or long-term
capital gain, may be increased or decreased as compared to a fund that did not
engage in such hedging transactions.
The Short-Short Gain Test and the diversification requirements
applicable to each Fund's assets may limit the extent to which each Fund will be
able to engage in transactions in options and futures contracts.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues receivables or
liabilities denominated in a foreign currency, and the time the Fund actually
collects such receivables or pays such liabilities, generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency and on disposition of certain options and
futures contracts, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract and
the date of disposition also are treated as ordinary gain or loss. These gains
or losses, referred to under the Code as "section 988" gains or losses, may
increase or decrease the amount of a Fund's investment company taxable income to
be distributed to its shareholders as ordinary income.
Upon the sale or other disposition of shares of a Fund, a shareholder
may realize a capital gain or loss which will be long-term or short-term,
generally depending upon the shareholder's holding period for the shares. Any
loss realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including shares acquired pursuant to a dividend
reinvestment plan) within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.
If a Fund invests in stock of certain foreign investment companies, the
Fund may be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income tax rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
A Fund may be able to make an election, in lieu of being taxable in the
manner described above, to include annually in income its pro rata share of the
ordinary earnings and net capital gain of the foreign investment company,
regardless of whether it actually received any distributions from the foreign
company. These amounts would be included in the Fund's investment company
taxable income and net capital gain which, to the extent distributed by the Fund
as ordinary or capital gain dividends, as the case may be, would not be taxable
to the Fund. In order to make this election, the Fund would be required to
obtain certain annual information from the foreign investment companies in which
is invests, which in many cases may be difficult to obtain. Alternatively, the
Fund may be eligible to elect to mark to market its foreign investment company
stock, resulting in the stock being treated as sold at fair market value on the
last business day of each taxable year. Any resulting gain would be reported as
ordinary income, and any resulting loss would not be recognized. If this
election were made, the special rules described above with respect to excess
distributions and dispositions would still apply.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.
The Company will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable distributions paid to any shareholder
(i) who has provided either an incorrect tax identification number or no number
at all, (ii) who is subject to backup withholding by the Internal Revenue
Service for failure to report the receipt of taxable interest or dividend income
properly, or (iii) who has failed to certify to the Company that he is not
subject to backup withholding or that he is an "exempt recipient."
Fund shareholders may be subject to state, local and foreign taxes on
their Fund distributions. In many states, Fund distributions which are derived
from interest on certain U.S. Government obligations are exempt from taxation.
The tax consequences to a foreign shareholder of an investment in a Fund may be
different from those described herein. Foreign shareholders are advised to
consult their own tax advisers with respect to the particular tax consequences
to them of an investment in a Fund. Shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in a Fund.
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.
<PAGE>
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, Munder Institutional S&P 500 Index Equity Fund, Munder
Institutional S&P MidCap Index Equity Fund, Munder Institutional S&P SmallCap
Index Equity Fund, Munder Institutional Short Term Treasury Fund and Munder
Institutional Money Market 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.
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).
<PAGE>
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, MA
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.
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.
<PAGE>
A-1
shared/bankgrp/stclr/sai/inssai3.doc
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.
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."
<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+".
<PAGE>
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G:\SHARED\BANKGRP\STCLR\EDGAR/PEA.24.DOC
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. Index Futures Contracts
General. 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.
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
Portfolio Futures
-Day Hedge is Placed-
Anticipate buying $62,500 in Equity Securities Buying 1 Index Futures at 125
Value of Futures =
$62,500/Contract
-Day Hedge is Lifted-
Buy Equity Securities with Actual Cost = $65,000 Sell 1 Index Futures at 130
Increase in Purchase Price = $2,500 Value of Futures =
$65,000/Contract
Gain on Futures = $2,500
<PAGE>
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
Portfolio Futures
-Day Hedge is Placed-
Anticipate Selling $1,000,000 in Equity Securities Sell 16 Index Futures at 125
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
II. 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 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.
III. 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 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.
IV. 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 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.
<PAGE>
V. Other Matters
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
<PAGE>
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
incorporated herein by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement on Form N-1A filed with the Commission on
April 18, 1997.
(k) Articles Supplementary to Registrant's Articles of
Incorporation are incorporated herein by reference to
Post-Effective Amendment No. 22 to Registrant's Registration
Statement on Form N-1A filed with the Commission on April 18,
1997 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.
(l) Certificate of Correction relating to the Liquidity Plus Money Market
Fund is incorporated herein by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement on Form N-1A filed with the Commission on
April 18, 1997.
(m) Articles Supplementary to Registrant's Articles of
Incorporation relating to Munder Institutional S&P 500 Index
Equity Fund, Munder Institutional S&P MidCap Index Equity
Fund, Munder Institutional S&P SmallCap Index Equity Fund,
Munder Institutional Short Term Treasury Fund and Munder
Institutional Money Market Fund are 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 incorporated herein by
reference to Post-Effective Amendment No. 22 to Registrant's
Registration Statement on Form N-1A filed with the Commission
on April 18, 1997.
(c) Form of Investment Advisory Agreement between Registrant
and Munder Capital Management with respect to Munder
Institutional S&P 500 Index Equity Fund, Munder Institutional
S&P MidCap Index Equity Fund, Munder Institutional S&P
SmallCap Index Equity Fund, Munder Institutional Short Term
Treasury Fund and Munder Institutional Money Market 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 incorporated herein by reference
to Post-Effective Amendment No. 22 to Registrant's
Registration Statement on Form N-1A filed with the Commission
on April 18, 1997.
(c) Form of Distribution Agreement between Registrant and Funds
Distributor, Inc. with respect to Munder Institutional S&P 500 Index Equity
Fund, Munder Institutional S&P MidCap Index Equity Fund, Munder Institutional
S&P SmallCap Index Equity Fund, Munder Institutional Short Term Treasury Fund
and Munder Institutional Money Market Fund is filed herein.
(7) Not Applicable.
(8) (a) 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
incorporated herein by reference to Post-Effective Amendment
No. 22 to Registrant's Registration Statement on Form N-1A
filed with the Commission on April 18, 1997.
(b) Form of Amendment to Custody Agreement between Registrant and Comerica
Bank is filed herein.
(c) Form of Notice to Custody Agreement between Registrant and
Comerica Bank with respect to the addition of Munder
Institutional S&P 500 Index Equity Fund, Munder Institutional
S&P MidCap Index Equity Fund, Munder Institutional S&P
SmallCap Index Equity Fund, Munder Institutional Short Term
Treasury Fund and Munder Institutional Money Market 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 incorporated herein by
reference to Post-Effective Amendment No. 22 to Registrant's
Registration Statement on Form N-1A filed with the Commission
on April 18, 1997.
(d) Form of Amendment to Amended and Restated Administration Agreement
between Registrant and First Data Investor Services Group, Inc is filed herein.
(e) Form of Notice to Administration Agreement between Registrant
and First Data Investor Services Group, Inc. with respect to
the addition of Munder Institutional S&P 500 Index Equity
Fund, Munder Institutional S&P MidCap Index Equity Fund,
Munder Institutional S&P SmallCap Index Equity Fund, Munder
Institutional Short Term Treasury Fund and Munder
Institutional Money Market Fund is filed herein.
(f) Form of Notice to Sub-Administration Agreement between Registrant and
FDI Distribution Services, Inc. with respect to the addition of Munder
Institutional S&P 500 Index Equity Fund, Munder Institutional S&P MidCap Index
Equity Fund, Munder Institutional S&P SmallCap Index Equity Fund, Munder
Institutional Short Term Treasury Fund and Munder Institutional Money Market is
filed herein.
(g) 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 incorporated herein by
reference to Post-Effective Amendment No. 22 to Registrant's
Registration Statement on Form N-1A filed with the Commission
on April 18, 1997.
(h) Form of Amendment to Transfer Agency and Registrar Agreement
between Registrant and First Data Investor Services Group, Inc is filed herein.
(i) Form of Notice to Transfer Agency and Registrar Agreement with
respect to the addition of Munder Institutional S&P 500 Index
Equity Fund, Munder Institutional S&P MidCap Index Equity
Fund, Munder Institutional S&P SmallCap Index Equity Fund,
Munder Institutional Short Term Treasury Fund and Munder
Institutional Money Market Fund is filed herein.
(j) 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
incorporated herein by reference to Post-Effective Amendment
No. 22 to Registrant's Registration Statement on Form N-1A
filed with the Commission on April 18, 1997.
(k) 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 incorporated
herein by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement on Form N-1A filed with
the Commission on April 18, 1997.
(10)(a) 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.
(b) 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 incorporated herein by
reference to Post-Effective Amendment No. 22 to Registrant's
Registration Statement on Form N-1A filed with the Commission
on April 18, 1997.
(c) Opinion and consent of counsel with respect to Munder
Institutional S&P 500 Index Equity Fund, Munder Institutional
S&P MidCap Index Equity Fund, Munder Institutional S&P
SmallCap Index Equity Fund, Munder Institutional Short Term
Treasury Fund and Munder Institutional Money Market is filed
herein.
(11)(a) Powers of Attorney are incorporated herein by reference to
Post-Effective Amendment No. 22 to Registrant's Registration Statement on Form
N-1A filed with the Commission on April 18, 1997.
(b) Certified Resolution of Board authorizing signature on behalf of
Registrant pursuant to power of attorney is incorporated herein by reference to
Post-Effective Amendment No. 23 to Registrant's Registration Statement on Form
N-1A filed with the Commission on May 9, 1997.
(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.
(c) Schedules for computation of total return and yield with
respect to Munder Institutional S&P 500 Index Equity Fund,
Munder Institutional S&P MidCap Index Equity Fund, Munder
Institutional S&P SmallCap Index Equity Fund, Munder
Institutional Short Term Treasury Fund and Munder
Institutional Money Market Fund is filed herein.
(17) Not Applicable.
(18) Not Applicable.
Item 25. Persons Controlled by or under Common Control with Registrant.
-------------------------------------------------------------
<PAGE>
Not Applicable.
Item 26. Number of Holders of Securities
--------------------------------------
As of July 15, 1997, 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 had no
shareholders.
As of July 15, 1997, the number of shareholders of record for Liquidity
Plus Money Market Fund is 3.
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
Clark Durant Vice President and Co-Director
of The Private Management Group
Elyse G. Essick Vice President and Director of
Client Services
Sharon E. Fayolle Vice President and Director of
Money Market Trading
<PAGE>
Otto G. Hinzmann Vice President and Director of
Equity Portfolio Management
Anne K. Kennedy Vice President and Director of
Corporate Bond Trading
Richard R. Mullaney Vice President and Director of
The Private Management Group
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 Executive 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, Munder Institutional
S&P 500 Index Equity Fund, Munder Institutional S&P MidCap Index Equity Fund,
Munder Institutional S&P SmallCap Index Equity Fund, Munder Institutional Short
Term Treasury Fund and Munder Institutional 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 Institutional Funds The JPM Series Trust
RCM Equity Funds, Inc. The JPM Series Trust II
Waterhouse Investors Cash Management Fund, Inc. Monetta Fund, Inc.
HT Insight Funds, Inc. Monetta Trust
d/b/a Harris Insight Funds The Brinson Funds
LKCM Fund The Munder Framlington
Funds Trust
The JPM Pierpont Funds The Munder Funds, Inc.
The JPM Institutional Funds WEBS Index Fund, Inc.
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 following is a list of the executive officers, directors and
partners of Funds Distributor, Inc.
Director, President and Chief Executive Officer -Marie E. Connolly
Executive Vice President -Richard W. Ingram
Executive Vice President -Donald R. Robertson
Senior Vice President, General Counsel, -John E. Pelletier
Secretary and Clerk
Senior Vice President -Michael S. Petrucelli
Director, Senior Vice President, Treasurer and
Chief Financial Officer
Senior Vice President -Paula R. David
Senior Vice President -Bernard A. Whalen
Director -William J. Nutt
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, Munder
Institutional S&P 500 Index Equity Fund,
Munder Institutional S&P MidCap Index Equity
Fund, Munder Institutional S&P SmallCap
Index Equity Fund, Munder Institutional
Short Term Treasury Fund and Munder
Institutional 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
----------------
(a) Not Applicable.
(b) 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 Munder
Institutional S&P 500 Index Equity Fund, Munder
Institutional S&P MidCap Index Equity Fund, Munder
Institutional S&P SmallCap Index Equity Fund, Munder
Institutional Short Term Treasury Fund and Munder
Institutional Money Market Fund.
(c) 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.
(d) 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.
<PAGE>
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. 24 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. 24 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston and the Commonwealth of Massachusetts, on the 23rd day of July, 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 July 23, 1997
------------------------------
Lee P. Munder Executive Officer
* Director July 23, 1997
------------------------------
Charles W. Elliott
* Director July 23, 1997
------------------------------
Joseph E. Champagne
* Director July 23, 1997
------------------------------
Thomas B. Bender
* Director July 23, 1997
------------------------------
Thomas D. Eckert
* Director July 23, 1997
------------------------------
John Rakolta, Jr.
* Director July 23, 1997
------------------------------
David J. Brophy
* Vice President, July 23, 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 incorporated herein by reference to
Post-Effective Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A filed with the Commission on April 18, 1997.
<PAGE>
EXHIBIT INDEX
Exhibit Description
1(m) Articles Supplementary to Registrant's
Articles of Incorporation
5(c) Form of Investment Advisory Agreement
6(c) Form of Distribution Agreement
8(b) Form of Amendment to Custody Agreement
8(c) Form of Notice to Custody Agreement
9(d) Form of Amendment to Amended and
Restated Administration Agreement
9(e) Form of Notice to Amended and Restated
Administration Agreement
9(f) Form of Notice to Sub-Administration
Agreement
9(h) Form of Amendment to Transfer Agency
and Registrar Agreement
9(i) Form of Notice to Transfer Agency and
Registrar Agreement
10(c) Opinion and Consent of Counsel
16(c) Schedules of computation of total
return and yield
Exhibit 1(m)
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 May 6,
1997 pursuant to Section 2-208.1 of the Maryland General Corporation Law, duly
authorized the increase in the aggregate number of shares of stock that the
Corporation shall have the authority to issue from Two Billion (2,000,000,000)
shares to Twenty Billion (20,000,000,000) shares, all designated as Common
Stock.
SECOND: In accordance with procedures established in the Corporation's
Charter, the Board of Directors of the Corporation, by resolution dated May 6,
1997 pursuant to Section 2-208.1 of the Maryland General Corporation Law, duly
(i) classified 5,200,000,000 shares of the authorized capital stock of the
Corporation into the following additional series, designated as follows:
<TABLE>
<CAPTION>
Name of Series Number of Authorized Shares Allocated
- -------------- -------------------------------------
<S> <C>
Munder Institutional S&P 500 Index Equity Fund 50,000,000
Munder Institutional S&P MidCap Index Equity Fund 50,000,000
Munder Institutional S&P SmallCap Index Equity Fund 50,000,000
Munder Institutional Short Term Treasury Fund 50,000,000
Munder Institutional Money Market Fund 5,000,000,000
</TABLE>
; and (ii) reclassified 1,000,000,000 shares of authorized capital stock
previously classified as the Liquidity Plus Money Market Fund; 500,000,000
shares of authorized capital stock previously classified as the Institutional
Index Equity Fund, and 500,000,000 shares of authorized capital stock not
previously classified as set forth below:
<PAGE>
Name of Series Newly Reclassified Shares
Liquidity Plus Money Market Fund 2,000,000,000
Institutional Index Equity Fund 0
THIRD: The increase in the shares of capital stock which the
Corporation shall have the authority to issue pursuant to Article First of these
Articles Supplementary has been so authorized under the authority contained in
the Charter of the Corporation. The total number of shares of capital stock that
the Corporation has authority to issue has been increased by the Board of
Directors in accordance with ss.2-105(c) of the Maryland General Corporation
Law.
FOURTH: The shares of the Corporation classified and reclassified
pursuant to Article Second of these Articles Supplementary have been so
classified and reclassified 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.
FIFTH: 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 $0.001 per share and of the aggregate par value of two million
dollars ($2,000,000), of which the Board of Directors had classified one
billion, seven hundred and fifty million (1,750,000,000) shares into Series as
follows:
Previously Classified 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
As amended hereby, the Corporation's Articles of Incorporation
authorize the issuance of twenty billion (20,000,000,000) shares of Common Stock
of the par value of $0.001 per share and of the aggregate par value of twenty
million dollars ($20,000,000), of which the Board of Directors has classified
seven billion, four hundred fifty million (7,450,000,000) shares into Series as
follows:
Current Classification of Shares
Liquidity Plus Money Market Fund 2,000,000,000 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
Munder Institutional S&P 500 Index Equity Fund 50,000,000 shares
Munder Institutional S&P MidCap Index Equity Fund 50,000,000 shares
Munder Institutional S&P SmallCap Index Equity Fund 50,000,000 shares
Munder Institutional Short Term Treasury Fund 50,000,000 shares
Munder Institutional Money Market Fund 5,000,000,000 shares
SIXTH: 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, 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,
Munder Institutional S&P 500 Index Equity Fund, Munder Institutional S&P MidCap
Index Equity Fund, Munder Institutional S&P SmallCap Index Equity Fund, Munder
Institutional Short Term Treasury Fund and Munder Institutional Money Market
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: May 6, 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
<PAGE>
Exhibit 5(c)
Form of
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made this day of , 1997, between St. Clair Funds, Inc. ("St.
Clair") on behalf of the Munder Institutional S&P 500 Index Equity Fund, Munder
Institutional S&P MidCap Index Equity Fund, Munder Institutional S&P SmallCap
Index Equity Fund, Munder Institutional Short Term Treasury Fund and Munder
Institutional Money Market 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 St. Clair 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.
<PAGE>
The Advisor further agrees that, in performing its duties hereunder, it
will:
(a) comply with the 1940 Act and all rules and regulations thereunder
and under 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 St. Clair 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.
<PAGE>
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 (with the exception of the Munder Institutional S&P 500 Index Equity
Fund) will pay the Advisor a fee at an annual rate equal to ___% of the average
daily net assets of each Fund. The Munder Institutional S&P 500 Index Equity
Fund will pay the Advisor a fee at an annual rate equal to ___% of its average
daily net assets. These fees 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 approved 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 the Company and each Fund have the
right to use such name (or derivable or logo) only so long as this Agreement
shall continue with respect to the Funds. Upon termination of this Agreement,
the Company and 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 Company's and 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.
<PAGE>
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:
Exhibit 6(c)
Form of
DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of this _____ day of __________,
1997 by and between ST. CLAIR FUNDS, INC., a Maryland Corporation (the "Fund"),
and FUNDS DISTRIBUTOR, INC., a Massachusetts corporation ("Funds Distributor").
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 Funds Distributor as Distributor
for the Fund's shares of beneficial interest in the Munder Institutional S&P 500
Index Equity Fund, Munder Institutional S&P MidCap Index Equity Fund, Munder
Institutional S&P SmallCap Index Equity Fund, Munder Institutional Short Term
Treasury Fund and Munder Institutional Money Market Fund (the "Portfolios") to
provide for the sale and distribution of shares of the Portfolios (the
"Shares"), and Funds Distributor 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 Funds Distributor 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;
(f) The Fund's most recent Prospectuses and Statements of Additional
Information and all amendments and supplements thereto
(collectively, the "Prospectuses").
<PAGE>
II. DISTRIBUTION
1. Appointment of Distributor. The Fund hereby appoints Funds
Distributor as Distributor of the Portfolios' Shares and Funds Distributor
hereby accepts such appointment and agrees to render the services and duties set
forth in this Section II. 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 Funds Distributor to act as
distributor hereunder, the Fund shall notify Funds Distributor in writing. If
Funds Distributor is willing to render such services, it shall so notify the
Fund in writing whereupon such portfolios 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
each portfolio or shares in writing by the Fund and Funds Distributor at the
time.
2. Services and Duties.
(a) The Fund agrees to sell through Funds Distributor, 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.
Funds Distributor 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. Funds Distributor 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,
Funds Distributor 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) Funds Distributor will bear the cost of printing and
distributing any Prospectus relating to the Portfolios (including any supplement
or amendment thereto), provided, however, that Funds Distributor shall not be
obligated to bear the expenses incurred by the Fund in connection with (i) the
preparation and printing of any supplement or amendment to a Registration
Statement or Prospectus necessary for the continued effective registration of
the Shares under the 1933 Act or state securities laws; and (ii) the printing
and distribution of any Prospectus, supplement or amendment thereto for existing
shareholders of the Portfolios.
(d) All Shares of each Portfolio offered for sale by Funds
Distributor shall be offered for sale to the public at a price per share (the
"offering price") equal to (i) their net asset value (determined in the manner
set forth in the applicable Prospectuses) plus, except to those classes of
persons set forth in the applicable Prospectuses, (ii) a sales charge which
shall be the percentage of the offering price of such Shares as set forth in the
applicable Prospectuses. The offering price, if not an exact multiple of one
cent, shall be adjusted to the nearest cent. Concessions paid by Funds
Distributor to broker-dealers and other persons shall be set forth in either the
selling agreements between Funds Distributor and such broker-dealers and persons
or, if such concessions are described in the applicable Prospectuses, shall be
as so set forth. No broker-dealer or other person who enters into a selling or
distribution and servicing agreement with Funds Distributor shall be authorized
to act as agent for the Fund in connection with the offering or sale of Shares
to the public or otherwise.
(e) If any Shares sold by Funds Distributor under the terms of this
Agreement are redeemed or repurchased by the Fund or by Funds Distributor as
agent or are tendered for redemption within seven business days after the date
of confirmation of the original purchase of said Shares, Funds Distributor shall
forfeit the amount above the net asset value received by it with respect to such
Shares, provided that the portion, if any, of such amount re-allowed by Funds
Distributor to broker-dealers or other persons shall be repayable to the Fund
only to the extent recovered by Funds Distributor from the broker-dealer or
other persons concerned. Funds Distributor shall include in the form of
agreement with such broker-dealers and other persons a corresponding provision
for the forfeiture by them of their concession with respect to Shares sold by
them or their principals and redeemed or repurchased by the Fund or by Funds
Distributor as agent (or tendered for redemption) within seven business days
after the date of confirmation of such initial purchases.
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 except as set forth in subsection 2(c) of Section
II hereof.
(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 qualification of the
Shares for sale in such states as Funds Distributor 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 qualification. Funds Distributor shall pay all
other expenses incurred by Funds Distributor 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.
<PAGE>
III. LIMITATIONS OF LIABILITY
Funds Distributor 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
Funds Distributor 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 Funds Distributor's 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 Funds Distributor 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) Funds Distributor may be exposed to civil or criminal
contempt proceedings for failure to divulge such information; (ii) Funds
Distributor is requested to divulge such information by duly constituted
authorities; or (iii) Funds Distributor is so requested by the Fund.
V. INDEMNIFICATION
1. Fund Representation. The Fund represents and warrants to Funds
Distributor that at all times the Registration Statement and Prospectuses will
in all material respects conform to the applicable requirements of the 1933 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 Funds Distributor expressly for use in the Registration
Statement or Prospectuses.
2. Funds Distributor Representation. Funds Distributor represents
and warrants to the Fund that it is duly organized as a Massachusetts
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 Funds
Distributor, its several officers and directors, and any person who controls
Funds Distributor 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
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 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, and will reimburse Funds Distributor, its several
officers and directors, and any person who controls Funds Distributor 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 Funds Distributor 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 trustees 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 each
Portfolio shall be insured against losses arising by reason of any lawful
advances, or a majority of a quorum of the disinterested, non-party trustees 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.
<PAGE>
4. Funds Distributor Indemnification. Funds Distributor will
indemnify, defend and hold harmless the Fund, each Portfolio, the Fund's several
officers and trustees 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
trustees by or on behalf of Funds Distributor specifically for inclusion
therein, and will reimburse the Fund, each Portfolio, the Fund's several
officers and trustees, 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
May 6, 1999. 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 Funds Distributor, or by Funds
Distributor 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 Funds
Distributor 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 Funds
Distributor. Notices of any kind to be given to Funds Distributor hereunder by
the Fund shall be in writing and shall be duly given if mailed or delivered to
Funds Distributor at 60 State Street, Suite 1300, Boston, Massachusetts 02109,
Attention: Marie Connolly or at such other address or to such individual as
shall be so specified by Funds Distributor 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 Massachusetts 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.
<PAGE>
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:
FUNDS DISTRIBUTOR, INC.
By:
Name: Marie Connolly
Title: President
Attest:
Exhibit 8(b)
Form of
AMENDMENT TO CUSTODY AGREEMENT
THIS AMENDMENT dated as of _____________, 1997 (the "Amendment") is made to
the Custody Agreement dated as of the 4th of February, 1997 (the "Agreement")
between ST. CLAIR FUNDS, INC. (the "Company") and COMERICA BANK ("Comerica").
The Company and Comerica agree that the Agreement shall, as of the date
first written above, be amended as follows:
1. Schedule A to the Agreement shall be deleted in its entirety and
Schedule A attached hereto shall be substituted in its place; and
2. The Fee Schedule of the Agreement shall be deleted in its entirety and
the Fee Schedule attached hereto shall be substituted in its place.
In all other respects, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first written
above.
ST. CLAIR FUNDS, INC.
By: _______________________________
Title: ______________________________
COMERICA BANK
By: _______________________________
Title: ______________________________
<PAGE>
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
Munder Institutional S&P 500 Index Equity Fund
Munder Institutional S&P MidCap Index Equity Fund
Munder Institutional S&P SmallCap Index Equity Fund
Munder Institutional Money Market Fund
Munder Institutional Short Term Treasury Fund
<PAGE>
SCHEDULE B
Fee Schedule
Computed daily and payable monthly based on the aggregate average daily net
assets of St. Clair Funds, Inc., The Munder Funds, Inc., The Munder Funds Trust,
and The Munder Framlington Funds Trust.
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
Exhibit 8(c)
Form of
NOTICE TO CUSTODY AGREEMENT
Comerica Bank
One Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226
Gentlemen:
Reference is made to the Custody Agreement between us dated as of
February 4, 1997 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the
creation of five additional investment portfolios of St. Clair Funds, Inc.,
namely the Munder Institutional S&P 500 Index Equity Fund, Munder Institutional
S&P MidCap Index Equity Fund, Munder Institutional S&P SmallCap Index Equity
Fund, Munder Institutional Short Term Treasury Fund and Munder Institutional
Money Market Fund (the "New Portfolios").
We request that you act as Custodian under the Agreement with respect
to the New Portfolios.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
St. Clair Funds, Inc.
By:
Accepted:
Comerica Bank
Date: May 6, 1997 By:
Exhibit 9(d)
Form of
AMENDMENT TO ADMINISTRATION AGREEMENT
THIS AMENDMENT dated as of _________, 1997 (the "Amendment") is made to the
Administration Agreement, dated as of the 1st day of May, 1995, (the
"Agreement") between ST. CLAIR FUNDS, INC. (the "Company") and FIRST DATA
INVESTOR SERVICES GROUP, INC. ("FDISG").
The Company and FDISG agree that the Agreement shall, as of the date
first written above, be amended as follows:
1. The Fee Schedule of the Agreement shall be deleted in its entirety and
the Fee Schedule attached hereto shall be substituted in its place; and
2. Schedule A to the Agreement shall be deleted in its entirety and
Schedule A attached hereto shall be substituted in its place.
In all other respects, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first written
above.
ST. CLAIR FUNDS, INC.
By: _____________________________
Title:_____________________________
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: _____________________________
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 The Munder Funds Trust, the Liquidity Plus Money
Market Fund of St. Clair Funds, Inc., The Munder Funds, Inc. (other than the
Munder All-Season Maintenance Fund, All-Season Accumulation Fund, All-Season
Development Fund and Munder Financial Services Fund) and The Munder Framlington
Funds 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 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")
A. FEES FOR ADMINISTRATION SERVICES -- (Fund Administration and Fund
Accounting)
The following annual Fund Administration fees apply:
[TO BE DETERMINED]
<PAGE>
Munder Institutional S&P 500 Index Equity Fund, Munder Institutional S&P MidCap
Index Equity Fund, Munder Institutional S&P SmallCap Index Equity Fund, Munder
Institutional Short Term Treasury Fund and Munder Institutional Money Market
Fund (the "Institutional Funds")
A. FEES FOR ADMINISTRATION SERVICES -- (Fund Administration and Fund
Accounting)
The following annual Fund Administration fees apply:
$20,000 per Institutional Fund plus:
.01% of the first billion of the Institutional Funds'
aggregate net assets; and .005% of the Institutional Funds'
aggregate net assets in excess of $1.0 billion; plus
the lesser of .005% of the Institutional Funds' aggregate net assets or
$150,000.
<PAGE>
SCHEDULE A
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
Munder Institutional S&P 500 Index Equity Fund
Munder Institutional S&P MidCap Index Equity Fund
Munder Institutional S&P SmallCap Index Equity Fund
Munder Institutional Short Term Treasury Fund
Munder Institutional Money Market Fund
Exhibit 9(e)
Form of
NOTICE TO AMENDED AND RESTATED ADMINISTRATION AGREEMENT
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Gentlemen:
Reference is made to the Administration Agreement between us dated as
of February 4, 1997 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the
creation of five additional investment portfolios of St. Clair Funds, Inc.,
namely the Munder Institutional S&P 500 Index Equity Fund, Munder Institutional
S&P MidCap Index Equity Fund, Munder Institutional S&P SmallCap Index Equity
Fund, Munder Institutional Short Term Treasury Fund and Munder Institutional
Money Market Fund (the "New Portfolios").
We request that you act as Administrator under the Agreement with
respect to the New Portfolios.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
St. Clair Funds, Inc.
By:
Accepted:
First Data Investor Services Group, Inc.
Date: May 6, 1997 By:
Exhibit 9(f)
Form of
NOTICE TO SUB-ADMINISTRATION AGREEMENT
FDI Distribution Services, Inc.
One Exchange Place
Boston, Massachusetts 02109
Gentlemen:
Reference is made to the Sub-Administration Agreement between us dated
as of May 1, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the
creation of five additional investment portfolios of St. Clair Funds, Inc.,
namely the Munder Institutional S&P 500 Index Equity Fund, Munder Institutional
S&P MidCap Index Equity Fund, Munder Institutional S&P SmallCap Index Equity
Fund, Munder Institutional Short Term Treasury Fund and Munder Institutional
Money Market Fund (the "New Portfolios").
We request that you act as Sub-Administrator under the Agreement with
respect to the New Portfolios.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
First Data Investor Services Group, Inc.
By:
Accepted:
FDI Distribution Services, Inc.
Date: May 6, 1997 By:
Exhibit 9(h)
Form of
AMENDMENT TO TRANSFER AGENCY AND REGISTRAR AGREEMENT
THIS AMENDMENT dated as of _________, 1997 (the "Amendment") is made to the
Transfer Agency and Registrar Agreement, dated as of the ___ day of ______, 1997
(the "Agreement") between ST. CLAIR FUNDS, INC. (the "Company") and FIRST DATA
INVESTOR SERVICES GROUP, INC. ("FDISG").
The Company and FDISG agree that the Agreement shall, as of the date
first written above, be amended as follows:
1. Schedule A, "Transfer Agent Fees," of the Agreement shall be deleted in
its entirety and the Schedule A attached hereto shall be substituted in its
place; and
2. Exhibit 1 to the Agreement shall be deleted in its entirety and Exhibit
1 attached hereto shall be substituted in its place.
In all other respects, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first written
above.
ST. CLAIR FUNDS INC.
By: _____________________________
Title:_____________________________
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: _____________________________
Title:_____________________________
<PAGE>
Exhibit 1
LIST OF PORTFOLIOS
dated ___________, 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
Munder Institutional S&P 500 Index Equity Fund
Munder Institutional S&P MidCap Index Equity Fund
Munder Institutional S&P SmallCap Index Equity Fund
Munder Institutional Short Term Treasury Fund
Munder Institutional Money Market Fund
<PAGE>
Schedule A
TRANSFER AGENT FEES
<TABLE>
<CAPTION>
Liquidity Plus Money Market Fund
<S> <C> <C>
1) Asset Based Charge: Based on the total net assets of the
Companies (as defined below*)
First $2.8 billion of aggregate 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: Each IRA account will be charged $10.00
per annum NSCC Transaction Charge is
$.15 per financial transaction
2) 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
<FN>
*Companies shall include The Munder Funds Trust, The Munder Funds, Inc.
(other than the Munder All-Season Maintenance Fund, Munder All-Season
Accumulation Fund, Munder All-Season Development Fund and Munder Financial
Services Fund) and the Liquidity Plus Money Market Fund of St. Clair Funds, Inc.
</FN>
</TABLE>
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")
[TO BE DETERMINED]
<PAGE>
Munder Institutional S&P 500 Index Equity Fund, Munder Institutional S&P MidCap
Index Equity Fund, Munder Institutional S&P SmallCap Index Equity Fund, Munder
Institutional Short Term Treasury Fund and Munder Institutional Money Market
Fund (the "Institutional Funds")
The annual rate of $10,000 per Institutional Fund plus .025% of the
Institutional Funds' aggregate average daily net assets in excess of $5 billion.
Exhibit 9(i)
Form of
NOTICE TO TRANSFER AGENCY AND REGISTRAR AGREEMENT
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts, 02109
Gentlemen:
Reference is made to the Transfer Agency and Registrar Agreement between us
dated as of February 4, 1997 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the
creation of five additional investment portfolios of St. Clair Funds, Inc.,
namely the Munder Institutional S&P 500 Index Equity Fund, Munder Institutional
S&P MidCap Index Equity Fund, Munder Institutional S&P SmallCap Index Equity
Fund, Munder Institutional Short Term Treasury Fund and Munder Institutional
Money Market Fund (the "New Portfolios").
We request that you act as Transfer Agent under the Agreement with
respect to the New Portfolios.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
St. Clair Funds, Inc.
By:
Accepted:
First Data Investor Services Group, Inc.
Date: May 6, 1997 By:
Exhibit 10(c)
July 21, 1997
St. Clair Funds, Inc.
480 Pierce Street
Birmingham, MI 48009
Dear Sirs:
In connection with the registration of an indefinite number of shares
of common stock (the "Shares") of Munder Institutional S&P 500 Index Equity
Fund, Munder Institutional S&P MidCap Index Equity Fund, Munder Institutional
S&P SmallCap Index Equity Fund, Munder Institutional Short Term Treasury Fund
and Munder Institutional Money Market Fund (the "Funds"), series of St. Clair
Funds, Inc. (the "Company"), we are familiar with the registration statement of
the Company under the Investment Company Act of 1940 and the registration
statement relating to the Company's Shares under the Securities Act of 1933
(File No. 2-91373) (the "Registration Statement"). We have also examined such
other corporate records, agreements, documents and instruments of the Company as
we deemed appropriate.
On the basis of the foregoing, we are of the opinion that the Shares of
the Company being registered under the Securities Act of 1933 in the
Registration Statement, when issued in accordance with the terms set forth
therein, will be legally and validly issued, fully paid and non-assessable by
the Company.
We hereby consent to the filing of this opinion with and as part of the
Company's Registration Statement of an indefinite number of the Shares, and to
the use of our name in the prospectus and statement of additional information
contained therein, and any amendments thereto.
Very truly yours,
/s/ Dechert Price & Rhoads
Dechert Price & Rhoads
Exhibit 16(c)
ST. CLAIR FUNDS, INC.
Schedule of Computation
(Exhibit 16c)
1. Yield for the seven-day period:
Formula: (Base period return/1) x 365/7
2. Effective yield for the seven-day period:
Formula: (1 + base period return) 367/7 -1
3. 30-Day SEC Yield:
Formula 2[((A - B)/CD) + 1)6 - 1]
A = interest and dividends (current income) earned during the
30 day period B = expenses accrued during the 30 day period
(net of expense reimbursements and waivers) C = average fund
shares outstanding during the 30 day period entitled to
receive dividends D = maximum offering price per share on the
last day of the period
4. Average Annual Total Return:
T = (ERV) 1/n -1
P
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) and
deduction of any CDSC
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed in
years and portion of a year
5. Aggregate Total Return:
Formula: (ERV/P) - 1= TR
TR = Aggregate Total Return
