<PAGE>
As filed with the Securities and Exchange Commission on February 27, 1998
Securities Act File No. 2-91373
Investment Company Act of 1940 File No. 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. 27 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 28 / X /
St. Clair Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
480 Pierce Street, Birmingham, Michigan 48009
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number (248) 647-9200
Cynthia J. Surprise
Vice President and Associate Counsel
State Street Bank and Trust Company
1776 Heritage Drive, AFB
North Quincy, MA 02171
Copies to:
Lisa Anne Rosen, Esq. Paul F. Roye, Esq.
Munder Capital Management Dechert Price & Rhoads
480 Pierce Street 1775 Eye Street, NW
Birmingham, Michigan 48009 Washington, D.C. 20006
It is proposed that this filing will become effective 60 days after filing
pursuant to paragraph (a) of Rule 485.
<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
<TABLE>
<CAPTION>
ITEM HEADING
<S> <C> <C>
1. Cover Page Cover Page
2. Synopis Fund Highlights; Financial Information
3. Condensed Financial Information Financial Information
4. General Description of Registrant Cover Page; Fund Highlights; Fund Choices; Structure and Management
of the Funds
5. Management of Fund Structure and Management of the Funds; Fund Choices; Dividends,
Distributions and Taxes; Performance
6. Capital Stock and Other Securities Structure and Management of the Funds; Purchases of Shares; Redemptions of
Shares; Dividends, Distributions and Taxes
7. Purchase of Securities Being Offered Purchase of Shares;
8. Redemption or Repurchase Redemptions of Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
ST. CLAIR FUNDS, INC.
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 B
<TABLE>
<CAPTION>
ITEM HEADING
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History See Prospectus -- "Structure and Management of the Funds";
General; Directors and Officers
13. Investment Objectives and Policies Fund Investments; Investment Limitations; Portfolio Transactions
Investment
14. Management of Fund See Prospectus -- "Structure and Management of the Funds"; Directors and
Officers; Miscellaneous
15. Control Persons and Principal Holders See Prospectus -- Structure and Management of the Funds; Miscellaneous
of Securities
16. Investment Advisory and Other Services Investment Advisory and Other Service Arrangements; See Prospectus --
"Structure and Management of the Funds"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities See Prospectus -- "Structure and Management of the Funds"; Additional
Information Concerning Shares
19. Purchase, Redemption and Pricing of Additional Purchase and Redemption Information; Net Asset Value; Additional
Securities Being Offered 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 Financial Statements
</TABLE>
<PAGE>
ST. CLAIR FUNDS, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
PROSPECTUS FOR ST. CLAIR FUNDS, INC.
LIQUIDITY PLUS MONEY MARKET FUND
PART A
<TABLE>
<CAPTION>
ITEM HEADING
<S> <C> <C>
1. Cover Page Cover Page
2. Synopis Fund Information; Financial Information
3. Condensed Financial Information Financial Information
4. General Description of Registrant Cover Page; Fund Information; Structure and Management of the Funds
5. Management of Fund Structure and Management of the Funds; Dividends, Distributions and Taxes;
Performance
6. Capital Stock and Other Securities Structure and Management of the Funds; Purchases of Shares; Redemptions of
Shares; Dividends, Distributions and Taxes
7. Purchase of Securities Being Offered Purchases of Shares;
8. Redemption or Repurchase Redemptions of Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
ST. CLAIR FUNDS, INC.
PROSPECTUS FOR ST. CLAIR FUNDS, INC.
LIQUIDITY PLUS MONEY MARKET FUND
PART B
<TABLE>
<CAPTION>
ITEM HEADING
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History See Prospectus -- "Structure and Management of the Funds"; General; Directors
and Officers
13. Investment Objectives and Policies Fund Investments; Additional Investment Limitations; Portfolio Transactions
Investment
14. Management of Fund See Prospectus -- "Structure and Management of the Funds"; Directors and
Officers; Miscellaneous
15. Control Persons and Principal Holders See Prospectus -- "Structure and Management of the Funds"; Miscellaneous
of Securities
16. Investment Advisory and Other Services Investment Advisory and Other Service Arrangements; See Prospectus --
"Structure and Management of the Funds"
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities See Prospectus -- "Structure and Management of the Funds"; Additional
Information Concerning Shares
19. Purchase, Redemption and Pricing of Additional Purchase and Redemption Information; Net Asset Value; Additional
Securities Being Offered Information Concerning Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and Other Service Arrangements
22. Calculation of Performance Data See Prospectus -- "Performance"
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
ST. CLAIR FUNDS, INC.
The purposes of this filing are (i) to change certain non-fundamental
investment policies for certain investment portfolios and (ii) to rewrite and
streamline the Prospectus for 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 and the Prospectus for Liquidity Plus
Money Market Fund and to conform them to the Plain-English format utilized by
the other investment companies that comprise The Munder Funds.
The Prospectus and Statement of Additional Information relating 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, 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 explains the objectives, policies, risks and fees of each
Fund. Investors are encouraged to read this Prospectus carefully before
investing and retain it for future reference. A Statement of Additional
Information ("SAI") has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated by reference into this Prospectus. The SAI 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
SAI 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 APRIL 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Fund Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
What are the key facts regarding the Funds?. . . . . . . . . . . . . . . 3
Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Fund Choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
What Funds are offered?. . . . . . . . . . . . . . . . . . . . . . . . . 7
Who may want to invest in the Funds? . . . . . . . . . . . . . . . . . . 9
What are the Funds' investments and investment practices?. . . . . . . . 9
What are the risks of investing in the Funds?. . . . . . . . . . . . . .13
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
How is the Funds' performance calculated?. . . . . . . . . . . . . . . .14
Where can I obtain performance data? . . . . . . . . . . . . . . . . . .15
Purchases of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
What price do I pay for shares?. . . . . . . . . . . . . . . . . . . . .15
When can I purchase shares?. . . . . . . . . . . . . . . . . . . . . . .16
What is the minimum required investment? . . . . . . . . . . . . . . . .16
How can I purchase shares? . . . . . . . . . . . . . . . . . . . . . . .16
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
What price do I receive for redeemed shares? . . . . . . . . . . . . . .16
When can I redeem shares?. . . . . . . . . . . . . . . . . . . . . . . .16
How can I redeem shares? . . . . . . . . . . . . . . . . . . . . . . . .16
When will I receive redemption amounts?. . . . . . . . . . . . . . . . .16
Structure and Management of the Funds. . . . . . . . . . . . . . . . . . . . .17
How are the Funds structured?. . . . . . . . . . . . . . . . . . . . . .17
Who manages and services the Funds?. . . . . . . . . . . . . . . . . . .17
What are my rights as a shareholder? . . . . . . . . . . . . . . . . . .18
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . .18
When will I receive distributions from the Funds?. . . . . . . . . . . .18
How will distributions be made?. . . . . . . . . . . . . . . . . . . . .19
Are there tax implications of my investments in the Funds? . . . . . . .19
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
</TABLE>
2
<PAGE>
FUND HIGHLIGHTS
WHAT ARE THE KEY FACTS REGARDING THE FUNDS?
Q: WHAT ARE THE FUNDS' GOALS?
A:
- The Institutional S&P 500 Index Equity Fund seeks to provide price
performance and income that is comparable to the Standard & Poor's
500 Composite Stock Price Index ("S&P 500").
- The Institutional S&P MidCap Index Equity Fund seeks to provide price
performance and income that is comparable to the Standard & Poor's
MidCap 400 Index ("S&P MidCap 400").
- The Institutional S&P SmallCap Index Equity Fund seeks to provide
price performance and income that is comparable to the Standard &
Poor's SmallCap 600 Index ("S&P SmallCap 600").
- The Institutional Short Term Treasury Fund seeks to provide an
enhanced money market return consistent with the preservation of
capital.
- The Institutional Money Market Fund seeks to provide current income
consistent with the preservation of capital and liquidity.
Q: WHAT ARE THE FUNDS' STRATEGIES?
A: INSTITUTIONAL S&P 500 INDEX EQUITY FUND
- This Fund invests primarily in Equity Securities and it normally will
hold the securities of at least 80% of the issuers in the S&P 500.
The Fund is managed through a "quantitative" or "indexing" investment
approach, which attempts to duplicate the investment composition and
performance of the S&P 500 through statistical procedures.
INSTITUTIONAL S&P MIDCAP INDEX EQUITY FUND
- This Fund invests primarily in Equity Securities and it normally will
hold the securities of at least 80% of the issuers in the S&P MidCap
400. The Fund is managed through a "quantitative" or "indexing"
investment approach, which attempts to duplicate the investment
composition and performance of the S&P MidCap 400 through
statistical procedures.
INSTITUTIONAL S&P SMALLCAP INDEX EQUITY FUND
- This Fund invests primarily in Equity Securities and it normally will
hold the securities of at least 80% of the issuers in the S&P
SmallCap 600. The Fund is managed through a "quantitative" or
"indexing" investment approach, which attempts to duplicate the
investment composition and performance of the S&P SmallCap 600
through statistical procedures.
INSTITUTIONAL SHORT TERM TREASURY FUND
- This Fund invests only in U.S. Treasury securities and repurchase
agreements relating to U.S. Treasury securities.
INSTITUTIONAL MONEY MARKET FUND
- This Fund invests in a broad range of short-term, high quality, U.S.
dollar-denominated instruments that are available in the money
markets.
Each Fund implements a different investment strategy which is described
in this Prospectus.
3
<PAGE>
Q: WHAT ARE THE FUNDS' RISKS?
A: The following table summarizes the primary risks of investing in the
Funds:
<TABLE>
<CAPTION>
FUND RISK
<S> <C>
Institutional S&P 500 Index Equity Fund Potential loss of investment due to changes in the stock market in general,
Institutional S&P MidCap Index Equity Fund changes in the stock prices of particular companies and perceptions about
Institutional S&P SmallCap Index Equity Fund particular industries.
Institutional Short Term Treasury Fund Potential loss of investment due to changes in the bond market and in
interest rates.
Institutional Money Market Fund Potential failure to maintain $1.00 net asset value.
</TABLE>
Q: HOW DO I BUY AND SELL SHARES OF THE FUNDS?
A: Funds Distributor Inc. (the "Distributor") sells shares of the Funds.
You may purchase shares directly from the Distributor or from the Funds'
transfer agent, First Data Investor Services Group, Inc. (the "Transfer
Agent") or through arrangements with institutions.
The minimum initial investment for each Fund is as follows: $3,000,000
for the Institutional S&P 500 Index Equity Fund, $1,000,000 for each of the
Institutional MidCap Index Equity Fund and the Institutional SmallCap Index
Equity Fund and $10,000,000 for each of the Institutional Short Term Treasury
Fund and the Institutional Money Market Fund.
Shares may be redeemed through arrangements between the investors and
institutions.
Q: WHEN AND HOW ARE DISTRIBUTIONS MADE?
A: Dividend distributions are made from the dividends and interest earned
on investments. Dividends paid at least quarterly (if income is available):
Institutional S&P 500 Index Equity Fund, Institutional S&P MidCap Index
Equity Fund, Institutional SmallCap Index Equity Fund.
Dividends paid monthly: Institutional Short Term Treasury Fund and
Institutional Money Market Fund.
The Funds distribute capital gains at least annually. Unless you elect
to receive distributions in cash, we will use all dividends and capital gains
distributions of a Fund to purchase additional shares of that Fund.
Q: WHO MANAGES THE FUNDS' ASSETS?
A: Munder Capital Management is the Funds' investment advisor. The Advisor
is responsible for all purchases and sales of the securities held by the
Funds.
4
<PAGE>
FINANCIAL INFORMATION
SHAREHOLDER TRANSACTIONS EXPENSES (1)
The purpose of this table is to assist you in understanding the expenses a
shareholder in the Funds will bear directly.
<TABLE>
<S> <C>
Maximum Sales Charge on Purchase (as a % of Offering Price)... None
Sales Charge Imposed on Reinvested Dividends ................. None
Maximum Deferred Sales Charge ................................ None
Redemption Fees (2) .......................................... None
Exchange Fees ................................................ None
</TABLE>
- -------------------------
Notes:
(1) Does not include fees which institutions may charge for services they
provide to you.
(2) The Funds' transfer agent may charge a fee of $7.50 for wire redemptions
under $5,000.
FUND OPERATING EXPENSES
The purpose of this table is to assist you in understanding the expenses
charged directly to each Fund, which investors in the Funds will bear
indirectly. Such expenses include payments to Directors, auditors, legal
counsel and service providers (such as the Advisor), registration fees, and
distribution fees. The fees shown below are based on estimated operating
expenses for the current fiscal year. Any fees charged by institutions
directly to customer accounts for services provided in connection with
investments in shares of the Fund are in addition to the expenses shown in
the table below and in the Example.
<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>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees .................. .07% .15% .15% .20% .20%
Other Expenses+ ................ .02%* .03%* .03%* .03%* .0%*
------------ ------------ ------------ ------------ ------------
Total Fund Operating Expenses+.. .09%* .18%* .18%* .23%* .20%*
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
- -------------------------
* The Advisor has voluntarily agreed to reimburse expenses to limit "Other
Expenses" to .02% with respect to the Munder Institutional S&P 500 Index
Equity Fund,.03% with respect to Munder Institutional S&P MidCap Index Equity
Fund and Munder Institutional S&P SmallCap Index Equity Fund and
[.0% with respect to the Munder Institutional Short Term Treasury Fund and
Munder Institutional Money Market Fund]. [NEED TO BE VERIFIED]
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 SmallCap Index Equity Fund, [ ]% for Munder Institutional
Short Term Treasury Fund and [ ]% for Munder Institutional Money Market
Fund.
+ After expense reimbursements if any.
5
<PAGE>
EXAMPLE
This example shows the amount of expenses you would pay (directly or
indirectly) on a $1,000 investment in the Funds, assuming (1) a 5% annual
return and (2) redemption at the end of the following time periods. THIS
EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR OPERATING
EXPENSES; ACTUAL PERFORMANCE OR OPERATING EXPENSES MAY BE LARGER OR SMALLER
THAN THOSE SHOWN.
<TABLE>
<CAPTION>
1 3
YEAR YEARS
---- -----
<S> <C> <C>
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 ................. $[ ] $[ ]
</TABLE>
FINANCIAL HIGHLIGHTS
The following financial highlights for the period ended December 31,
1997 were audited by Ernst & Young LLP, independent auditors. The financial
highlights for the Institutional S&P 500 Index Equity Fund for the period
ended [March 31, 1998] are unaudited. As of the date of this prospectus, the
Institutional Short Term Treasury Fund and the Institutional Money Market
Fund had not commenced operations. The Institutional S&P MidCap Index Equity
Fund commenced operations on February 13, 1998. The financial highlights
should be read in conjunction with the Funds' Annual Report dated December
31, 1997 and the unaudited Financial Statements dated [March 30, 1998], which
are incorporated by reference in the SAI. You may obtain the Annual Report
and unaudited Financial Statements without charge by calling (800) 438-5789.
MUNDER INSTITUTIONAL S&P 500 INDEX EQUITY FUND
<TABLE>
<CAPTION>
PERIOD PERIOD
ENDED ENDED
3/31/98(a) 12/31/97(a)
<S> <C> <C>
Net asset value, beginning of period ...............................................
INCOME FROM INVESTMENT OPERATIONS: .................................................
Net investment income ..............................................................
Net realized and unrealized gain on investments ....................................
Total from investment operations ...................................................
LESS DISTRIBUTIONS: ................................................................
Distributions from net investment income ...........................................
Net asset value, end of period .....................................................
TOTAL RETURN(b) ....................................................................
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...............................................
Ratio of operating expenses to average net assets ..................................
Ratio of net investment income to average net assets ...............................
Ratio of operating expenses to average net assets without expense reimbursed .......
Portfolio turnover rate ............................................................
Average commission rate(d) .........................................................
</TABLE>
- -------------------------
(a) Munder Institutional S&P 500 Index Equity Fund commenced operations on
October 15, 1997.
(b) Total return represents aggregate total return for the period indicated.
(c) Annualized.
(d) Average commission rate paid per share of securities purchased and sold
by the Fund.
6
<PAGE>
MUNDER INSTITUTIONAL S&P SMALLCAP INDEX EQUITY FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/97(a)
<S> <C>
Net asset value, beginning of period ...............................................
INCOME FROM INVESTMENT OPERATIONS: .................................................
Net investment income ..............................................................
Net realized and unrealized gain on investments ....................................
Total from investment operations ...................................................
LESS DISTRIBUTIONS:
Distributions from net investment income
Net asset value, end of period
TOTAL RETURN(b)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...............................................
Ratio of operating expenses to average net assets ..................................
Ratio of net investment income to average net assets ...............................
Ratio of operating expenses to average net assets without expense reimbursed .......
Portfolio turnover rate ............................................................
Average commission rate(d) .........................................................
</TABLE>
- -------------------------
(a) Munder Institutional S&P SmallCap Index Equity Fund commenced operations on
August 7, 1997.
(b) Total return represents aggregate total return for the period indicated.
(c) Annualized.
(d) Average commission rate paid per share of securities purchased and sold by
the Fund.
FUND CHOICES
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.
WHAT FUNDS ARE OFFERED?
LARGECAP 500 INDEX FUND
GOAL AND PRINCIPAL INVESTMENT. The goal of the LargeCap 500 Index Fund
is to provide performance and income that is comparable to the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500"). The S&P 500 is an index
of 500 stocks which emphasizes large capitalization companies. See Appendix
A for more information on the S&P 500. The Fund will normally hold the
securities of at least 80% of the stocks in the S&P 500. Stock selections
are based primarily on market capitalization and industry weightings.
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 the S&P 500, and the timing and amount of investor purchases
and redemptions.
7
<PAGE>
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.
PORTFOLIO MANAGEMENT. [TO BE COMPLETED]
MIDCAP INDEX FUND
GOAL AND PRINCIPAL INVESTMENT. The goal of the MidCap Index Fund is to
provide performance and income that is comparable to the Standard & Poor's
MidCap 400 Index ("S&P MidCap 400"). The S&P MidCap 400 is an index of 400
stocks which emphasize medium capitalization companies. See Appendix A for
more information on the S&P MidCap 400. The Fund will normally hold the
securities of at least 80% of the issuers included in the S&P MidCap 400.
Stock selections are based primarily on market capitalization and industry
weightings.
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.
PORTFOLIO MANAGEMENT. [TO BE COMPLETED]
SMALLCAP INDEX FUND
GOAL AND PRINCIPAL INVESTMENTS. The goal of the SmallCap Index Fund is
to provide performance and income that is comparable to the Standard & Poor's
SmallCap 600 Index ("S&P SmallCap 600"). The S&P SmallCap 600 is an index of
600 stocks which emphasize small capitalization companies. See Appendix A
for more information on the S&P SmallCap 600. The Fund will normally hold
the securities of at least 80% of the issuers included in the S&P SmallCap
600. 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.
PORTFOLIO MANAGEMENT. [TO BE COMPLETED]
8
<PAGE>
SHORT TERM TREASURY FUND
GOAL AND PRINCIPAL INVESTMENTS. The Fund's goal is to provide investors
with a high level of current income consistent with capital preservation.
Under normal conditions, the Fund invests 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. The Fund's dollar-weighted average maturity usually
will not exceed two years.
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 value of such shares will not
be less than the value when originally purchased.
PORTFOLIO MANAGEMENT. Sharon E. Fayolle, Vice President and Director of
Money Marketing Trading for Advisor, manages the Fund. Prior to joining the
Advisor in 1996, she was a European Portfolio Manager for Ford Motor Company.
MONEY MARKET FUND
GOAL AND PRINCIPAL INVESTMENTS. The Fund's primary goal is to provide
as high a level of current interest income as is consistent with maintaining
liquidity and stability of principal.
The Fund invests 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.
WHO MAY WANT TO INVEST IN THE FUNDS?
INDEX FUNDS
These Funds are designed for investors who desire potentially high
capital appreciation and who can accept short-term variations in return for
potentially greater returns over the long term. In general, the greater the
risk, the greater the potential reward. Investors who have a short time
horizon, who desire a high level of income or who are conservative in their
investment approach may wish to invest in other portfolios offered by the
Company.
SHORT TERM TREASURY FUND AND MONEY MARKET FUND
These Funds are designed for investors who desire a high level of income
and liquidity and, in the case of the Money Market Fund, stability of
principal.
WHAT ARE THE FUNDS' INVESTMENTS AND INVESTMENT PRACTICES?
Each of the LargeCap 500 Index Fund, MidCap Index Fund and SmallCap
Index Fund (collectively, the "Index Funds") invests in EQUITY SECURITIES
which include common stocks, preferred stocks, convertible preferred stocks
and 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 Fund (other than the Short Term Treasury Fund) may invest in CASH
EQUIVALENTS, which are high-quality, short-term money market instruments
including, among other things, commercial paper, bankers' acceptances and
negotiable certificates of deposit of banks or savings and loan associations,
short-term corporate obligations and short-term securities issued by, or
guaranteed by, the U.S. Government and its agencies or instrumentalities.
These instruments will be used primarily pending investment, to meet
anticipated redemptions or as a temporary defensive measure. If a Fund is
investing defensively, it may not be pursuing its investment objective.
9
<PAGE>
The Index Funds may purchase AMERICAN DEPOSITARY RECEIPTS ("ADRS"),
EUROPEAN DEPOSITARY RECEIPTS ("EDRS") AND GLOBAL DEPOSITARY RECEIPTS
("GDRS"). ADRs are issued by U.S. financial institutions and EDRs and GDRs
are issued by European financial institutions. They are receipts evidencing
ownership of underlying foreign securities.
All Funds may enter into REPURCHASE AGREEMENTS. Under a repurchase
agreement, a Fund agrees to purchase securities from a seller and the seller
agrees to repurchase the securities at a later time, typically within seven
days, at a set price. The seller agrees to set aside collateral at least
equal to the repurchase price. This ensures that the Fund will receive the
purchase price at the time it is due, unless the seller defaults or declares
bankruptcy, in which event the Fund will bear the risk of possible loss due
to adverse market action or delays in liquidating the underlying obligation.
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 Funds (other than the Short Term Treasury Fund) may invest in MONEY
MARKET FUNDS. The LargeCap 500 Index Fund and the MidCap Index Fund may also
invest in Standard & Poor's Depositary Receipts ("SPDRs") and shares of other
open-end investment companies that are structured to seek performance that
corresponds to that of the appropriate Index. The Funds will bear a portion
of the expenses of any investment company whose shares they purchase,
including operating costs and investment advisory, distribution and
administration fees. These expenses would be in addition to a Fund's own
expenses. Each Fund may invest up to 10% of its assets in other investment
companies and no more than 5% of its assets in any one investment company.
Each Fund may BORROW MONEY in an amount up to 5% of its assets for
temporary purposes and in an amount up to 33 1/3% of its assets to meet
redemptions. This is a "fundamental" policy which only can be changed by
shareholders.
Each Index Fund may purchase FIXED INCOME SECURITIES. Fixed Income
Securities are securities which either pay interest at set times at either
fixed or variable rates, or which realize a discount upon maturity. Fixed
Income Securities include corporate bonds, debentures, notes and other
similar corporate debt instruments, zero coupon bonds (discount debt
obligations that do not make interest payments) and variable amount master
demand notes that permit the amount of indebtedness to vary in addition to
providing for periodic adjustments in the interest rate.
The Short Term Treasury Fund may purchase "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.
Each Fund is classified as a "diversified fund." With respect to 75% of
each Fund's assets, each Fund cannot invest more than 5% of its assets in one
issuer (other than the U.S. Government and its agencies and
instrumentalities). In addition, each Fund cannot invest more than 25% of its
assets in a single issuer.
The Money Market Fund will invest primarily in ELIGIBLE SECURITIES (as
defined by the SEC) with remaining maturities of 397 days or less as defined
by the SEC (although securities subject to repurchase agreements, variable
and floating securities and certain other securities may bear longer
maturities), and the dollar-weighted average portfolio maturity of the Money
Market Fund will not exceed 90 days. Eligible Securities consist of
securities that are determined by the Advisor, under guidelines established
by the Board of Directors, to present minimal credit risk. The Money Market
Fund may also hold uninvested cash pending investment of late payments for
purchase orders or during temporary defensive periods.
10
<PAGE>
INVESTMENT CHART
The following chart summarizes the Funds' investments and investment
practices. The SAI contains more details. All percentages are based on a
Fund's total assets except where otherwise noted. See "What are the Risks of
Investing in the Funds?" for a description of the risks involved with the Funds'
investment practices.
<TABLE>
<CAPTION>
S&P SHORT
S&P SMALLCAP TERM MONEY
INVESTMENTS AND S&P 500 MIDCAP INDEX TREASURY MARKET
INVESTMENT PRACTICES INDEX FUND INDEX FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
FOREIGN SECURITIES. Includes securities issued
by foreign companies and foreign governments and
their agencies, instrumentalities or political
subdivisions and supranational organizations.
Present more risks than U.S. securities. 25% 25% 25% N Y
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS.
Obligations of a Fund to purchase or sell a
specific currency at a future date at a set price.
May decrease a Fund's loss due to a change in
currency value, but also limits gains from
currency changes. Y Y Y N N
STRIPPED SECURITIES:
- Participations in trusts that hold N N N N Y
U.S. Treasury and agency securities
- U.S. Treasury-issued receipts N N N Y Y
- Non-U.S. Treasury receipts N N N N Y
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS.
Agreement by a Fund to purchase securities at
a set price, with delivery and payment in the
future. The value of securities may change
between the time the price is set and payment.
Not to be used for speculation. Y Y Y Y Y
</TABLE>
- -------------------------
Key:
Y = investment allowed without restriction
N = investment not allowed
11
<PAGE>
<TABLE>
<CAPTION>
S&P SHORT
S&P SMALLCAP TERM MONEY
INVESTMENTS AND S&P 500 MIDCAP INDEX TREASURY MARKET
INVESTMENT PRACTICES INDEX FUND INDEX FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
FUTURES AND OPTIONS ON FUTURES. (1)
Contracts in which a Fund agrees, at maturity,
to make delivery of or receive securities, the
cash value of an index or foreign currency.
Used for hedging purposes or to maintain
liquidity. Y Y Y N N
OPTIONS. A Fund may buy options giving
it the right to require a buyer to buy
a security held by the Fund (put options),
buy options giving it the right to require
a seller to sell securities to the Fund
(call options), sell (write) options giving
a buyer the right to require the Fund to
buy securities from the buyer or write
options giving a buyer the right to require
the Fund to sell securities to the buyer
during a set time at a set price. Options
may relate to stock indices, individual
securities, foreign currencies or futures
contracts. See the SAI for more details
and additional limitations. Y Y Y N N
REVERSE REPURCHASE AGREEMENTS. A Fund sells
securities and agrees to buy them back later
at an agreed upon time and price. A method
to borrow money for temporary purposes. Y Y Y Y Y
ILLIQUID SECURITIES. Typically there is no ready
market for these securities, which inhibits the
ability to sell them and to obtain their full
market value, or there are legal restrictions on
their resale by the Fund. 15% 15% 15% N 10%
LENDING SECURITIES. A Fund may lend
securities to financial institutions
which pay for the use of the securities.
May increase return. Slight risk of
borrower failing financially. 25% 25% 25% 25% 25%
BANK OBLIGATIONS. U.S. dollar denominated
bank obligations, including certificates
of deposit, bankers' acceptances, bank notes,
time deposits issued by U.S. or foreign banks
or savings institutions having total assets in
excess of $1 billion. 25% 25% 25% N Y
- -------------------------
</TABLE>
Key:
Y = investment allowed without restriction
N = investment not allowed
(1) The limitation on margin and premiums for futures and related options is
5% of a Fund's assets
12
<PAGE>
<TABLE>
<CAPTION>
S&P SHORT
S&P SMALLCAP TERM MONEY
INVESTMENTS AND S&P 500 MIDCAP INDEX TREASURY MARKET
INVESTMENT PRACTICES INDEX FUND INDEX FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS:
- Issued or guaranteed by U.S.
Government Y Y Y Y Y
- Issued or guaranteed by U.S.
Government agencies and
instrumentalities Y Y Y N Y
CORPORATE OBLIGATIONS:
- Commercial paper
- Corporate bonds
- Notes Y Y Y N Y
- Other short-term obligations
- Variable Master Demand Notes
- Debentures
ASSET-BACKED SECURITIES. Includes
debt securities backed by mortgages,
installment sales contracts and
credit card receivables. N N N N Y
GUARANTEED INVESTMENT CONTRACTS. Agreements
of a Fund to make payments to an insurance
company's general account in exchange
for a minimum level of interest based on an index. N N N N Y
- -------------------------
</TABLE>
Key:
Y = investment allowed without restriction
N = investment not allowed
WHAT ARE THE RISKS OF INVESTING IN THE FUNDS?
ALL FUNDS
Consistent with a long-term investment approach, investors in a Fund
should be prepared and able to maintain their investments during periods of
adverse market conditions. By itself, no Fund constitutes a balanced
investment program and there is no guarantee that any Fund will achieve its
investment objectives since there is uncertainty in every investment.
A Fund's risk is mostly dependent on the types of securities it
purchases and its investment techniques. Certain Funds are authorized to use
options, futures, and forward foreign currency exchange contracts, which are
types of derivative instruments. Derivative instruments are instruments that
derive their value from a different underlying security, index or financial
indicator. 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) 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; (5) leverage risk, that is, the risk that adverse price movements in
an instrument can result in a loss substantially greater than the Fund's
initial investment in that instrument (in some
13
<PAGE>
cases, the potential loss is unlimited); and (6) particularly in the case of
privately-negotiated instruments, the risk that the counterparty will not
perform its obligations, which could leave the Fund worse off than if it had
not entered into the position.
The risks of various investment techniques the Funds use are described
in more detail in the SAI.
INDEX FUNDS
Investing in these Funds may be less risky than investing in individual
stocks due to the diversification of investing in a portfolio of many
different stocks; however, such diversification does not eliminate all risks.
Because the Funds invest mostly in Equity Securities, rises and falls in the
stock market in general, as well as in the value of particular Equity
Securities held by the Funds, can affect the Funds' performance. Your
investment in the Funds is not guaranteed. The net asset value of the Funds
will change daily and you might not recoup the amount you invest in the Funds.
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.
SHORT TERM TREASURY FUND
The value of the Short Term Treasury Fund's shares, like the value of
most fixed income securities, will rise and fall in response to changes in
economic conditions, interest rates and the market's perception of the
underlying securities held by the Fund. Investing in the Fund may be less
risky than investing in individual Fixed Income Securities due to the
diversification of investing in a portfolio containing many different Fixed
Income Securities; however, such diversity does not eliminate all risks. The
Fund invests mostly in Fixed Income Securities, whose values typically rise
when interest rates fall and fall when interest rates rise. Fixed Income
Securities with shorter maturities (time period until repayment) tend to be
less affected by interest rate changes, but generally offer lower yields than
securities with longer maturities. Current yield levels should not be
considered representative of yields for any future time. Securities with
variable interest rates may exhibit greater price variations than ordinary
securities. 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.
MONEY MARKET FUND
The Money Market Fund attempts to maintain a constant net asset value of
$1.00 per share. However, your investment in the Fund is not guaranteed.
MIDCAP INDEX FUND AND SMALLCAP INDEX FUND
The Advisor believes that smaller companies can provide greater growth
potential and potentially higher returns than larger firms. Investing in
smaller companies, however, is riskier than investing in larger companies.
The stock of smaller companies may trade infrequently and in lower volume.
Smaller companies may have limited product lines, markets, financial
resources and distribution channels, which makes them more sensitive to
changing economic conditions. Stocks of smaller companies historically have
had larger fluctuations in price than stocks of larger companies included in
the S&P 500.
PERFORMANCE
HOW IS THE FUNDS' PERFORMANCE CALCULATED?
There are various ways in which the Funds may calculate and report their
performance.
14
<PAGE>
One method is to show a Fund's total return. Cumulative total return is
the percentage change in the value of an amount invested in a Fund over a
stated period of time and takes into account reinvested dividends.
Cumulative total return most closely reflects the actual performance of a
Fund.
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.
Each Fund may also publish its current yield. Yield is the net
investment income generated by a share of the Fund during a 30-day period
divided by the maximum offering price per share on the 30th day.
The current yield of shares in the Money Market Fund refers to the net
income generated by an investment in shares of 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.
You should be aware that (i) past performance does not indicate how a
Fund will perform in the future; and (ii) each Fund's return and net asset
value will fluctuate, so you cannot use a Fund's performance data to compare
it to investments in certificates of deposit, savings accounts or other
investments that provide a fixed or guaranteed yield.
Each Fund may compare its performance to that of other mutual funds,
such as the performance of mutual funds reported by Lipper Analytical
Services, Inc. or information 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 local or regional publications. Each
Fund may also compare its total return to broad-based indices. These indices
show the value of selected portfolios of securities (assuming reinvestment of
interest and dividends) which are not managed by a portfolio manager. The
Funds may report how they are performing in comparison to the Consumer Price
Index, an indication of inflation reported by the U.S. Government.
WHERE CAN I OBTAIN PERFORMANCE DATA?
The WALL STREET JOURNAL and certain local newspapers report information
on the performance of mutual funds. In addition, performance information is
contained in the Fund's annual report dated December 31 of each year and
semi-annual report dated June 30 of each year, which will automatically be
mailed to shareholders. To obtain copies of financial reports or performance
information, call (800) 438-5789.
PURCHASES OF SHARES
The following persons may purchase shares of the Funds:
- fiduciary and discretionary accounts of institutions
- high net worth individuals
- institutional investors (including: banks, savings institutions,
credit unions and other financial institutions; corporations,
foundations, partnerships, 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)
WHAT PRICE DO I PAY FOR SHARES?
Shares of the Funds are sold at net asset value per share next determined
after receipt of a purchase order in proper form. Shares are sold without an
initial or contingent deferred sales charge. The net value ("NAV") of each Fund
(except the Money Market Fund) is determined as of the close of trading on the
New York Stock Exchange
15
<PAGE>
("NYSE") (normally 4:00 p.m., Eastern time) on each day the NYSE is open for
trading (a "Business Day"). The NAV of the Money Market Fund is determined
as of 3:00 p.m. (Eastern time) and as of the close of trading on the NYSE on
each Business Day. NAV is calculated by totaling the value of all of the
assets of the Fund, subtracting the Fund's liabilities and expenses charged
and dividing the result by the number of outstanding shares.
WHEN CAN I PURCHASE SHARES?
Shares of each Fund are sold on a continuous basis and can be purchased
on any Business Day.
WHAT IS THE MINIMUM REQUIRED INVESTMENT?
The minimum initial investment for each Fund is as follows: $3,000,000
for the LargeCap 500 Index Fund; $1,000,000 for each of the MidCap Index Fund
and the SmallCap Index Fund and $10,000,000 for each of the Short Term
Treasury Fund and the Money Market Fund.
HOW CAN I PURCHASE SHARES?
Purchase orders may be placed directly through the Distributor or the
Transfer Agent or through arrangements with institutions. Payments for
shares may be made by institutions in federal funds or other funds
immediately available to the Sub-Custodian no later than 4:00 p.m. (Eastern
time) on the next Business Day following receipt of the purchase order.
You will not be issued a share certificate unless you request one in
writing. We reserve the right to (i) reject any purchase order and (ii)
suspend the offering of Shares for any period of time. You may pay for
shares of each Fund with securities which the Fund is allowed to hold.
REDEMPTIONS OF SHARES
WHAT PRICE DO I RECEIVE FOR REDEEMED SHARES?
The redemption price is the net asset value next determined after we
receive the redemption request in proper order.
WHEN CAN I REDEEM SHARES?
You can redeem shares on any Business Day, provided all required
documents have been received by First Data Investor Services Group, Inc. (the
"Transfer Agent"). A Fund may temporarily stop redeeming shares when the
NYSE is closed or trading on the NYSE is restricted, when an emergency exists
and the Fund cannot sell its assets or accurately determine the value of its
assets or if the SEC orders the Fund to suspend redemptions.
HOW CAN I REDEEM 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 that institution.
WHEN WILL I RECEIVE REDEMPTION AMOUNTS?
If we receive a redemption order for a Fund before 4:00 p.m. (Eastern
time) on a Business Day, we will normally wire payment to the redeeming
institution on the next Business Day. We may delay wiring redemption
proceeds for up to seven days if we feel an earlier payment would have a
negative impact on the Fund.
16
<PAGE>
STRUCTURE AND MANAGEMENT OF THE FUNDS
HOW ARE THE FUNDS STRUCTURED?
The Company is an open-end management investment company, which is a
mutual fund that sells and redeems shares every day that it is open for
business. It is managed under the direction of its governing Board of
Directors, which is responsible for the overall management of the Company and
supervises the Funds' service providers. The Company is a Maryland
corporation.
WHO MANAGES AND SERVICES THE FUNDS?
INVESTMENT ADVISOR. The Funds' investment advisor is Munder Capital
Management, a Delaware general partnership with its principal offices at 480
Pierce Street, Birmingham, Michigan 48009. The principal partners of the
Advisor are Old MCM, Inc. ("MCM"), Munder Group LLC and WAM Holdings, Inc.
("WAM"). MCM was founded in February 1985 as a Delaware corporation and was
a registered investment advisor. WAM is an indirect, wholly-owned subsidiary
of Comerica Incorporated. Mr. Lee P. Munder, the Advisor's chief executive
officer, indirectly owns or controls a majority of the partnership interests
in the Advisor. As of December 31, 1997, the Advisor and its affiliates had
approximately $[ ] billion in assets under management, of which $[ ]
billion were invested in equity securities, $[ ] billion were invested in
money market or other short-term instruments, and $[ ] billion were
invested in other fixed income securities.
The Advisor provides overall investment management for the Funds,
provides research and credit analysis and is responsible for all purchases
and sales of portfolio securities.
The Advisor is entitled to receive an annual fee equal to .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. The Advisor may make such payments out of
its own resources and there are no additional costs to the Funds or their
shareholders.
ADMINISTRATOR. State Street Bank and Trust Company ("State Street" or
the "Administrator") is the Funds' administrator. The Administrator is
located at 225 Franklin Street, Boston, Massachusetts 02110. The
Administrator generally assists the Company in all aspects of its
administration and operations, including the maintenance of financial records
and fund accounting. State Street is entitled to receive fees at an annual
rate of .0120% of the first $3 billion of the Funds' aggregate net assets;
.01% of the next $3 billion and .0075% of the Funds' aggregate net assets in
excess of $6 billion (with a minimum annual fee of $200,000) plus the lesser
of 0.005% of net assets or $150,000 for up to ten funds, and $10,000 per fund
in excess of ten funds.
State Street has entered into a Sub-Administration Agreement with the
Distributor under which the Distributor provides certain administrative
services with respect to the Fund. The Administrator pays the Distributor a
fee for these services out of its own resources at no cost to the Fund.
TRANSFER AGENT. First Data Investor Services Group, Inc. is the Funds'
Transfer Agent. The Transfer Agent is a wholly-owned subsidiary of First
Data Corporation and is located at 53 State Street, Boston, Massachusetts
02109.
17
<PAGE>
CUSTODIAN. Comerica Bank (the "Custodian") whose principal business
address is One Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48226,
provides custodial services to the Funds. No compensation is paid to the
Custodian for its services. State Street also serves as Sub-Custodian to the
Funds.
DISTRIBUTOR. Funds Distributor, Inc. is the distributor of the Funds'
shares and is located at 60 State Street, Boston, Massachusetts 02109. It
markets and sells the Funds' shares.
For an additional description of the services performed by the
Administrator, Transfer Agent, Custodian, Sub-Custodian and the Distributor,
see the SAI.
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
All shareholders have equal voting, liquidation and other rights. You
are entitled to one vote for each share you hold and a fractional vote for
each fraction of a share you hold. You will be asked to vote on matters
affecting the Company as a whole and affecting your particular Fund. The
Company will not hold annual shareholder meetings, but special meetings may
be held at the written request of shareholders owning more than 10% of
outstanding shares for the purpose of removing a Director. The SAI contains
more information regarding voting rights.
Comerica Bank currently has the right to vote a majority of the
outstanding shares of the Funds as agent, custodian or trustee for its
customers and therefore it is considered to be a controlling person of the
Company.
DIVIDENDS, DISTRIBUTIONS AND TAXES
WHEN WILL I RECEIVE DISTRIBUTIONS FROM THE FUNDS?
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.
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.
It is possible that a Fund may make a distribution in excess of the
Fund's current and accumulated earnings and profits. You will treat such a
distribution as a return of capital which is applied against and reduces your
basis in your shares. To the extent that the amount of any such distribution
exceeds your basis in your shares, you will treat the excess as gain from a
sale or exchange of the shares.
18
<PAGE>
HOW WILL DISTRIBUTIONS BE MADE?
The Funds will pay dividend and capital gains distributions in
additional shares of a Fund. If you wish to receive distributions in cash,
either indicate this request on your Account Application Form or notify the
Fund at (800) 438-5789.
ARE THERE TAX IMPLICATIONS OF MY INVESTMENTS IN THE FUNDS?
In general, as long as each Fund meets the requirements to qualify as a
regulated investment company ("RIC") under Federal tax laws, it will not be
subject to Federal income tax on its income and capital gains that it
distributes in a timely manner to its shareholders. Each Fund intends to
qualify annually as a RIC. Even if it qualifies as a RIC, a Fund may still
be liable for any excise tax on income that is not distributed in accordance
with a calendar year requirement; the Funds intend to avoid the excise tax by
making timely distributions.
Generally, you will owe tax on the amounts distributed to you,
regardless of whether you receive these amounts in cash or reinvest them in
additional Fund shares. Shareholders not subject to tax on their income
generally will not be required to pay any tax on amounts distributed to them.
Federal income tax on distributions to an IRA or to a qualified retirement
plan will generally be deferred.
Capital gains derived from sales of portfolio securities held by a Fund
will generally be designated as long-term or short-term. Distributions from
a Fund's long-term capital gains are generally taxed at the long-term capital
gains rates, regardless of how long you have owned shares in the Fund.
Dividends derived from other sources are generally taxed as ordinary income.
Dividends and capital gain distributions are generally taxable when you
receive them; however, if a distribution is declared in October, November or
December, but not paid until January of the following year, it will be
considered to be paid on December 31 in the year in which it was declared.
Shortly after the end of each year, you will receive from each Fund in which
you are a shareholder a statement of the amount and nature of the
distributions made to you during the year.
If you redeem, transfer or exchange Fund shares, you may have taxable
gain or a loss. If you hold Fund shares for six months or less, and during
that time you receive a capital gain dividend, any loss you realize on the
sale of these Fund shares will be treated as a long-term loss to the extent
of the earlier distribution.
Dividends and certain interest income earned from foreign securities by
a Fund may be subject to foreign withholding or other taxes. A Fund may be
permitted to pass on to its shareholders the right to a credit or deduction
for income or other tax credits earned from foreign investments and will do
so if possible. These deductions or credits may be subject to tax law
limitations.
If a Fund invests in certain "passive foreign investment companies"
("PFICs"), it will be subject to Federal income tax (and possibly additional
interest charges) on a portion of any "excess distribution" or gain from the
disposition of such shares, even if it distributes such income to its
shareholders. If a Fund elects to treat a PFIC as a "qualified electing
fund" ("QEF") and the PFIC furnishes certain financial information in the
required form to such Fund, the Fund will instead be required to include in
income each year its allocable share of the ordinary earnings and net capital
gains of the QEF, regardless of whether received, and such amounts will be
subject to the various distribution requirements described above. The Funds
may also elect to mitigate the tax effects of owning PFIC stock by making an
annual mark-to-market election with respect to PFIC shares.
More information about the tax treatment of distributions from the Funds
and about other potential tax liabilities, including backup withholding for
certain taxpayers and information about tax aspects of dispositions of shares
of the Funds, is contained in the SAI. You should consult your tax advisor
regarding the impact of owning Fund shares on your own personal tax
situation, including the applicability of any state and local taxes.
19
<PAGE>
ADDITIONAL INFORMATION
SHAREHOLDER COMMUNICATIONS. You will receive unaudited Semi-Annual
Reports and audited Annual Reports on a regular basis from the Funds. In
addition, you will also receive updated Prospectuses or Supplements to this
Prospectus. In order to eliminate duplicate mailings, the Funds will only
send one copy of the above communications to (1) accounts with the same
primary record owner, (2) joint tenant accounts, (3) tenant in common
accounts and (4) accounts which have the same address.
20
<PAGE>
APPENDIX A
STANDARD & POOR'S INDEXES
"Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-",
"S&P 500-Registered Trademark-", "Standard and Poor's 500", "500", "S&P
MidCap 400", "Standard & Poor's MidCap 400", "400", "S&P SmallCap
600-Registered Trademark-", "Standard & Poor's SmallCap 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
track 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 are 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.
The S&P 500 is an index of 500 common stocks, most of which trade on the
NYSE. As of December 31, 1997, the S&P 500 represented approximately [ ]%
of the market capitalization of publicly owned stocks in the United States.
The S&P MidCap 400 is an index of 400 stocks 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, 1997, the S&P MidCap 400 represented approximately [ ]% of the market
capitalization of publicly owned stocks in the United States.
The S&P SmallCap 600 is an index of 600 stocks which emphasizes small
capitalization companies. As of December 31, 1997, the S&P SmallCap 600
represented approximately [ ]% of the market capitalization of publicly
owned stocks in the United States.
21
<PAGE>
PROSPECTUS
LIQUIDITY PLUS MONEY MARKET FUND
APRIL 30, 1998
PROSPECTUS BEGINS ON THE NEXT PAGE ...
<PAGE>
LIQUIDITY PLUS MONEY MARKET FUND
- -------------------------------------------------------------------------------
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 is a mutual fund that seeks to provide current interest income
consistent with liquidity and stability of principal. The Fund invests
substantially all of its assets in a diversified portfolio of money market
instruments with remaining maturities of 397 days or less.
Munder Capital Management (the "Advisor") serves as investment advisor to the
Fund.
This Prospectus explains the objective, policies, risks and fees of the Fund.
You should read this Prospectus and retain it for future reference. A Statement
of Additional Information ("SAI") describing the Fund has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated by reference
into this Prospectus. You can obtain the SAI free of charge by calling the Fund
at (800) 438-5789. In addition, the SEC maintains a web site
(http://www.sec.gov) that contains the SAI and other information regarding the
Fund.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED OR GUARANTEED. AN INVESTMENT IN THE
FUND INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
Although the 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 Fund ("Shares") 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 custodian 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.
SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 30, 1998.
1
<PAGE>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Information............................................. 2
Fund Information.................................................. 3
Purchases of Shares............................................... 6
Redemption of Shares.............................................. 7
Structure and Management of Fund.................................. 8
Dividends, Distributions and Taxes................................ 10
Performance....................................................... 11
Additional Information............................................ 12
</TABLE>
FINANCIAL INFORMATION
FUND OPERATING EXPENSES
The purpose of this table is to assist you in understanding the expenses charged
directly to the Fund, which investors in the Fund will bear indirectly for the
current fiscal year. Such expenses include payments to Directors, auditors,
legal counsel and service providers (such as the Advisor), registration fees and
distribution fees. The amount of "Other Expenses" in the table below is based
on estimated expenses and projected assets for the current fiscal year. Any
fees charged by institutions directly to customer accounts for services provided
in connection with investments in shares of the Fund are in addition to the
expenses shown in the table and in the Example shown below. Shares of the Fund
are sold without an initial or contingent deferred sales charge to Comerica
Bank, its affiliate and subsidiary banks, and certain other Institutional
Investors.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
<S> <C>
Advisory Fees........................ 0.35%
12b-1 Fees........................... 0.35%
Other Expenses....................... 0.30%
-----
Total Fund Operating Expenses........ 1.00%
-----
-----
</TABLE>
EXAMPLE
This example shows the amount of expenses you would pay (directly or
indirectly) on a $1,000 investment in the Fund assuming (1) a 5% annual return
and (2) redemption at the end of the time period. THIS EXAMPLE IS NOT A
REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR OPERATING EXPENSES; ACTUAL
PERFORMANCE OR OPERATING EXPENSES MAY BE LARGER OR SMALLER THAN THOSE SHOWN.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
$10 $32 $55 $123
</TABLE>
2
<PAGE>
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FINANCIAL HIGHLIGHTS
The following financial highlights were audited by Ernst & Young LLP,
independent auditors. This information should be read in conjunction with the
Fund's most recent Annual Report, which is incorporated by reference into the
SAI. You may obtain a copy of the Annual Report without charge by calling (800)
438-5789.
<TABLE>
<CAPTION>
LIQUIDITY PLUS MONEY
--------------------
MARKET FUND (a)
---------------
PERIOD
ENDED
12/31/97
--------
<S> <C>
Net asset value, beginning of period....................................... $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................................
Total from investment operations.......................................
LESS DISTRIBUTIONS:
Distributions from net investment income..............................
Total distributions...................................................
Net asset value, end of period............................................. $1.00
=====
TOTAL RETURN (b).......................................................
RATIOS TO AVERAGE NET ASSET/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..................................
Ratio of operating expenses to average net assets..................... (c)
Ratio of net investment income to average net assets.................. (c)
Ratio of operating expenses to average net assets without expenses
reimbursed............................................................ (c)
</TABLE>
- ---------------
(a) Liquidity Plus Money Market Fund commenced operations on June 4, 1997.
(b) Total return represents aggregate total return for the period indicated.
(c) Annualized.
FUND INFORMATION
This section summarizes the Fund's principal investments. The section
entitled "What are the Fund's Investments and Investment Practices?" and "What
are the Risks of Investing in the Fund?" and the SAI give more information about
the Fund's investment techniques and risks.
GOAL AND PRINCIPAL INVESTMENTS. The goal of the Fund is to provide current
interest income consistent with liquidity and stability of principal.
The Fund invests its assets in a broad range of short-term, high quality
U.S. dollar-denominated instruments such as government, bank, and commercial
paper obligations available in the money markets.
WHO MAY WANT TO INVEST?
The Fund is designed for investors who desire a high level of income,
liquidity and stability of principal.
3
<PAGE>
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WHAT ARE THE FUND'S INVESTMENTS AND INVESTMENT PRACTICES?
The Fund may invest in CASH EQUIVALENTS, which are high-quality, short-term
money market instruments including, among other things, commercial paper,
including variable amount master demand notes, bankers' acceptances and
negotiable certificates of deposit of banks or savings and loan associations,
short-term corporate obligations and short-term securities issued by, or
guaranteed by, the U.S. Government and its agencies or instrumentalities.
The Fund may invest in 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. Investments by the Fund in the obligations of foreign banks and
foreign branches of domestic banks will not exceed 25% of the Fund's total
assets at the time of investment. Foreign bank obligations include Eurodollar
Certificates ("ECDs"), Eurodollar Time Deposits ("ETDs"), Canadian Time Deposits
("CTDs"), Schedule Bs, Yankee Certificates of Deposit ("Yankee CDs") and Yankee
Bankers' Acceptances ("Yankee BAs").
The Fund may enter into REPURCHASE AGREEMENTS. Under a repurchase
agreement, the Fund agrees to purchase securities from a seller and the seller
agrees to repurchase the securities at a later time, typically within seven
days, at a set price. The seller agrees to set aside collateral at least equal
to the repurchase price. This ensures that the Fund will receive the purchase
price at the time it is due, unless the seller defaults or declares bankruptcy,
in which event the Fund will bear the risk of possible loss due to adverse
market action or delays in liquidating the underlying obligation.
The Fund may invest in REVERSE REPURCHASE AGREEMENTS. Under a reverse
repurchase agreement, the Fund sells securities and agrees to buy them back
later at an agreed upon time and price. Reverse repurchase agreements are used
to borrow money for temporary purposes.
The Fund may buy shares of registered MONEY MARKET FUNDS. The Fund will
bear a portion of the expenses of any investment company whose shares it
purchases, including operating costs and investment advisory, distribution and
administration fees. These expenses would be in addition to the Fund's own
expenses. The Fund may invest up to 10% of its assets in other investment
companies and no more than 5% of its assets in any one investment company.
The Fund may purchase FIXED INCOME SECURITIES. Fixed Income Securities are
securities which either pay interest at set times at either fixed or variable
rates, or which realize a discount upon maturity. Fixed income securities
include corporate bonds, debentures, notes and other similar corporate debt
instruments, zero coupon bonds (discount debt obligations that do not make
interest payments) and variable amount master demand notes that permit the
amount of indebtedness to vary in addition to providing for periodic adjustments
in the interest rate.
The Fund may purchase U.S. GOVERNMENT SECURITIES, which are securities
issued by, or guaranteed by, the U.S. Government or its agencies or
instrumentalities. Such securities include U.S. Treasury bills, which have
initial maturities of less than one year, U.S. Treasury notes, which have
initial maturities of one to ten years, U.S. Treasury bonds, which generally
have initial maturities of greater than ten years, and obligations of the
Federal Home Loan Mortgage Corporation, Federal National Mortgage Association
and Government National Mortgage Association.
Subject to applicable maturity and credit criteria, the Fund may purchase
ASSET-BACKED SECURITIES which are securities backed by mortgages, installment
sales contracts, credit card receivables or other assets.
4
<PAGE>
- -------------------------------------------------------------------------------
The Fund may purchase STRIPPED SECURITIES. Stripped securities include
participations in trusts that hold U.S. Treasury and agency securities (such as
TIGRs and CATS), U.S. Treasury-issued receipts and non-U.S. Treasury receipts.
The Fund may purchase VARIABLE AND FLOATING RATE INSTRUMENTS which may have
stated maturities in excess of the Fund's maturity limitations but are deemed to
have shorter maturities because the Fund can demand payment of the principal of
the instrument at least once within such periods on not more than thirty days'
notice. 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 rate.
The Fund may invest up to 5% of its assets in MUNICIPAL OBLIGATIONS which
are payable from the issuer's general revenues, the revenue of a specific
project, current revenues or a reserve fund.
The Fund may invest in GUARANTEED INVESTMENT CONTRACTS ("GICs"). GICs are
agreements of the Fund to make payments to an insurance company's general
account in exchange for a minimum level of interest based on an index.
The Fund may purchase securities on a "WHEN-ISSUED" basis and may purchase
or sell securities on a "FORWARD COMMITMENT" basis. Although the price to be
paid by the Fund is set at the time of the agreement, the Fund usually does not
pay for securities until they are received. The value of the securities may
change between the time the price is set and the time the price is paid. When
the Fund purchases securities for future delivery, the Fund's custodian will set
aside cash or liquid securities to "cover" the Fund's position. The Fund does
not intend to purchase securities for future delivery for speculative purposes.
The Fund may invest up to 25% of its assets in U.S. dollar-denominated
FOREIGN SECURITIES such as debt obligations issued by foreign governments and
their agencies, instrumentalities or political subdivisions, supranational
organizations, and foreign corporations or convertible into foreign stock.
The Fund may invest up to 10% of the value of its net assets in ILLIQUID
SECURITIES. Illiquid securities are securities for which there is no ready
market, which inhibits the ability to sell them and obtain their full market
value, or which are legally restricted as to their resale by the Fund.
The Fund will invest primarily in ELIGIBLE SECURITIES (as defined by the
SEC) 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. Eligible securities consist of securities that are determined by the
Advisor, under guidelines established by the Board of Directors, to present
minimal credit risk. The Fund may also hold uninvested cash pending investment
of late payments for purchase orders or during temporary defensive periods.
The Fund may LEND SECURITIES to broker-dealers and other financially sound
institutional investors who will pay the Fund for the use of the securities,
thus potentially increasing the Fund's return. The borrower must set aside cash
or liquid securities equal to the value of the securities borrowed at all times
during the term of the loan. Loans may not exceed 25% of the value of the
Fund's total assets.
The Fund may BORROW MONEY in an amount up to 33 1/3% of its assets for
temporary purposes. This is a "fundamental" policy which only can be changed by
shareholders. Whenever borrowings exceed 5% of the Fund's total assets, the
Fund will not make any additional investments.
5
<PAGE>
- -------------------------------------------------------------------------------
The Fund is classified as a "diversified fund." With respect to 75% of the
Fund's assets, it cannot invest more than 5% of its assets in one issuer (other
than the U.S. Government and its agencies and instrumentalities). In addition,
the Fund cannot invest more than 25% of its assets in a single issuer. This is
a "fundamental" policy which can only be changed by shareholders. However, as
an operating policy the Fund intends to adhere to the 5% limitation with regard
to 100% of its portfolio. The Fund may invest more than 25% of its assets in
domestic bank certificates of deposit, bankers' acceptances, U.S. Government
Securities, and repurchase agreements secured by such obligations.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
By itself, the Fund does not constitute a balanced investment program and
there is no guarantee that the Fund will achieve its investment objective since
there is uncertainty in every investment.
The Fund attempts to maintain a constant net asset value of $1.00 per
share. However, your investment in the Fund is not guaranteed. Although the
Fund expects under normal market conditions to be as fully invested as possible,
the Fund may hold uninvested cash pending investment of late payment for
purchase orders (or other payments) or during temporary defensive periods.
Uninvested cash will not earn income.
To the extent that the Fund invests in illiquid securities, the Fund risks
not being able to sell such securities at the time and the price that it would
like. The Fund may therefore have to lower the price, sell substitute
securities or forego an investment opportunity, each of which might adversely
affect the Fund.
Risks involved in lending securities include possible delay in recovering
the loaned securities and possible loss of the securities or the collateral if
the borrower fails financially.
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. Investments in foreign securities involve
higher costs than investments in U.S. securities, including higher transaction
costs as well as the imposition of additional taxes by foreign governments. In
addition, foreign investments may include additional risks associated with the
level of currency exchange rates, less complete financial information about the
issuers, less market liquidity, and political instability. Future political and
economic developments, the possible imposition of withholding taxes on interest
income, the possible seizure or nationalization of foreign holdings, the
possible establishment of exchange controls, or the adoption of other
governmental restrictions might adversely affect the payment of principal and
interest on foreign obligations. Additionally, foreign banks and foreign
branches of domestic banks may be subject to less stringent reserve
requirements, and to different accounting, auditing and record keeping
requirements.
The risks of the various investment techniques are described in further
detail in the SAI.
PURCHASES OF SHARES
Institutional Investors that have entered into agreements with the Company
to provide shareholder services for Customer Accounts may purchase shares of the
Fund.
6
<PAGE>
- -------------------------------------------------------------------------------
WHAT PRICE DO I PAY FOR SHARES?
Shares of the Fund are sold at net asset value next determined by the Fund
without any initial or contingent sales charge. The Fund determines its net
asset value ("NAV") as of 12:00 noon (Eastern time) and as of the close of
trading on the New York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern
time) on each day the NYSE is open for trading (a "Business Day"). Net asset
value for the Fund is calculated by dividing the value of all securities and
other assets belonging to the Fund, less the liabilities charged to the Fund, by
the number of outstanding shares of the Fund.
WHEN CAN I PURCHASE SHARES?
Shares of the Fund are sold on a continuous basis and can be purchased on
any Business Day.
HOW CAN I PURCHASE SHARES?
All share purchases on behalf of a Customer Account are effected through
procedures established in connection with the requirements of the account.
Confirmations of share purchases will be sent to the institution involved.
Institutional Investors (or their nominees) will normally be the holders of
record of Fund shares acting on behalf of their Customers, and will reflect
their Customers' beneficial ownership of shares in the account statements
provided by them to their Customers.
Provided their procedures are compatible with the purchase and redemption
operations of the Fund, Institutional Investors may purchase shares of the Fund
on behalf of their Customers through automatic "sweeping" and other programs
established by the Institutional Investors. There is no minimum for initial or
subsequent investments.
Purchase orders by an institution for shares of the Fund must be received,
together with payment, by the Distributor or Transfer Agent by 12:00 noon
(Eastern time) on any Business Day. A purchase order received by the
Distributor or by the Transfer Agent after such time will not be accepted;
notice will be given to the institution placing the order, and any funds
received will be returned promptly to the sending institution.
It is the responsibility of the institution to transmit orders for
purchases by their 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 will be given, and the institution will be responsible for any
loss to the Fund or its shareholders. Institutions may charge certain account
fees depending on the type of account the investor has established with the
institution.
You may pay for shares of the Fund with securities which the Fund is
allowed to hold, subject to approval by the Advisor.
We reserve the right to (i) reject any purchase order if, in our opinion,
it is in the Fund's best interest to do so and (ii) suspend the offering of
shares for any period of time. The issuance of shares is recorded on the books
of the Fund, and share certificates are not issued unless expressly requested in
writing. Certificates are not issued for fractional shares.
REDEMPTION OF SHARES
WHAT PRICE DO I RECEIVE FOR REDEEMED SHARES?
The redemption price is the net asset value next determined after the
Transfer Agent receives the redemption order.
7
<PAGE>
- -------------------------------------------------------------------------------
WHEN CAN I REDEEM SHARES?
You can redeem shares on any Business Day, provided all required documents
have been received by First Data Investor Services Group, Inc. (the "Transfer
Agent"). The Fund may temporarily stop redeeming shares when the NYSE is closed
or trading on the NYSE is restricted, when an emergency exists and the Fund
cannot sell its assets or accurately determine the value of its assets or if the
SEC orders the Fund to suspend redemptions.
HOW CAN I REDEEM SHARES?
Shares 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 Customer Accounts with the
redemption proceeds on a timely basis. 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.
WHEN WILL I RECEIVE REDEMPTION AMOUNTS?
If a redemption order for shares of the Fund is received by the Transfer
Agent before 12:00 noon (Eastern time) on a Business Day, payment is normally
wired on the same Business Day; if a redemption order is received by the
Transfer Agent between 12:00 noon (Eastern time) and 4:00 p.m. (Eastern time) on
a Business Day, payment is normally wired on the next Business Day. 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 the Fund.
STRUCTURE AND MANAGEMENT OF THE FUND
HOW IS THE FUND STRUCTURED?
The Company is managed under the direction of the Board of Directors, which
is responsible for the overall management of the Company and supervises the
Fund's service providers. The Company is a Maryland corporation.
WHO MANAGES AND SERVICES THE FUND?
INVESTMENT ADVISOR. The Fund's investment advisor is Munder Capital
Management, a Delaware general partnership with its principal offices at 480
Pierce Street, Birmingham, Michigan 48009. The principal partners of the
Advisor are Old MCM, Inc., Munder Group LLC and WAM Holdings, Inc. ("WAM"). WAM
is an indirect, wholly-owned subsidiary of Comerica Incorporated. Mr. Lee P.
Munder, the Advisor's chief executive officer, indirectly owns or controls a
majority of the partnership interests in the Advisor. As of December 31, 1997,
the Advisor and its affiliates had approximately $[ ] billion in assets under
active management, of which $[ ] were invested in equity securities,
$[ ] billion were invested in money market or other short-term
instruments, and $[ ] were invested in other fixed income securities.
The Advisor provides overall investment management for the Fund, provides
research and credit analysis, is responsible for all purchases and sales of
portfolio securities, maintains books and records with respect to the Fund's
securities transactions and provides periodic and special reports to the Board
of Directors.
The Advisor is entitled to receive an annual fee equal to .35% of average
daily net assets of the Fund.
8
<PAGE>
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The Advisor may, from time to time, make payments to banks, broker-dealers
or other financial institutions for certain services to the Fund and/or its
shareholders, including sub-administration, sub-transfer agency and shareholder
servicing. Such payments are made out of the Advisors own resources and do not
involve additional costs to the Fund or its shareholders.
ADMINISTRATOR. State Street Bank and Trust Company ("State Street" or the
"Administrator") serves as administrator for the Fund. The Administrator is
located at 225 Franklin Street, Boston, Massachusetts 02110. The Administrator
generally assists the Fund in all aspects of its administration and operations,
including the maintenance of financial records and fund accounting.
As compensation for its services, State Street is entitled to receive fees,
based on the aggregate average daily net assets of the Fund and certain other
investment portfolios that are advised by the Advisor and for which State Street
provides services, computed daily and payable monthly at the annual rate of
0.113% on the first $2.8 billion of net assets, plus 0.103% on the next $2.2
billion of net assets, plus 0.101% on the next $2.5 billion of net assets, plus
0.095% on the next $2.5 billion of net assets, plus 0.080% on the next $2.5
billion of net assets, plus 0.070% on all net assets in excess of $12.5 billion
(with a $75,000 minimum fee per annum in the aggregate for all portfolios with
respect to the Administrator). State Street is also entitled to reimbursement
for out-of-pocket expenses. State Street has entered into a Sub-Administration
Agreement with the Distributor under which the Distributor provides certain
administrative services with respect to the Fund. The Administrator pays the
Distributor a fee for these services out of its own resources at no cost to the
Fund.
TRANSFER AGENT. First Data Investor Services Group, Inc. ("First Data"),
whose principal business address is 53 State Street, Boston, Massachusetts 02109
serves as transfer agent and dividend disbursing agent. First Data is a
wholly-owned subsidiary of First Data Corporation. Shareholder inquiries may
be direct to First Data at P.O. Box 5130, Westborough, Massachusetts
01581-5130.
CUSTODIAN. Comerica Bank (the "Custodian"), whose principal business
address is One Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48226,
provides custodial services to the Fund. No compensation is paid to the
Custodian for its services.
SUB-CUSTODIAN. State Street also serves as Sub-Custodian to the Fund. As
compensation for its services, the Sub-Custodian is entitled to receive fees,
based on the aggregate average daily net assets of the Fund, computed daily and
payable monthly at an annual rate of [ ] of average daily net assets. The
Sub-Custodian also receives certain transaction based fees.
DISTRIBUTOR. Funds Distributor, Inc. (the "Distributor") is the
distributor of the Fund's shares. The distributor is located at 60 State
Street, Boston, Massachusetts 02109. It markets and sells the Fund's shares.
The Fund has adopted a Distribution and Service Plan, pursuant to which the
Fund uses its assets to finance activities relating to the distribution of its
shares to investors and the provision of certain shareholder services (the
"Plan"). Under the Plan, the Distributor is paid a service fee at an annual
rate of 0.25% of the value of the average daily net assets of the Fund. The
Distributor is also paid a distribution fee at an annual rate of 0.10%, of the
value of the average daily net assets of the Fund.
Under the Plan, the Distributor uses the service fees primarily to pay
ongoing trail commissions to securities dealers (which may include the
Distributor itself) and other financial institutions and organizations
(collectively, the "Service Organizations") who provide shareholder services for
the Fund. These services include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
Transfer Agent computer processable tapes of all transactions by customers and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions with the Fund.
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The Plan permits payments to be made by the Fund to the Distributor for
expenditures incurred by it in connection with the distribution of Fund shares
to investors and the provision of certain shareholder services, including but
not limited to the payment of compensation, including incentive compensation, to
Service Organizations to obtain various distribution related services for the
Fund. The Distributor is also authorized to engage in advertising, the
preparation and distribution of sales literature and other promotional
activities on behalf of the Fund. In addition, the Plan authorizes payments by
the Fund of the cost of preparing, printing and distributing Fund prospectuses
and statements of additional information to prospective investors and of
implementing and operating the Plan. Distribution expenses also include an
allocation of overhead of the Distributor and accruals for interest on the
amount of distribution expenses incurred by the Distributor.
The Distributor expects to pay or arrange for payment of sales commissions
to dealers authorized to sell shares, all or a part of which may be paid 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 Plan. Because the
payment of distribution and service fees with respect to shares of the Fund is
subject to the 0.35% limitation described above and will therefore be spread
over a number of years, it may take the Distributor a number of years to recoup
sales commissions paid by it to dealers and other distribution and service
related expenses from the payments received by it from the Fund pursuant to the
Plan.
The Plan may be terminated at any time. The Plan provides that amounts
paid as prescribed by the Plan at any time may not cause the limitation on such
payments established by the Plan to be exceeded. The amount of daily
compensation payable to the Distributor with respect to each day will be accrued
each day as a liability of the Fund and will accordingly reduce the Fund's net
assets upon such accrual.
Payments under the Plans are not tied exclusively to the distribution
and/or shareholder service expenses incurred by the Distributor and the payments
may exceed distribution and/or service expenses actually incurred. The
Company's Board of Directors evaluates the appropriateness of the Plan and its
payment terms on a continuous basis and in so doing will consider all relevant
factors, including expenses incurred by the Distributor and the amount received
under the Plan.
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
All shareholders have equal voting, liquidation and other rights. You are
entitled to one vote for each share you hold and a fractional vote for each
fraction of a share you hold. You will be asked to vote on matters affecting
the Company as a whole and affecting your particular Fund. The Company will not
hold annual shareholder meetings, but special meetings may be held at the
written request of shareholders owning more than 10% of outstanding shares for
the purpose of removing a Director. The SAI contains more information regarding
voting rights.
Comerica Bank currently has the right to vote a majority of the outstanding
shares of the Fund as agent, custodian or trustee for its customers and
therefore it is considered to be a controlling person of the Company.
DIVIDENDS, DISTRIBUTIONS AND TAXES
WHEN WILL I RECEIVE DISTRIBUTIONS?
The net investment income of the Fund is declared daily and distributed
monthly as a dividend to its shareholders. Capital gains distributions, if any,
will be made at least annually. Shareholders of the Fund whose purchase orders
are received and executed by 12:00 noon (Eastern time) receive dividends for
that day. Shareholders whose redemption orders who have been received by 12:00
noon (Eastern time) will not receive dividends for that day, while shareholders
whose redemption orders are received after 12:00 noon (Eastern time) will
receive that day's dividends.
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HOW WILL DISTRIBUTIONS BE MADE?
Dividends are distributed monthly in the form of additional shares of the
Fund, or, if specifically requested (in writing) by the shareholder from the
Fund's Transfer Agent prior to the distribution date, in cash.
ARE THERE ANY TAX IMPLICATIONS OF MY INVESTMENTS IN THE FUNDS?
In general, as long as the Fund meets the requirements to qualify as a
regulated investment company ("RIC") under Federal tax laws, it will not be
subject to Federal income tax on its income and capital gains that it
distributes in a timely manner to its shareholders. The Fund intends to qualify
annually as a RIC. Even if it qualifies as a RIC, a Fund may still be liable
for an excise tax on income that is not distributed in accordance with a
calendar year requirement; the Fund intends to avoid the excise tax by making
timely distributions.
Generally, you will owe tax on the amounts distributed to you, regardless
of whether you receive these amounts in cash or reinvest them in additional
shares of the Fund. Shareholders not subject to tax on their income generally
will not be required to pay any tax on amounts distributed to them. Federal
income tax on distributions to an IRA or to a qualified retirement plan will
generally be deferred.
The Fund does not expect to realize any net long-term capital gains and,
therefore, does not currently foresee paying any capital gains.
Corporate investors should note that dividends from the Fund's net
investment income will generally not qualify for the dividends-received
deduction for corporations.
Dividends declared in October, November or December but not paid until
January of the following year will be considered to be paid on December 31 of
the year in which the dividend was declared.
Shortly after the end of the year, you will receive from the Fund a
statement of the amount and nature of the distributions made to you during the
year.
More information about the tax treatment of distributions from the Fund and
about other potential tax liabilities, including backup withholding for certain
taxpayers and information about tax aspects of dispositions of shares of the
Fund, is contained in the SAI. You should consult your tax advisor regarding
the impact owning shares of the Fund on your own tax situation, including the
applicability of any state and local taxes.
PERFORMANCE
HOW IS THE FUND'S PERFORMANCE CALCULATED?
The Fund may publish its current yield. Yield is the net investment income
generated by a share of the Fund during a 30-day period divided by the maximum
offering price on the 30th day.
The current yield of shares in the Fund refers to the net income generated
by an investment in shares 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.
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You should be aware that (i) past performance does not indicate how the
Fund will perform in the future; and (ii) the Fund's return and net asset value
will fluctuate, so you cannot necessarily use a Fund' performance data to
compare it to investment in certificates of deposit, savings accounts or other
investments that provide a fixed or guaranteed yield.
The Fund may compare its performance to that of other mutual funds, such as
the performance of similar funds reported by Lipper Analytical Services, Inc. or
information reported in national financial publications (such as MONEY MAGAZINE,
FORBES, BARRON'S, THE WALL STREET JOURNAL and THE NEW YORK TIMES) or in local or
regional publications. The Fund may also compare its performance to broad-based
indices. These indices show the value of selected portfolios of securities
(assuming reinvestment of interest and dividends) which are not managed by a
portfolio manager. The Fund may report how it is performing in comparison to
the Consumer Price Index, an indication of inflation reported by the U.S.
Government.
ADDITIONAL INFORMATION
SHAREHOLDER COMMUNICATIONS. You will receive unaudited Semi-Annual Reports
and audited Annual Reports on a regular basis from the Fund. In addition, you
will receive updated Prospectuses or Supplements to this Prospectus. In order
to eliminate duplicate mailings, the Fund will only send one copy of the above
communications to (1) accounts with the same primary record owner, (2) joint
tenant accounts, (3) tenant in common accounts and (4) accounts which have the
same address.
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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
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 April 30,
1998 and has been filed with the Securities and Exchange Commission ("SEC")
as part of the Company's Registration Statement. This Statement of Additional
Information is not a prospectus, and should be read only in conjunction with
the Funds' Prospectus dated April 30, 1998. 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 April 30, 1998.
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.
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TABLE OF CONTENTS
PAGE
General................................... 3
Fund Investments ......................... 3
Risk Factors and Special Considerations... 16
Investment Limitations.................... 17
Directors and Officers.................... 18
Investment Advisory and Other
Service Arrangements...................... 23
Portfolio Transactions.................... 25
Additional Purchase and Redemption
Information............................... 26
Net Asset Value........................... 27
Performance Information................... 28
Taxes..................................... 31
Additional Information
Concerning Shares......................... 35
Miscellaneous............................. 36
Registration Statement.................... 37
Financial Statements...................... 38
Appendix A................................ 39
Appendix B................................ 42
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or
in the Prospectus in connection with the offering made by the Prospectus and,
if given or made, such information or representations must not be relied upon
as having been authorized by the Funds or the Distributor. The Prospectus
does not constitute an offering by the Funds or by the Distributor in any
jurisdiction in which such offering may not lawfully be made.
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GENERAL
The Company was organized as a Maryland corporation on May 23, 1984
under the name St. Clair Money Market Fund, Inc., which was changed to St.
Clair Fixed Income Fund, Inc. on December 30, 1986 and to St. Clair Funds,
Inc. on September 18, 1996.
As stated in the Prospectus, the investment advisor of the Fund is
Munder Capital Management (the "Advisor"). The principal partners of the
Advisor are Old MCM, Inc. ("Old MCM"), Munder Group LLC 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 (other than the Short Term
Treasury Fund) 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.
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. 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.
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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. 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 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 AND FLOATING RATE SECURITIES. The Funds (other than Short Term
Treasury Fund) may purchase variable and floating rate securities which are
debt instruments with variable or floating interest rates. Unrated variable
and floating 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 Funds (other than the 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.
The absence of a secondary market 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. 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. 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.
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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
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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.
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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.
FORWARD FOREIGN CURRENCY TRANSACTIONS. In order to protect against a
possible loss on investments resulting from a decline or appreciation in the
value of a particular foreign currency against the U.S. dollar or another
foreign currency, the Index Funds are authorized to enter into forward
foreign currency exchange contracts ("forward currency contracts"). These
contracts involve an obligation to purchase or sell a specified currency at a
future date at a price set at the time of the contract. Forward currency
contracts do not eliminate fluctuations in the values of portfolio securities
but rather allow a Fund to establish a rate of currency exchange for a future
point in time.
When entering into a contract for the purchase or sale of a security, a
Fund may enter into a forward foreign currency exchange contract for the
amount of the purchase or sale price to protect against variations, between
the date the security is purchased or sold and the date on which payment is
made or received, in the value of the foreign currency relative to the U.S.
dollar or other foreign currency.
When the Advisor anticipates that a particular foreign currency may
decline substantially relative to the U.S. dollar or other leading
currencies, in order to reduce risk, a Fund may enter into a forward contract
to sell, for a fixed amount, the amount of foreign currency approximating the
value of some or all of the Fund's securities denominated in such foreign
currency. Similarly, when the obligations held by a Fund create a short
position in a foreign currency, the Fund may enter into a forward contract to
buy, for a fixed amount, an amount of foreign currency approximating the
short position. With respect to any forward foreign currency contract, it
will not generally be possible to match precisely the amount covered by that
contract and the value of the securities involved due to the changes in the
values of such securities resulting from market movements between the date
the forward contract is entered into and the date it matures. In addition,
while forward contracts may offer protection from losses resulting from
declines or appreciation in the value of a particular foreign currency, they
also limit potential gains which might result from changes in the value of
such currency. A Fund will also incur costs in connection with forward
foreign currency exchange contracts and conversions of foreign currencies and
U.S. dollars.
A separate account consisting of cash or liquid securities equal to the
amount of a Fund's assets that could be required to consummate forward
contracts will be established with the Funds' Custodian except to the extent
the contracts are otherwise "covered." For the purpose of determining the
adequacy of the securities in the account, the deposited securities will be
calculated at market or fair value. If the market or fair value of such
securities declines, additional cash or securities will be placed in the
account daily so that the value of the account will equal the amount of such
commitments by the Fund. A forward contract to sell a foreign currency is
"covered" if a Fund owns the currency (or securities denominated in the
currency) underlying the contract, or holds a forward contract (or call
option) permitting the Fund to buy the same currency at a price no higher
than the Fund's price to sell the currency. A forward contract to buy a
foreign currency is "covered" if a Fund holds a forward contract
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(or put option) permitting the Fund to sell the same currency at a price as
high as or higher than the Fund's price to buy the currency.
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.
For purposes of the Funds' investment policies, a Fund's investments in
depositary receipts will be deemed to be investments in the underlying
securities.
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 or to the
restriction that each Fund's investment in warrants or rights may not exceed
5% of its net assets at the time of purchase.
CONVERTIBLE PREFERRED STOCK. 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 a 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.
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
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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.
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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. 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 Short Term
Treasury Fund will only purchase zero coupon Treasury securities which have
been stripped by the Federal Reserve Bank.
U.S. TREASURY INFLATION-PROTECTION SECURITIES. The Short Term Treasury
Fund may purchase securities issued by the U.S. Government, which includes U.S.
Treasury inflation-protection securities.
Inflation-protection securities are a new type of marketable book-entry
security issued by the United States Department of Treasury ("Treasury") with
a nominal return linked to the inflation rate in prices. Inflation-protection
securities will be auctioned and issued on a quarterly basis on the 15th of
January, April, July, and October beginning on January 15, 1997. Initially,
they will be issued as 10-year notes, with other maturities added thereafter.
The index used to measure inflation will be non-seasonally adjusted U.S. City
Average All Items Consumer Price Index for All Urban Consumers ("CPI-U").
The value of the principal will be adjusted for inflation, and every six
months the security will pay interest, which will be an amount equal to a
fixed percentage of the inflation-adjusted value of the principal. The final
payment of principal of security will not be less than the original par
amount of the security at issuance.
The principal of the inflation-protection security will be indexed to
the non-seasonally adjusted CPI-U. To calculate the inflation-adjusted
principal value for a particular valuation date, the value of the principal
at issuance is multiplied by the index ratio applicable to that valuation
date. The index ratio for any date is the ration of reference CPI applicable
to such date to the reference CPI applicable to the original issue date.
Semiannual coupon interest is determined by multiplying the
inflation-adjusted principal amount by one-half of the stated rate of
interest on each interest payment date.
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Inflation-adjusted principal or the original par amount, whichever is
larger, will be paid on the maturity date as specified in the applicable
offering announcement. If at maturity the inflation-adjusted principal is
less than the original principal value of the security, an additional amount
will be paid at maturity so that the additional amount plus the
inflation-adjusted principal equals the original principal amount. Some
inflation-protection securities may be stripped into principal and interest
components. In the case of a stripped security, the holder of the stripped
principal would receive this additional amount. The final interest payment,
however, will be based on the final inflation-adjusted principal value, not
the original par amount.
The reference CPI for the first day of any calendar month is the CPI-U
for the third preceding calendar month. (For example, the reference CPI for
December 1 is the CPI-U reported for September of the same year, which is
released in October). The reference CPI for any other day of the month is
calculated by a linear interpolation between the reference CPI applicable to
the first day of the month and the reference CPI applicable to the first day
of the following month.
Any revision the Bureau of Labor Statistics (or successor agency) makes
to any CPI-U number that has been previously released will not be used in
calculations of the value of outstanding inflation-protection securities. In
the case that the CPI-U for a particular month is not reported by the last
day of the following month, the Treasury will announce an index number based
on the last year-over-year CPI-U inflation rate available. Any calculations
of the Treasury's payment obligations on the inflation-protection security
that need that month's CPI-U number will be based on the index number that
the Treasury has announced. If the CPI-U is rebased to a different year, the
Treasury will continue to use the CPI-U series based on the base reference
period in effect when the security was first issued as long as that series
continues to be published. If the CPI-U is discontinued during the period
the inflation-protection security is outstanding, the Treasury will, in
consultation with the Bureau of Labor Statistics (or successor agency),
determine an appropriate substitute index and methodology for linking the
discontinued series with the new price index series. Determinations of the
Secretary of Treasury in this regard are final.
Inflation-protection securities will be held and transferred in either
of two book-entry systems: the commercial book-entry system ("TRADES") and
TREASURY DIRECT system through which an individual investor can make a
noncompetitive bid on U.S. Treasury securities. The securities will be
maintained and transferred at their original par amount, i.e., not at their
inflation-adjusted value. Separate Trading of Registered Interest and
Principal of Securities ("STRIPS") components will be maintained and
transferred in TRADES at their value based on the original par amount of the
fully constituted security.
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
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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.
Stripped securities will normally be considered illiquid instruments and
will be acquired subject to the limitation on illiquid investments unless
determined to be liquid under guidelines established by the Board of
Directors.
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 Short Term Treasury Fund will only invest in repurchase
agreements fully collateralized by U.S. Treasury Securities. 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 397 days, provided that the repurchase agreement
itself matures in 397 days.
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The repurchase price under the repurchase agreements described in the
Prospectus generally equals the price paid by a Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements will be held by the
Company's custodian (or sub-custodian) in the Federal Reserve/Treasury
book-entry system or by another authorized securities depository. Repurchase
agreements are considered to be loans by a Fund under the Investment Company
Act of 1940, as amended (the "1940 Act").
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. A Fund may not purchase portfolio
securities while borrowings exceed 5% of the Fund's total assets.
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
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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.
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
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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. It is possible
that unregistered securities purchased by a Fund in reliance upon Rule 144A
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.
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 interest 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.
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.
A-15
<PAGE>
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.
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 weighting 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
A-16
<PAGE>
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;
A-17
<PAGE>
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
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<PAGE>
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.
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
- --------------------- ---------------------- ----------------------
Charles W. Elliott Chairman of the Board Senior Advisor to the
of Directors President - Western
3338 Bronson Boulevard Michigan University
Kalamazoo, MI 49008 since Michigan
Age: 65 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 Chairman and Chief
1876 Rathmor of the Board of Directors Executive Officer,
Bloomfield Hills, MI Walbridge Aldinger
48304 Company (construction
company).
Age: 50
Thomas B. Bender Director Investment Advisor,
7 Wood Ridge Road Financial & Investment
Glen Arbor, MI 49636 Management Group
(since April, 1991)
Age: 64 Vice President
Institutional Sale,
Kidder, Peabody & Co.
(Retired April, 1991);
Trustee, Vining Real
Estate Investment
Trust.
David J. Brophy Director Professor, University
1025 Martin Place of Michigan; Director,
Ann Arbor, MI 48104 River Place Financial
Age: 61 Corp.
A-19
<PAGE>
NAME, ADDRESS AND AGE POSITIONS WITH COMPANY DURING THE PAST FIVE
YEARS
- --------------------- ---------------------- ----------------------
Dr. Joseph E. Champagne Director Dean, University Center, Macomb
319 East Snell Road College since September 1997;
Rochester, MI 48306 Corporate and Executive
Age: 59 Consultant since September
1995; prior to that Chancellor,
Lamar University from
September 1994 until September
1995; before that Consultant to
Management; 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; Chairman, Board of
Directors, Ross Controls of
Troy, MI.
Thomas D. Eckert Director President and Chief Executive
10726 Falls Pointe Drive Officer, Capital Automotive
Great Falls, VA 22066 REIT from November 1997 to
Age: 50 present (real estate investment
trust specializing in retail
automotive properties);
prior to that President,
Mid-Atlantic Division of Pulte
Home Corporation (developer of
residential land and
construction of housing units)
from 1983 until 1997.
Lee P. Munder President Chairman of the Advisor
480 Pierce Street since February 1998; President
Suite 300 of the Advisor; Chief
Birmingham, MI 48009 Executive Officer and
Age: 52 President of Old
MCM, Inc.; Chief Executive
Officer of World Asset
Management; and Director,
LPM Investment Services,
Inc. (LPM).
Terry H. Gardner Vice President, Vice President and Chief
480 Pierce Street Chief Financial Officer of the
Suite 300 Financial Advisor; Vice President
Birmingham, MI 48009 Officer and and Chief Financial
Age: 37 Treasurer Officer of Old MCM, Inc.
(February 1993 to
present); Audit Manager
Arthur Andersen & Co.
(1991 to February 1993);
Secretary of LPM.
A-20
<PAGE>
Paul Tobias Vice President Chief Executive Officer of the
480 Pierce Street Advisor (since February 1998);
Suite 300 Executive Vice President and Chief
Birmingham, MI 48009 Operating Officer of the Advisor
Age: 46 (since April 1995) and Executive
Vice President of Comerica, Inc.
Gerald Seizert Vice President Chief Executive Officer of the
480 Pierce Street Advisor (since February 1998);
Suite 300 Executive Vice President and Chief
Birmingham, MI 48009 Investment Officer/Equities of the
Age: 45 Advisor (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 Director
480 Pierce Street of Marketing for the Advisor;
Suite 300 Vice President and Director
Birmingham, MI 48009 of Client Services of Old MCM,
Age: 39 Inc. (August 1988 to
December 1994).
James C. Robinson Vice President Vice President and Chief
480 Pierce Street Investment Officer/Fixed
Suite 300 Income for the Advisor;
Birmingham, MI 48009 Vice President and Director
Age: 36 of Fixed Income of Old MCM,
Inc. (1987-1994).
Leonard J. Barr, II Vice President Vice President and Director
480 Pierce Street of Core Equity Research of
Suite 300 the Advisor; Director and
Birmingham, MI 48009 Senior Vice President of
Age: 53 Old MCM, Inc. (since 1988);
Director of LPM.
Ann F. Putallaz Vice President Vice President and Director
480 Pierce Street of Fiduciary Services of the
Suite 300 Advisor(since January 1995);
Birmingham, MI 48009 Director of Client and
Age: 54 Marketing Services of
Woodbridge Capital
Management, Inc.
A-21
<PAGE>
Lisa A. Rosen
480 Pierce Street
Suite 300
Birmingham, MI 48009
Age: 30 Secretary, General Counsel of the
Assistant Treasurer Advisor (since May 1996);
formerly Counsel, First Data
Investor Services Group,
Inc.; Assistant Vice
President and Counsel with
The Boston Company Advisors,
Inc.; Associate with
Hutchins, Wheeler & Dittmar.
Therese Hogan
53 State Street
Boston, MA 02109
Age: 36 Assistant Director, State Regulation
Secretary Department, First Data
Investor Services Group
(June 1994-present); formerly
Senior Legal Assistant,
Palmer & Dodge (October
1993-June 1994); Blue Sky
Paralegal, Robinson & Cole
(February 1984-October 1993).
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 December 31, 1997.
<TABLE>
<CAPTION>
Pension
Aggregate Retirement Estimated
Compensation Benefits Annual
Name of from the Company, Accrued Benefits Total from
Person the Trust, Munder and as Part of upon the Fund
and Position Framlington Trust Fund Expenses Retirement Complex
- ------------------ ----------------- ------------- ---------- -------
<S> <C> <C> <C> <C>
Charles W. Elliott
Chairman
$26,000 None None $26,000
John Rakolta, Jr.
Vice Chairman
$23,000 None None $23,000
Thomas B. Bender
Trustee and Director
$26,000 None None $26,000
David J. Brophy
Trustee and Director
$26,000 None None $26,000
Dr. Joseph E. Champagne
Trustee and Director
$26,000 None None $26,000
Thomas D. Eckert
Trustee and Director $22,500 None None $22,500
</TABLE>
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<PAGE>
No officer, director or employee of the Advisor, Comerica, the
Sub-Custodian, the Distributor, the Administrator or the Transfer Agent
currently receives any compensation from the Company, the Trust, Munder or
Framlington Trust. As of April 1, 1998, the Directors and officers of the
Company, as a group, owned [less than 1%] of outstanding shares of the Funds
of the Company.
As of April 1, 1998, Munder Capital Management and affiliates of Munder
Capital Management, through common ownership, owned beneficially [ ].
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 WAM, Old MCM and Munder Group, LLC. WAM is a wholly-owned
subsidiary of Comerica Bank -- Ann Arbor, which, in turn is a wholly-owned
subsidiary of Comerica Incorporated, a publicly-held bank holding company.
The Investment Advisory Agreement between the Advisor and the Company
with respect to the Funds (the "Advisory Agreement") was approved by the
Company's Board of Directors on [date] and by shareholders on [date]. Under
the terms of 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.
For the period from commencement of operations through December 31,
1997, the Advisor received fees after waivers, if any, in the amounts of $0
for the LargeCap 500 Index Fund and $0 for the SmallCap Index Fund.
For the period of commencement of operations through December 31, 1997,
the Advisor voluntarily waived advisory fees in the amounts of $7,005 for the
LargeCap 500 Index Fund and $1,554 for the SmallCap Index Fund.
For the period of commencement of operations through December 31, 1997,
the Advisor voluntarily reimbursed expenses in the amounts of $46,422 for the
LargeCap 500 Index Fund and $36,792 for the SmallCap Index 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.
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<PAGE>
ADMINISTRATION AGREEMENT. State Street Bank and Trust Company ("State
Street") located at 225 Franklin Street, Boston, Massachusetts 02110, serves
as administrator for the Company pursuant to an administration agreement (the
"Administration Agreement"). State Street has agreed to maintain office
facilities for the Company; oversee 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. State Street may enter into
an agreement with one or more third parties pursuant to which such third
parties will provide administrative services on behalf of the Funds.
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 negligence in the performance of its duties
or from the reckless disregard by it of its duties and obligations thereunder.
For the period from commencement of operations through December 31,
1997, the administration fees of State Street accrued as follows: LargeCap
500 Index Fund $841 and SmallCap Index Fund $87.
CUSTODIAN, SUB-CUSTODIAN AND TRANSFER AGENCY AGREEMENTS. Comerica Bank,
whose principal business address is One Detroit Center, 500 Woodward Avenue,
Detroit, MI 48226, is the custodian of each Fund pursuant to a custodian
agreement ("Custody Agreement") with the Company. The Custodian receives no
compensation for its services. State Street serves as the sub-custodian to
the Funds pursuant to a sub-custodian agreement (the "Sub-Custodian
Contract") among the Company, Comerica Bank and State Street. State Street
is also the Sub-Custodian with respect to the custody of foreign securities
held by certain of the Funds. State Street has in turn entered into
additional agreements with financial institutions and depositaries located in
foreign countries with respect to the custody of such securities. Under the
Sub-Custodian Contract, 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.
First Data Investor Services Group Inc. 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.
A-24
<PAGE>
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.
For the period from commencement of operations through December 31,
1997, the Funds paid brokerage commissions as follows: $[ ] for the
LargeCap 500 Index Fund and $[ ] for the SmallCap Index Fund.
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.
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
A-25
<PAGE>
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.
The Company is required to identify the securities of their regular brokers
or dealers (as discussed in Rule 10b-1 under the 1940 Act) or their parent
companies held by them as of the close of their most recent fiscal year and to
state the value of such holding. [IDENTIFY]
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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases and redemptions are discussed in the Funds' prospectus and
such information is incorporated herein by reference.
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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.
OTHER INFORMATION. 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
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.,
Eastern time) on each Business Day. 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
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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).
In seeking to maintain a stable net asset value of $1.00 per share with
respect to the Money Market 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.
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.
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<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).
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<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.
ALL FUNDS. 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.
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<PAGE>
Based on the foregoing calculation, the average annual total return for
the period from commencement of operations through December 31, 1997 was
0.39% for the LargeCap 500 Index Fund and 3.0% for the SmallCap Index
Fund.
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.
GENERAL. 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"). Interest (including original issue discount and "accrued
market discount") received by a Fund at maturity or on disposition of a
security held for less than three months will not be treated (in contrast to
other income which is attributable to realized market appreciation) as gross
income from the sale or other disposition of securities held for less than
three months for this purpose.
In addition to the foregoing requirements, at the close of each quarter
of its taxable year, at least 50% of the value of each Fund's assets must
consist of cash and cash items, U.S. Government securities, securities of
other regulated investment companies, and securities of other issuers (as to
which the Fund has not invested more than 5% of the value of its total assets
in securities of such issuer and as to which the Fund does not hold more than
10% of the outstanding voting securities of such issuer) and no more than 25%
of the value of each Fund's total assets may be invested in the securities of
any one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
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
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<PAGE>
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 and will not be eligible for the dividends
received deduction for corporations.
Each Fund intends to distribute to shareholders any excess of net
long-term capital gain over net short-term capital loss ("net capital gain")
for each taxable year. Such gain is distributed as a capital gain dividend
and is taxable to shareholders as gain from the sale or exchange of a capital
asset held for more than one year, regardless of the length of time the
shareholder has held the Fund shares, and regardless of whether the
distribution is paid in cash or reinvested in shares. The Funds expect that
capital gain dividends will be taxable to shareholders as long-term gains.
Capital gain dividends are not eligible for the dividends received deduction.
In the case of corporate shareholders, distributions of a Fund for any
taxable year generally qualify for the dividends received deduction to the
extent of the gross amount of "qualifying dividends" received by such Fund
for the year and if certain holding period requirements are met. Generally,
a dividend will be treated as a "qualifying dividend" if it has been received
from a domestic corporation.
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.
HEDGING TRANSACTIONS. 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,
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<PAGE>
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.
Any regulated futures contracts and certain options (namely, nonequity
options and dealer equity options) 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 for taxable years beginning before August 6,
1997 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.
CURRENCY FLUCTUATIONS - "SECTION 988" GAINS OR LOSSES. 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.
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<PAGE>
DISPOSITION OF SHARES. Upon the redemption, sale or exchange of shares
of a Fund, a shareholder may realize a capital gain or loss depending upon
his or her basis in the shares. Such gain or loss will be treated as capital
gain or loss if the shares are capital assets in the shareholder's hands and
will be long-term or short-term, generally depending upon the shareholder's
holding period for the shares. Any loss realized on a redemption, 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 and treated as long-term capital gains. Furthermore a
loss realized by a shareholder on the redemption, sale or exchange of shares
of a Fund with respect to which exempt-interest dividends have been paid
will, to the extent of such exempt-interest dividends, be disallowed if such
shares have been held by the shareholder for six months or less.
CONSTRUCTIVE SALES. Recently enacted rules may affect the timing and
character of gain if a Fund engages in transactions that reduce or eliminate
its risk of loss with respect to appreciated financial positions. If the
Fund enters into certain transactions in property while holding substantially
identical property, the Fund would be treated as if it had sold and
immediately repurchased the property and would be taxed on any gain (but not
loss) from the constructive sale. The character of gain from a constructive
sale would depend upon the Fund's holding period in the property. Loss from
a constructive sale would be recognized when the property was subsequently
disposed of, and its character would depend on the Fund's holding period and
the application of various loss deferral provisions of the Code.
PASSIVE FOREIGN INVESTMENT COMPANIES. Certain Funds may invest in
shares of foreign corporations that may be classified under the Code as
passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets, or 75% or more of its gross income
investment-type income. If a Fund receives a so-called "excess distribution"
with respect to PFIC stock, the Fund itself may be subject to a tax on a
portion of the excess distribution, whether or not the corresponding income
is distributed by the Fund to shareholders. In general, under the PFIC
rules, an excess distribution is treated as having been realized ratably over
the period during which the Fund held the PFIC shares. Each Fund will itself
be subject to tax on the portion, if any, of an excess distribution that is
so allocated to prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable years.
Certain distributions from a PFIC as well as gain from the sale of PFIC
shares are treated as excess distributions. Excess distributions are
characterized as ordinary income even though, absent application of the PFIC
rules, certain excess distributions might have been classified as capital
gain.
The Funds may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in
some circumstances, a Fund generally would be required to include in its
gross income its share of the earnings of a PFIC on a current basis,
regardless of whether distributions were received from the PFIC in a given
year. If this election were made, the special rules, discussed above,
relating to the taxation of excess distributions, would not apply. In
addition, another election would involve marking to market the Fund's PFIC
shares at the end of each taxable year, with the result that unrealized gains
would be treated as though they were realized and reported as ordinary
income. Any mark-to-market losses and loss from an actual disposition of
Fund shares would be deductible as ordinary losses to the extent of any net
mark-to-market gains included in income in prior years.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.
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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.
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.
A-35
<PAGE>
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).
MISCELLANEOUS
COUNSEL. The law firm of Dechert Price & Rhoads, 1775 Eye Street, N.W.,
Washington, DC 20006, 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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. As of April 1, 1998
the following persons were beneficial owners of 5% or more of the outstanding
shares of a Fund because they possessed voting or investment power with respect
to such shares:
PERCENTAGE OF TOTAL SHARES
NAME OF FUND NAME AND ADDRESS OUTSTANDING
- ----------------- ----------------- -----------------
[To Be Completed] [To Be Completed] [To Be Completed]
[As of April 1, 1998, Munder Capital Management, on behalf of their
clients owned [ ]]
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
A-36
<PAGE>
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.
A-37
<PAGE>
FINANCIAL STATEMENTS
The financial statements for the Company including the notes, thereto,
dated December 31, 1997 have been audited by Ernst & Young LLP and are
incorporated by reference into this Statement of Additional Information from
the Annual Report of the Company dated as of December 31, 1997. The
information under the caption "Financial Highlights" of the Funds for the
period from commencement of operations through December 31, 1997, appearing
in the Prospectus dated April 30, 1998 has been derived from the financial
statements audited by Ernst & Young LLP. The information for the LargeCap
500 Index Fund for the period from commencement of operations through
[March 31, 1998 ]is unaudited.
A-38
<PAGE>
APPENDIX A
- RATED INVESTMENTS -
CORPORATE BONDS
Excerpts from MOODY'S INVESTORS SERVICES, INC. ("MOODY'S") description of
its bond ratings:
"Aaa": Bonds that are rated "Aaa" are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
"Aa": Bonds that are rated "Aa" are judged to be of high-quality
by all standards. Together with the "Aaa" group they comprise what are
generally known as "high-grade" bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in "Aaa" securities.
"A": Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
"Baa": Bonds that are rated "Baa" are considered as medium grade
obligations, I.E., they are neither highly protected nor poorly secured.
Interest payments and principal security appears adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
"Ba": Bonds that are rated "Ba" are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
"B": Bonds that are rated "B" generally lack characteristics of
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
"Caa": Bonds that are rated "Caa" are of poor standing. These
issues may be in default or present elements of danger may exist with respect to
principal or interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated "Aa" through "B". The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.
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.
A-39
<PAGE>
"AA": Debt rated "AA" has a very strong capacity to pay interest
and repay principal and differs from "AAA" issues by a small degree.
"A": Debt rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories.
"BBB": Bonds rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and repay principal for bonds in this category than for bonds in higher rated
categories.
"BB", "B" AND "CCC": Bonds rated "BB" and "B" are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. "BB" represents a
lower degree of speculation than "B" and "CCC" the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
To provide more detailed indications of credit quality, the "AA" or "A"
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
COMMERCIAL PAPER
The rating "PRIME-1" is the highest commercial paper rating assigned by
MOODY'S. These issues (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issues rated "PRIME-2" (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics of "Prime-1" rated issues, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted "A-1+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1."
A-40
<PAGE>
APPENDIX A
- RATED INVESTMENTS -
COMMERCIAL PAPER
Rated commercial paper purchased by a Fund must have (at the time of
purchase) the highest quality rating assigned to short-term debt securities or,
if not rated, or rated by only one agency, are determined to be of comparative
quality pursuant to guidelines approved by a Fund's Boards of Trustees and
Directors. Highest quality ratings for commercial paper for Moody's and S&P are
as follows:
MOODY'S: The rating "PRIME-1" is the highest commercial paper rating
category assigned by Moody's. These issues (or related supporting institutions)
are considered to have a superior capacity for repayment of short-term
promissory obligations.
S&P: Commercial paper ratings of S&P are current assessments of the
likelihood of timely payment of debts having original maturities of no more than
365 days. Commercial paper rated in the "A-1" category by S&P indicates that
the degree of safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety characteristics
are denoted "A-1+".
A-41
<PAGE>
APPENDIX B
As stated in the Prospectus, the Funds may enter into certain futures
transactions and options for hedging purposes. Such transactions are described
in this Appendix.
I. 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
<TABLE>
<CAPTION>
PORTFOLIO FUTURES
--------- -------
<S> <C>
-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
</TABLE>
42
<PAGE>
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
<TABLE>
<CAPTION>
Factors:
<S> <C>
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
</TABLE>
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.
43
<PAGE>
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
44
<PAGE>
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
45
<PAGE>
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.
V. OTHER MATTERS
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
46
<PAGE>
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 April 30, 1998
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 April 30, 1998. 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 Fund at (800) 438-5789. This
Statement of Additional Information is dated April 30, 1998.
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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
General................................................ 2
Fund Investments....................................... 2
Additional Investment Limitations...................... 7
Directors and Officers................................. 9
Investment Advisory and Other Service Arrangements..... 13
Portfolio Transactions................................. 15
Purchase and Redemption Information.................... 16
Net Asset Value........................................ 17
Yield.................................................. 17
Taxes.................................................. 18
Additional Information Concerning Shares............... 19
Miscellaneous.......................................... 20
Registration Statement................................. 21
Financial Statements................................... 21
Appendix............................................... 22
</TABLE>
<PAGE>
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 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.
2
<PAGE>
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 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.
3
<PAGE>
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 recordkeeping 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.
4
<PAGE>
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.
5
<PAGE>
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.
COMMERCIAL PAPER. Commercial paper (short-term promissory notes issued by
----------------
corporations), including variable amount master demand notes, having short-term
ratings at the time of purchase, must be rated by at least two nationally
recognized statistical rating organizations ("NRSROs"), such as Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P")
within the highest rating category assigned to short-term debt securities or, if
not rated, or rated by only one agency, are determined to be of comparable
quality pursuant to guidelines approved by the Company's Board of Directors. To
the extent that the ratings accorded by NRSROs may change as a result of changes
in their rating systems, the Fund will attempt to use comparable ratings as
standards for its investments, in accordance with the investment policies
contained herein. Where necessary to ensure that an instrument meets, or is of
comparable quality to, the Fund's rating criteria, the Fund may require that the
issuer's obligation to pay the principal of, and the interest on, the instrument
be backed by insurance or by an unconditional bank letter or line of credit,
guarantee, or commitment to lend.
6
<PAGE>
All obligations, including any underlying guarantees, must be deemed by the
Advisor to present minimal credit risks, pursuant to guidelines approved by the
Board of Directors. See the "Appendix" for a description of applicable ratings.
The Fund may invest in commercial obligations issued in reliance on the
"private placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as amended ("Section 4(2) paper"). The Fund may also
purchase securities that are not registered under the Securities Act of 1933, as
amended, but which can be sold to qualified institutional buyers in accordance
with Rule 144A under that 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, such as the Fund, which agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction. Section 4(2)
paper normally is resold to other institutional investors like the Fund through
or with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold 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.
ASSET-BACKED SECURITIES. Subject to applicable maturity and credit
-----------------------
criteria, the 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 scheduled 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
interest rates and current conditions in the relevant housing markets. 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 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. The extent
that the Fund purchases mortgage-related or mortgage-backed securities at a
premium, mortgage prepayments (which may be made at any time without penalty)
may result in some loss of the Fund's principal investment to the extent of
premium paid.
ADDITIONAL INVESTMENT LIMITATIONS
The Fund is subject to the investment restrictions and limitations listed
below which may be changed only by a vote of the holders of a majority of the
Fund's outstanding shares.
The Fund may not:
1. Purchase securities (other than obligations of the U.S. Government,
its agencies or instrumentalities) if more than 5% of the value of the
Fund's total assets would be invested in the securities of any one
issuer, except that up to 25% of the value of the Fund's total assets
may be invested without regard to this 5% limitation. However, as an
operating policy the Fund intends to adhere to this 5% limitation with
regard to 100% of its portfolio to the extent required under
applicable regulations under the 1940 Act.
7
<PAGE>
2. Purchase more than 10% of the outstanding voting securities of any
issuer, except that up to 25% of the value of the Fund's total assets
may be invested without regard to this 10% limitation.
3. Invest 25% or more of the Fund's total assets in one or more issuers
conducting their principal business activities in the same industry,
provided that: (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, domestic bank certificates of deposit, bankers'
acceptances, and repurchase agreements secured by such obligations;
(b) wholly-owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related
to financing the activities of their parents; and (c) utilities will
be divided according to their services -- for example, gas, gas
transmission, electric and gas, electric, and telephone will each be
considered separate industry.
4. Make loans, except that the Fund may purchase or hold certain debts
instruments and enter into repurchase agreements, in accordance with
its policies and limitations.
5. Borrow money except for temporary purposes in amounts up to one-third
of the value of the Fund's total assets at the time of such borrowing.
Whenever borrowings exceed 5% of the Fund's total assets, the Fund
will not make any additional investments.
6. Knowingly invest more than 10% of its total assets in illiquid
securities including time deposits with maturities longer than seven
days and repurchase agreements providing for settlement more than
seven days after notice.
7. Pledge, mortgage or hypothecate its assets other than to secure
permitted borrowings.
8. 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.
9. 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.
10. 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.
11. 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.
8
<PAGE>
2. Invest in other investment companies except as permitted under the
1940 Act.
3. 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.
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, and their business
addresses and principal occupations during the past five years, are:
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITIONS WITH COMPANY DURING THE PAST FIVE YEARS
--------------------- ---------------------- --------------------------
<S> <C> <C>
Charles W. Elliott Chairman of the Board of Directors Senior Advisor to the
3338 Bronson Boulevard President - Western Michigan
Kalamazoo, MI 49008 University since July 1995;
Age: 65 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 of Chairman and Chief
1876 Rathmor the Board of Directors Executive Officer,
Bloomfield Hills, MI 48304 Walbridge Aldinger
Age: 50 Company (construction
company).
Thomas B. Bender Director Investment Advisor, Financial &
7 Wood Ridge Road Investment Management Group (since
Glen Arbor, MI 49636 April, 1991); Vice President
Age: 64 Institutional Sales, Kidder,
Peabody & Co. (Retired April,
1991); Trustee, Vining
Real Estate Investment Trust.
David J. Brophy Director Professor, University of Michigan;
1025 Martin Place Director, River Place Financial
Ann Arbor, MI 48104 Corp.; Trustee, Renaissance Assets
Age: 61 Trust.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITIONS WITH COMPANY DURING THE PAST FIVE YEARS
--------------------- ---------------------- --------------------------
<S> <C> <C>
Dr. Joseph E. Champagne Director Dean, University Center, Macomb
319 East Snell Road College since September 1997;
Rochester, MI 48306 Corporate and Executive Consultant
Age: 59 since September 1995; prior to that
Chancellor, Lamar University from
September 1994 until September
1995; before that Consultant to
Management, President and Chief
Executive Officer, Crittenton
Corporation (holding company that
own healthcare facilities), and
Crittenton Development Corporation
until August 1993; before that
President, Oakland University of
Rochester, MI, until August 1991;
Chairman, Board of Directors, Ross
Controls of Troy, MI.
Thomas D. Eckert Director President and Chief Executive
10726 Falls Pointe Drive Officer, Capital Automotive
Great Falls, VA 22066 REIT from November 1997 to
Age: 50 present (real estate investment
trust specializing in retail
automotive properties);
prior to that President and COO,
Mid-Atlantic Division of Pulte
Home Corporation (developer of
residential land and
construction of housing units)
from 1983 until 1997.
Lee P. Munder President Chairman of the Advisor since
480 Pierce Street February 1998, President of the
Suite 300 Advisor; Chief Executive Officer
Birmingham, MI 48009 and President of Old MCM, Inc.;
Age: 52 Chief Executive Officer of World
Asset 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: 37 1993 to present); Audit Manager
Arthur Andersen & Co. (1991 to
February 1993); Secretary of LPM.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITIONS WITH COMPANY DURING THE PAST FIVE YEARS
--------------------- ---------------------- --------------------------
<S> <C> <C>
Paul Tobias Vice President Chief Executive Officer of the
480 Pierce Street Advisor (since February 1998);
Suite 300 Executive Vice President and Chief
Birmingham, MI 48009 Operating Officer of the Advisor
Age: 46 (since April 1995) and Executive
Vice President of Comerica, Inc.
Gerald Seizert Vice President Chief Executive Officer of the
480 Pierce Street Advisor (since February 1998);
Suite 300 Executive Vice President and Chief
Birmingham, MI 48009 Investment Officer/Equities of the
Age: 45 Advisor (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 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: 39 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: 36 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: 53 Director of LPM.
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: 30 Counsel with The Boston Company
Advisors, Inc.; Associate with
Hutchins, Wheeler & Dittmar.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITIONS WITH COMPANY DURING THE PAST FIVE YEARS
--------------------- ---------------------- --------------------------
<S> <C> <C>
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: 52 Woodbridge Capital Management, Inc.
Therese Hogan Assistant Secretary Director, State Regulation
53 State Street Department, First Data Investor
Boston, MA 02109 Services Group (June 1994-present);
Age: 36 formerly Senior Legal Assistant,
Palmer & Dodge (October 1993-June
1994); Blue Sky Paralegal, Robinson
& Cole (February 1984-October
1993).
</TABLE>
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 December 31, 1997.
<TABLE>
<CAPTION>
Aggregate Pension
Compensation Retirement Estimated
Name of from the Company, Benefits Annual Total from
Person the Trust, Munder Accrued Benefits the Fund
and Position and as Part of upon Complex
------------ Framlington Trust Fund Expenses Retirement -------
----------------- ------------- ----------
<S> <C> <C> <C> <C>
Charles W. Elliott
Chairman
$26,000 None None $26,000
John Rakolta, Jr.
Vice Chairman
$23,000 None None $23,000
Thomas B. Bender
Trustee and Director
$26,000 None None $26,000
David J. Brophy
Trustee and Director
$26,000 None None $26,000
Dr. Joseph E. Champagne
Trustee and Director
$26,000 None None $26,000
Thomas D. Eckert
Trustee and Director $22,500 None None $22,500
</TABLE>
12
<PAGE>
No officer, director or employee of the Advisor, Comerica, the
Sub-Custodian, the Distributor, the Administrator or Transfer Agent currently
receives any compensation from the Company.
As of April 1, 1998, the Directors and officers of the Company, as a group,
owned [less than 1%] of outstanding shares of the Fund.
As of April 1, 1998, Munder Capital Management, through common ownership,
owned beneficially [ ].
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 WAM,
Old MCM, and Munder Group, LLC. WAM is a wholly-owned subsidiary of Comerica
Bank -- Ann Arbor, which in turn is a wholly-owned subsidiary of Comerica
Incorporated, a publicly held bank holding company.
The Advisory Agreement between the Advisor and the Company with respect to
the Fund (the "Advisory Agreement") was approved by the Company's Board of
Directors on [ ] and by shareholders on [ ]. 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.
For the period from commencement of operations through December 31, 1997,
the Advisor received fees in the amount of $52,118.
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.
13
<PAGE>
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.
During the period from commencement of operations through December 31,
1997, the Fund paid the Distributor service fee in the amount of $[ ] and
distribution fees in the amount of $[ ].
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. State Street Bank and Trust Company ("State
------------------------
Street"), located at 225 Franklin Street, Boston, Massachusetts 02110, serves as
Administrator for the Company pursuant to an administration agreement (the
"Administration Agreement"). State Street has agreed to maintain office
facilities for the Company; provide accounting and bookkeeping services for the
Fund, 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 Securities and Exchange Commission or any state securities commission
having jurisdiction over the Company. State Street may enter into an agreement
with one or more third parties pursuant to which such third parties will provide
administrative services on behalf of the Fund.
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 negligence in the performance of its duties or
from the reckless disregard by it of its duties and obligations thereunder.
CUSTODIAN, SUB-CUSTODIAN 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, is the
custodian of the Company's assets pursuant to a custodian agreement (the
"Custodian Agreement"). For the period from commencement of operations to
October 31, 1997 the Custodian received fees of $1,609.64. Commencing October
31, 1997 the Custodian
14
<PAGE>
receives no compensation for its services. The Custodian has entered into a
Sub-Custody Agreement with State Street pursuant to which State Street serves
as Sub-Custodian to the Fund. [As compensation for its services State
Street is entitled to receive fees, based on the aggregate average daily net
assets of the Fund and certain other investment portfolios that are advised
by the Advisor for which State Street provides services, computed daily and
payable monthly at an annual rate of .01% of average daily net assets. The
Sub-Custodian also receives certain transaction based fees.] State Street
is also the Sub-Custodian with respect to the custody of foreign securities
held by the Fund. State Street has in turn entered into additional
agreements with financial institutions and depositaries located in foreign
countries with respect to the custody of such securities. Under the
Sub-Custodian Agreement, the Sub-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 Sub-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 Investor Services Group, Inc. ("First Data" or the "Transfer
Agent") located at 53 State Street, Boston, Massachusetts 02109 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.
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.
15
<PAGE>
Investment decisions for the Fund are made independently from those for any
other investment portfolios or accounts ("accounts") managed by the Advisor.
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
Advisor 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 Advisor 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. Since
the Fund will invest only in short-term debt instruments, brokerage commissions
will not normally be paid, and 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.
16
<PAGE>
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
17
<PAGE>
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.
Based on the foregoing computations, for the seven-day period ended
December 31, 1997 the Fund's annualized yield was 4.89% and the effective
yield was 5.01%.
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 specified percentages of its ordinary taxable income and
capital gain net income (the excess of capital gains over capital losses). The
Fund intends to make sufficient distributions and deemed distributions of its
ordinary taxable income and capital gain net income each calendar year to avoid
liability for this 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.
18
<PAGE>
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 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 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 nonassessable. 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
19
<PAGE>
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, 1775 Eye Street, N.W.,
-------
Washington, D.C. 20006, serves as counsel to the Company.
INDEPENDENT AUDITORS. Ernst & Young LLP, 200 Clarendon Street, Boston, MA
--------------------
02116, serves as the Company's independent auditors.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. As of April 1, 1998
---------------------------------------------------
the following persons were beneficial owners of 5% or more of the outstanding
shares of the Fund because they possessed voting or investment power with
respect to such shares:
Name and Address Percentage of Total Shares
Outstanding
----------------- -----------------
[To Be Completed] [To Be Completed]
[As of April 1, 1998, Munder Capital Management, on behalf of its clients,
owned [ ].]
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.
20
<PAGE>
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.
FINANCIAL STATEMENTS
The financial statements for the Fund including the notes thereto dated
December 31, 1997 have been audited by Ernst & Young LLP and are incorporated by
reference into this SAI from the Annual Report of the Fund dated December 31,
1997. The information under the caption "Financial Highlights" of the Fund for
the period from commencement of operations through December 31, 1997 appearing
in the Prospectus dated April 30, 1998 has been derived from the financial
statements audited by Ernst & Young LLP.
21
<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+".
22
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------------
(a) Financial Statements
Included in Part A:
Unaudited Financial Highlights for Munder Institutional S&P SmallCap
Index Equity Fund for the period from commencement of operations to
November 30, 1997 were previously filed in Post-Effective Amendment
No. 26 to Registration Statement on Form N-1A with the Commission on
December 30, 1997 and are incorporated herein by reference.
Unaudited Financial Highlights for Liquidity Plus Money Market Fund
for the period from commencement of operations to September 30, 1997
were previously filed in Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A with the Commission
on October 31, 1997 and are incorporated herein by reference.
Included in Part B:
The following unaudited Financial Statements for Munder S&P
Institutional SmallCap Index Equity Fund for the period from
commencement of operations to November 30, 1997 were previously filed
in Post-Effective Amendment No. 26 to Registration Statement on Form
N-1A with the Commission on December 30, 1997 and are incorporated
herein by reference:
Portfolio of Investments
Statements of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights, For a Share Outstanding Throughout the
Period
Notes to Financial Statements
The following unaudited Financial Statements for Liquidity Plus Money
Market Fund for the period from commencement of operations to
September 30, 1997 were previously filed in Post-Effective Amendment
No. 25 to Registrant's Registration Statement on Form N-1A with the
Commission on October 31, 1997 and are incorporated herein by
reference.
Portfolio of Investments
Statements of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights, For a Share Outstanding Throughout the
Period
Notes to Financial Statements
<PAGE>
(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.
2
<PAGE>
(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 is incorporated by
reference to Post-Effective Amendment No. 24 to Registrant's
Registration Statement on Form N-1A filed with the Commission on July
23, 1997.
(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 incorporated by reference to Post-Effective
Amendment No. 24 to Registrant's Registration Statement on Form N-1A
filed with the Commission on July 23, 1997.
(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.
3
<PAGE>
(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 incorporated by reference to Post-Effective
Amendment No. 24 to Registrant's Registration Statement on Form
N-1A filed with the Commission on July 23, 1997.
(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 incorporated by reference to Post-Effective
Amendment No. 24 to Registrant's Registration Statement on Form
N-1A filed with the Commission on July 23, 1997.
(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 incorporated by reference to Post-Effective Amendment No.
24 to Registrant's Registration Statement on Form N-1A filed with the
Commission on July 23, 1997.
(d) Form of Sub-Custodian Agreement among Registrant, Comerica Bank and
State Street Bank and Trust Company 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 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 is incorporated by reference to Post-
Effective Amendment No. 26 to Registration Statement on Form N-1A
filed with the Commission on December 30, 1997.
4
<PAGE>
(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
incorporated by reference to Post-Effective Amendment No. 24 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on July 23, 1997.
(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 incorporated by
reference to Post-Effective Amendment No. 24 to Registrant's
Registration Statement on Form N-1A filed with the Commission on July
23, 1997.
(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 incorporated by reference to Post-
Effective Amendment No. 24 to Registrant's Registration Statement on
Form N-1A filed with the Commission on July 23, 1997.
(g) Form of Administration Agreement between Registrant and State Street
Bank and Trust Company 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 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
Equity Fund, Munder Institutional S&P SmallCap Index Equity Fund,
Munder Institutional Short Term Treasury Fund and Munder
Institutional Money Market Fund is incorporated by reference to
Post-Effective Amendment No. 26 to Registration Statement on Form
N-1A filed with the Commission on December 30, 1997.
5
<PAGE>
(h) 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.
(i) Form of Amendment to Transfer Agency and Registrar Agreement between
Registrant and First Data Investor Services Group, Inc. is
incorporated by reference to Post-Effective Amendment No. 24 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on July 23, 1997.
(j) 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 incorporated by reference to Post-Effective Amendment No. 24 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on July 23, 1997.
(k) 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.
(l) 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.
6
<PAGE>
(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 incorporated by reference to
Post-Effective Amendment No. 24 to Registrant's Registration
Statement on Form N-1A filed with the Commission on July 23, 1997.
(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.
(c) Powers of Attorney filed herein.
(d) Certified Resolution of Board authorizing signature on behalf of
Registrant pursuant to power of attorney filed herein.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Form of Service and Distribution Plan of the Liquidity Plus Money
Market Fund is incorporated herein by reference to Post-Effective
Amendment No. 20 to Registrant's Registration Statement on Form N-1A
filed with the Commission on November 15, 1996.
(16) (a) Schedules for computation of annualized and effective yields of
the Liquidity Plus Money Market Fund is incorporated herein by
reference to Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
November 15, 1996.
(b) Schedules for computation of annualized and effective yields with
respect to Munder S&P 500 Index Equity Fund, Munder S&P MidCap Index
Equity Fund, Munder S&P SmallCap Index Equity Fund, Munder Foreign
Equity Fund and Munder Aggregate Bond Index Fund is incorporated
herein by reference to Post-Effective Amendment No. 21 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
February 3, 1997.
(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 incorporated by
7
<PAGE>
reference to Post-Effective Amendment No. 24 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
July 23, 1997.
(17) Not Applicable.
(18) Not Applicable.
Item 25. Persons Controlled by or under Common Control with Registrant.
--------------------------------------------------------------
Not Applicable.
Item 26. Number of Holders of Securities
--------------------------------------
As of February 20, 1998, the number of shareholders of record for 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 was [ ], [ ], [ ], [ ]
and [ ], respectively.
As of February 20, 1998, the number of shareholders of record for
Liquidity Plus Money Market Fund was [ ].
As of February 20, 1998, there were no shareholders of record for
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.
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
8
<PAGE>
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
Lee P. Munder President and Chairman
Leonard J. Barr, II Senior Vice President and
Director of Research
9
<PAGE>
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
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 Chief Executive Officer,
Executive Vice President and
Chief Investment Officer/Equity
Paul D. Tobias Chief Executive Officer,
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.
10
<PAGE>
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, Suite 1300, Boston,
Massachusetts 02109. 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:
<TABLE>
<S> <C>
Harris Insight Funds Trust RCM Capital Funds, Inc.
The Munder Funds Trust Monetta Fund, Inc.
St. Clair Funds, Inc. Monetta Trust
The Munder Framlington Funds Trust The JPM Series Trust
BJB Investment Funds The JPM Series Trust II
The PanAgora Institutional Funds HT Insight Funds, Inc.
RCM Equity Funds, Inc. d/b/a Harris Insight Funds
Waterhouse Investors Family of Funds, Inc. The Brinson Funds
J.P. Morgan Funds WEBS Index Fund, Inc.
The J.P. Morgan Institutional Funds The Montgomery Funds
The Skyline Funds The Montgomery Funds II
Orbitex Group of Funds The Munder Funds, Inc.
</TABLE>
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.
<TABLE>
<S> <C>
Director, President and Chief Executive Officer -Marie E. Connolly
Executive Vice President -Richard W. Ingram
Executive Vice President -Donald R. Roberson
Senior Vice President -Michael S. Petrucelli
Director, Senior Vice President, Treasurer and
Chief Financial Officer -Joseph F. Tower, III
Senior Vice President -Paula R. David
Senior Vice President -Bernard A. Whalen
Director -William J. Nutt
Senior Vice President -A. Bayard Closser
Executive Vice President -William S. Nichols
</TABLE>
11
<PAGE>
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 transfer agent);
(3) State Street Bank and Trust Company, 150 Newport Avenue, North
Quincy, Massachusetts 02171 (records relating to its function as
administrator and subcustodian);
(4) Longrow Securities Inc., 222 South Central Avneue, 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) Funds Distributor, Inc., 60 State Street, Boston, Massachusetts
02109 (records relating to its function as distributor); and
(6) 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) Not Applicable.
12
<PAGE>
(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.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant certifies that this
Post-Effective Amendment No. 27 to the Registration Statement meets the
requirements for effectiveness pursuant to Rule 485(a) of the Securities Act of
1933, as amended, and the Registrant has duly caused this Post-Effective
Amendment No. 27 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Quincy and The Commonwealth of Massachusetts, on the
27th day of February 1998.
ST. CLAIR FUNDS, INC.
By: *_____________________
Lee P. Munder
* By: /S/ Cynthia Surprise
---------------------
Cynthia Surprise
as Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
SIGNATURES TITLE DATE
*----------------- Director, February 27, 1998
Lee P. Munder President and
Chairman
*----------------- Director February 27, 1998
Charles W. Elliott
*----------------- Director February 27, 1998
Joseph E. Champagne
*----------------- Director February 27, 1998
Thomas B. Bender
*----------------- Director February 27, 1998
Thomas D. Eckert
*----------------- Director February 27, 1998
John Rakolta, Jr.
*----------------- Director February 27, 1998
David J. Brophy
14
<PAGE>
*----------------- Vice President, February 27, 1998
Terry H. Gardner Treasurer and
Chief Financial Officer
*By: /S/ Cynthia Surprise
---------------------
Cynthia Surprise
as Attorney-in-Fact
15
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
11(c) Powers of Attorney
11(d) Certified Resolution of Board authorizing signature on
behalf of Registrant pursuant to power of attorney
16
<PAGE>
Exhibit 11(c)
Powers of Attorney
<PAGE>
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
-----------------
The undersigned, Lee P. Munder, whose signature appears below, does hereby
constitute and appoint Lisa Anne Rosen, Cynthia Surprise and Paul F. Roye his
true and lawful attorneys and agents to execute in his name, place and stead, in
his capacity as director or officer, or both, of St. Clair Funds, Inc. ("St.
Clair"), the Registration Statement of St. Clair on Form N-1A, any amendments
thereto, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission; and such
attorneys shall have the full power of substitution and re-substitution; and
such attorneys shall have full power and authority to do and perform in the name
and on the behalf of the undersigned director and/or officer of St. Clair, in
any and all capacities, every act whatsoever requisite or necessary to be done
in the premises, as fully and to all intents and purposes as the undersigned
director and/or officer of St. Clair might or could do in person, such acts of
such attorneys being hereby ratified and approved.
/s/ Lee P. Munder
-----------------
Lee P. Munder
Dated: February 24, 1998
<PAGE>
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Charles W. Elliot, whose signature appears below, does
hereby constitute and appoint Lisa Anne Rosen, Cynthia Surprise and Paul F. Roye
his true and lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St. Clair Funds, Inc.
("St. Clair"), the Registration Statement of St. Clair on Form N-1A, any
amendments thereto, and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange Commission; and
such attorneys shall have the full power of substitution and re-substitution;
and such attorneys shall have full power and authority to do and perform in the
name and on the behalf of the undersigned director and/or officer of St. Clair,
in any and all capacities, every act whatsoever requisite or necessary to be
done in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do in person,
such acts of such attorneys being hereby ratified and approved.
/s/ Charles W. Elliott
----------------------
Charles W. Elliott
Dated: February 24, 1998
<PAGE>
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Joseph E. Champagne, whose signature appears below, does
hereby constitute and appoint Lisa Anne Rosen, Cynthia Surprise and Paul F. Roye
his true and lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St. Clair Funds, Inc.
("St. Clair"), the Registration Statement of St. Clair on Form N-1A, any
amendments thereto, and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange Commission; and
such attorneys shall have the full power of substitution and re-substitution;
and such attorneys shall have full power and authority to do and perform in the
name and on the behalf of the undersigned director and/or officer of St. Clair,
in any and all capacities, every act whatsoever requisite or necessary to be
done in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do in person,
such acts of such attorneys being hereby ratified and approved.
/s/ Joseph E. Champagne
-------------------------
Joseph E. Champagne
Dated: February 24, 1998
<PAGE>
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Thomas B. Bender, whose signature appears below, does
hereby constitute and appoint Lisa Anne Rosen, Cynthia Surprise and Paul F. Roye
his true and lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St. Clair Funds, Inc.
("St. Clair"), the Registration Statement of St. Clair on Form N-1A, any
amendments thereto, and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange Commission; and
such attorneys shall have the full power of substitution and re-substitution;
and such attorneys shall have full power and authority to do and perform in the
name and on the behalf of the undersigned director and/or officer of St. Clair,
in any and all capacities, every act whatsoever requisite or necessary to be
done in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do in person,
such acts of such attorneys being hereby ratified and approved.
/s/ Thomas B. Bender
--------------------
Thomas B. Bender
Dated: February 24, 1998
<PAGE>
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Thomas D. Eckert, whose signature appears below, does
hereby constitute and appoint Lisa Anne Rosen, Cynthia Surprise and Paul F. Roye
his true and lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St. Clair Funds, Inc.
("St. Clair"), the Registration Statement of St. Clair on Form N-1A, any
amendments thereto, and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange Commission; and
such attorneys shall have the full power of substitution and re-substitution;
and such attorneys shall have full power and authority to do and perform in the
name and on the behalf of the undersigned director and/or officer of St. Clair,
in any and all capacities, every act whatsoever requisite or necessary to be
done in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do in person,
such acts of such attorneys being hereby ratified and approved.
/s/ Thomas D. Eckert
--------------------
Thomas D. Eckert
Dated: February 24, 1998
<PAGE>
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, John Rakolta, Jr., whose signature appears below, does
hereby constitute and appoint Lisa Anne Rosen, Cynthia Surprise and Paul F. Roye
his true and lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St. Clair Funds, Inc.
("St. Clair"), the Registration Statement of St. Clair on Form N-1A, any
amendments thereto, and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange Commission; and
such attorneys shall have the full power of substitution and re-substitution;
and such attorneys shall have full power and authority to do and perform in the
name and on the behalf of the undersigned director and/or officer of St. Clair,
in any and all capacities, every act whatsoever requisite or necessary to be
done in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do in person,
such acts of such attorneys being hereby ratified and approved.
/s/ John Rakolta, Jr.
---------------------
John Rakolta, Jr.
Dated: February 24, 1998
<PAGE>
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, David J. Brophy, whose signature appears below, does
hereby constitute and appoint Lisa Anne Rosen, Cynthia Surprise and Paul F. Roye
his true and lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St. Clair Funds, Inc.
("St. Clair"), the Registration Statement of St. Clair on Form N-1A, any
amendments thereto, and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange Commission; and
such attorneys shall have the full power of substitution and re-substitution;
and such attorneys shall have full power and authority to do and perform in the
name and on the behalf of the undersigned director and/or officer of St. Clair,
in any and all capacities, every act whatsoever requisite or necessary to be
done in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do in person,
such acts of such attorneys being hereby ratified and approved.
/s/ David J. Brophy
-------------------
David J. Brophy
Dated: February 24, 1998
<PAGE>
ST. CLAIR FUNDS, INC.
POWER OF ATTORNEY
The undersigned, Terry H. Gardner, whose signature appears below, does
hereby constitute and appoint Lisa Anne Rosen, Cynthia Surprise and Paul F. Roye
his true and lawful attorneys and agents to execute in his name, place and
stead, in his capacity as director or officer, or both, of St. Clair Funds, Inc.
("St. Clair"), the Registration Statement of St. Clair on Form N-1A, any
amendments thereto, and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange Commission; and
such attorneys shall have the full power of substitution and re-substitution;
and such attorneys shall have full power and authority to do and perform in the
name and on the behalf of the undersigned director and/or officer of St. Clair,
in any and all capacities, every act whatsoever requisite or necessary to be
done in the premises, as fully and to all intents and purposes as the
undersigned director and/or officer of St. Clair might or could do in person,
such acts of such attorneys being hereby ratified and approved.
/s/ Terry H. Gardner
--------------------
Terry H. Gardner
Dated: February 24, 1998
<PAGE>
Exhibit 11(d)
Certified Resolution of Board authorizing signature on behalf of
Registrant pursuant to power of attorney
<PAGE>
SECRETARY'S CERTIFICATE
I, Lisa A. Rosen, Secretary of St. Clair Funds, Inc. ("St. Clair"), hereby
certify that the following resolution authorizing Paul Roye, Lisa A. Rosen and
Cynthia Surprise to sign St. Clair's Registration Statement on behalf of Lee
Munder, President of St. Clair, has been adopted, at a meeting of the Board of
Directors duly called and held on February 24, 1998, at which a quorum was
present and acting throughout:
RESOLVED, that Paul Roye, Lisa A. Rosen and Cynthia Surprise be, and hereby
are authorized to execute and sign on behalf of Lee Munder, President of St.
Clair, all amendments and supplements to the St. Clair's Registration Statements
on Form N-1A pursuant to a power of attorney from Lee Munder and hereby ratifies
the execution of such Registration Statements by such persons.
Dated: February 27, 1998 /s/ Lisa A. Rosen
-----------------
Lisa A. Rosen, Secretary
St. Clair Funds, Inc.
