LIQUIDITY PLUS MONEY MARKET FUND
Statement of Additional Information
Liquidity Plus Money Market Fund (the "Fund") is a diversified portfolio of
St. Clair Funds, Inc. (the "Company"), an open-end management investment
company. The Fund's investment advisor is Munder Capital Management (the
"Advisor").
This Statement of Additional Information is intended to supplement the
information provided to investors in the Fund's Prospectus dated November 15,
1996 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
Fund's Prospectus dated November 15, 1996. 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 Distributors,
Inc. (the "Distributor"), or by calling the Fund at (800) 438-5789. This
Statement of Additional Information is dated November 15, 1996.
Shares of the Fund 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 Fund involves investment risks, including the possible loss of principal.
<PAGE>
TABLE OF CONTENTS
Page
General 2
Fund Investments 3
Additional Investment Limitations 9
Directors and Officers 10
Investment Advisory and Other Service Arrangements 16
Portfolio Transactions 20
Purchase and Redemption Information 21
Net Asset Value 22
Yield 23
Taxes 24
Additional Information Concerning Shares 25
Miscellaneous 26
Registration Statement 27
Appendix 29
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 Fund or the Distributor. The 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.
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., 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.
Shares of the Fund are sold only to Comerica Bank, its affiliate and
subsidiary banks, and certain other Institutional Investors ("Institutional
Investors"). Shares may be purchased by Institutional Investors for investment
of their own funds, or for funds of their customer accounts ("Customer
Accounts") for which they serve in a fiduciary, agency or custodial capacity.
Shares are sold and redeemed without the imposition of a purchase or redemption
charge by the Fund, although Institutional Investors that are record owners of
Shares for their Customer Accounts may charge their customers separate account
fees.
FUND INVESTMENTS
The following policies supplement the Fund's investment objective and
policies as set forth in the Prospectus. A description of applicable credit
ratings is set forth in the Appendix hereto.
Non-Domestic Bank Obligations. Non-domestic bank obligations include
Eurodollar Certificates of Deposit ("ECDs"), which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs"), which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs"), which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs,
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank and held in
the United States; and Yankee Bankers' Acceptances ("Yankee BAs"), which are
U.S. dollar-denominated bankers' acceptances issued by a U.S. branch of a
foreign bank and held in the United States.
Repurchase Agreements. The Fund may agree to purchase securities from
financial institutions such as banks and non-bank dealers of U.S. Government
securities that are listed on the Federal Reserve Bank of New York's list of
reporting dealers, 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 the Fund to possible loss
because of adverse market action or delays in connection with the disposition of
underlying obligations except with respect to repurchase agreements secured by
U.S. Government securities.
The repurchase price under the repurchase agreements described in the
Prospectus generally equals the price paid by the Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements will be held by the Fund's
Custodian (or sub-custodian) in the Federal Reserve/Treasury book-entry system
or by another authorized securities depositary. Repurchase agreements are
considered to be loans by the Fund under the Investment Company Act of 1940 (the
"1940 Act").
Repurchase agreements shall be deemed to have a maturity equal to the
period remaining until the date on which the repurchase of the underlying
securities is scheduled to occur, or, where the agreement is subject to demand,
the notice period applicable to a demand for the repurchase of the securities.
Reverse Repurchase Agreements. The Fund 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. The Fund will pay interest on
amounts obtained pursuant to a reverse repurchase agreement. While reverse
repurchase agreements are outstanding, the Fund will maintain in a segregated
account cash, U.S. Government securities or other liquid high-grade debt
securities in an amount at least equal to the market value of the securities,
plus accrued interest, subject to the agreement.
Investment Company Securities. The Fund may invest in securities issued
by other investment companies. As a shareholder of another investment company,
the 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 the Fund bears directly in connection with its own operations. The 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. It is the policy not to invest in securities issued by other investment
companies which pay asset-based fees to the Advisor, the Administrator, the
Custodian, the Distributor or their affiliates.
Stripped Securities. The 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 Fund 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 Fund is able to have its beneficial
ownership of zero coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidences
of ownership of the underlying U.S.
Treasury securities.
In addition, the Fund may invest in stripped mortgage-backed securities
("SMBS"), which represent beneficial ownership interests in the principal
distributions and/or the interest distributions on mortgage assets. SMBS are
usually structured with two classes that receive different proportions of the
interest and principal distributions on a pool of mortgage assets. One type of
SMBS will have one class receiving some of the interest and most of the
principal from the mortgage assets, while the other class will receive most of
the interest and the remainder of the principal. In the most common case, one
class of SMBS will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the
principal-only or "PO" class). SMBS may be issued by FNMA or FHLMC.
The original principal amount, if any, of each SMBS class represents
the amount payable to the holder thereof over the life of such SMBS class from
principal distributions of the underlying mortgage assets, which will be zero in
the case of an IO class. Interest distributions allocable to a class of SMBS, if
any, consist of interest at a specified rate on its principal amount, if any, or
its notional principal amount in the case of an IO class. The notional principal
amount is used solely for purposes of the determination of interest
distributions and certain other rights of holders of such IO class and does not
represent an interest in principal distributions of the mortgage assets.
Yields on SMBS will be extremely sensitive to the prepayment experience
on the underlying mortgage loans, and there are other associated risks. For IO
classes of SMBS and SMBS that were purchased at prices exceeding their principal
amounts there is a risk that a Fund may not fully recover its initial
investment.
The determination of whether a particular government-issued IO or PO
backed by fixed-rate mortgages is liquid may be made under guidelines and
standards established by the Board of Directors. Such securities may be deemed
liquid if they can be disposed of promptly in the ordinary course of business at
a value reasonably close to that used in the calculation of the Fund's net asset
value per share.
Variable and Floating Rate Instruments. Debt instruments may be
structured to have variable or floating interest rates. Variable and floating
rate obligations purchased by the Fund may have stated maturities in excess of
the Fund's maturity limitation if the Fund can demand payment of the principal
of the instrument at least once during such period on not more than thirty days'
notice (this demand feature is not required if the instrument is guaranteed by
the U.S. Government or an agency thereof) or if the instruments are deemed to
have shorter maturities in accordance with the current regulations of the
Securities and Exchange Commission. These instruments may include variable
amount master demand notes that permit the indebtedness to vary in addition to
providing for periodic adjustments in the interest rates. The Advisor will
consider the earning power, cash flows and other liquidity ratios of the issuers
and guarantors of such instruments and, if the instrument is subject to a demand
feature, will continuously monitor their financial ability to meet payment on
demand. Where necessary to ensure that a variable or floating rate instrument is
equivalent to the quality standards applicable to the Fund, the issuer's
obligation to pay the principal of the instrument will be backed by an
unconditional bank letter or line of credit, guarantee or commitment to lend.
In determining average weighted portfolio maturity of the Fund,
short-term variable rate securities shall be deemed to have a maturity equal to
the earlier of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount can be recovered through
demand, and short-term floating rate securities shall be deemed to have a
maturity of one day. For purposes of this paragraph, "short-term" with respect
to a security means that the principal amount, in accordance with the terms of
the security, must unconditionally be paid in 397 calendar days or less.
In determining average weighted portfolio maturity of the Fund,
long-term variable rate securities shall be deemed to have a maturity equal to
the longer of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount can be recovered through
demand, and long-term floating rate securities shall be deemed to have a
maturity equal to the period remaining until the principal amount can be
recovered through demand. For purposes of this paragraph, "long-term" with
respect to a security means that the principal amount of the security is
scheduled to be paid in more than 397 days.
Variable rate government securities where the variable rate of interest
is readjusted no less frequently than every 762 days shall be deemed to have a
maturity equal to the period remaining until the next interest rate
readjustment. Floating rate government securities shall be deemed to have a
remaining maturity of one day.
The absence of an active secondary market for certain variable and
floating rate notes could make it difficult to dispose of the instruments, and
the Fund could suffer a loss if the issuer defaulted or during periods that the
Fund is not entitled to exercise its demand rights.
Variable and floating rate instruments held by the 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.
When-Issued Purchases and Forward Commitments (Delayed-Delivery).
When-issued purchases and forward commitments (delayed-delivery) are commitments
by the 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 the Fund to lock-in a price or yield on a security, regardless of future
changes in interest rates.
When the Fund agrees to purchase securities on a when-issued or forward
commitment basis, the Custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the Custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case the Fund may be required subsequently to
place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of the Fund's commitments. It
may be expected that the market value of the Fund's net assets will fluctuate to
a greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash.
The Fund 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, the 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 the Fund engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such party to do so may result in the Fund's incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
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 market value of
the Fund starting on the day the Fund agrees to purchase the securities. The
Fund does not earn interest on the securities it has committed to purchase until
they are paid for and delivered on the settlement date.
ADDITIONAL INVESTMENT LIMITATIONS
The Fund's Prospectus lists certain investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of the Fund (as
defined in the Prospectus). The additional investment restrictions and
limitations listed below supplement those contained in the Prospectus and may be
changed only by such a shareholder vote.
The Fund may not:
1. Pledge, mortgage or hypothecate its assets other than to
secure permitted borrowings.
2. Underwrite securities of other issuers, except insofar as the
Fund may be deemed an underwriter under the Securities Act of
1933, as amended, in selling portfolio securities.
3. Purchase or sell real estate or any interest therein,
including interests in real estate limited partnerships,
except securities issued by companies (including real estate
investment trusts) that invest in real estate or interests
therein.
4. Purchase securities on margin, or make short sales of
securities, except for the use of short-term credit necessary
for the clearance of purchases and sales of portfolio
securities.
5. Invest in commodities or commodity futures contracts, provided
that this limitation shall not prohibit the purchase or sale
by the Fund of financial futures contracts and options on
financial futures contracts, options on securities and
securities indices, as permitted by the Fund's Prospectus.
Additional investment restrictions adopted by the Fund, which may be
changed by the Board of Directors, provide that the Fund may not:
1. Purchase or sell interests in oil, gas or other mineral
exploration or development plans or leases.
2. Invest more than 5% of its total assets in securities of
issuers which together with any predecessors have a record of
less than three years of continuous operation. This
restriction shall not apply with respect to securities issued
by a special purpose funding vehicle for a company with a
record of at least three years of continuous operation, or to
real estate investment trusts the sponsor of which has a
record of at least three years of continuous operation.
3. Invest in other investment companies except as permitted under
the 1940 Act.
4. Make investments for the purpose of exercising control or
management.
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 the Fund's investments will not constitute a violation of such
limitation, and the 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.
In order to permit the sale of shares in certain states, the Fund may
make commitments more restrictive than the investment policies and limitations
described above.
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, and their business
addresses and principal occupations during the past five years, are:
<PAGE>
- 1 -
Principal Occupation
Name, Positions During
Address and Age with Company Past Five Years
Charles W. Elliott 1/ Chairman of the Senior Advisor to the
3338 Bronson Blvd. Board of Directors President - Western
Kalmazoo, MI 49008 Michigan University
Age: 64 University since July
1995; prior to that
Executive Vice
President -
Administration & Chief
Financial Officer,
Kellogg Company from
January 1987 through
June 1995; before that
Price Waterhouse. Board
of Directors, Steelcase
Financial Corporation.
John Rakolta, Jr. Director and Vice Chairman, Walbridge
1876 Rathmor Chairman of the Aldinger Company
Bloomfield Hills, Board of Directors
MI 48304
Age: 49
Thomas B. Bender Director Investment Advisor,
7 Wood Ridge Road Financial & Investment
Glen Arbor, Management Group
MI 49636 (since April, 1991);
Age: 63 Vice President
Institutional Sales,
Kidder, Peabody & Co.
(Retired April, 1991).
David J. Brophy Director Professor, University
1025 Martin Place of Michigan; Director,
Ann Arbor, River Place Financial
MI 48104 Corp.; Trustee,
Age: 60 Renaissance Assets
Trust.
Dr. Joseph E. Champagne Director Corporate and
319 Snell Road Executive Consultant
Rochester, MI 48306 since September
Age: 58 1995; prior to that
Chancellor, Lamar
University from
September 1994 until
September 1995; before
that Consultant to
Management, Lamar
University; President
and Chief Executive
Officer, Crittenton
Corporation, 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,
10726 Falls Mid-Atlantic Group
Pointe Drive of Pulte Home
Great Falls, Corporation
VA 22066
Age: 49
Jack L. Otto Director Retired; Director of
6532 W. Beech Standard Federal Bank;
Tree Road Executive Director,
Glen Arbor, McGregor Fund (a
MI 49636 private philanthropic
Age: 70 foundation) 1981-1985;
Managing Partner,
Detroit office of Ernst
& Young, until 1981.
Arthur DeRoy Director President, Rodecker &
Rodecker Company, Investment
4000 Town Center Brokers, Inc. since
Suite 101 November 1976;
Southfield, President, RAC
MI 48075 Advisors, Inc.,
Age: 69 Registered Investment
Advisor since February
1979; President and
Trustee, Helen L. DeRoy
Foundation, a
charitable foundation;
Vice President and
Trustee, DeRoy
Testamentary
Foundation, a
charitable foundation;
Trustee, Providence
Hospital Foundation.
Lee P. Munder President President and CEO
480 Pierce Street of the Advisor;
Suite 300 Chief Executive
Birmingham, Officer and President
MI 48009 of Old MCM, Inc.;
Age: 51 Chief Executive
Officer of World
Asset Management;
Director, LPM
Investment Services,
Inc. ("LPM").
Terry H. Gardner Vice President, Vice President and
480 Pierce Street Chief Financial Chief Financial
Suite 300 Officer and Officer of the
Birmingham, Treasurer Advisor and World
MI 48009 Asset Management;
Age: 36 Vice President and
Chief Financial Officer
of Old MCM, Inc.
(February 1993 to
present); Audit Manager
Arthur Andersen & Co.
(1991 to February
1993); Secretary of
LPM.
Paul Tobias Vice President Executive Vice
480 Pierce Street President and
Suite 300 Chief Operating
Birmingham, Officer of the
MI 48009 Advisor (since
Age: 45 April 1995) and
Executive Vice
President of Comerica,
Inc.
Gerald Seizert Vice President Executive Vice
480 Pierce Street President and
Suite 300 Chief Investment
Birmingham, Officer/Equities
MI 48009 of the Advisor
Age: 44 (since April 1995);
Managing Director
(1991- 1995), Director
(1992-1995) and Vice
President (1984-1991)
of Loomis, Sayles and
Company, L.P.
Elyse G. Essick Vice President Vice President and
480 Pierce Street Director of Marketing
Suite 300 for the Advisor; Vice
Birmingham, President and Director
MI 48009 of Client Services of
Age: 38 Old MCM, Inc. (August
1988 to December 1994).
James C. Robinson Vice President Vice President and
480 Pierce Street Chief Investment
Suite 300 Officer/Fixed Income
Birmingham, for the Advisor; Vice
MI 48009 President and Director
Age: 35 of Fixed Income of Old
MCM, Inc. (1987-1994).
Leonard J. Barr, II Vice President Vice President and
480 Pierce Street Director of Core
Suite 300 Equity Research of the
Birmingham, Advisor; Director and
MI 48009 Senior Vice President
Age: 52 of Old MCM, Inc.
(since 1988); Director
of LPM.
Lisa A. Rosen Secretary General Counsel of the
480 Pierce Street Advisor since May,
Suite 300 1996; Formerly Counsel,
Birmingham, First Data Investor
MI 48009 Services Group, Inc.;
Age: 29 Assistant Vice
President and Counsel
with The Boston
Company Advisors, Inc.;
Associate with
Hutchins, Wheeler &
Dittmar.
<PAGE>
Ann F. Putallaz Vice President Vice President and
480 Pierce Street Director of Fiduciary
Suite 300 Services (since
Birmingham, January 1995);
MI 48009 Director of Client and
Age: 51 Marketing Services of
Woodbridge Capital
Management, Inc.
Richard H. Rose Assistant Treasurer Senior Vice President,
First Data First Data Investor
Investor Services Services Group, Inc.
Group, Inc. (since May 6, 1994).
One Exchange Place Formerly, Senior Vice
6th Floor President, The Boston
Boston, MA 02109 Company Advisors, Inc.
Age: 41 since November 1989.
Teresa M.R. Hamlin Assistant Secretary Counsel, First Data
First Data Investor Services
Investor Services Group, Inc.; Formerly
Group, Inc. Paralegal Manager,
One Exchange Place The Boston Company
6th Floor Advisors, Inc.
Boston, MA 02109
Age: 32
1/ Director is an "interested person" of the Company as defined in the
1940 Act.
Directors of the Company receive an aggregate fee from the Company, The
Munder Funds Trust (the "Trust") and the Munder Funds, Inc. ("MFI") 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 to the Directors
for the fiscal year ended June 30, 1995.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Aggregate
Compensation Pension
from the Retirement Estimated Total
Company, The Benefits Annual from
Munder Funds, Inc., Accrued Benefits the
Name of Person and The Munder as part of Upon Fund
Position Funds Trust Fund Expenses Retirement Complex
Charles W. Elliott $14,000 None None $14,000
Chairman
John Rakolta, Jr. $14,000 None None $14,000
Vice Chairman
Thomas B. Bender $14,000 None None $14,000
David J. Brophy $14,000 None None $14,000
Trustee and Director
Dr. Joseph E. Champagne $14,000 None None $14,000
Trustee and Director
Thomas D. Eckert $14,000 None None $14,000
Trustee and Director
Jack L. Otto $14,000 None None $14,000
Trustee and Director
Arthur DeRoy Rodecker $14,000 None None $14,000
Trustee and Director
</TABLE>
No officer, director or employee of the Advisor, Comerica, the
Distributor, the Administrator or Transfer Agent currently receives any
compensation from the Company.
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 Advisory Agreement, the Advisor furnishes
continuing investment supervision to the Fund and is responsible for the
management of the Fund's portfolio. The responsibility for making decisions to
buy, sell or hold a particular security rests with the Advisor, subject to
review by the Company's Board of Directors.
For the advisory services provided and expenses assumed by it, the
Advisor has agreed to a fee from the Fund, computed daily and payable monthly,
at an annual rate of .35% of average daily net assets of the Fund.
The Advisory Agreement will continue in effect for a period of two
years from its effective date. If not sooner terminated, the Advisory Agreement
will continue in effect for successive one year periods thereafter, provided
that each continuance is specifically approved annually by (a) the vote of a
majority of the Board of Directors who are not parties to the Advisory Agreement
or interested persons (as defined in the 1940 Act), cast in person at a meeting
called for the purpose of voting on approval, and (b) either (i) the vote of a
majority of the outstanding voting securities of the Fund, or (ii) the vote of a
majority of the Board of Directors. The Advisory Agreement is terminable with
respect to the Fund by a vote of the Board of Directors, or by the holders of a
majority of the outstanding voting securities of the Fund, at any time without
penalty, on 60 days' written notice to the Advisor. The Advisor may also
terminate its advisory relationship with respect to the Fund on 60 days' written
notice to the Company, and the Advisory Agreement terminates automatically in
the event of its assignment.
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.
Distribution Services Arrangements. The Fund has adopted a Service and
Distribution Plan, pursuant to which it uses its assets to finance activities
relating to the distribution of its shares to investors and the provision of
certain shareholder services. Under the Service and Distribution Plans, the
Distributor is paid an annual service fee of 0.25% of the value of average daily
net assets of the Fund and an annual distribution fee at the rate of 0.10% of
the value of average daily net assets of the Fund.
Under the terms of the Service and Distribution Plan (the "Plan"), the
Plan continues from year to year, provided such continuance is approved annually
by vote of the Board of Directors, including a majority of the Board of
Directors who are not interested persons of the Company, as applicable, and who
have no direct or indirect financial interest in the operation of that Plan (the
"Non-Interested Plan Directors"). The Plan may not be amended to increase the
amount to be spent for the services provided by the Distributor without
shareholder approval, and all amendments of the Plan also must be approved by
the Directors in the manner described above. The Plan may be terminated at any
time, without penalty, by vote of a majority of the Non-Interested Plan
Directors or by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the 1940 Act) upon not more than 30 days' written notice to
any other party to the Plan. Pursuant to the Plan, the Distributor will provide
the Board of Directors periodic reports of amounts expended under the Plan and
the purposes for which such expenditures were made.
The Distributor expects to pay sales commissions to dealers authorized
to sell the Fund's shares at the time of sale. The Distributor will use its own
funds (which may be borrowed) to pay such commissions pending reimbursement
pursuant to the Service and Distribution Plan. In addition, the Advisor may use
its own resources to make payments to the Distributor or dealers authorized to
sell the Fund's shares to support their sales efforts.
Administration Agreement. First Data Investor Services Group, Inc.
("First Data" or the Administrator") located at 53 State Street, Boston,
Massachusetts 02109 serves as the Company's administrator pursuant to an
administration agreement (the "Administration Agreement"). First Data has agreed
to provide accounting and bookkeeping services for the Fund, including the
computation of the Fund's net asset value, net income and realized capital
gains, if any, to maintain office facilities for the Company; 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, Sub-Administration and Transfer Agency Agreements. Comerica
Bank, the Company's Custodian (the "Custodian"), whose principal business
address is One Detroit Center, 500 Woodward Avenue, Detroit, Michigan 46226,
maintains custody of the Company's assets pursuant to a custodian agreement (the
"Custodian Agreement"). Under the Custodian Agreement, the Custodian (i)
maintains a separate account in the name of the Fund, (ii) holds and transfers
portfolio securities on account of the Fund, (iii) accepts receipts and makes
disbursements of money on behalf of the Fund, (iv) collects and receives all
income and other payments and distributions on account of the Fund's securities
and (v) makes periodic reports to the Company's Board of Directors concerning
the Fund's operations. The Custodian is authorized to select one or more
domestic or foreign banks or trust companies to serve as sub-custodian on behalf
of the Company.
First Data also serves as the transfer and dividend disbursing agent
for the Company pursuant to a transfer agency agreement (the "Transfer Agency
Agreement"), under which First Data (i) issues and redeems shares of the Fund,
(ii) addresses and mails all communications by the 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 the Fund and (v)
makes periodic reports to the Company's Board of Directors concerning the
operations of the Fund.
Other Information Pertaining to Administration, Custodian and Transfer
Agency Agreements. As stated in the Prospectus, the Company's Administrator and
Transfer Agent receive, as compensation for their services, a fee from the
Company based on the aggregate average daily net assets of the Fund and other
investment portfolios advised by the Adviser and administered by First Data. The
Custodian receives a separate fee for its services. In approving the
Administration and Transfer Agency Agreements, the Board of Directors of the
Company considered the services that are to be provided under the several
agreements, the experience and qualifications of the respective service
contractors, the reasonableness of the fee payable by the Company in comparison
to the charges of competing vendors, the impact of the fee on the operating
expense ratio of the Fund and the fact that neither the Administrator nor the
Transfer Agent is affiliated with either the Company or the Adviser. The Board
of Directors also considered their responsibilities under federal and state law
in approving these agreements.
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Agreement, the Advisor determines which
securities are to be sold and purchased by the Fund and which brokers are to be
eligible to execute its portfolio transactions. Portfolio securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. Purchases from underwriters of portfolio securities
include a commission or concession paid by the issuer to the underwriter and
purchases from dealers serving as market makers may include the spread between
the bid and asked price. While the Advisor generally seeks competitive spreads
or commissions, the Fund may not necessarily pay the lowest spread or commission
available on each transaction for reasons discussed below.
Allocation of transactions, including their frequency, to various
dealers is determined by the Advisor in its best judgment and in a manner deemed
fair and reasonable to shareholders. The primary consideration is the prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, dealers who provide supplemental investment research to
the Advisor may receive orders for transactions by the Fund. Information so
received is in addition to and not in lieu of services required to be performed
by the Advisor, nor would the receipt of such information reduce the Advisor's
fees. Such information may be useful to the Advisor in serving both the Fund and
other clients, and conversely, supplemental information obtained by the
placement of business of other clients may be useful to the Advisor in carrying
out its obligations to the Fund.
The Fund will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with the Advisor, First Data, or
their affiliates.
Investment decisions for the Fund are made independently from those for
any other investment portfolios or accounts ("accounts") managed by the Adviser.
Such accounts may also invest in the same securities as the Fund. When a
purchase or sale of the same security is made at substantially the same time on
behalf of the Fund and another account, the transaction will be averaged as to
price, and available investments allocated as to amount, in a manner which the
Adviser believes to be equitable to the Fund and such other account. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtained or sold by the Fund.
To the extent permitted by law, the Adviser may aggregate the securities to be
sold or purchased for the Fund with those to be sold or purchased for other
accounts in order to obtain the best execution.
The Fund does not intend to seek profits through short-term trading.
The Fund's annual portfolio turnover rate will be relatively high, but portfolio
turnover is not expected to have a material effect on the net income of the
Fund. The Fund's portfolio turnover rate is expected to be zero for regulatory
reporting purposes.
PURCHASE AND REDEMPTION INFORMATION
Differing types of Customer Accounts over which Institutional Investors
exercise substantial investment discretion may be used to purchase Fund Shares,
including trust accounts. Investors purchasing Fund Shares may include officers,
directors, or employees of Comerica Bank or its affiliated banks.
The Fund 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 "Exchange") is restricted by applicable rules and regulations of
the Securities and Exchange Commission (the "SEC"); (b) the 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 Fund may also
suspend or postpone the recordation of the transfer of its Shares.
In addition, the Fund may compel the redemption of, reject any order
for, or refuse to give effect on the Fund's books to the transfer of, its Shares
where the relevant investor or investors have not furnished the Fund with valid,
certified taxpayer identification numbers and such other tax-related
certifications as the Fund may request. The Fund may also redeem Shares
involuntarily if it otherwise appears appropriate to do so in light of the
Fund's 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. (See "Net Asset Value.")
Payment for shares may, in the discretion of the Advisor, be made in
the form of securities that are permissible investments for the Fund 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 Fund 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 Fund; and (3) adequate
information will be provided concerning the basis and other tax matters relating
to the securities.
NET ASSET VALUE
The Fund has elected to use the amortized cost method of valuation
pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an instrument at
its cost initially and thereafter assuming a constant amortization to maturity
of any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. This method may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Fund would receive if it sold the instrument. The value of securities
in the Fund can be expected to vary inversely with changes in prevailing
interest rates.
Pursuant to Rule 2a-7, as amended, the Fund will maintain a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per Share, provided that the Fund will
neither purchase any security with a remaining maturity of more than 397 days
(securities subject to repurchase agreements, variable and floating rate
instruments, and certain other securities may bear longer maturities) nor
maintain a dollar-weighted average portfolio maturity which exceeds 90 days.
In addition, the Fund may acquire only U.S. dollar-denominated
obligations that present minimal credit risks and that are "First Tier
Securities" at the time of investment. First Tier Securities are those that are
rated in the highest rating category by at least two nationally recognized
security rating organizations ("NRSROs") or by one if it is the only NRSRO
rating such obligation or, if unrated, determined to be of comparable quality. A
security is deemed to be rated if the issuer has any security outstanding of
comparable priority and security which has received a short-term rating by an
NRSRO. The Adviser will determine that an obligation presents minimal credit
risks or that unrated investments are of comparable quality, in accordance with
guidelines established by the Board of Directors.
The Company's Board of Directors has also undertaken to establish
procedures reasonably designed, taking into account current market conditions
and the Fund's investment objective, to stabilize the Fund's net asset value per
Share for purposes of sales and redemptions at $1.00. These procedures include
review by the Board of Directors, at such intervals as it deems appropriate, to
determine the extent, if any, to which the Fund's net asset value per Share
calculated by using available market quotations deviates from $1.00 per Share.
In the event such deviation exceeds one-half of one percent, the Rule requires
that the Board promptly consider what action, if any, should be initiated. If
the Board believes that the extent of any deviation from the Fund's $1.00
amortized cost price per Share may result in material dilution or other unfair
results to new or existing investors, it will take such steps as it considers
appropriate to eliminate or reduce to the extent reasonably practicable any such
dilution or unfair results. These steps may include: selling portfolio
instruments prior to maturity; shortening the average portfolio maturity;
withholding or reducing dividends; or redeeming Shares in kind.
YIELD
The Fund's standardized 7-day yield is computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account in the Fund having a balance of one Share at the beginning
of the period, dividing the net change in account value by the value of the
account at the beginning of the base period to obtain the base period return,
and multiplying the base period return by 365/7. The net change in the value of
an account in the Fund includes the value of additional Shares purchased with
dividends from the original Share and any such additional Shares, and all fees,
other than non-recurring account or sales charges, that are charged to all
shareholder accounts in proportion to the length of the base period and the
Fund's average account size. The capital changes to be excluded from the
calculation of the net change in account value are realized gains and losses
from the sale of securities and unrealized appreciation and depreciation. The
Fund's effective annualized yield is computed by compounding the unannualized
base period return (calculated as above) by adding 1 to the base period return,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result.
<PAGE>
TAXES
In General
The Fund is treated as a separate corporation for Federal Income Tax
purposes and intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. This requires the Fund to meet
numerous tests regarding distributions, derivation of gross income, and
diversification of assets.
The Fund's policy is to distribute as dividends substantially all of
its investment company taxable income and any net realized long-term capital
gains to shareholders each year.
Information as to the tax status of distributions to shareholders will
be furnished at least annually by the Fund. Investors considering purchasing
Shares of the Fund should consult competent tax counsel regarding the state and
local, as well as Federal, tax consequences before investing.
While the Fund does not expect to realize any net capital gains (the
excess of net long-term capital gains over net short-term capital losses), such
gains, if any, will be distributed at least annually. Such distributions, if
any, will be taxable to Fund shareholders as long-term capital gains, regardless
of how long a shareholder has held Fund Shares. The Fund intends to designate
such distributions as capital gains dividends in a written notice mailed by the
Fund to shareholders not later than sixty days after the close of the Fund's
taxable year.
A non-deductible, 4% Federal Excise Tax is imposed on any regulated
investment company that does not distribute to investors in each calendar year
an amount equal to (i) 98% of its calendar year ordinary income, (ii) 98% of its
capital gain net income (the excess of short- and long-term capital gain over
short-and long-term capital loss) for the one-year period ending October 31, and
(iii) 100% of any undistributed ordinary income or capital gain net income from
the prior year.
The Fund intends to declare and pay dividends and any capital gains
distributions so as to avoid imposition of the Federal Excise Tax. Dividends
declared during October, November or December and payable to shareholders of
record on a specified date in one of such months will be deemed to have been
paid by the Fund and received by shareholders on December 31 of the calendar
year declared, provided that such dividends and distributions are paid during
January of the following year.
Backup Withholding
Generally, the Fund is required to withhold 31% of ordinary income
dividends, capital gains distributions, and redemptions paid to shareholders who
have not complied with IRS taxpayer identification regulations and in certain
other circumstances. Shareholders who are not otherwise subject to backup
withholding may avoid this withholding requirement by certifying on the Account
Application Form their proper Social Security or Taxpayer Identification Number
and certifying that they are not subject to backup withholding.
Other
The foregoing describes some of the tax consequences of investing in the
Fund but is not an exhaustive presentation of all matters that may bear upon a
particular situation. Non-U.S. shareholders in particular should note that they
generally will be subject to U.S. withholding taxes on Fund dividends at a
maximum rate of 30%.
ADDITIONAL INFORMATION CONCERNING SHARES
The Company's Articles of Incorporation authorize the Board of
Directors to issue up to 2 billion full and fractional shares of Common Stock.
The Board has allocated shares in two series ("Portfolios"), although currently
only shares of the Fund are offered by the Company.
The Board of Directors may 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.
Shares 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 Fund's Prospectus and this Statement of
Additional Information, the Fund's Shares will be fully paid and non-assessable.
In the event of a liquidation or dissolution of the Company, Shares of the Fund
are entitled to receive the assets available for distribution belonging to the
Fund, and a proportionate distribution, based upon the relative asset values of
the Fund and the Company's other Portfolios, of any general assets not belonging
to any particular Portfolio which are available for distribution.
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 a
Portfolio affected by the matter. A Portfolio is affected by a matter unless it
is clear that the interests of the Portfolio in the matter are identical to the
interests of the Company's other Portfolios or that the matter does not affect
any interest of the Portfolio. Under Rule 18f-2, the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a Portfolio only if approved by a
majority of the outstanding shares of the Portfolio. However, Rule 18f-2 also
provides that the ratification 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 without
regard to class.
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 by 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 Fund and the Company's other Portfolios, if
any, (voting together without regard to class).
MISCELLANEOUS
Counsel. The law firm of Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, serves as counsel to the Company.
Independent Auditors. Ernst & Young LLP, 200 Clarendon Street, Boston, MA
02116, serves as the Company's independent auditors.
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 or 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 any
Fund or result in a financial loss to any Customer.
Shareholder Approvals. As used in this Statement of Additional
Information and in the Prospectus, a "majority of the outstanding shares" of a
Fund or investment portfolio means the lesser of (a) 67% of the shares of the
particular Fund portfolio represented at a meeting at which the holders of more
than 50% of the outstanding shares of such Fund or portfolio are present in
person or by proxy, or (b) more than 50% of the outstanding shares of such Fund
or portfolio.
REGISTRATION STATEMENT
This Statement of Additional Information and the Fund's Prospectus do
not contain all the information included in the Fund's 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 Fund's Prospectus as to the
contents of any contract of 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 Fund's registration statement,
each such statement being qualified in all respect by such reference.
<PAGE>
APPENDIX
- Rated Investments -
Commercial Paper
Rated commercial paper purchased by the 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 the Fund's Board of 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+".
