on June 25, 1996[/R]
Registration Nos. 33-54748
811-7348
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. 16 [ X ]
----
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940[ X ]
Amendment No. 18 [ X ]
----
(Check appropriate box or boxes)
The Munder Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
480 Pierce Street, Birmingham, Michigan 48009
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number: (810) 647-9200
Brigid O. Bieber, Esq.
First Data Investor Services Group, Inc.
One Exchange Place, 4th Floor
Boston, Massachusetts 02109
Copies to:
Lisa Anne Rosen, Esq. Paul R. Roye, Esq.
Munder Capital Management Dechert Price & Rhoads
480 Pierce Street 1500 K Street, NW
Birmingham, Michigan 48009 Washington, DC 20005
[X] It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b) of Rule 485
The Registrant has elected to register an indefinite number
of shares under the Securities Act of 1933 pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant filed the
notice required by Rule 24f-2 with respect to its fiscal period
ended June 30, 1995 on August 30, 1995.
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder International Bond Fund
(Class A, B and C Shares)
Part A
- ------
Item Heading
---- -------
1. Cover Page Cover Page
2. Synopsis Prospectus
Summary; Expense Table
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover
Page;Prospectus Summary; Investment Objectives and Policies;
Description of Shares
5. Management of the Fund Management;
Investment Objective and Policies; Dividends and Distributions;
Performance
6. Capital Stock and Other Securities Management; How
to Purchase Shares; How to Redeem Shares; Dividends and
Distributions; Taxes; Description of Shares
7. Purchase of Securities Being How to Purchase
Offered Shares; Net
Asset Value
8. Redemption or Repurchase How to
Redeem Shares
9. Pending Legal Proceedings Not Applicable
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder International Bond Fund
(Class K Shares)
Part A
- ------
Item Heading
---- -------
1. Cover Page Cover Page
2. Synopsis Expense
Table;
The Fund
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover Page; The
Fund; Investment Objectives and Policies; Description of Shares
5. Management of the Fund Management;
Investment Objective and Policies; Dividends and Distributions;
Performance
6. Capital Stock and Other Securities Management;
Purchases and Redemptions of Shares; Dividends and Distributions;
Taxes; Description of Shares
7. Purchase of Securities Being Purchases and
Offered Redemptions
of Shares; Net Asset Value
8. Redemption or Repurchase Purchases
and Redemptions of Shares
9. Pending Legal Proceedings Not Applicable
THE MUNDER FUNDS, INC.
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus to The Munder International Bond Fund
(Class Y Shares)
Part A
- ------
Item Heading
---- -------
1. Cover Page Cover Page
2. Synopsis The Fund;
Expense Table
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover Page; The
Fund; Investment Objectives and Policies; Description of Shares
5. Management of the Fund Management;
Investment Objective and Policies; Dividends and Distributions;
Performance
6. Capital Stock and Other Securities Management;
Purchases and Redemptions of Shares; Dividends and Distributions;
Taxes; Description of Shares
7. Purchase of Securities Being Purchases and
Offered Redemptions
of Shares; Net Asset Value
8. Redemption or Repurchase Purchases
and Redemptions of Shares
9. Pending Legal Proceedings Not Applicable
Part B
- ------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History See Prospectus --
"Management;" General; Directors and Officers
13. Investment Objectives and Policies Fund Investments;
Additional Investment Limitations; Portfolio Transactions
14. Management of the Fund See Prospectus --
"Management;" Directors and Officers; Miscellaneous
15. Control Persons and Principal See Prospectus --
Holders of Securities "Management;"
Miscellaneous
16. Investment Advisory and Other Investment
Advisory
Services Services and
Other Service Arrangements; See Prospectus --"Management"
17. Brokerage Allocation and Other Portfolio
Practices
Transactions
18. Capital Stock and Other Securities See Prospectus --
"Description of Shares" and "Management;" Additional Information
Concerning Shares
19. Purchase, Redemption and Pricing Purchase and
of Securities Being Offered Redemption
Information; Net Asset Value; Additional Information Concerning
Shares
20. Tax Status Taxes
21. Underwriters
Distribution of Fund Shares
22. Calculation of Performance Data Performance
Information
23. Financial Statements Not Applicable
THE MUNDER FUNDS, INC.
The purpose of this Post-Effective Amendment filing is to
respond to the Staff's comments with respect to Thr Munder
International Bond Fund included in Post-Effective
Amendment No. 14 to the Company's Registration Statement and to
make other non-material language changes that the Registrant
deems appropriate.
The Prospectuses of The Munder Multi-Season Growth
Fund, The Munder Money Market Fund, The Munder Real Estate Equity
Investment Fund, The Munder Mid-Cap Growth Fund and The Munder
Value Fund (collectively, the "Existing Munder Funds") and
the Statement of Additional Information for the Existing Munder
Funds are not included in this filing.
<PAGE>
THE MUNDER INTERNATIONAL BOND FUND
480 PIERCE STREET
BIRMINGHAM, MICHIGAN 48009
TELEPHONE: (800) 438-5789
PROSPECTUS
CLASS A, CLASS B AND CLASS C SHARES
The Munder International Bond Fund (the "Fund") is a series of shares issued
by The Munder Funds, Inc. (the "Company"), an open-end management investment
company. The Fund's investment objective is to realize a competitive total
return through a combination of current income and capital appreciation. The
Fund seeks to achieve its objective by investing primarily in foreign debt
obligations. There can be no assurance that the Fund's investment objective
will be achieved. The net asset value per share of the Fund will fluctuate in
response to changes in market conditions and other factors.
Munder Capital Management (the "Advisor") serves as the investment advisor
to the Fund.
This Prospectus contains the information that a prospective investor should
know before investing in the Fund. Investors are encouraged to read this
Prospectus and retain it for future reference. A Statement of Additional
Information dated July 1, 1996, as amended or supplemented from time to time,
has been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus. It may be obtained free of
charge by calling the Fund at (800) 438-5789.
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.
SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECU-
RITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PRO-
SPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 3
The Fund
Expense Table............................................................ 5
Investment Objective and Policies........................................ 6
Portfolio Instruments and Practices...................................... 7
Investment Limitations................................................... 13
How to Do Business with Us
How to Purchase Shares................................................... 13
How to Redeem Shares..................................................... 18
Conversion of Class B Shares............................................. 21
How to Exchange Shares................................................... 22
Dividends and Distributions.............................................. 23
Other Information
Net Asset Value.......................................................... 23
Management............................................................... 24
Taxes.................................................................... 26
Description of Shares.................................................... 28
Performance.............................................................. 28
Shareholder Account Information.......................................... 29
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION, OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE COMPANY OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing in this Prospectus.
INVESTMENT OBJECTIVE
The investment objective of the Fund is to realize a competitive total
return through a combination of current income and capital appreciation. The
Fund seeks to achieve its objective by investing primarily in a non-
diversified portfolio of foreign debt obligations.
PRINCIPAL INVESTMENTS
Under normal market conditions, at least 65% of the Fund's assets are
invested in bonds of issuers located in at least three countries other than
the United States. The Fund invests in debt securities that allow it to
maintain an average dollar weighted portfolio maturity of three to fifteen
years.
INVESTMENT PROGRAM
The Fund invests substantially all of its assets in debt obligations of
foreign governments and their political subdivisions, debt securities issued
or guaranteed by supranational organizations, debt obligations of foreign and
domestic corporations, asset-backed securities and various mortgage-related
securities and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and other debt securities including those
convertible into foreign stock.
PURCHASE PLANS
This Prospectus offers three classes of shares ("Classes") to investors.
Investors may select Class A Shares, Class B Shares or Class C Shares, each
with different expense levels and with a public offering price that reflects
different sales charges. Purchases in excess of $250,000 must be for Class A
or Class C Shares. The Fund also offers two additional classes of Shares,
Class K Shares and Class Y Shares. These classes of the Fund may have
different sales charges and expense levels, which may affect performance.
Investors may call the Fund at (800) 438-5789 for more information concerning
Class K Shares and Class Y Shares.
CLASS A SHARES
Offered at net asset value plus a maximum initial sales charge of 4.00%. The
Fund pays a shareholder servicing fee at the annual rate of .25% of the value
of average daily net assets. See "How to Purchase Shares."
CLASS B SHARES
Offered at net asset value per share subject to a contingent deferred sales
charge ("CDSC") imposed on certain redemptions made within six years of the
date of purchase at the maximum rate of 5.00% of the lesser of the shares' net
asset value or original purchase price. The Fund is subject to shareholder
servicing and distribution fees at the annual rate of 1.00% of the value of
average daily net assets. Class B Shares will convert automatically to Class A
Shares, based on relative net asset value, at the end of six years after the
date of original purchase. See "How to Purchase Shares."
CLASS C SHARES
Offered at net asset value per share subject to a CDSC imposed on certain
redemptions made within one year of the date of purchase at the rate of 1.00%
of the lesser of the shares' net asset value or original purchase price. The
Fund is subject to shareholder servicing and distribution fees at the annual
rate of 1.00% of the value of average daily net assets.
PURCHASING SHARES
Class A Shares, Class B Shares and Class C Shares (the "Shares") of the Fund
are offered continuously and may be purchased from the Distributor through
certain broker-dealers and other financial institutions or through
3
<PAGE>
the Transfer Agent. Shares of the Fund are subject to the applicable sales
charge or CDSC. See "How to Purchase Shares."
MINIMUM INVESTMENT
$1,000 minimum investment ($50 through Automatic Investment Plan). $50
minimum for subsequent purchases.
EXCHANGE PRIVILEGES
Shares may be exchanged for shares of the same Class of other funds of the
Company or The Munder Funds Trust, subject to any applicable sales charge.
REINVESTMENT
Automatic reinvestment of dividends and capital gains without a sales charge
or CDSC unless a shareholder elects to receive cash.
OTHER FEATURES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C>
Automatic Investment
Plan Automatic Investment Plan Automatic Investment Plan
Automatic Withdrawal
Plan Automatic Withdrawal Plan Automatic Withdrawal Plan
Retirement Plans Retirement Plans Retirement Plans
Telephone Exchanges Telephone Exchanges Telephone Exchanges
Rights of Accumulation Reinvestment Privilege Reinvestment Privilege
Letter of Intent
Quantity Discounts
Reinvestment Privilege
</TABLE>
DIVIDENDS AND OTHER DISTRIBUTIONS
Dividends are declared quarterly for the Fund; capital gains are distributed
at least annually.
NET ASSET VALUE
Determined once daily for the Fund on each business day.
REDEEMING SHARES
Class A Shares of the Fund may be redeemed at net asset value per share by
mail, telephone or check. Certain redemptions of Class A Shares may be subject
to a CDSC. Class B and Class C Shares are redeemable at net asset value less
any applicable CDSC by mail or telephone. See "How to Redeem Shares."
INVESTMENT RISKS AND SPECIAL CONSIDERATIONS
The Fund's performance per Share will change daily based on many factors;
including interest rate levels, the quality of the instruments in the Fund's
investment portfolio, national and international economic conditions, general
market conditions and international exchange rates. Depending on these
factors, the net asset value of the Fund may decrease instead of increase. The
Fund will seek to achieve its investment objective through investments in
securities of foreign issuers that involve risks not typically associated with
U.S. issuers. It is anticipated that the Fund's annual portfolio turnover will
range from 200% to 300%. There is no assurance that the Fund will achieve its
investment objective. For hedging purposes the Fund may enter into certain
interest rate and currency swap transactions and the Fund also may engage in
certain futures contracts and options. These strategies are highly specialized
and involve techniques and risks different from those associated with ordinary
portfolio transactions. In addition, there are certain risks inherent in
investing in a non-diversified investment portfolio. See "Portfolio
Instruments and Practices."
4
<PAGE>
INVESTMENT ADVISOR
As investment advisor for the Fund, Munder Capital Management provides
overall investment management for the Fund, provides research and credit
analysis, is responsible for all purchases and sales of portfolio securities,
maintains records relating to such purchases and sales, and provides reports
to the Board of Directors. See "Management--Investment Advisor."
DISTRIBUTOR
Funds Distributor, Inc.
EXPENSE TABLE
The following table sets forth certain costs and expenses that an investor
will incur either directly or indirectly as a shareholder of the Fund based on
estimated operating expenses.
<TABLE>
<CAPTION>
CLASS CLASS CLASS
A B C
SHARES SHARES SHARES
------ ------ ------
<S> <C> <C> <C>
Shareholder transaction expenses:
Maximum sales load on purchases.................. 4.00% None None
Maximum sales load on reinvested dividends....... None None None
Maximum contingent deferred sales charge......... None(1) 5.00% 1.00%(2)
Redemption fees.................................. None None None
Exchange fees.................................... None None None
Annual operating expenses:
(as a percentage of average net assets)
Advisory fees.................................... .50% .50% .50%
12b-1 fees....................................... .25% 1.00%(3) 1.00%(3)
Other expenses................................... .35% .35% .35%
---- ---- ----
Total Fund operating expenses.................... 1.10% 1.85% 1.85%
==== ==== ====
</TABLE>
- --------
(1) A deferred sales charge of 1.00% is assessed on certain redemptions of
Class A Shares that were purchased with no initial sales charge as part of
an investment of $1,000,000 or more. See "How to Purchase Shares."
(2) A deferred sales charge of up to 1.00% is assessed on redemption of Class
C Shares made within the first year of investing.
(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the National Association of
Securities Dealers, Inc.
The initial sales charge applicable to Class A Shares set forth in the above
table is the maximum charge imposed upon the purchase of Class A Shares.
Reductions and waivers from sales loads are described under "How to Purchase
Shares." The CDSC applicable to Class B Shares set forth in the above table is
the maximum sales load applicable imposed upon redemption of Class B Shares.
Waivers of CDSC are described under "How to Redeem Shares."
"Other expenses" in the above table include fees for shareholder services,
administrator fees, custodial fees, legal and accounting fees, printing costs,
registration fees, fees for any portfolio valuation service, the cost of
regulatory compliance, the costs of maintaining the Fund's legal existence and
the costs involved with communicating with shareholders. The amount of "Other
expenses" is based on estimated expenses and projected assets for the current
fiscal year. The nature of the services for which the Fund is obligated to pay
advisory fees is described under "Management." Any fees charged by
institutions directly to customer accounts for services provided in connection
with investments in shares of the Fund are in addition to the expenses shown
in the above Expense Table and the Example shown below. The Transfer Agent may
deduct a wire redemption fee of $7.50 for wire redemptions under $5,000.
5
<PAGE>
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in the Fund. These amounts are based on payment
by the Fund of operating expenses at the levels set forth in the above table,
and are also based on the following assumptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
An investor would pay the following expenses on a
$1,000 investment, assuming a 5% annual return
Class A Shares(1).............................................. $51 $74
Class B Shares
Assuming redemption at end of time period(2)................... $69 $88
Assuming no redemption at the end of time period............... $19 $58
Class C Shares(3).............................................. $29 $58
</TABLE>
- --------
(1) Assumes deduction at the time of purchase of the maximum initial sales
charge and redemption at the end of the time period shown.
(2) Assumes deduction at the time of redemption of the maximum applicable
CDSC. See "How to Redeem Shares--Contingent Deferred Sales Charge--Class B
Shares."
(3) Assumes redemption at the end of time period shown and is subject to a
CDSC for redemptions made within one year of date of purchase.
Because of the 12b-1 fees paid by the Fund as shown in the above table,
long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers. Inc.
The foregoing Expense Table and Example are intended to assist investors in
understanding the various shareholder transaction expenses and operating
expenses of the Fund that investors bear either directly or indirectly.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL INVESTMENT RETURN AND
OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
THE FUND
The Munder International Bond Fund (the "Fund"), is a series of shares
issued by The Munder Funds, Inc. (the "Company"), an open-end management
investment company. The Company was incorporated under the laws of the State
of Maryland on November 18, 1992 and has registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund's principal office
is located at 480 Pierce Street, Birmingham, Michigan 48009 and its telephone
number is (800) 438-5789.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to realize a competitive total
return through a combination of current income and capital appreciation. The
Fund seeks to achieve its objective by investing primarily in foreign debt
obligations. As an international fund, the Fund may invest in securities of
any issuer and in any currency. Under normal market conditions, at least 65%
of the Fund's assets are invested in bonds of issuers located in at least
three countries other than the United States. The Fund will primarily invest
in foreign debt obligations denominated in foreign currencies, including the
European Currency Unit ("ECU"), which are issued by foreign governments and
governmental agencies, instrumentalities or political subdivisions; debt
securities issued or guaranteed by supranational organizations (e.g. European
Investment Bank, Inter-American Development Bank or the World Bank); corporate
debt securities; bank or bank holding company debt securities and other debt
securities including those convertible into foreign stock. For the purposes of
the 65% limitation with respect to
6
<PAGE>
the Fund's designation as an international bond fund, the securities described
in this paragraph are considered "international bonds." There can be no
assurance that the Fund will achieve its investment objective. Purchasing
shares of the Fund should not be considered a complete investment program, but
an important segment of a well-diversified investment program.
The Fund's dollar-weighted average maturity will generally be between three
and fifteen years except during temporary defensive periods, and will be
adjusted by the Advisor according to market conditions. Pending investment, to
meet anticipated redemption requests, or as a temporary defensive measure if
the Advisor determines that market conditions warrant, the Fund may invest
without limitation in short-term U.S. Government obligations, high quality
money market instruments and repurchase agreements. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. The
Fund may also invest in futures contracts and options and enter into interest
rate swap transactions. See "Portfolio Instruments and Practices--Futures
Contracts and Options" for a discussion of the risks associated with the use
of derivative instruments. A further description of the types of obligations
and the various investment techniques used by the Fund is provided below under
"Portfolio Instruments and Practices."
PORTFOLIO INSTRUMENTS AND PRACTICES
Foreign Debt Securities. The Fund may purchase debt obligations issued or
guaranteed by a foreign sovereign government or one of its agencies,
authorities, instrumentalities or political subdivisions, including foreign
states, provinces or municipalities and corporate debt securities. Investing
in the securities of any foreign issuer involves special risks and
considerations not typically associated with investing in U.S. issuers. These
include differences in accounting, auditing and financial reporting standards;
different disclosure laws, which may result in less publicly available
information about foreign issuers than U.S. issuers; generally higher markups
on foreign portfolio transactions; the possibility of nationalization,
expropriation or confiscatory taxation; adverse changes in investment or
exchange control regulations (which may include suspension of the ability to
transfer currency from a country); political instability; less government
regulation of securities markets, brokers and issuers; possible difficulty in
obtaining and enforcing judgments in foreign courts; and imposition of
restrictions on foreign investments. Additionally, foreign securities and
interest payable on those securities may be subject to foreign taxes,
including taxes withheld from payments on those securities. Foreign securities
often trade with less frequency and volume than domestic securities and
therefore may exhibit greater price volatility. Additional costs associated
with an investment in foreign securities may include higher custodial fees
than apply to U.S. custodial arrangements, and transaction costs of foreign
currency conversions. Changes in foreign exchange rates will also affect the
value of securities denominated or quoted in currencies other than the U.S.
dollar.
Corporate Obligations. The Fund may purchase commercial paper and corporate
bonds that meet the Fund's applicable quality and maturity limitations.
Commercial paper may include obligations issued by foreign corporations and
foreign counterparts of U.S. corporations and europaper, which is U.S. dollar-
denominated commercial paper of a foreign issuer. The Fund may also purchase
commercial paper indexed to certain specific foreign currency exchange rates.
The Fund will purchase only those securities which are considered to be
investment grade or better (within the four highest rating categories of
Standard & Poor's Ratings Service, a division of McGraw-Hill Companies, Inc.
("S&P") or Moody's Investor Services, Inc. ("Moody's") or, if unrated, of
comparable quality). Obligations rated "Baa" by Moody's lack outstanding
investment characteristics and have speculative characteristics. Adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of obligations rated "BBB" by S&P to pay interest and repay
principal than in the case of higher grade obligations. After purchase by the
Fund, a security may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Fund. Neither event will require the Fund
to sell such security. However, the Advisor will reassess promptly whether the
security presents minimal credit risks and determine whether continuing to
hold the security is in the best interests of the Fund. To the extent that the
ratings given by Moody's, S&P or another nationally recognized statistical
rating organization for securities may change as a result of changes in the
rating
7
<PAGE>
systems or because of corporate reorganization of such rating organizations,
the Fund will attempt to use comparable ratings as standards for its
investments in accordance with the investment objective and policies of the
Fund. Descriptions of each rating category are included as Appendix A to the
Statement of Additional Information.
Fixed Income Securities. The market value of fixed income securities held by
the Fund can be expected to vary inversely to changes in prevailing interest
rates. Investors should also recognize that in periods of declining interest
rates the yields of investment portfolios composed primarily of fixed income
securities will tend to be higher than prevailing market rates and, in periods
of rising interest rates, yields will tend to be somewhat lower. The Fund may
purchase zero-coupon bonds (i.e., discount debt obligations that do not make
periodic interest payments). Zero-coupon bonds are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
Forward Foreign Currency Transactions. The Fund normally conducts its
foreign currency exchange transactions either on a spot (cash) basis at the
spot rate prevailing in the foreign currencies or on a forward basis. Under
normal circumstances, the Advisor expects that the Fund will enter into
forward currency contracts (to purchase or sell a specified currency at a
specified future date and price). The Fund generally will not enter into a
forward contract with a term of greater than one year. Although forward
contracts are used primarily to protect the Fund from adverse currency
movements, they may also be used to increase exposure to a currency, and
involve the risk that anticipated currency movements will not be accurately
predicted and the Fund's total return will be adversely affected as a result.
Open positions in forward contracts are covered by the segregation with the
Fund's custodian of cash, U.S. Government securities or other high grade debt
obligations which are marked to market daily.
Bank Obligations. The Fund may purchase debt obligations issued or
guaranteed by supranational organizations such as the World Bank, Asian
Development Bank, European Investment Bank and European Union; debt
obligations of U.S. and foreign banks and bank holding companies and U.S.
dollar-denominated bank obligations, including certificates of deposit,
bankers' acceptances, bank notes, deposit notes and interest-bearing savings
and time deposits, issued by U.S. or foreign banks or savings institutions
having total assets at the time of purchase in excess of $1 billion. For this
purpose, the assets of a bank or savings institution include the assets of
both its domestic and foreign branches. See "Foreign Debt Securities" for a
discussion of the risks associated with investments in obligations of foreign
banks and foreign branches of domestic banks. Foreign bank obligations include
Eurodollar Certificates of Deposit ("ECDs"), Eurodollar Time Deposits
("ETDs"), Canadian Time Deposits ("CTDs"), Schedule Bs, Yankee Certificates of
Deposit ("Yankee CDs") and Yankee Bankers' Acceptances ("Yankee BAs"). A
discussion of these obligations appears in the Statement of Additional
Information under "Fund Investments."
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 market rates and current conditions in the
relevant housing markets. In calculating the weighted average maturity of the
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 a 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 a Fund purchases mortgage-related or
mortgage-backed
8
<PAGE>
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.
Interest Rate and Currency Swaps. For hedging purposes, the Fund may enter
into interest rate and currency swap transactions and purchase or sell
interest rate caps and floors. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations as a technique for managing the portfolio's duration (i.e., the
price sensitivity to changes in interest rates) or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. An interest rate or currency swap is a derivative instrument which
involves an agreement between the Fund and another party to exchange payments
calculated as if they were interest on a fictitious ("notional") principal
amount (e.g., an exchange of floating rate payments by one party for fixed
rate payments by the other). An interest rate cap or floor is a derivative
instrument which entitles the purchaser, in exchange for a premium, to receive
payments of interest on a notional principal amount from the seller of the cap
or floor, to the extent that a specified reference rate exceeds or falls below
a predetermined level.
The Fund usually enters into such transactions on a "net" basis, with the
Fund receiving or paying, as the case may be, only the net amount of the two
payment streams. The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each swap is accrued on a
daily basis and an amount of cash or high-quality liquid securities having an
aggregate net asset value at least equal to the accrued excess is maintained
in a segregated account by the Fund's custodian. If the Fund enters into a
swap on other than a net basis, or sells caps or floors, the Fund maintains a
segregated account in the full amount accrued on a daily basis of the Fund's
obligations with respect to the transaction. Such segregated accounts are
maintained in accordance with applicable regulations of the SEC.
The use of swaps, caps and floors is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Advisor's forecast of
market values, interest rates, currency rates of exchange and other applicable
factors is incorrect, the investment performance of the Fund will diminish
compared with the performance that could have been achieved if these
investment techniques were not used. Moreover, even if the Advisor's forecasts
were correct, a Fund's swap position may correlate imperfectly with the asset
or liability being hedged. In addition, in the event of a default by the other
party to the transaction, the Fund might incur a loss.
U.S. Government Obligations. The Fund may purchase obligations issued or
guaranteed by the U.S. Government and U.S. Government agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of
the U.S. Government, such as those of the Government National Mortgage
Association, are supported by the full faith and credit of the U.S. Treasury.
Others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the U.S. Treasury; and
still others, such as those of the Student Loan Marketing Association, are
supported only by the credit of the agency or instrumentality issuing the
obligation. No assurance can be given that the U.S. Government would provide
financial support to U.S. Government-sponsored instrumentalities if it is not
obligated to do so by law.
Borrowing. The Fund is authorized to borrow money in amounts up to 5% of the
value of the Fund's total assets at the time of such borrowing for temporary
purposes. However, the Fund is authorized to borrow money in amounts up to 33
1/3% of its assets, as permitted by the 1940 Act, for the purpose of meeting
redemption requests. Borrowing by the Fund creates an opportunity for greater
total return but, at the same time, increases exposure to capital risk. In
addition, borrowed funds are subject to interest costs that may offset or
exceed the return earned on the borrowed funds. However, the Fund will not
purchase portfolio securities while borrowings exceed 5% of the Fund's total
assets. For more detailed information with respect to the risks associated
with borrowing, see the heading "Fund Investments" in the Statement of
Additional Information.
Stripped Securities. The Fund may purchase participations in trusts that
hold U.S. Treasury and agency securities (such as TIGRs and CATS) and also may
purchase Treasury receipts and other stripped securities, which represent
beneficial ownership interests in either future interest payments or the
future principal payments
9
<PAGE>
on U.S. Government obligations. These instruments are issued at a discount to
their "face value" and may (particularly in the case of stripped mortgage-
backed securities) exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors. Stripped securities will normally be considered
illiquid investments and will be acquired subject to the limitation on
illiquid investments unless determined to be liquid under guidelines
established by the Board of Directors.
Repurchase Agreements. The Fund may agree to purchase securities from
financial institutions subject to the seller's agreement to repurchase them at
an agreed-upon time and price ("repurchase agreements"). The financial
institutions with which the Fund may enter into repurchase agreements include
member banks of the Federal Reserve System, any foreign bank or any domestic
or foreign broker/dealer which is recognized as a reporting government
securities dealer. The Advisor will review and continuously monitor the
creditworthiness of the seller under a repurchase agreement, and will require
the seller to maintain the value of the securities 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 the underlying
obligations.
Reverse Repurchase Agreements. The Fund may borrow funds for temporary
purposes by selling portfolio securities to financial institutions such as
banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). Reverse repurchase
agreements involve the risk that the market value of the securities sold by
the Fund may decline below the repurchase price. The Fund would pay interest
on amounts obtained pursuant to a reverse repurchase agreement.
Futures Contracts and Options. The Fund may write call options, buy put
options, buy call options and write secured put options. Such options may be
related to particular securities or to various bond indices. The Fund may also
purchase and write put and call options on foreign currencies (traded on U.S.
and foreign exchanges or over-the-counter) to manage the Fund's exposure to
changes in dollar exchange rates. The Fund may also invest in futures
contracts and options on futures contracts for hedging purposes or to maintain
liquidity. However, the Fund may not purchase or sell a futures contract
unless immediately after any such transaction the sum of the aggregate amount
of margin deposits on its existing futures positions and the amount of
premiums paid for related options is 5% or less of its total assets.
Options trading is a highly specialized activity which entails greater than
ordinary investment risks. A call option for a particular security gives the
purchaser of the option the right to buy, and a writer the obligation to sell,
the underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is the consideration for undertaking the
obligations under the option contract. A put option for a particular security
gives the purchaser the right to sell, and the writer the obligation to
purchase, the underlying security prior to the expiration date of the option,
regardless of the market price of the security. In contrast to an option on a
particular security, an option on a bond index provides the holder with the
right to make or receive a cash settlement upon exercise of the option.
Futures contracts obligate the Fund, at maturity, to take or make delivery
of certain securities or the cash value of a bond or securities index. When
interest rates are rising, futures contracts can offset a decline in value of
the Fund's portfolio securities. When rates are falling, these contracts can
secure higher yields for securities the Fund intends to purchase.
The Fund may purchase and sell call and put options on futures contracts
traded on an exchange or board of trade. When the Fund purchases an option on
a futures contract, it has the right to assume a position as a purchaser or
seller of a futures contract at a specified exercise price at any time during
the option period. When the Fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the option is
exercised. In anticipation of a decline in interest rates, the Fund may
purchase call options on futures contracts as a substitute for the purchase of
futures contracts to hedge against a possible increase in the price of
securities which the Fund intends to purchase. Similarly, if the value of the
Fund's portfolio securities is expected to decline as a result of an increase
in interest rates, the Fund might purchase put options or sell call options on
10
<PAGE>
futures contracts rather than sell futures contracts. The Fund may also enter
into contracts for the purchase or sale for future delivery of foreign
currencies.
In connection with the Fund's position in a futures contract or option
thereon, the Fund will create a segregated account of liquid assets or will
otherwise cover its position in accordance with applicable requirements of the
SEC.
The use of derivative instruments exposes the 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 the 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 inability
to close out certain hedged positions to avoid adverse tax consequences; (5)
the possible absence of a liquid secondary market for any particular
instrument and possible exchange-imposed price fluctuation limits, either of
which may make it difficult or impossible to close out a position when
desired; (6) leverage risk, that is, the risk that adverse price movements in
an instrument can result in a loss substantially greater than the Fund's
initial investment in that instrument (in some cases, the potential loss is
unlimited); and (7) particularly in the case of privately negotiated
instruments, the risk that the counterparty will fail to perform its
obligations, which could leave the Fund worse off than if it had not entered
into the position. For a further discussion see "Fund Investments" and
Appendix B in the Statement of Additional Information.
Variable and Floating Rate Instruments. 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 (this demand feature
is not required if the instrument is guaranteed by the U.S. Government or an
agency or instrumentality thereof). 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. Unrated variable and
floating rate instruments will be determined by the Advisor to be of
comparable quality at the time of purchase to rated instruments purchasable by
the Fund. The absence of an active secondary market, however, could make it
difficult to dispose of the instruments, and the 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 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.
Guaranteed Investment Contracts. The Fund may make limited investments in
guaranteed investment contracts ("GICs") issued by U.S. insurance companies.
Pursuant to such contracts, the Fund makes a cash contribution to a deposit
fund of the insurance company's general account. The insurance company then
credits to the Fund on a monthly basis interest which is based on an index (in
most cases this index is expected to be the Salomon Brothers CD Index), but is
guaranteed not to be less than a certain minimum rate. A GIC is normally a
general obligation of the issuing insurance company and not funded by a
separate account. The purchase price paid for a GIC becomes part of the
general assets of the insurance company, and the contract is paid from the
company's general assets. The Fund will only purchase GICs from insurance
companies which, at the time of purchase, have assets of $1 billion or more
and meet quality and credit standards established by the Advisor pursuant to
guidelines approved by the Board of Directors. Generally, GICs are not
assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Therefore, GICs will normally be considered illiquid investments, and will be
acquired subject to the limitation on illiquid investments.
When-lssued Purchases and Forward Commitments. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis. These transactions, which involve a commitment by
the Fund to purchase or sell particular securities with payment and delivery
taking place at a
11
<PAGE>
future date (perhaps one or two months later), permit the Fund to lock-in a
price or yield on a security, regardless of future changes in interest rates.
When-issued and forward commitment transactions involve the risk that the
price or yield obtained may be less favorable than the price or yield
available when the delivery takes place. The Fund will establish a segregated
account consisting of cash, U.S. Government securities or other high grade
debt obligations in an amount equal to the amount of its when-issued purchases
and forward commitments. The Fund's when-issued purchases and forward purchase
commitments are not expected to exceed 25% of the value of the Fund's total
assets absent unusual market conditions. The Fund does not intend to engage in
when-issued purchases and forward commitments for speculative purposes but
only in furtherance of its investment objective.
Investment Company Securities. In connection with the management of its
daily cash position, the Fund may invest in securities issued by other
investment companies which invest in short-term debt securities and which seek
to maintain a $1.00 net asset value per share (i.e. "money market funds").
Securities of other investment companies will be acquired within limits
prescribed by the 1940 Act. These limitations, among other matters, restrict
investments in securities of other investment companies to no more than 10% of
the value of the Fund's total assets, with no more than 5% invested in the
securities of any one investment company. As a shareholder of another
investment company, 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 fees and expenses the Fund bears directly in connection
with its own operations.
Illiquid Securities. The Fund will not invest more than 15% of the value of
its net assets (determined at the time of acquisition) in securities that are
illiquid. If, after the time of acquisition, events cause this limit to be
exceeded, the Fund will take steps to reduce the aggregate amount of its
illiquid holdings as soon as reasonably practicable in accordance with the
policies of the SEC. Subject to this limitation are GICs and repurchase
agreements and time deposits which do not provide for payment within seven
days. 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 (the "1933 Act") ("Section 4(2)
paper"). The Fund may also purchase securities that are not registered under
the 1933 Act, but which can be sold to qualified institutional buyers in
accordance with Rule 144A under the 1933 Act ("Rule 144A securities"). Section
4(2) paper is restricted as to disposition under Federal securities laws, and
generally is sold to institutional investors which agree to purchase the paper
for investment and not with a view to public distribution. Any resale by the
purchasers must be 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 who make a market in the Section 4(2) paper, thus
providing liquidity. Rule 144A securities generally must be sold only to other
qualified institutional buyers. If a particular investment in Section 4(2)
paper or Rule 144A securities is not determined to be liquid, that investment
will be included within the Fund's limitation on investments in illiquid
securities. The Advisor will determine the liquidity of such investments
pursuant to guidelines established by the Board of Directors.
Lending of Portfolio Securities. To enhance the return of its portfolio, the
Fund may lend securities in its portfolio representing up to 25% of its total
assets, taken at market value, to securities firms and financial institutions,
provided that each loan is secured continuously by collateral in the form of
cash, high quality money market instruments or short-term U.S. Government
securities adjusted daily to have a market value at least equal to the current
market value of the securities loaned. The risk in lending portfolio
securities, as with other extensions of credit, consists of possible delay in
the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially.
Diversification. The Fund is classified as a non-diversified investment
company under the 1940 Act. As a "non-diversified" investment company, the
Fund is not subject to the provisions of the 1940 Act which would otherwise
limit the proportion of its assets that may be invested in obligations of a
single issuer. Consequently, because the Fund may hold a relatively high
proportion of its assets in a limited number of issuers, an investment in the
Fund may, under certain circumstances, present greater risk to an investor
than an investment in a diversified investment company. Investment return on a
non-diversified portfolio typically is dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. Consequently, the change in value of any one security may affect
the overall value of a non-diversified portfolio
12
<PAGE>
more than it would a diversified portfolio, and thereby subject the market-
based net asset value per share of the non-diversified portfolio to greater
fluctuations. In addition, a non-diversified portfolio may be more susceptible
to economic, political and regulatory developments than a diversified
investment portfolio with similar objectives. The Fund will, however, comply
with the diversification requirements imposed by the Internal Revenue Code of
1986, as amended (the "Code").
Portfolio Turnover. The Advisor will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with the Fund's
objective and policies. A high portfolio turnover rate involves larger
brokerage commission expenses or transaction costs which must be borne
directly by the Fund, and may result in the realization of short-term capital
gains which are taxable to shareholders as ordinary income. It is anticipated
that the Fund's annual portfolio turnover will range from 200% to 300%.
INVESTMENT LIMITATIONS
The Fund's investment objective and policies may be changed by the Company's
Board of Directors without shareholder approval. However, shareholders will be
notified of any such material change, except where notice is not required. No
assurance can be given that the Fund will achieve its investment objective.
The Fund has also adopted certain fundamental investment limitations that
may be changed only with the approval of a "majority of the outstanding shares
of the Fund" (as defined in the Statement of Additional Information). The
following descriptions summarize several of the Fund's fundamental investment
policies, which are set forth in full in the Statement of Additional
Information.
The Fund may not:
(1) invest 25% or more of its total assets in one or more issuers
conducting their principal business activities in the same industry
(securities issued or guaranteed by the United States Government, its
agencies or instrumentalities are not considered to represent industries);
and
(2) borrow money or issue senior securities (as defined in the 1940 Act)
except (i) to borrow for temporary purposes in amounts not exceeding 5% of
its total assets and (ii) to meet redemption requests, in amounts (when
aggregated with amounts borrowed under clause (i)) not exceeding 33 1/3% of
its total assets.
These investment limitations are applied at the time investment securities
are purchased.
HOW TO PURCHASE SHARES
This Prospectus offers individual investors three methods of purchasing
shares of the Fund, thus enabling investors to choose the Class that best
suits their needs, given the amount of purchase and intended length of
investment.
Shares of the Fund are sold on a continuous basis and may be purchased on
any day the New York Stock Exchange is open for business through authorized
investment dealers or directly from Funds Distributor, Inc. (the
"Distributor") or the Transfer Agent. Only the Distributor and investment
dealers which have a sales agreement with the Distributor are authorized to
sell shares of the Fund. The Distributor is a registered broker/dealer with
principal offices at One Exchange Place, Boston, Massachusetts 02109.
Shares will be credited to a shareholder's account at the public offering
price next computed after an order is received by the Distributor or a dealer,
less any applicable initial sales charges. The issuance of shares is recorded
on the books of the Fund, and share certificates are not issued unless
expressly requested in writing. The Fund's management reserves the right to
reject any purchase order if in its opinion, it is in the Fund's best interest
to do so and to suspend the offering of shares of any class for any period of
time.
13
<PAGE>
The minimum initial investment for Class A, Class B or Class C Shares is
$1,000 and subsequent investments must be at least $50. Purchases in excess of
$250,000 must be for Class A Shares or Class C Shares. Payments for Shares of
the Fund may, in the discretion of the Advisor, be made in the form of
securities that are permissible investments for the Fund. For further
information, see "In-Kind Purchases" in the Statement of Additional
Information.
DIFFERENCES AMONG THE CLASSES
The primary distinctions among the classes of the Fund's shares are in their
sales charge structures and ongoing expenses, as summarized in the table
below. Each class has distinct advantages and disadvantages for different
investors, and investors may choose the class that best suits their
circumstances and objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE
SALES CHARGE DAILY NET ASSETS) OTHER INFORMATION
------------ ------------------ -----------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge Service fee of 0.25% Initial sales charge waived
of 4% of the public offering or reduced for certain
price purchases.
CLASS B Maximum CDSC of 5% of Service fee of 0.25%; CDSC waived for certain
redemption proceeds; distribution fee of 0.75% redemptions; shares convert
declines to zero after six to Class A Shares
years approximately six years
after issuance, subject to
receipt of certain tax
rulings or opinions.
CLASS C Maximum CDSC of 1% of Service fee of 0.25%; Shares do not convert to
redemption proceeds for distribution fee of 0.75% another class.
redemptions made within the
first year after purchase
</TABLE>
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES
In deciding which class of shares to purchase, investors should consider the
cost of sales charges together with the cost of the ongoing annual expenses
described below, as well as any other relevant facts and circumstances:
Sales Charges
Class A Shares are sold at net asset value plus an initial sales charge of
up to 4% of the public offering price. Because of this initial sales charge,
not all of a Class A shareholder's purchase price is invested in the Fund.
Class A Shares sold pursuant to a complete waiver of the initial sales charge
applicable to large purchases are subject to a 1% CDSC if redeemed within one
year of the date of purchase.
Class B Shares are sold with no initial sales charge, but a CDSC of up to 5%
of the redemption proceeds applies to redemptions made within six years of
purchase. See "Redemption of Shares Contingent Deferred Sales Charge--Class B
Shares." Class B Shares are subject to higher ongoing expenses than Class A
Shares, but automatically convert to Class A Shares approximately six years
after issuance subject to receipt of certain tax rulings and opinions.
Class C Shares are sold without an initial sales charge or a CDSC, except
for a CDSC of 1% applicable to redemptions made within the first year after
investing. Thus, the entire amount of a Class B or C shareholder's purchase
price is immediately invested in the Fund.
Waiver and Reductions of Class A Sales Charges
Class A share purchases of $100,000 or more may be made at a reduced sales
charge. In considering the combined cost of sales charges and ongoing annual
expenses, investors should take into account any applicable
14
<PAGE>
reduced sales charges on Class A Shares. In addition, the entire initial sales
charge on Class A Shares is waived for certain eligible purchasers. See
"Initial Sales Charge--Class A Shares." Because Class A Shares bear lower
ongoing annual expenses than Class B Shares or Class C Shares, investors
eligible for complete initial sales charge waivers should purchase Class A
Shares.
Ongoing Annual Expenses
Classes A, B and C Shares pay an annual 12b-1 service fee of 0.25% of
average daily net assets. Classes B and C Shares pay an annual 12b-1
distribution fee of 0.75% of average daily net assets. An investor should
consider both ongoing annual expenses and initial or contingent deferred sales
charges in estimating the costs of investing in the respective classes of Fund
shares over various time periods.
For example, assuming a constant net asset value, the cumulative
distribution fee on Class B and Class C Shares would approximate the expense
of the 4.0% maximum initial sales charge on the Class A Shares if the shares
were held for approximately 5 1/2 years. Because Class B Shares convert to
Class A Shares (which do not bear the expense of ongoing distribution fees)
approximately six years after purchase (subject to receipt of certain tax
rulings or opinions), an investor expecting to hold shares of the Fund for
longer than six years would generally pay lower cumulative expenses by
purchasing Class B Shares than by purchasing Class C Shares. An investor
expecting to hold shares of the Fund for less than four years would generally
pay lower cumulative expenses by purchasing Class C Shares than by purchasing
Class A Shares, and due to the contingent deferred sales charges that would
become payable on redemption of Class B Shares, such an investor would
generally pay lower cumulative expenses by purchasing Class C Shares than
Class B Shares. On the other hand, an investor expecting to hold shares of the
Fund for more than six years would generally pay lower cumulative expenses by
purchasing Class B Shares because of the Class B conversion feature described
under "Conversion of Class B Shares." An investor who qualifies for a
reduction or waiver of the initial sales charge on Class A Shares may pay
lower cumulative expenses by purchasing Class A Shares than by purchasing
Class B or Class C Shares.
The foregoing examples do not reflect, among other variables, the cost or
benefit of bearing sales charges or distribution fees at the time of purchase,
upon redemption or over time, nor can they reflect fluctuations in the net
asset value of Fund shares, which will affect the actual amount of expenses
paid. Expenses borne by classes may differ slightly because of the allocation
of other class-specific expenses, such as transfer agency fees, printing and
postage expenses related to shareholder reports, prospectuses and proxies, and
securities registration fees. The example set forth above under "Fund
Expenses" shows the cumulative expenses an investor would pay over periods of
one, three, five and ten years on a hypothetical investment in each class of
Fund shares, assuming an annual return of 5%.
Other Information
Dealers may receive different levels of compensation for selling one
particular class of Fund shares rather than another. Investors should
understand that distribution fees and initial and contingent deferred sales
charges all are intended to compensate the Distributor for distribution
services.
An account may be opened by mailing a check or other negotiable bank draft
(payable to The Munder Funds) for $1,000 or more for Class A, Class B or Class
C Shares with a completed and signed Account Application Form to The Munder
Funds, c/o First Data Investor Services Group, Inc., P.O. Box 9755 Providence,
Rhode Island 02940-9755. An Account Application Form may be obtained by
calling (800) 438-5789. All such investments are made at the public offering
price of Fund shares next computed following receipt of payment by the
Transfer Agent. The public offering price for the shares is the per share net
asset value (see "Net Asset Value") next determined after receipt of the order
by the dealer, plus any applicable initial sales charge for Class A Shares.
Confirmations of the opening of an account and of all subsequent transactions
in the account are forwarded by the Transfer Agent to the shareholder's
address of record. When placing purchase orders, investors should specify the
class of shares being purchased. All share purchase orders that fail to
specify a class will automatically be invested in Class A Shares.
15
<PAGE>
The completed investment application must indicate a valid taxpayer
identification number and must be certified as such. Failure to provide a
certified taxpayer identification number may result in backup withholding at
the rate of 31%. Additionally, investors may be subject to penalties if they
falsify information with respect to their taxpayer identification numbers.
In addition, investors having an account with a commercial bank that is a
member of the Federal Reserve System may purchase shares of the Fund by
requesting their bank to transmit funds by wire to Boston Safe Deposit and
Trust Company, Boston, MA, ABA #011001234, DDA #16-798-3, Fund Name,
Shareholder Account Number, Account of (Registered Shareholder). Before wiring
any funds, an investor must contact the Fund by calling (800) 438-5789 to
confirm the wire instructions. The investor's name, account number, taxpayer
identification or social security number, and address must be specified in the
wire. In addition, an Account Application Form containing the investor's
taxpayer identification number should be forwarded within seven days of
purchase to The Munder Funds, c/o First Data Investor Services Group, Inc.,
P.O. Box 9755, Providence, Rhode Island 02940-9755.
Additional investments may be made at any time through the wire procedures
described above, which must include the investor's name and account number.
The investor's bank may impose a fee for investments by wire.
AUTOMATIC INVESTMENT PLAN ("AIP")
An investor in Class A, Class B and Class C Shares of the Fund may arrange
for periodic investments in the Fund through automatic deductions from a
checking or savings account by completing the AIP Application Form or by
calling the Fund at (800) 438-5789. The minimum pre-authorized investment
amount is $50. Such a plan is voluntary and may be discontinued by the
shareholder at any time or by the Company on 30 days' written notice to the
shareholder.
See the Statement of Additional Information for further information
regarding purchases of the Fund's Shares.
REINVESTMENT PRIVILEGE
Upon redemption of Class A, B or C Shares of the Fund (or Class A, B or C
Shares of another non-money market fund of the Company or The Munder Funds
Trust), a shareholder has an annual right, to be exercised within 60 days, to
reinvest the redemption proceeds in shares of the same class of the same fund
without any sales charges of redemption. The Transfer Agent must be notified
in writing by the purchaser, or by his or her broker, at the time the purchase
is made of the reinvestment in order to eliminate a sales charge.
INITIAL SALES CHARGE--CLASS A SHARES
The public offering price of Class A Shares is the next determined net asset
value, plus any applicable sales charge, which will vary with the size of the
purchase as shown in the following table:
INITIAL SALES CHARGE SCHEDULE--CLASS A SHARES
<TABLE>
<CAPTION>
SALES CHARGE AS
A PERCENTAGE OF DISCOUNT TO
-------------------------- SELECTED DEALERS
NET AMOUNT AS A PERCENTAGE
OFFERING INVESTED OF OFFERING
AMOUNT OF PURCHASE PRICE (NET ASSET VALUE) PRICE
- ------------------ -------- ----------------- ----------------
<S> <C> <C> <C>
Less than $100,000.................. 4.00% 4.17% 3.75%
$100,000 but less than $250,000..... 3.00% 3.09% 2.75%
$250,000 but less than $500,000..... 2.00% 2.04% 1.75%
$500,000 but less than $1,000,000... 1.25% 1.27% 1.00%
$1,000,000 or more.................. None* None* (see below)**
</TABLE>
16
<PAGE>
- --------
*No initial sales charge applies on investments of $1 million or more, but a
CDSC of 1% is imposed on certain redemptions within one year of the
purchase. See "Redemption of Shares--Contingent Deferred Sales Charge--Class
A and Class C Shares."
**A 1% commission will be paid by the Distributor to dealers who initiate
and are responsible for purchases of $1 million or more.
The Distributor will pay the appropriate Dealers' Reallowance to brokers
purchasing Class A Shares. From time to time, the Distributor may reallow to
brokers the full amount of the sales charge on Class A Shares. To the extent
the Distributor reallows more than 90% of the sales charge to brokers, such
brokers may be deemed to be underwriters under the 1933 Act. In addition to
the Dealers' Reallowance, the Distributor will, from time to time, at its
expense or as an expense for which it may be reimbursed under the Class B Plan
or Class C Plan described below, pay a bonus or other consideration or
incentive (which may be in the form of merchandise or trips) to brokers or
institutions which sell a minimum dollar amount of shares of the Fund during a
specified period of time. Dealers may receive compensation from the
Distributor on sales made without a sales charge.
SALES CHARGE WAIVERS--CLASS A SHARES
Upon notice to the Transfer Agent at the time of purchase, the initial sales
charge will be waived on sales of Class A Shares to the following types of
purchasers: (1) individuals with an investment account or relationship with
the Advisor; (2) full-time employees and retired employees of the Advisor,
employees of the Fund's Administrator, Distributor and Custodian, and
immediate family members of such persons; (3) registered broker-dealers that
have entered into selling agreements with the Distributor, for their own
accounts or for retirement plans for their employees or sold to registered
representatives for full-time employees (and their families) that certify to
the Distributor at the time of purchase that such purchase is for their own
account (or for the benefit of their families); (4) certain qualified employee
benefit plans as defined below; and (5) financial institutions, financial
planners or employee benefit plan consultants acting for the accounts of their
clients.
QUALIFIED EMPLOYER SPONSORED RETIREMENT PLANS
Upon notice to the Transfer Agent at the time of purchase, the initial sales
charge will be waived on purchases by employer sponsored retirement plans
which are qualified under Section 401(a) of the Code including: 401(k) plans,
defined benefit pension plans, profit-sharing pension plans, money-purchase
pension plans; and Section 457 deferred compensation plans and Section 403(b)
plans (each, a "Qualified Employee Benefit Plan") that (1) invest $1,000,000
or more in Class A Shares of investment portfolios offered by the Company or
The Munder Funds Trust (other than the Index 500 Fund) or (2) have at least 75
eligible plan participants. In addition, the CDSC of 1% imposed on certain
redemptions within one year of purchase will be waived for Qualified Employee
Benefit Plan purchases that meet the above criteria. A 1% commission will be
paid by the Distributor to dealers who initiate and are responsible for
Qualified Employee Benefit Plan purchases that meet the above criteria. For
purposes of the foregoing sales charge waiver, Simplified Employee Pension
Plans ("SEPs") and Individual Retirement Accounts ("IRAs") are not considered
to be Qualified Employee Benefit Plans.
Sales charges will be waived for individuals who purchase Class A Shares
with the proceeds of distributions from qualified retirement plans for which
Munder Capital Management serves as investment advisor. Sales charges will be
waived for individuals who purchase Class A Shares with the proceeds of Class
Y Shares of the funds of the Company or The Munder Funds Trust if the proceeds
are invested within 60 days of redemptions. See "Other Information--
Description of Shares."
If an investor intends to purchase over the next 13 months at least $100,000
of Class A Shares, the sales charge may be reduced by completing the Letter of
Intent portion of the Account Application Form or the applicable form from the
investor's broker. The Letter of Intent includes a provision for a sales
charge adjustment
17
<PAGE>
depending on the amount actually purchased within the 13-month period. In
addition, pursuant to a Letter of Intent, the Custodian will hold in escrow
the difference between the sales charge applicable to the amount initially
purchased and the sales charge paid at the time of the investment which is
based on the amount covered by the Letter of Intent. The amount held in escrow
will be applied to the investor's account at the end of the 13-month period
unless the amount specified in the Letter of Intent is not purchased.
The Letter of Intent will not obligate the investor to purchase shares, but
if he or she does, each purchase made during the period will be at the sales
charge applicable to the total amount intended to be purchased. The letter may
be dated as of a prior date to include any purchase made within the past 90
days. The Letter of Intent will apply only to Class A Shares of the Fund or
other investment portfolios of the Company and The Munder Funds Trust. The
value of Class B or Class C Shares of any Fund of the Company or The Munder
Funds Trust will not be counted toward the fulfillment of a Letter of Intent.
As shown in the table under "Initial Sales Charge--Class A Shares," larger
purchases may reduce the sales charge paid. Upon notice to the investor's
broker or the Transfer Agent, purchases of Class A Shares that are made by the
investor, his or her spouse, his or her children under age 21 and his or her
IRA will be combined when calculating the sales charge. The value of Class B
or Class C Shares of any fund of the Company or The Munder Funds Trust will
not be counted toward the foregoing Quantity Discounts.
An investor who has previously purchased Class A Shares of a non-money
market fund of the Company or The Munder Funds Trust upon which a sales charge
has already been paid may upon request aggregate investments in such shares
with current purchases to determine the applicable sales charge for current
purchases. An investor's aggregate investment is the total value (based upon
the greater of current net asset value or the public offering price originally
paid, if provided at the time of purchase) of: (a) current purchases, and (b)
shares that are beneficially owned by the investor for which a sales charge
has already been paid. Similarly, with respect to each subsequent investment,
all Class A Shares of a non-money market fund of the Company or The Munder
Funds Trust upon which a sales charge has already been paid that are
beneficially owned by the investor at the time of investment may be combined
to determine the applicable sales charge.
Pursuant to the Fund's Variable Pricing System, the Fund issues two
additional classes of shares, Class K and Class Y Shares in addition to the
classes described in this Prospectus. Class K and Class Y Shares have
different sales charges and expense levels, which will affect performance.
Investors may call (800) 438-5789 to obtain more information concerning Class
K and Class Y Shares. When placing purchase orders, investors should specify
the class of shares being purchased. All share purchase orders that fail to
specify a class will automatically be invested in Class A Shares.
HOW TO REDEEM SHARES
Generally, shareholders may require the Fund to redeem their shares by
sending a written request, signed by the record owner(s), to The Munder Funds,
c/o First Data Investor Services Group, Inc., P.O. Box 9755, Providence, Rhode
Island 02940-9755. 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 brokerage costs in converting such securities to
cash.
SIGNATURE GUARANTEE
If the proceeds of the redemption are greater than $50,000, or are to be
paid to someone other than the registered holder, or to other than the
shareholder's address of record, or if the shares are to be transferred, the
owner's signature must be guaranteed by a commercial bank, trust company,
savings association or credit union as defined by the Federal Deposit
Insurance Act, or by a securities firm having membership on a recognized
national securities exchange. No signature guarantees are required for shares
for which certificates have not been issued when an application is on file
with the Transfer Agent and payment is to be made to the shareholder of record
at the shareholder's address of record. The redemption price shall be the net
asset value per share next
18
<PAGE>
computed after receipt of the redemption request in proper order. See "Net
Asset Value." Redemption proceeds will be reduced by the amount of any CDSC
(see below).
EXPEDITED REDEMPTION
In addition, a shareholder redeeming at least $1,000 of shares and who has
authorized expedited redemption on the application form filed with the
Transfer Agent may, at the time of such redemption, request that funds be
mailed to the commercial bank or registered broker-dealer previously
designated on the application form by telephoning the Fund at (800) 438-5789
prior to 4:00 p.m. New York City time. Redemption proceeds will be sent on the
next business day following receipt of the telephone redemption request. If a
shareholder seeks to use an expedited method of redemption of shares recently
purchased by check, the Fund may withhold the redemption proceeds until it is
reasonably assured of the collection of the check representing the purchase,
which may take up to 15 days.
There is no minimum for telephone redemptions paid by check. However, the
Transfer Agent may deduct its current wire fee from the principal in the
shareholder's account for wire redemptions under $5,000. As of the date of
this Prospectus, this fee was $7.50 for each wire redemption. There is no
charge for wire redemptions of $5,000 or more.
The Company, the Distributor and the Transfer Agent reserve the right at any
time to suspend or terminate the redemption procedure or to impose a fee for
this service. During periods of unusual economic or market changes,
shareholders may experience difficulties or delays in effecting telephone
redemptions. The Transfer Agent has instituted procedures that it believes are
reasonably designed to insure that redemption instructions communicated by
telephone are genuine, and could be liable for losses caused by unauthorized
or fraudulent instructions in the absence of such procedures. The procedures
currently include a recorded verification of the shareholder's name, social
security number and account number, followed by the mailing of a statement
confirming the transaction, which is sent to the address of record. If these
procedures are followed, neither the Company, the Distributor nor the Transfer
Agent will be responsible for any loss, damages, expense or cost arising out
of any telephone redemptions effected upon instructions believed by them to be
genuine. Redemption proceeds will be mailed only according to the previously
established instructions.
The right of redemption and payment of redemption proceeds are subject to
suspension for any period during which the New York Stock Exchange is closed,
or when trading on the New York Stock Exchange is restricted as determined by
the SEC; during any period when an emergency as defined by the rules and
regulations of the SEC exists; or during any period when the SEC has by order
permitted such suspension. The Fund will not mail redemption proceeds until
checks (including certified checks or cashier's checks) received for the
shares purchased have cleared, which can be as long as 15 days.
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 redemption price. In such cases, an investor
may incur brokerage costs in converting such securities to cash. 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.
The value of shares on repurchase may be more or less than the investor's
cost depending upon the market value of the Fund's portfolio securities at the
time of redemption. No redemption fee is charged for the redemption of shares,
but a CDSC is imposed on certain redemptions of Class A, Class B and Class C
Shares as described below.
INVOLUNTARY REDEMPTION
The Fund may involuntarily redeem an investor's shares if the net asset
value of such shares is less than $500; provided that involuntary redemptions
will not result from fluctuations in the value of an investor's shares.
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<PAGE>
An investor may be notified that the value of the investor's account is less
than $500, in which case the investor would be allowed 60 days to make an
additional investment before the redemption is processed.
AUTOMATIC WITHDRAWAL PLAN ("AWP")
The Fund offers an Automatic Withdrawal Plan which may be used by holders of
Class A, Class B and Class C Shares who wish to receive regular distributions
from their accounts. Upon commencement of the AWP, the account must have a
current value of $2,500 or more in the Fund. Shareholders may elect to receive
automatic cash payments of $50 or more on a monthly, quarterly, semi-annual,
or annual basis. Automatic withdrawals are normally processed on the 20th day
of the applicable month or, if such day is not a day the New York Stock
Exchange is open for business, on the next business day, and are paid promptly
thereafter. An investor may utilize the AWP by completing the AWP Application
Form available through the Transfer Agent.
Shareholders should realize that if withdrawals exceed income dividends
their invested principal in the account will be depleted. Thus, depending upon
the frequency and amounts of the withdrawal payments and/or any fluctuations
in the net asset value per share, their original investment could be exhausted
entirely. To participate in the AWP, shareholders must have their dividends
automatically reinvested and may not hold share certificates. Shareholders may
change or cancel the AWP at any time, upon written notice to the Transfer
Agent. Purchases of additional Class A Shares of the Fund concurrently with
withdrawals may be disadvantageous to investors because of the sales charges
involved, and, therefore, are discouraged. Class B and Class C Shares, if any,
that are redeemed in connection with the AWP are still subject to the
applicable CDSC.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES
Class B Shares that are redeemed within six years of purchase will be
subject to a CDSC as set forth below. A CDSC payable to the Distributor is
imposed on any redemption of shares that causes the current value of a
shareholder's account to fall below the dollar amount of all payments by the
shareholder for the purchase of shares during the preceding six years.
The CDSC will be waived for certain exchanges as described below. In
addition, Class B Shares that are redeemed will not be subject to a CDSC to
the extent that the value of such shares represents (1) reinvestment of
dividends or capital gains distributions, (2) shares held more than six years,
or (3) capital appreciation of shares redeemed. In determining the
applicability and rate of any CDSC, it will be assumed that a redemption of
Class B Shares is made first of shares representing reinvestment of dividends
and capital gains distributions, then any appreciation on shares redeemed, and
then of remaining shares held by the shareholders for the longest period of
time. The purchase payment from which a redemption is made is assumed to be
the earliest purchase payment from which a full redemption has not already
been effected. The holding period of Class B Shares of the Fund acquired
through an exchange of Class B Shares of The Munder Money Market Fund (which
are available only by exchange of Class B Shares of the Fund) will be
calculated from the date that the Class B Shares of the Fund were initially
purchased.
The amount of any applicable CDSC will be calculated by multiplying the net
asset value of shares subject to the charge at the time of redemption or at
the time of purchase, whichever is lower, by the applicable percentage shown
in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
------------------- -------------------
<S> <C>
First................ 5.00%
Second............... 4.00%
Third................ 3.00%
Fourth............... 3.00%
Fifth................ 2.00%
Sixth................ 1.00%
Seventh.............. 0.00%
</TABLE>
20
<PAGE>
For Federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the
redemption of shares. The amount of any CDSC will be paid to the Distributor.
The Distributor will pay a commission of 4.0% of the net asset value of
Class B Shares to brokers that initiate and are responsible for purchases of
Class B Shares of the Funds.
The CDSC will be waived for certain exchanges, as described below. In
addition, the CDSC will be waived in the following circumstances: (1) total or
partial redemptions made within one year following the death of a shareholder
or registered joint owner; (2) minimum required distributions made in
connection with an IRA or other retirement plan following attainment of age 70
1/2; and (3) redemptions pursuant to the Fund's right to liquidate a
shareholder's account involuntarily.
CONTINGENT DEFERRED SALES CHARGE--CLASS A AND CLASS C SHARES
In order to recover commissions paid to dealers on investments of $1 million
or more in Class A Shares and on investments in Class C Shares, a CDSC of 1%
applies to certain redemptions of such shares made within the first year after
investing.
No charge is imposed to the extent that the net asset value of the shares
redeemed does not exceed (a) the current net asset value of shares purchased
through reinvestment of dividends or capital gain distributions plus (b) the
current net asset value of shares purchased more than one year prior to the
redemption, plus (c) increases in the net asset value of the shareholder's
shares above the purchase payments made during the preceding one year. The
same waivers as are available with respect to the CDSC on Class B Shares also
apply to the CDSC on Class A and Class C Shares.
The holding period of Class A or Class C Shares of the Fund acquired through
an exchange of the corresponding class of shares of The Munder Money Market
Fund (which are available only by exchange of Class A or Class C Shares of the
Fund, as the case may be) and other non-money market funds of the Munder Funds
Trust and other funds of the Company will be calculated from the date that the
Class A or Class C Shares of the Fund were initially purchased.
See the Statement of Additional Information for further information
regarding redemption of Fund shares.
Class A Shares purchased for at least $1,000,000 without a sales charge may
be exchanged for Class A Shares of another fund of the Company or The Munder
Funds Trust without the imposition of a CDSC, although the CDSC described
above will apply to the redemption of the shares acquired through an exchange.
In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing all Class A
Shares on which a front-end sales charge has been assessed; then of shares
acquired pursuant to the reinvestment of dividends and distributions; and then
of amounts representing the cost of shares purchased one year or more prior to
the redemption. For Federal income tax purposes, the amount of the CDSC will
reduce the gain or increase the loss, as the case may be, on the amount
realized on redemption. The amount of any CDSC will be paid to the
Distributor.
CONVERSION OF CLASS B SHARES
A shareholder's Class B Shares will automatically convert to Class A Shares
in the Fund on the sixth anniversary of the issuance of the Class B Shares,
together with a pro rata portion of all Class B Shares representing dividends
and other distributions paid in additional Class B Shares. The Class B Shares
so converted will no longer be subject to the higher expenses borne by Class B
Shares. The conversion will be effected at the
21
<PAGE>
relative net asset values per share of the two Classes. If a shareholder
effects one or more exchanges among Class B Shares of the Fund, other non-
money market funds of the Company or other funds of The Munder Funds Trust
during the six-year period, the holding periods for the shares so exchanged
will be counted toward the six-year period. Because the per share net asset
value of the Class A Shares may be higher than that of the Class B Shares at
the time of conversion, a shareholder may receive fewer Class A Shares than
the number of Class B Shares converted, although the dollar value will be the
same. See "Net Asset Value."
OTHER
Some or all of the services and privileges described herein may not be
available to certain customers of a broker, and a broker may impose conditions
on its customers which are different from those described in this Prospectus.
Investors should consult their brokers in this regard.
HOW TO EXCHANGE SHARES
GENERAL
Class A, Class B and Class C Shares of the Fund may be exchanged for shares
of the same Class of other funds of the Company or The Munder Funds Trust,
based on their respective net asset values, subject to any applicable sales
charge differential.
Class A Shares of a money market fund of the Company or The Munder Funds
Trust that were (1) acquired through the use of the exchange privilege and (2)
can be traced back to a purchase of shares in one or more investment
portfolios of the Company or The Munder Funds Trust for which a sales charge
was paid, can be exchanged for Class A Shares of a fund of the Company or The
Munder Funds Trust subject to payment of differential sales charges as
applicable.
The exchange of Class B Shares of one fund of the Company or The Munder
Funds Trust for Class B Shares of another fund of the Company or The Munder
Funds Trust will not be subject to a CDSC. The exchange of Class C Shares of
one fund of the Company or The Munder Funds Trust for Class C Shares of
another fund of the Company or The Munder Funds Trust will not be subject to a
CDSC. For purposes of computing the applicable CDSC, the length of time of
ownership of the Class B or Class C Shares will be measured from the date of
the original purchase and will not be affected by such exchanges.
Any share exchange must satisfy the requirements relating to the minimum
initial investment in an investment portfolio of the Company or The Munder
Funds Trust, and the shares involved must be legally available for sale in the
state of the investor's residence. For Federal income tax purposes, a share
exchange is a taxable event and, accordingly, a capital gain or loss may be
realized. Before making an exchange request, shareholders should consult a tax
or other financial advisor and should consider the investment objective,
policies and restrictions of the investment portfolio into which the
shareholder is making an exchange, as set forth in the applicable prospectus.
An investor who is considering an exchange may obtain a copy of the prospectus
for any investment portfolio of the Company or The Munder Funds Trust by
contacting his or her broker or the Fund at (800) 438-5789. Certain brokers
may charge a fee for handling exchanges.
The Company reserves the right to modify or terminate the exchange privilege
at any time. Notice will be given to shareholders of any material
modifications except where notice is not required.
EXCHANGES BY TELEPHONE
A shareholder may give exchange instructions to the shareholder's broker or
by telephone to the Fund at (800) 438-5789. Telephone exchange privileges are
not available to shareholders who have custody of their share certificates.
The Company reserves the right to reject any telephone exchange request.
Telephone exchanges may be subject to limitations as to amount or frequency,
and to other restrictions that may be established from time to time to ensure
that exchanges do not operate to the disadvantage of the Fund or its
shareholders.
22
<PAGE>
EXCHANGES BY MAIL
Exchange orders may be sent by mail to the shareholder's broker or to the
Transfer Agent at the address set forth in "Shareholder Account Information."
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to pay dividends and distributions from the net income and
capital gains, if any, earned on investments held by the Fund. The net income
of the Fund is declared quarterly as a dividend. Generally, dividends are paid
within six business days after quarter-end.
The Fund's net realized capital gains (including net short-term capital
gains), if any, are distributed at least annually. Dividends and other
distributions paid by the Fund with respect to its Class A, Class B and Class
C Shares are calculated at the same time.
Dividends and capital gains are paid in the form of additional shares of the
same Class of the Fund unless a shareholder requests that dividends and
capital gains be paid in cash. In the absence of this request on the Account
Application Form or in a subsequent request, each purchase of shares is made
on the understanding that the Fund's Transfer Agent is automatically appointed
to receive the dividends upon all shares in the shareholder's account and to
reinvest them in full and fractional shares of the same Class of the Fund at
the net asset value in effect at the close of business on the reinvestment
date. Dividends are automatically paid in cash (along with any redemption
proceeds) not later than seven Business Days after a shareholder closes an
account with the Fund.
The per share dividends on Class B and Class C Shares of the Fund generally
will be lower than the per share dividends on Class A Shares of the Fund as a
result of the higher annual service and distribution fees applicable with
respect to Class B and Class C Shares.
The Fund's expenses are deducted from the income of the Fund before
dividends are declared and paid.
These expenses include, but are not limited to, fees paid to the Advisor,
Administrator, Custodian and Transfer Agent; fees and expenses of officers and
Directors; taxes; interest; legal and auditing fees; brokerage fees and
commissions; certain fees and expenses in registering and qualifying the 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 of Officers' liability insurance premiums; the expense of using
independent pricing services; and other expenses which are not assumed by the
Administrator. Any general expenses of the Company that are not readily
identifiable as belonging to a particular fund of the Company are allocated
among all funds of the Company by or under the direction of the Board of
Directors in a manner that the Board determines to be fair and equitable.
Except as noted in this Prospectus and the Statement of Additional
Information, the Fund's service contractors bear expenses in connection with
the performance of their services, and the Fund bears the expenses incurred in
its operations. The Advisor, Administrator, Custodian and Transfer Agent may
voluntarily waive all or a portion of their respective fees from time to time.
The Fund's net investment income available for distribution to the holders
of Shares will be reduced by the amount of service and distribution fees
payable under the Class A Plan, the Class B Plan and Class C Plan described
below.
NET ASSET VALUE
Net asset value for a particular Class of shares in the Fund is calculated
by dividing the value of all securities and other assets belonging to the Fund
allocable to that Class, less the liabilities charged to that Class, by the
number of outstanding shares of that Class.
23
<PAGE>
The net asset value per share of the Fund for the purpose of pricing
purchase and redemption orders is determined as of the close of regular
trading hours on the New York Stock Exchange (currently 4:00 p.m., New York
time) on each business day. Securities traded on a national securities
exchange or on the NASDAQ National Market System are valued at the last sale
price on such exchange or market as of the close of business on the date of
valuation. Securities traded on a national securities exchange or on the
NASDAQ National Market System for which there were no sales on the date of
valuation and securities traded on other over-the-counter markets, including
listed securities for which the primary market is believed to be over-the-
counter, are valued at the mean between the most recently quoted bid and asked
prices. Options will be valued at market value or fair value if no market
exists. Futures contracts will be valued in like manner, except that open
futures contract sales will be valued using the closing settlement price or,
in the absence of such a price, the most recently quoted asked price.
Portfolio securities primarily traded on the London Stock Exchange are
generally valued at the mid-price between the current bid and asked prices.
Portfolio securities which are primarily traded on foreign securities
exchanges, other than the London Stock Exchange, are generally valued at the
preceding closing values of such securities on their respective exchanges,
except when an occurrence subsequent to the time a value was so established is
likely to have changed such value. In such an event, the fair value of those
securities will be determined through the consideration of other factors by or
under the direction of the Board of Directors. Restricted securities and
securities and assets for which market quotations are not readily available
are valued at fair value by the Advisor under the supervision of the Board of
Directors. Debt securities with remaining maturities of 60 days or less are
valued at amortized cost, unless the Board of Directors determines that such
valuation does not constitute fair value at that time. Under this method, such
securities are valued initially at cost on the date of purchase (or the 61st
day before maturity).
The Company does not accept purchase and redemption orders on days which the
New York Stock Exchange is closed. The New York Stock Exchange is currently
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving and
Christmas, and on the preceding Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively.
The different expenses borne by each class of shares will result in
different net asset values and dividends. The per share net asset value of the
Class B and Class C Shares of the Fund generally will be lower than that of
the Class A Shares of the Fund because of the higher expenses borne by the
Class B and Class C Shares.
MANAGEMENT
BOARD OF DIRECTORS
The Company is managed under the direction of its Board of Directors. The
Statement of Additional Information contains the name and background
information of each Director.
INVESTMENT ADVISOR
The investment advisor of the Fund is Munder Capital Management, a Delaware
general partnership with its principal offices at 480 Pierce Street,
Birmingham, Michigan 48009. The Advisor was formed in December 1994. The
principal partners of the Advisor are Old MCM, Inc. ("MCM"), Munder Group LLC,
Woodbridge Capital Management, Inc. ("Woodbridge") and WAM Holdings, Inc.
("WAM"). MCM was founded in February 1985 as a Delaware corporation and was a
registered investment advisor. Woodbridge and WAM are indirect, wholly-owned
subsidiaries of Comerica Incorporated. Mr. Lee P. Munder, the Advisor's chief
executive officer, indirectly owns or controls a majority of the partnership
interests in the Advisor. As of March 31, 1996, the Advisor and its affiliates
had approximately $31 billion in assets under active management, of which $15
billion were invested in equity securities, $7 billion were invested in money
market or other short-term instruments, and $9 billion were invested in other
fixed income securities.
24
<PAGE>
Subject to the supervision of the Board of Directors of the Company, 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 as requested.
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 .50% of the Fund's average daily net assets.
The Adviser 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 Advisor's own
resources and do not involve additional costs to the Fund or its shareholders.
PORTFOLIO MANAGERS
Gregory A. Prost, CFA, Senior Fixed Income Portfolio Manager of the Advisor
or MCM, has co-managed the Munder Bond Fund and Munder Balanced Fund since
May, 1995. Prior to joining MCM in 1995, he was a Vice President and Senior
Fund Manager for First of America Investment Corp.
Sharon E. Fayolle, Vice President and Director of Money Market Trading for
the Advisor or MCM, is responsible for overseeing the management of cash
portfolios, money market funds and foreign currency trading since May, 1996.
Prior to joining MCM in 1996, she was employed in the investment area of Ford
Motor Company as European Portfolio Manager responsible for investments and
cash management for Ford's European operations.
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
First Data Investor Services Group, Inc. ("First Data"), whose principal
business address is 53 State Street, Boston, Massachusetts 02109 (the
"Administrator"), serves as administrator for the Company. First Data is a
wholly-owned subsidiary of First Data Corporation. The Administrator generally
assists the Company in all aspects of its administration and operations,
including the maintenance of financial records and fund accounting.
First Data also serves as the Company's transfer agent and dividend
disbursing agent ("Transfer Agent"). Shareholder inquiries may be directed to
First Data at P.O. Box 9755, Providence, Rhode Island 02940-9755.
As compensation for these services, the Administrator and Transfer Agent are
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 they provide services, computed daily and payable monthly at
the rate of .12% of the first $2.8 billion of net assets, plus .105% of the
next $2.2 billion of net assets, plus .10% of all net assets in excess of $5
billion with respect to the Administrator and .02% of the first $2.8 billion
of net assets, plus .015% of the next $2.2 billion of net assets, plus .01% of
all net assets in excess of $5 billion with respect to the Transfer Agent.
Administration fees payable by the Company and certain other investment
portfolios advised by the Advisor are subject to a minimum annual fee of $1.2
million to be allocated among each series and class thereof. The Administrator
and Transfer Agent are also entitled to reimbursement for out-of-pocket
expenses. The Administrator has entered into a Sub-Administration Agreement
with the Distributor under which the Distributor provides certain
administrative services with respect to the Fund. The Administrator pays the
Distributor a fee for these services out of its own resources at no cost to
the Fund.
Comerica Bank (the "Custodian"), whose principal business address is One
Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48226, provides
custodial services to the Fund. As compensation for its services, the
Custodian is entitled to receive fees, based on the aggregate average daily
net assets of the Fund and other funds of the Company and Munder Funds Trust
computed daily and payable monthly at an annual rate of .03% of the first $100
million of average daily net assets, .02% of the next $500 million of net
assets and .01% of net assets in excess of $600 million. The Custodian also
receives certain transaction based fees. For an additional description of the
services performed by the Administrator, Transfer Agent and Custodian, see the
Statement of Additional Information.
25
<PAGE>
DISTRIBUTION SERVICES ARRANGEMENT
The Company has adopted Distribution and Service Plans with respect to Class
A, Class B and Class C Shares of the Fund, 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 (collectively, the
"Plans"). Under the Class A Plan, the Distributor is paid a service fee at an
annual rate of 0.25% of the value of average daily net assets of the Class A
Shares. Under the Class B and Class C Plans, the Distributor is paid a service
fee at an annual rate of 0.25%, and a distribution fee at an annual rate of
0.75% of the value of average daily net assets of the Class B and Class C
Shares.
Under the Plans, 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.
The Class B and Class C Plans permit 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 Class B and Class C Plans authorize 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 Plans. Distribution expenses also include an allocation of
overhead of the Distributor and accruals for interest on the amount of
distribution expenses that exceed distribution fees and CDSCs received by the
Distributor.
The Distributor expects to pay or arrange for payment of sales commissions
to dealers authorized to sell Class B or Class C 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 Class B and Class C Plans. Because the payment of distribution and
service fees with respect to Class B and Class C Shares is subject to the
1.00% 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 Plans.
The Plans may be terminated at any time. The Plans provide that amounts paid
as prescribed by the Plans at any time may not cause the limitation on such
payments established by the Plans 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 actually 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 Plans
and their payment terms on a continuous basis and in doing so will consider
all relevant factors, including expenses incurred by the Distributor and the
amount received under the Plans and the proceeds of the CDSCs with respect to
the Class B and Class C Shares.
TAXES
GENERAL
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. Such qualification relieves the Fund of liability
for Federal income taxes to the extent its earnings are distributed in
accordance with the Code.
26
<PAGE>
Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that the Fund distribute to its
shareholders an amount equal to at least 90% of its investment company taxable
income and 90% of its net tax-exempt interest income for such year. In
general, the Fund's investment company income will be its taxable income
(including dividends, interest, and short-term capital gains) subject to
certain adjustments and excluding the excess of any net long-term capital gain
for the taxable year over the net short-term capital loss, if any, for such
year. The Fund intends to distribute substantially all of its investment
company taxable income each taxable year. Such distributions will be taxable
as ordinary income to the Fund's shareholders who are not currently exempt
from Federal income taxes, whether such income is received in cash or
reinvested in additional shares. (Federal income taxes for distributions to an
IRA or qualified retirement plan are deferred under the Code if applicable
requirements are met.)
Substantially all of the Fund's net realized long-term capital gains, if
any, will be distributed at least annually. The Fund will generally have no
Federal income tax liability with respect to such gains, and the distributions
will be taxable to shareholders who are not currently exempt from Federal
income taxes as long-term capital gains, no matter how long the shareholders
have held their shares.
A taxable gain or loss may also be realized by a holder of shares in the
Fund upon the redemption or transfer of shares depending upon the tax basis of
the shares and their price at the time of the transaction.
The Fund's gains and losses from investments in foreign currency denominated
debt securities and from certain other transactions may be treated as ordinary
income or loss rather than capital gain or loss. This may have the effect of
increasing ordinary dividends paid to shareholders (in the case of such gains)
or decreasing the amounts available for distribution as dividends (in the case
of such losses).
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by the Fund on December 31 of such
year if such dividends are actually paid during January of the following year.
Before purchasing shares in the Funds, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of
the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, may be subject to tax.
On an annual basis, the Company will send written notices to record owners
of shares regarding the Federal tax status of distributions made by the Fund.
Since this is not an exhaustive discussion of applicable tax consequences, and
since state and local taxes may be different than the Federal taxes described
above, investors may wish to contact their tax advisors concerning investments
in the Fund.
FOREIGN TAXES
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Fund will be
subject to foreign withholding taxes with respect to income received from
sources within foreign countries. If more than 50% of the value of the Fund's
total assets at the close of a taxable year consists of securities of foreign
corporations, the Fund may elect, for U.S. Federal income tax purposes, to
treat certain foreign taxes paid by it, including generally any withholding
taxes and other foreign income taxes, as paid by its shareholders. If the Fund
makes this election, the amount of such foreign taxes paid by the Fund will be
included in its shareholders' income pro rata (in addition to taxable
distributions actually received by them), and the shareholders would be
entitled (a) to credit their proportionate amount of such taxes against their
U.S. Federal income tax liabilities subject to certain limitations described
in the Statement of Additional Information, or (b) if they itemize their
deductions to deduct such proportionate amount from their U.S. income.
The Fund's investments in derivative instruments are subject to special tax
rules, some of which are not entirely clear. As a result, the Fund may be
limited by tax considerations in the extent to which it enters into such
transactions. See the Statement of Additional Information for further
Information.
27
<PAGE>
DESCRIPTION OF SHARES
The Fund operates as one series of the Company. The Company was organized as
a Maryland corporation on November 18, 1992 and is also registered under the
1940 Act as an open-end management investment company. The Company's Articles
of Incorporation authorize the Directors to classify and reclassify any
unissued shares into one or more classes of shares. Pursuant to such
authority, the Directors have authorized the issuance of shares of common
stock, representing interests in The Munder Multi-Season Growth Fund, The
Munder Real Estate Equity Investment Fund, The Munder Mid-Cap Growth Fund, The
Munder Value Fund, The Munder International Bond Fund and The Munder Money
Market Fund, respectively, each of which, except The Munder International Bond
Fund, is classified as a diversified investment company under the 1940 Act.
The shares of the Fund are offered as five separate classes of common stock,
$.01 par value per share, designated Class A Shares, Class B Shares, Class C
Shares, Class K Shares and Class Y Shares. All shares represent interests in
the same assets of the Fund and are identical in all respects except that each
class bears different service and distribution expenses and may bear various
class-specific expenses, and each class has exclusive voting rights with
respect to its service and/or distribution plan, if any. Class B and Class C
Shares are subject to a distribution fee which generally will cause Class B
and Class C Shares to have a higher expense ratio and pay lower dividends than
Class A Shares. Shares of the Fund issued are fully paid, non-assessable,
fully transferable and redeemable at the option of the holder. Investors may
call the Fund at (800) 438-5789 for more information concerning other classes
of Shares of the Fund. This Prospectus relates only to the Class A, Class B
and Class C Shares of the Fund.
The Company's shareholders are entitled to one vote for each full share held
and proportionate fractional votes for fractional shares held, and will vote
in the aggregate and not by Fund, except where otherwise required by law or
when the Directors determine that the matter to be voted upon affects only the
interests of the shareholders of a particular Fund. In addition, shareholders
of the Fund will vote in the aggregate and not by Class, except as otherwise
expressly required by law or when the Directors determine that the matter to
be voted on affects only the interests of the holders of a particular class of
shares. The Company is not required and does not currently intend to hold
annual meetings of shareholders for the election of Board members except as
required under the 1940 Act. A meeting of shareholders will be called upon the
written request of at least 10% of the outstanding shares of the Company. The
extent required by law, the Company will assist in shareholder communications
in connection with such a meeting. For further discussion of the voting rights
of shareholders, see "Additional Information Concerning Shares" in the
Statement of Additional Information.
REPORTS TO SHAREHOLDERS
The Fund will seek to eliminate duplicate mailings of prospectuses and
shareholder reports to accounts which have the same primary record owner, and
with respect to joint tenant accounts or tenant in common accounts, accounts
which have the same address. Additional copies of prospectuses and reports to
shareholders are available upon request by calling the Fund at (800) 438-5789.
PERFORMANCE
From time to time, the Company may quote performance and yield data for the
Shares of the Fund in advertisements or in communications to shareholders. The
total return of Class A, Class B or Class C Shares in the Fund may be
calculated on an average annual total return basis, and may also be calculated
on an aggregate total return basis, for various periods. Average annual total
return reflects the average percentage change in value of an investment in a
class of shares in the Fund from the beginning date of the measuring period to
the end of the measuring period. Aggregate total return reflects the total
percentage change in value over the measuring period. Both methods of
calculating total return assume that dividends and capital gains distributions
made during the period are reinvested in the same class of shares.
28
<PAGE>
The yield of a class of Shares in the Fund is computed based on the net
income of such class in the Fund during a 30-day (or one month) period (which
period will be identified in connection with the particular yield quotation).
More specifically, the Fund's yield for a class of shares is computed by
dividing the per share net income for the class during a 30-day (or one-month)
period by the maximum offering price per share on the last day of the period
and annualizing the result on a semi-annual basis.
Performance quotations for each class of Shares will be calculated
separately. Quotations for total return for Class A Shares will reflect the
maximum sales charge charged by the Fund with respect to Class A Shares and
quotations of total return for Class B and Class C Shares will reflect any
applicable CDSC, except that the Fund may also provide, in conjunction with
such quotations, additional quotations that do not reflect the maximum sales
charge when the quotations are being provided to investors who are subject to
waived or reduced sales charges as described in this Prospectus. Because these
additional quotations will not reflect the maximum sales charge payable by
non-exempt investors, these quotations will be higher than the performance
quotations otherwise computed.
Quotations of total return for Shares will reflect the fees for certain
distribution and shareholder services as described in this Prospectus.
The Fund may compare the performance of the Shares to the performance of
other mutual funds with similar investment objectives and to other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds, including,
for example, Lipper Analytical Services, Inc., the Lehman Brothers
Government/Corporate Bond Index, a recognized unmanaged index of government
and corporate bonds, the Standard & Poor's 500 Index, an unmanaged index of a
group of common stocks, the Consumer Price Index, or the Dow Jones Industrial
Average, an unmanaged index of common stocks of 30 industrial companies listed
on the New York Stock Exchange. Performance and yield data as reported in
national financial publications such as Morningstar, Inc., Money Magazine,
Forbes, Barron's, The Wall Street Journal and The New York Times, or in
publications of a local or regional nature, may also be used in comparing the
performance of a class of Shares in the Fund.
Performance will fluctuate and any quotation of performance should not be
considered as representative of future performance of a class of shares in the
Fund. Shareholders should remember that performance is generally a function of
the kind and quality of the instruments held in a fund, portfolio maturity,
operating expenses, and market conditions. Any fees charged by institutions
directly to their customers' accounts in connection with investments in the
Fund will not be included in calculations of yield and performance.
SHAREHOLDER ACCOUNT INFORMATION
INVESTMENT BY MAIL
Send the completed Account Application Form (if initial purchase) or letter
stating Fund name, share class, shareholder's registered name and account
number (if subsequent purchase) with a check to:
First Data Investor Services Group, Inc.
The Munder Funds
P.O. Box 9755
Providence, Rhode Island 02940-9755
INVESTMENTS BY BANK WIRE
An investor opening a new account should call the Fund at (800) 438-5789 to
obtain an account number. Within seven days of purchase such an investor must
send a completed Account Application Form containing the investor's certified
taxpayer identification number to First Data Investor Services Group, Inc. at
the address provided above under "Investment by Mail." Wire instructions must
state the Fund name, share class, the
29
<PAGE>
shareholder's registered name and the shareholder account number. Bank wires
should be sent through the Federal Reserve Bank Wire System to:
Boston Safe Deposit and Trust Company
Boston, MA
ABA#: 011001234
DDA#: 16-798-3
Account No.
(State Fund name, share class, shareholder's registered name and
shareholder account number)
Before wiring any funds an investor must call the Fund at (800) 438-5789 to
confirm the wire instructions.
EXCHANGE BY TELEPHONE
Call your broker or the Fund at (800) 438-5789.
Class A, Class B and Class C Shares may be exchanged only for shares of the
same Class of another fund of the Company or The Munder Funds Trust, subject to
any applicable sales charge.
REDEMPTIONS BY TELEPHONE
Call your broker or the Fund at (800) 438-5789.
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, share class, amount of
redemption, shareholder's registered name, account number, and, if a
certificate has been issued, an endorsed share certificate, to:
First Data Investor Services Group, Inc.
The Munder Funds
P.O. Box 9755
Providence, Rhode Island 02940-9755
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call the Fund at (800) 438-5789.
30
<PAGE>
THE MUNDER INTERNATIONAL BOND FUND
480 PIERCE STREET
BIRMINGHAM, MICHIGAN 48009
TELEPHONE: (800) 438-5789
PROSPECTUS
CLASS K SHARES
The Munder International Bond Fund (the "Fund") is a series of shares issued
by The Munder Funds, Inc. (the "Company"), an open-end management investment
company. The Fund's investment objective is to realize a competitive total
return through a combination of current income and capital appreciation. The
Fund seeks to achieve its objective by investing primarily in foreign debt
obligations. There can be no assurance that the Fund's investment objective
will be achieved. The net asset value per share of the Fund will fluctuate in
response to changes in market conditions and other factors.
Munder Capital Management (the "Advisor") serves as the investment advisor
to the Fund.
This Prospectus contains the information that a prospective investor should
know before investing in the Fund. Investors are encouraged to read this
Prospectus and retain it for future reference. A Statement of Additional
Information dated July 1, 1996, as amended or supplemented from time to time,
has been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus. It may be obtained free of
charge by calling the Fund at (800) 438-5789.
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.
SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expense Table
The Fund................................................................. 3
Investment Objective and Policies........................................ 4
Portfolio Instruments and Practices...................................... 4
Investment Limitations................................................... 10
Purchases and Redemptions of Shares...................................... 10
Dividends and Distributions.............................................. 12
Other Information
Net Asset Value.......................................................... 12
Management............................................................... 13
Taxes.................................................................... 15
Description of Shares.................................................... 16
Performance.............................................................. 17
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION, OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE COMPANY OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
2
<PAGE>
EXPENSE TABLE
The following table sets forth certain costs and expenses that an investor
will incur either directly or indirectly as a shareholder of Class K Shares of
the Fund based on estimated operating expenses.
<TABLE>
<S> <C> <C>
Annual operating expenses:
(as a percentage of average net assets)
Advisory fees...................................................... .50%
Other expenses..................................................... .60%
----
Shareholder Servicing.............................................. .25%
All Other Expenses................................................. .35%
---
Total Fund operating expenses...................................... 1.10%
====
</TABLE>
"Other expenses" in the above table include fees for shareholder services,
administrator fees, custodial fees, legal and accounting fees, printing costs,
registration fees, fees for any portfolio valuation service, the cost of
regulatory compliance, the costs of maintaining the Fund's legal existence and
the costs involved with communicating with shareholders. The amount of "Other
expenses" is based on estimated expenses and projected assets for the current
fiscal year. The nature of the services for which the Fund is obligated to pay
advisory fees is described under "Management." Any fees charged by
institutions directly to customer accounts for services provided in connection
with investments in shares of the Fund are in addition to the expenses shown
in the above Expense Table and the Example shown below.
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in the Fund. These amounts are based on payment
by the Fund of operating expenses at the levels set forth in the above table,
and are also based on the following assumptions:
<TABLE>
<CAPTION>
1 3
YEAR YEARS
---- -----
<S> <C> <C>
An investor in Class K Shares of the Fund would pay the following
expenses on a $1,000 investment, assuming a 5% annual return and
redemption at the end of the following time periods:.............. $11 $35
</TABLE>
The foregoing Expense Table and Example are intended to assist investors in
understanding the various shareholder transaction expenses and operating
expenses of the Fund that investors bear either directly or indirectly.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL INVESTMENT RETURN AND
OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
THE FUND
The Munder International Bond Fund (the "Fund"), is a series of shares
issued by The Munder Funds, Inc. (the "Company"), an open-end management
investment company. The Company was incorporated under the laws of the State
of Maryland on November 18, 1992 and has registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund's principal office
is located at 480 Pierce Street, Birmingham, Michigan 48009 and its telephone
number is (800) 438-5789.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to realize a competitive total
return through a combination of current income and capital appreciation. The
Fund seeks to achieve its objective by investing primarily in foreign debt
obligations. As an international fund, the Fund may invest in securities of
any issuer and in any currency. Under normal market conditions, at least 65%
of the Fund's assets are invested in bonds of issuers located in at least
three countries other than the United States. The Fund will primarily invest
in foreign debt obligations denominated in foreign currencies, including the
European Currency Unit ("ECU"), which are issued by foreign governments and
governmental agencies, instrumentalities or political subdivisions; debt
securities issued or guaranteed by supranational organizations (e.g. European
Investment Bank, Inter-American Development Bank or the World Bank); corporate
debt securities; bank or bank holding company debt securities and other debt
securities including those convertible into foreign stock. For the purposes of
the 65% limitation with respect to the Fund's designation as an international
bond fund, the securities described in this paragraph are considered
"international bonds." There can be no assurance that the Fund will achieve
its investment objective. Purchasing shares of the Fund should not be
considered a complete investment program, but an important segment of a well-
diversified investment program.
The Fund's dollar-weighted average maturity will generally be between three
and fifteen years except during temporary defensive periods, and will be
adjusted by the Advisor according to market conditions. Pending investment, to
meet anticipated redemption requests, or as a temporary defensive measure if
the Advisor determines that market conditions warrant, the Fund may invest
without limitation in short-term U.S. Government obligations, high quality
money market instruments and repurchase agreements. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. The
Fund may also invest in futures contracts and options and enter into interest
rate swap transactions. See "Portfolio Instruments and Practices -- Futures
Contracts and Options" for a discussion of the risks associated with the use
of derivative instruments. A further description of the types of obligations
and the various investment techniques used by the Fund is provided below under
"Portfolio Instruments and Practices."
PORTFOLIO INSTRUMENTS AND PRACTICES
Foreign Debt Securities. The Fund may purchase debt obligations issued or
guaranteed by a foreign sovereign government or one of its agencies,
authorities, instrumentalities or political subdivisions, including foreign
states, provinces or municipalities and corporate debt securities. Investing
in the securities of any foreign issuer involves special risks and
considerations not typically associated with investing in U.S. issuers. These
include differences in accounting, auditing and financial reporting standards;
different disclosure laws, which may result in less publicly available
information about foreign issuers than U.S. issuers; generally higher markups
on foreign portfolio transactions; the possibility of nationalization,
expropriation or confiscatory taxation; adverse changes in investment or
exchange control regulations (which may include suspension of the ability to
transfer currency from a country); political instability; less government
regulation of securities markets, brokers and issuers; possible difficulty in
obtaining and enforcing judgments in foreign courts; and imposition of
restrictions on foreign investments. Additionally, foreign securities and
interest payable on those securities may be subject to foreign taxes,
including taxes withheld from payments on those securities. Foreign securities
often trade with less frequency and volume than domestic securities and
therefore may exhibit greater price volatility. Additional costs associated
with an investment in foreign securities may include higher custodial fees
than apply to U.S. custodial arrangements, and transaction costs of foreign
currency conversions. Changes in foreign exchange rates will also affect the
value of securities denominated or quoted in currencies other than the U.S.
dollar.
Corporate Obligations. The Fund may purchase commercial paper and corporate
bonds that meet the Fund's applicable quality and maturity limitations.
Commercial paper may include obligations issued by foreign corporations and
foreign counterparts of U.S. corporations and europaper, which is U.S. dollar-
denominated commercial paper of a foreign issuer. The Fund may also purchase
commercial paper indexed to certain specific foreign currency exchange rates.
4
<PAGE>
The Fund will purchase only those securities which are considered to be
investment grade or better (within the four highest rating categories of
Standard & Poor's Ratings Service, a division of McGraw-Hill Companies, Inc.
("S&P") or Moody's Investor Services, Inc. ("Moody's") or, if unrated, of
comparable quality). Obligations rated "Baa" by Moody's lack outstanding
investment characteristics and have speculative characteristics. Adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of obligations rated "BBB" by S&P to pay interest and repay
principal than in the case of higher grade obligations. After purchase by the
Fund, a security may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Fund. Neither event will require the Fund
to sell such security. However, the Advisor will reassess promptly whether the
security presents minimal credit risks and determine whether continuing to
hold the security is in the best interests of the Fund. To the extent that the
ratings given by Moody's, S&P or another nationally recognized statistical
rating organization for securities may change as a result of changes in the
rating systems or because of corporate reorganization of such rating
organizations, the Fund will attempt to use comparable ratings as standards
for its investments in accordance with the investment objective and policies
of the Fund. Descriptions of each rating category are included as Appendix A
to the Statement of Additional Information.
Fixed Income Securities. The market value of fixed income securities held by
the Fund can be expected to vary inversely to changes in prevailing interest
rates. Investors should also recognize that in periods of declining interest
rates the yields of investment portfolios composed primarily of fixed income
securities will tend to be higher than prevailing market rates and, in periods
of rising interest rates, yields will tend to be somewhat lower. The Fund may
purchase zero-coupon bonds (i.e., discount debt obligations that do not make
periodic interest payments). Zero-coupon bonds are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
Forward Foreign Currency Transactions. The Fund normally conducts its
foreign currency exchange transactions either on a spot (cash) basis at the
spot rate prevailing in the foreign currencies or on a forward basis. Under
normal circumstances, the Advisor expects that the Fund will enter into
forward currency contracts (to purchase or sell a specified currency at a
specified future date and price). The Fund generally will not enter into a
forward contract with a term of greater than one year. Although forward
contracts are used primarily to protect the Fund from adverse currency
movements, they may also be used to increase exposure to a currency, and
involve the risk that anticipated currency movements will not be accurately
predicted and the Fund's total return will be adversely affected as a result.
Open positions in forward contracts are covered by the segregation with the
Fund's custodian of cash, U.S. Government securities or other high grade debt
obligations which are marked to market daily.
Bank Obligations. The Fund may purchase debt obligations issued or
guaranteed by supranational organizations such as the World Bank, Asian
Development Bank, European Investment Bank and European Union; debt
obligations of U.S. and foreign banks and bank holding companies and U.S.
dollar-denominated bank obligations, including certificates of deposit,
bankers' acceptances, bank notes, deposit notes and interest-bearing savings
and time deposits, issued by U.S. or foreign banks or savings institutions
having total assets at the time of purchase in excess of $1 billion. For this
purpose, the assets of a bank or savings institution include the assets of
both its domestic and foreign branches. See "Foreign Debt Securities" for a
discussion of the risks associated with investments in obligations of foreign
banks and foreign branches of domestic banks. Foreign bank obligations include
Eurodollar Certificates of Deposit ("ECDs"), Eurodollar Time Deposits
("ETDs"), Canadian Time Deposits ("CTDs"), Schedule Bs, Yankee Certificates of
Deposit ("Yankee CDs") and Yankee Bankers' Acceptances ("Yankee BAs"). A
discussion of these obligations appears in the Statement of Additional
Information under "Fund Investments."
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
5
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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 market rates
and current conditions in the relevant housing markets. In calculating the
weighted average maturity of the 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 a 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 a 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.
Interest Rate and Currency Swaps. For hedging purposes, the Fund may enter
into interest rate and currency swap transactions and purchase or sell
interest rate caps and floors. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations as a technique for managing the portfolio's duration (i.e., the
price sensitivity to changes in interest rates) or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. An interest rate or currency swap is a derivative instrument which
involves an agreement between the Fund and another party to exchange payments
calculated as if they were interest on a fictitious ("notional") principal
amount (e.g., an exchange of floating rate payments by one party for fixed
rate payments by the other). An interest rate cap or floor is a derivative
instrument which entitles the purchaser, in exchange for a premium, to receive
payments of interest on a notional principal amount from the seller of the cap
or floor, to the extent that a specified reference rate exceeds or falls below
a predetermined level.
The Fund usually enters into such transactions on a "net" basis, with the
Fund receiving or paying, as the case may be, only the net amount of the two
payment streams. The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each swap is accrued on a
daily basis and an amount of cash or high-quality liquid securities having an
aggregate net asset value at least equal to the accrued excess is maintained
in a segregated account by the Fund's custodian. If the Fund enters into a
swap on other than a net basis, or sells caps or floors, the Fund maintains a
segregated account in the full amount accrued on a daily basis of the Fund's
obligations with respect to the transaction. Such segregated accounts are
maintained in accordance with applicable regulations of the SEC.
The use of swaps, caps and floors is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Advisor's forecast of
market values, interest rates, currency rates of exchange and other applicable
factors is incorrect, the investment performance of the Fund will diminish
compared with the performance that could have been achieved if these
investment techniques were not used. Moreover, even if the Advisor's forecasts
were correct, a Fund's swap position may correlate imperfectly with the asset
or liability being hedged. In addition, in the event of a default by the other
party to the transaction, the Fund might incur a loss.
U.S. Government Obligations. The Fund may purchase obligations issued or
guaranteed by the U.S. Government and U.S. Government agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of
the U.S. Government, such as those of the 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.
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Borrowing. The Fund is authorized to borrow money in amounts up to 5% of the
value of the Fund's total assets at the time of such borrowing for temporary
purposes. However, the Fund is authorized to borrow money in amounts up to 33
1/3% of its assets, as permitted by the 1940 Act, for the purpose of meeting
redemption requests. Borrowing by the Fund creates an opportunity for greater
total return but, at the same time, increases exposure to capital risk. In
addition, borrowed funds are subject to interest costs that may offset or
exceed the return earned on the borrowed funds. However, the Fund will not
purchase portfolio securities while borrowings exceed 5% of the Fund's total
assets. For more detailed information with respect to the risks associated
with borrowing, see the heading "Fund Investments" in the Statement of
Additional Information.
Stripped Securities. The Fund may purchase participations in trusts that
hold U.S. Treasury and agency securities (such as TIGRs and CATS) and also may
purchase Treasury receipts and other stripped securities, which represent
beneficial ownership interests in either future interest payments or the
future principal payments on U.S. Government obligations. These instruments
are issued at a discount to their "face value" and may (particularly in the
case of stripped mortgage-backed securities) exhibit greater price volatility
than ordinary debt securities because of the manner in which their principal
and interest are returned to investors. Stripped securities will normally be
considered illiquid investments and will be acquired subject to the limitation
on illiquid investments unless determined to be liquid under guidelines
established by the Board of Directors.
Repurchase Agreements. The Fund may agree to purchase securities from
financial institutions subject to the seller's agreement to repurchase them at
an agreed-upon time and price ("repurchase agreements"). The financial
institutions with which the Fund may enter into repurchase agreements include
member banks of the Federal Reserve System, any foreign bank or any domestic
or foreign broker/dealer which is recognized as a reporting government
securities dealer. The Advisor will review and continuously monitor the
creditworthiness of the seller under a repurchase agreement, and will require
the seller to maintain the value of the securities 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 the underlying
obligations.
Reverse Repurchase Agreements. The Fund may borrow funds for temporary
purposes by selling portfolio securities to financial institutions such as
banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). Reverse repurchase
agreements involve the risk that the market value of the securities sold by
the Fund may decline below the repurchase price. The Fund would pay interest
on amounts obtained pursuant to a reverse repurchase agreement.
Futures Contracts and Options. The Fund may write call options, buy put
options, buy call options and write secured put options. Such options may be
related to particular securities or to various bond indices. The Fund may also
purchase and write put and call options on foreign currencies (traded on U.S.
and foreign exchanges or over-the-counter) to manage the Fund's exposure to
changes in dollar exchange rates. The Fund may also invest in futures
contracts and options on futures contracts for hedging purposes or to maintain
liquidity. However, the Fund may not purchase or sell a futures contract
unless immediately after any such transaction the sum of the aggregate amount
of margin deposits on its existing futures positions and the amount of
premiums paid for related options is 5% or less of its total assets.
Options trading is a highly specialized activity which entails greater than
ordinary investment risks. A call option for a particular security gives the
purchaser of the option the right to buy, and a writer the obligation to sell,
the underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is the consideration for undertaking the
obligations under the option contract. A put option for a particular security
gives the purchaser the right to sell, and the writer the obligation to
purchase, the underlying security prior to the expiration date of the option,
regardless of the market price of the security. In contrast to an option on a
particular security, an option on a bond index provides the holder with the
right to make or receive a cash settlement upon exercise of the option.
Futures contracts obligate the Fund, at maturity, to take or make delivery
of certain securities or the cash value of a bond or securities index. When
interest rates are rising, futures contracts can offset a decline in value of
the Fund's portfolio securities. When rates are falling, these contracts can
secure higher yields for securities the Fund intends to purchase.
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<PAGE>
The Fund may purchase and sell call and put options on futures contracts
traded on an exchange or board of trade. When the Fund purchases an option on
a futures contract, it has the right to assume a position as a purchaser or
seller of a futures contract at a specified exercise price at any time during
the option period. When the Fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the option is
exercised. In anticipation of a decline in interest rates, the Fund may
purchase call options on futures contracts as a substitute for the purchase of
futures contracts to hedge against a possible increase in the price of
securities which the Fund intends to purchase. Similarly, if the value of the
Fund's portfolio securities is expected to decline as a result of an increase
in interest rates, the Fund might purchase put options or sell call options on
futures contracts rather than sell futures contracts. The Fund may also enter
into contracts for the purchase or sale for future delivery of foreign
currencies.
In connection with the Fund's position in a futures contract or option
thereon, the Fund will create a segregated account of liquid assets or will
otherwise cover its position in accordance with applicable requirements of the
SEC.
The use of derivative instruments exposes the 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 the 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 inability
to close out certain hedged positions to avoid adverse tax consequences; (5)
the possible absence of a liquid secondary market for any particular
instrument and possible exchange-imposed price fluctuation limits, either of
which may make it difficult or impossible to close out a position when
desired; (6) leverage risk, that is, the risk that adverse price movements in
an instrument can result in a loss substantially greater than the Fund's
initial investment in that instrument (in some cases, the potential loss is
unlimited); and (7) particularly in the case of privately negotiated
instruments, the risk that the counterparty will fail to perform its
obligations, which could leave the Fund worse off than if it had not entered
into the position. For a further discussion see "Fund Investments" and
Appendix B in the Statement of Additional Information.
Variable and Floating Rate Instruments. 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 (this demand feature
is not required if the instrument is guaranteed by the U.S. Government or an
agency or instrumentality thereof). 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. Unrated variable and
floating rate instruments will be determined by the Advisor to be of
comparable quality at the time of purchase to rated instruments purchasable by
the Fund. The absence of an active secondary market, however, could make it
difficult to dispose of the instruments, and the 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 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.
Guaranteed Investment Contracts. The Fund may make limited investments in
guaranteed investment contracts ("GICs") issued by U.S. insurance companies.
Pursuant to such contracts, the Fund makes a cash contribution to a deposit
fund of the insurance company's general account. The insurance company then
credits to the Fund on a monthly basis interest which is based on an index (in
most cases this index is expected to be the Salomon Brothers CD Index), but is
guaranteed not to be less than a certain minimum rate. A GIC is normally a
general obligation of the issuing insurance company and not funded by a
separate account. The purchase price paid for a GIC becomes part of the
general assets of the insurance company, and the contract is paid from the
company's general assets. The Fund will only purchase GICs from insurance
companies which, at the time of purchase, have assets of $1 billion or more
and meet quality and credit standards established by the Advisor
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<PAGE>
pursuant to guidelines approved by the Board of Directors. Generally, GICs are
not assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Therefore, GICs will normally be considered illiquid investments, and will be
acquired subject to the limitation on illiquid investments.
When-lssued Purchases and Forward Commitments. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis. These transactions, which involve a commitment by
the Fund to purchase or sell particular securities with payment and delivery
taking place at a future date (perhaps one or two months later), permit the
Fund to lock-in a price or yield on a security, regardless of future changes
in interest rates. When-issued and forward commitment transactions involve the
risk that the price or yield obtained may be less favorable than the price or
yield available when the delivery takes place. The Fund will establish a
segregated account consisting of cash, U.S. Government securities or other
high grade debt obligations in an amount equal to the amount of its when-
issued purchases and forward commitments. The Fund's when-issued purchases and
forward purchase commitments are not expected to exceed 25% of the value of
the Fund's total assets absent unusual market conditions. The Fund does not
intend to engage in when-issued purchases and forward commitments for
speculative purposes but only in furtherance of its investment objective.
Investment Company Securities. In connection with the management of its
daily cash position, the Fund may invest in securities issued by other
investment companies which invest in short-term debt securities and which seek
to maintain a $1.00 net asset value per share (i.e. "money market funds").
Securities of other investment companies will be acquired within limits
prescribed by the 1940 Act. These limitations, among other matters, restrict
investments in securities of other investment companies to no more than 10% of
the value of the Fund's total assets, with no more than 5% invested in the
securities of any one investment company. As a shareholder of another
investment company, 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 fees and expenses the Fund bears directly in connection
with its own operations.
Illiquid Securities. The Fund will not invest more than 15% of the value of
its net assets (determined at the time of acquisition) in securities that are
illiquid. If, after the time of acquisition, events cause this limit to be
exceeded, the Fund will take steps to reduce the aggregate amount of its
illiquid holdings as soon as reasonably practicable in accordance with the
policies of the SEC. Subject to this limitation are GICs and repurchase
agreements and time deposits which do not provide for payment within seven
days. 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 (the "1933 Act") ("Section 4(2)
paper"). The Fund may also purchase securities that are not registered under
the 1933 Act, but which can be sold to qualified institutional buyers in
accordance with Rule 144A under the 1933 Act ("Rule 144A securities"). Section
4(2) paper is restricted as to disposition under Federal securities laws, and
generally is sold to institutional investors which agree to purchase the paper
for investment and not with a view to public distribution. Any resale by the
purchasers must be 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 who make a market in the Section 4(2) paper, thus
providing liquidity. Rule 144A securities generally must be sold only to other
qualified institutional buyers. If a particular investment in Section 4(2)
paper or Rule 144A securities is not determined to be liquid, that investment
will be included within the Fund's limitation on investments in illiquid
securities. The Advisor will determine the liquidity of such investments
pursuant to guidelines established by the Board of Directors.
Lending of Portfolio Securities. To enhance the return of its portfolio, the
Fund may lend securities in its portfolio representing up to 25% of its total
assets, taken at market value, to securities firms and financial institutions,
provided that each loan is secured continuously by collateral in the form of
cash, high quality money market instruments or short-term U.S. Government
securities adjusted daily to have a market value at least equal to the current
market value of the securities loaned. The risk in lending portfolio
securities, as with other extensions of credit, consists of possible delay in
the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially.
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<PAGE>
Diversification. The Fund is classified as a non-diversified investment
company under the 1940 Act. As a "non-diversified" investment company, the
Fund is not subject to the provisions of the 1940 Act which would otherwise
limit the proportion of its assets that may be invested in obligations of a
single issuer. Consequently, because the Fund may hold a relatively high
proportion of its assets in a limited number of issuers, an investment in the
Fund may, under certain circumstances, present greater risk to an investor
than an investment in a diversified investment company. Investment return on a
non-diversified portfolio typically is dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. Consequently, the change in value of any one security may affect
the overall value of a non-diversified portfolio more than it would a
diversified portfolio, and thereby subject the market-based net asset value
per share of the non-diversified portfolio to greater fluctuations. In
addition, a non-diversified portfolio may be more susceptible to economic,
political and regulatory developments than a diversified investment portfolio
with similar objectives. The Fund will, however, comply with the
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code").
Portfolio Turnover. The Advisor will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with the Fund's
objective and policies. A high portfolio turnover rate involves larger
brokerage commission expenses or transaction costs which must be borne
directly by the Fund, and may result in the realization of short-term capital
gains which are taxable to shareholders as ordinary income. It is anticipated
that the Fund's annual portfolio turnover will range from 200% to 300%.
INVESTMENT LIMITATIONS
The Fund's investment objective and policies may be changed by the Company's
Board of Directors without shareholder approval. However, shareholders will be
notified of any such material change, except where notice is not required. No
assurance can be given that the Fund will achieve its investment objective.
The Fund has also adopted certain fundamental investment limitations that
may be changed only with the approval of a "majority of the outstanding shares
of the Fund" (as defined in the Statement of Additional Information). The
following descriptions summarize several of the Fund's fundamental investment
policies, which are set forth in full in the Statement of Additional
Information.
The Fund may not:
(1) invest 25% or more of its total assets in one or more issuers
conducting their principal business activities in the same industry
(securities issued or guaranteed by the United States Government, its
agencies or instrumentalities are not considered to represent industries);
and
(2) borrow money or issue senior securities (as defined in the 1940 Act)
except (i) to borrow for temporary purposes in amounts not exceeding 5% of
its total assets and (ii) to meet redemption requests, in amounts (when
aggregated with amounts borrowed under clause (i)) not exceeding 33 1/3% of
its total assets.
These investment limitations are applied at the time investment securities
are purchased.
PURCHASES AND REDEMPTIONS OF SHARES
Shares of the Fund are sold on a continuous basis for the Company by the
Distributor, Funds Distributor, Inc. The Distributor is a registered
broker/dealer with principal offices at One Exchange Place, Boston,
Massachusetts 02109.
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<PAGE>
PURCHASE OF SHARES
Class K Shares of the Fund are sold without an initial or contingent sales
charge to customers ("Customers") of banks and other institutions, and the
immediate family members of such customers, that have entered into agreements
with the Company providing for shareholder services for Customers. Customers
may include individuals, trusts, partnerships and corporations. All share
purchases are effected through a Customer's account at an institution through
procedures established in connection with the requirements of the account, and
confirmations of share purchases and redemptions will be sent to the
institution involved. Institutions (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. The exercise of voting rights
and the delivery to Customers of shareholder communications from the Fund will
be governed by the Customers' account agreements with the institution.
Investors wishing to purchase shares of the Fund should contact their account
representatives.
Shares of the Fund are sold at net asset value per share next determined on
that day after receipt of a purchase order. Purchase orders by an institution
for Class K Shares must be received by the Distributor or the Fund's Transfer
Agent before the close of regular trading hours (currently 4:00 p.m. New York
City time) on the New York Stock Exchange (the "Exchange"), on any Business
Day (as defined below). Payment for such shares may be made by institutions in
Federal funds or other funds immediately available to the Custodian no later
than 4:00 p.m. (New York City time) on the next Business Day following the
receipt of the purchase order.
It is the responsibility of the institution to transmit orders for purchases
by 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 thereof 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. In addition, an institution may receive fees
from the Fund with respect to the investments of its customers as described
below under "Management." Payments for Class K shares of the Fund may, in the
discretion of the Advisor, be made in the form of securities that are
permissible investments for the Fund. For further information see "In-Kind
Purchases" in the Statement of Additional Information.
Purchases may be effected on days the Exchange is open for business (a
"Business Day"). The Company reserves the right to reject any purchase order.
Payment for orders which are not received or accepted will be returned after
prompt inquiry. The issuance of shares is recorded on the books of the Fund,
and share certificates are not issued unless expressly requested in writing.
Certificates are not issued for fractional shares.
Neither the Company, the Distributor nor the Transfer Agent will be
responsible for the authenticity of telephone instructions for the purchase or
redemption of shares where such instructions are reasonably believed to be
genuine. Accordingly, the Institution will bear the risk of loss. The Company
will attempt to confirm that telephone instructions are genuine and will use
such procedures as are considered reasonable. To the extent that the Company
fails to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such instructions
that prove to be fraudulent or unauthorized.
REDEMPTION OF SHARES
Redemption orders are effected at the net asset value per share next
determined after receipt of the order. Shares held by an institution on behalf
of its customers must be redeemed in accordance with instructions and
limitations pertaining to the account at the institution. The Fund 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 brokerage
costs in converting such securities to cash.
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<PAGE>
Share balances may be redeemed pursuant to arrangements between institutions
and investors. It is the responsibility of an institution to transmit
redemption orders to the Fund's Transfer Agent and to credit its Customers'
accounts with the redemption proceeds on a timely basis. If the Transfer Agent
receives a redemption order prior to 4:00 p.m. (New York City time), the
redemption proceeds for shares of the Fund are normally wired to the redeeming
institution the following Business Day. The Fund 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 Investment Advisor, an earlier
payment could adversely affect the Fund.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to pay dividends and distributions from the net income and
capital gains, if any, earned on investments held by the Fund. The net income
of the Fund is declared quarterly as a dividend. Generally, dividends are paid
within six business days after quarter-end.
The Fund's net realized capital gains (including net short-term capital
gains), if any, are distributed at least annually. Dividends and capital gains
are paid in the form of additional shares of the same class of the Fund unless
a shareholder requests that dividends and capital gains be paid in cash. In
the absence of this request on the Account Application Form or in a subsequent
request, each purchase of shares is made on the understanding that the Fund's
Transfer Agent is automatically appointed to receive the dividends upon all
shares in the shareholder's account and to reinvest them in full and
fractional shares of the same class of the Fund at the net asset value in
effect at the close of business on the reinvestment date. Dividends are
automatically paid in cash (along with any redemption proceeds) not later than
seven Business Days after a shareholder closes an account with the Fund.
The Fund's expenses are deducted from the income of the Fund before
dividends are declared and paid. These expenses include, but are not limited
to, fees paid to the Advisor, Administrator, Custodian and Transfer Agent;
fees and expenses of officers and Directors; taxes; interest; legal and
auditing fees; brokerage fees and commissions; certain fees and expenses in
registering and qualifying the 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 of Officers'
liability insurance premiums; the expense of using independent pricing
services; and other expenses which are not assumed by the Administrator. Any
general expenses of the Company that are not readily identifiable as belonging
to a particular fund of the Company are allocated among all funds of the
Company by or under the direction of the Board of Directors in a manner that
the Board determines to be fair and equitable. Except as noted in this
Prospectus and the Statement of Additional Information, the Fund's service
contractors bear expenses in connection with the performance of their
services, and the Fund bears the expenses incurred in its operations. The
Advisor, Administrator, Custodian and Transfer Agent may voluntarily waive all
or a portion of their respective fees from time to time.
The Fund's net investment income available for distribution to the holders
of Class K Shares will be reduced by the amount of service and distribution
fees payable under the Class K Plan described below.
NET ASSET VALUE
Net asset value for Class K Shares in the Fund is calculated by dividing the
value of all securities and other assets belonging to the Fund allocable to
that class, less the liabilities charged to that class, by the number of
outstanding shares of that class.
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The net asset value per share of the Fund for the purpose of pricing
purchase and redemption orders is determined as of the close of regular
trading hours on the New York Stock Exchange (currently 4:00 p.m., New York
time) on each business day. Securities traded on a national securities
exchange or on the NASDAQ National Market System are valued at the last sale
price on such exchange or market as of the close of business on the date of
valuation. Securities traded on a national securities exchange or on the
NASDAQ National Market System for which there were no sales on the date of
valuation and securities traded on other over-the-counter markets, including
listed securities for which the primary market is believed to be over-the-
counter, are valued at the mean between the most recently quoted bid and asked
prices. Options will be valued at market value or fair value if no market
exists. Futures contracts will be valued in like manner, except that open
futures contract sales will be valued using the closing settlement price or,
in the absence of such a price, the most recently quoted asked price.
Portfolio securities primarily traded on the London Stock Exchange are
generally valued at the mid-price between the current bid and asked prices.
Portfolio securities which are primarily traded on foreign securities
exchanges, other than the London Stock Exchange, are generally valued at the
preceding closing values of such securities on their respective exchanges,
except when an occurrence subsequent to the time a value was so established is
likely to have changed such value. In such an event, the fair value of those
securities will be determined through the consideration of other factors by or
under the direction of the Board of Directors. Restricted securities and
securities and assets for which market quotations are not readily available
are valued at fair value by the Advisor under the supervision of the Board of
Directors. Debt securities with remaining maturities of 60 days or less are
valued at amortized cost, unless the Board of Directors determines that such
valuation does not constitute fair value at that time. Under this method, such
securities are valued initially at cost on the date of purchase (or the 61st
day before maturity).
The Company does not accept purchase and redemption orders on days which the
New York Stock Exchange is closed. The New York Stock Exchange is currently
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving and
Christmas, and on the preceding Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively.
MANAGEMENT
BOARD OF DIRECTORS
The Company is managed under the direction of its Board of Directors. The
Statement of Additional Information contains the name and background
information of each Director.
INVESTMENT ADVISOR
The investment advisor of the Fund is Munder Capital Management, a Delaware
general partnership with its principal offices at 480 Pierce Street,
Birmingham, Michigan 48009. The Advisor was formed in December 1994. The
principal partners of the Advisor are Old MCM, Inc. ("MCM"), Munder Group LLC,
Woodbridge Capital Management, Inc. ("Woodbridge") and WAM Holdings, Inc.
("WAM"). MCM was founded in February 1985 as a Delaware corporation and was a
registered investment advisor. Woodbridge and WAM are indirect, wholly-owned
subsidiaries of Comerica Incorporated. Mr. Lee P. Munder, the Advisor's chief
executive officer, indirectly owns or controls a majority of the partnership
interests in the Advisor. As of March 31, 1996, the Advisor and its affiliates
had approximately $31 billion in assets under active management, of which $15
billion were invested in equity securities, $7 billion were invested in money
market or other short-term instruments, and $9 billion were invested in other
fixed income securities.
Subject to the supervision of the Board of Directors of the Company, the
Advisor provides overall investment management for the 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 as requested.
13
<PAGE>
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 .50% of the Fund's average daily net assets.
The Advisor may, from time to time, make payments to banks, broker-dealers
or other financial institutions for certain services to the Fund and/or its
shareholders, including sub-administration, sub-transfer agency and
shareholder servicing. Such payments are made out of the Advisor's own
resources and do not involve additional costs to the Fund or its Shareholders.
PORTFOLIO MANAGERS
Gregory A. Prost, CFA, Senior Fixed Income Portfolio Manager of the Advisor
or MCM, has co-managed the Munder Bond Fund and Munder Balanced Fund since
May, 1995. Prior to joining MCM in 1995, he was a Vice President and Senior
Fund Manager for First of America Investment Corp.
Sharon E. Fayolle, Vice President and Director of Money Market Fund Trading
for the Advisor or MCM, is responsible for overseeing the management of cash
portfolios, money market funds and foreign currency trading since May, 1996.
Prior to joining MCM in 1996, she was employed in the investment area of Ford
Motor Company as European Portfolio Manager responsible for investment and
cash management for Ford's European operations.
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
First Data Investor Services Group, Inc. ("First Data"), whose principal
business address is 53 State Street, Boston, Massachusetts 02109 (the
"Administrator"), serves as administrator for the Company. First Data is a
wholly-owned subsidiary of First Data Corporation. The Administrator generally
assists the Company in all aspects of its administration and operations,
including the maintenance of financial records and fund accounting.
First Data also serves as the Company's transfer agent and dividend
disbursing agent ("Transfer Agent"). Shareholder inquiries may be directed to
First Data at P.O. Box 9755, Providence, Rhode Island 02940-9755.
As compensation for these services, the Administrator and Transfer Agent are
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 they provide services, computed daily and payable monthly at
the rate of .12% of the first $2.8 billion of net assets, plus .105% of the
next $2.2 billion of net assets, plus .10% of all net assets in excess of $5
billion with respect to the Administrator and .02% of the first $2.8 billion
of net assets, plus .015% of the next $2.2 billion of net assets, plus .01% of
all net assets in excess of $5 billion with respect to the Transfer Agent.
Administration fees payable by the Company and certain other investment
portfolios advised by the Advisor are subject to a minimum annual fee of $1.2
million to be allocated among each series and class thereof. The Administrator
and Transfer Agent are also entitled to reimbursement for out-of-pocket
expenses. The Administrator has entered into a Sub-Administration Agreement
with the Distributor under which the Distributor provides certain
administrative services with respect to the Fund. The Administrator pays the
Distributor a fee for these services out of its own resources at no cost to
the Fund.
Comerica Bank (the "Custodian"), whose principal business address is One
Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48226, provides
custodial services to the Fund. As compensation for its services, the
Custodian is entitled to receive fees, based on the aggregate average daily
net assets of the Fund and other funds of the Company and Munder Funds Trust
computed daily and payable monthly at an annual rate of .03% of the first $100
million of average daily net assets, .02% of the next $500 million of net
assets and .01% of net assets in excess of $600 million. The Custodian also
receives certain transaction based fees. For an additional description of the
services performed by the Administrator, Transfer Agent and Custodian, see the
Statement of Additional Information.
SHAREHOLDER SERVICING ARRANGEMENTS
The Company, on behalf of the Fund, has adopted a Shareholder Servicing Plan
(the "Class K Plan") under which Class K shares are sold through institutions
which enter into shareholder servicing agreements with the Company. The
agreements require the institutions to provide shareholder services to their
customers ("Customers") who from time to time own of record or beneficially
Class K Shares in return for payment by the Fund at a rate not exceeding .25%
(on an annualized basis) of the average daily net asset value of the Class K
Shares beneficially owned by the Customers. Class K shares bear all fees paid
to institutions under the Class K Plan.
14
<PAGE>
The services provided by institutions under the Class K Plan may include
processing purchase, exchange and redemption requests from Customers and
placing orders with the Transfer Agent; processing dividend and distribution
payments from the Fund on behalf of Customers; providing information
periodically to Customers showing their positions in Class K Shares; providing
sub-accounting with respect to Class K Shares beneficially owned by Customers
or the information necessary for sub-accounting; responding to inquiries from
Customers concerning their investment in Class K Shares; arranging for bank
wires; and providing such other similar services as may be reasonably
requested.
The Fund understands that institutions may charge fees to their Customers
who are the owners of Class K Shares in connection with their Customer
accounts. These fees would be in addition to any amounts which may be received
by an institution under its agreements with the Fund. The agreements require
an institution to disclose to its Customers any compensation payable to the
institution by the Fund and any other compensation payable by the Customers in
connection with the investment of their assets in Class K Shares. Customers of
institutions should read this Prospectus in light of the terms governing their
accounts with their institutions. Conflict of interest restrictions may apply
to the receipt by institutions of compensation from the Distributor with
respect to the investment of fiduciary assets in Class K Shares.
Payments under the Class K Plan are not tied exclusively to the shareholder
service expenses actually incurred by the institutions and the payments may
exceed service expenses actually incurred. The Company's Board of Directors
evaluates the appropriateness of the Class K Plan and its payment terms on a
periodic basis.
TAXES
GENERAL
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. Such qualification relieves the Fund of liability
for Federal income taxes to the extent its earnings are distributed in
accordance with the Code.
Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that the Fund distribute to its
shareholders an amount equal to at least 90% of its investment company taxable
income and 90% of its net tax-exempt interest income for such year. In
general, the Fund's investment company income will be its taxable income
(including dividends, interest, and short-term capital gains) subject to
certain adjustments and excluding the excess of any net long-term capital gain
for the taxable year over the net
short-term capital loss, if any, for such year. The Fund intends to distribute
substantially all of its investment company taxable income each taxable year.
Such distributions will be taxable as ordinary income to the Fund's
shareholders who are not currently exempt from Federal income taxes, whether
such income is received in cash or reinvested in additional shares. (Federal
income taxes for distributions to an IRA or qualified retirement plan are
deferred under the Code if applicable requirements are met.)
Substantially all of the Fund's net realized long-term capital gains, if
any, will be distributed at least annually. The Fund will generally have no
Federal income tax liability with respect to such gains, and the distributions
will be taxable to shareholders who are not currently exempt from Federal
income taxes as long-term capital gains, no matter how long the shareholders
have held their shares.
A taxable gain or loss may also be realized by a holder of shares in the
Fund upon the redemption or transfer of shares depending upon the tax basis of
the shares and their price at the time of the transaction.
The Fund's gains and losses from investments in foreign currency denominated
debt securities and from certain other transactions may be treated as ordinary
income or loss rather than capital gain or loss. This may have the effect of
increasing ordinary dividends paid to shareholders (in the case of such gains)
or decreasing the amounts available for distribution as dividends (in the case
of such losses).
15
<PAGE>
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by the Fund on December 31 of such
year if such dividends are actually paid during January of the following year.
Before purchasing shares in the Funds, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of
the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, may be subject to tax.
On an annual basis, the Company will send written notices to record owners
of shares regarding the Federal tax status of distributions made by the Fund.
Since this is not an exhaustive discussion of applicable tax consequences, and
since state and local taxes may be different than the Federal taxes described
above, investors may wish to contact their tax advisors concerning investments
in the Fund.
FOREIGN TAXES
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Fund will be
subject to foreign withholding taxes with respect to income received from
sources within foreign countries. If more than 50% of the value of the Fund's
total assets at the close of a taxable year consists of securities of foreign
corporations, the Fund may elect, for U.S. Federal income tax purposes, to
treat certain foreign taxes paid by it, including generally any withholding
taxes and other foreign income taxes, as paid by its shareholders. If the Fund
makes this election, the amount of such foreign taxes paid by the Fund will be
included in its shareholders' income pro rata (in addition to taxable
distributions actually received by them), and the shareholders would be
entitled (a) to credit their proportionate amount of such taxes against their
U.S. Federal income tax liabilities subject to certain limitations described
in the Statement of Additional Information, or (b) if they itemize their
deductions to deduct such proportionate amount from their U.S. income.
The Fund's investments in derivative instruments are subject to special tax
rules, some of which are not entirely clear. As a result, the Fund may be
limited by tax considerations in the extent to which it enters into such
transactions. See the Statement of Additional Information for further
Information.
DESCRIPTION OF SHARES
The Fund operates as one series of the Company. The Company was organized as
a Maryland corporation on November 18, 1992 and is also registered under the
1940 Act as an open-end management investment company. The Company's Articles
of Incorporation authorize the Directors to classify and reclassify any
unissued shares into one or more classes of shares. Pursuant to such
authority, the Directors have authorized the issuance of shares of common
stock, representing interests in The Munder Multi-Season Growth Fund, The
Munder Real Estate Equity Investment Fund, The Munder Mid-Cap Growth Fund, The
Munder Value Fund, The Munder International Bond Fund and The Munder Money
Market Fund, respectively, each of which, except The Munder International Bond
Fund, is classified as a diversified investment company under the 1940 Act.
The shares of the Fund are offered as five separate classes of common stock,
$.01 par value per share, designated Class A Shares, Class B Shares, Class C
Shares, Class K Shares and Class Y Shares. All shares represent interests in
the same assets of the Fund and are identical in all respects except that each
class bears different service and distribution expenses and may bear various
class-specific expenses, and each class has exclusive voting rights with
respect to its service and/or distribution plan, if any. Shares of the Fund
issued are fully paid, non-assessable, fully transferable and redeemable at
the option of the holder. Investors may call the Fund at (800) 438-5789 for
more information concerning other classes of Shares of the Fund. This
Prospectus relates only to the Class K Shares of the Fund.
The Company's shareholders are entitled to one vote for each full share held
and proportionate fractional votes for fractional shares held, and will vote
in the aggregate and not by Fund, except where otherwise required
16
<PAGE>
by law or when the Directors determine that the matter to be voted upon
affects only the interests of the shareholders of a particular Fund. In
addition, shareholders of the Fund will vote in the aggregate and not by
class, except as otherwise expressly required by law or when the Directors
determine that the matter to be voted on affects only the interests of the
holders of a particular class of shares. The Company is not required and does
not currently intend to hold annual meetings of shareholders for the election
of Board members except as required under the 1940 Act. A meeting of
shareholders will be called upon the written request of at least 10% of the
outstanding shares of the Company. The extent required by law, the Company
will assist in shareholder communications in connection with such a meeting.
For further discussion of the voting rights of shareholders, see "Additional
Information Concerning Shares" in the Statement of Additional Information.
REPORTS TO SHAREHOLDERS
The Fund will seek to eliminate duplicate mailings of prospectuses and
shareholder reports to accounts which have the same primary record owner, and
with respect to joint tenant accounts or tenant in common accounts, accounts
which have the same address. Additional copies of prospectuses and reports to
shareholders are available upon request by calling the Fund at (800) 438-5789.
PERFORMANCE
From time to time, the Company may quote performance and yield data for
Class K Shares of the Fund in advertisements or in communications to
shareholders. The total return of Class K Shares in the Fund may be calculated
on an average annual total return basis, and may also be calculated on an
aggregate total return basis, for various periods. Average annual total return
reflects the average percentage change in value of an investment in a class of
shares in the Fund from the beginning date of the measuring period to the end
of the measuring period. Aggregate total return reflects the total percentage
change in value over the measuring period. Both methods of calculating total
return assume that dividends and capital gains distributions made during the
period are reinvested in the same class of shares.
The yield of a class of Shares in the Fund is computed based on the net
income of such class in the Fund during a 30-day (or one month) period (which
period will be identified in connection with the particular yield quotation).
More specifically, the Fund's yield for a class of shares is computed by
dividing the per share net income for the class during a 30-day (or one-month)
period by the maximum offering price per share on the last day of the period
and annualizing the result on a semi-annual basis.
The Fund may compare the performance of the Shares to the performance of
other mutual funds with similar investment objectives and to other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds, including,
for example, Lipper Analytical Services, Inc., the Lehman Brothers
Government/Corporate Bond Index, a recognized unmanaged index of government
and corporate bonds, the Standard & Poor's 500 Index, an unmanaged index of a
group of common stocks, the Consumer Price Index, or the Dow Jones Industrial
Average, an unmanaged index of common stocks of 30 industrial companies listed
on the New York Stock Exchange. Performance and yield data as reported in
national financial publications such as Morningstar, Inc., Money Magazine,
Forbes, Barron's, The Wall Street Journal and The New York Times, or in
publications of a local or regional nature, may also be used in comparing the
performance of a class of Shares in the Fund.
Performance will fluctuate and any quotation of performance should not be
considered as representative of future performance of a class of shares in the
Fund. Shareholders should remember that performance is generally a function of
the kind and quality of the instruments held in a fund, portfolio maturity,
operating expenses, and market conditions. Any fees charged by institutions
directly to their customers' accounts in connection with investments in the
Fund will not be included in calculations of yield and performance.
Quotations of total return for Class K Shares will reflect the fees for
certain shareholder services as described in this Prospectus.
17
<PAGE>
THE MUNDER INTERNATIONAL BOND FUND
480 PIERCE STREET
BIRMINGHAM, MICHIGAN 48009
TELEPHONE: (800) 438-5789
PROSPECTUS
CLASS Y SHARES
The Munder International Bond Fund (the "Fund") is a series of shares issued
by The Munder Funds, Inc. (the "Company"), an open-end management investment
company. The Fund's investment objective is to realize a competitive total
return through a combination of current income and capital appreciation. The
Fund seeks to achieve its objective by investing primarily in foreign debt
obligations. There can be no assurance that the Fund's investment objective
will be achieved. The net asset value per share of the Fund will fluctuate in
response to changes in market conditions and other factors.
Munder Capital Management (the "Advisor") serves as the investment advisor
to the Fund.
This Prospectus contains the information that a prospective investor should
know before investing in the Fund. Investors are encouraged to read this
Prospectus and retain it for future reference. A Statement of Additional
Information dated July 1, 1996, as amended or supplemented from time to time,
has been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus. It may be obtained free of
charge by calling the Fund at (800) 438-5789.
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.
SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expense Table
The Fund................................................................. 3
Investment Objective and Policies........................................ 3
Portfolio Instruments and Practices...................................... 4
Investment Limitations................................................... 10
Purchases and Redemptions of Shares...................................... 10
Dividends and Distributions.............................................. 12
Other Information
Net Asset Value.......................................................... 12
Management............................................................... 13
Taxes.................................................................... 14
Description of Shares.................................................... 16
Performance.............................................................. 16
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION, OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE COMPANY OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
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<PAGE>
EXPENSE TABLE
The following table sets forth certain costs and expenses that an investor
will incur either directly or indirectly as a shareholder of Class Y Shares of
the Fund based on estimated operating expenses.
<TABLE>
<S> <C>
Annual operating expenses:
(as a percentage of average net assets)
Advisory fees............................................................. .50%
Other expenses............................................................ .35%
----
Total Fund operating expenses............................................. .85%
====
</TABLE>
"Other expenses" in the above table include fees for shareholder services,
administrator fees, custodial fees, legal and accounting fees, printing costs,
registration fees, fees for any portfolio valuation service, the cost of
regulatory compliance, the costs of maintaining the Fund's legal existence and
the costs involved with communicating with shareholders. The amount of "Other
expenses" is based on estimated expenses and projected assets for the current
fiscal year. The nature of the services for which the Fund is obligated to pay
advisory fees is described under "Management." Any fees charged by
institutions directly to customer accounts for services provided in connection
with investments in shares of the Fund are in addition to the expenses shown
in the above Expense Table and the Example shown below.
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in the Fund. These amounts are based on payment
by the Fund of operating expenses at the levels set forth in the above table,
and are also based on the following assumptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
An investor would pay the following expenses on a $1,000
investment in Class Y Shares of the Fund, assuming a 5% annual
return and redemption at the end of the following time
periods....................................................... $9 $27
</TABLE>
The foregoing Expense Table and Example are intended to assist investors in
understanding the various shareholder transaction expenses and operating
expenses of the Fund that investors bear either directly or indirectly.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL INVESTMENT RETURN AND
OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
THE FUND
The Munder International Bond Fund (the "Fund"), is a series of shares
issued by The Munder Funds, Inc. (the "Company"), an open-end management
investment company. The Company was incorporated under the laws of the State
of Maryland on November 18, 1992 and has registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund's principal office
is located at 480 Pierce Street, Birmingham, Michigan 48009 and its telephone
number is (800) 438-5789.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to realize a competitive total
return through a combination of current income and capital appreciation. The
Fund seeks to achieve its objective by investing primarily in foreign debt
obligations. As an international fund, the Fund may invest in securities of
any issuer and in any currency. Under normal market conditions, at least 65%
of the Fund's assets are invested in bonds of issuers located in at least
three countries other than the United States. The Fund will primarily invest
in foreign debt obligations
3
<PAGE>
denominated in foreign currencies, including the European Currency Unit
("ECU"), which are issued by foreign governments and governmental agencies,
instrumentalities or political subdivisions; debt securities issued or
guaranteed by supranational organizations (e.g. European Investment Bank,
Inter-American Development Bank or the World Bank); corporate debt securities;
bank or bank holding company debt securities and other debt securities
including those convertible into foreign stock. For the purposes of the 65%
limitation with respect to the Fund's designation as an international bond
fund, the securities described in this paragraph are considered "international
bonds." There can be no assurance that the Fund will achieve its investment
objective. Purchasing shares of the Fund should not be considered a complete
investment program, but an important segment of a well-diversified investment
program.
The Fund's dollar-weighted average maturity will generally be between three
and fifteen years except during temporary defensive periods, and will be
adjusted by the Advisor according to market conditions. Pending investment, to
meet anticipated redemption requests, or as a temporary defensive measure if
the Advisor determines that market conditions warrant, the Fund may invest
without limitation in short-term U.S. Government obligations, high quality
money market instruments and repurchase agreements. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. The
Fund may also invest in futures contracts and options and enter into interest
rate swap transactions. See "Portfolio Instruments and Practices--Futures
Contracts and Options" for a discussion of the risks associated with the use
of derivative instruments. A further description of the types of obligations
and the various investment techniques used by the Fund is provided below under
"Portfolio Instruments and Practices."
PORTFOLIO INSTRUMENTS AND PRACTICES
Foreign Debt Securities. The Fund may purchase debt obligations issued or
guaranteed by a foreign sovereign government or one of its agencies,
authorities, instrumentalities or political subdivisions, including foreign
states, provinces or municipalities and corporate debt securities. Investing
in the securities of any foreign issuer involves special risks and
considerations not typically associated with investing in U.S. issuers. These
include differences in accounting, auditing and financial reporting standards;
different disclosure laws, which may result in less publicly available
information about foreign issuers than U.S. issuers; generally higher markups
on foreign portfolio transactions; the possibility of nationalization,
expropriation or confiscatory taxation; adverse changes in investment or
exchange control regulations (which may include suspension of the ability to
transfer currency from a country); political instability; less government
regulation of securities markets, brokers and issuers; possible difficulty in
obtaining and enforcing judgments in foreign courts; and imposition of
restrictions on foreign investments. Additionally, foreign securities and
interest payable on those securities may be subject to foreign taxes,
including taxes withheld from payments on those securities. Foreign securities
often trade with less frequency and volume than domestic securities and
therefore may exhibit greater price volatility. Additional costs associated
with an investment in foreign securities may include higher custodial fees
than apply to U.S. custodial arrangements, and transaction costs of foreign
currency conversions. Changes in foreign exchange rates will also affect the
value of securities denominated or quoted in currencies other than the U.S.
dollar.
Corporate Obligations. The Fund may purchase commercial paper and corporate
bonds that meet the Fund's applicable quality and maturity limitations.
Commercial paper may include obligations issued by foreign corporations and
foreign counterparts of U.S. corporations and europaper, which is U.S. dollar-
denominated commercial paper of a foreign issuer. The Fund may also purchase
commercial paper indexed to certain specific foreign currency exchange rates.
The Fund will purchase only those securities which are considered to be
investment grade or better (within the four highest rating categories of
Standard & Poor's Ratings Service, a division of McGraw-Hill Companies, Inc.
("S&P") or Moody's Investor Services, Inc. ("Moody's") or, if unrated, of
comparable quality). Obligations rated "Baa" by Moody's lack outstanding
investment characteristics and have speculative characteristics. Adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of obligations rated "BBB" by S&P to pay interest and repay
principal than in the case of higher grade obligations. After
4
<PAGE>
purchase by the Fund, a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Fund. Neither event
will require the Fund to sell such security. However, the Advisor will
reassess promptly whether the security presents minimal credit risks and
determine whether continuing to hold the security is in the best interests of
the Fund. To the extent that the ratings given by Moody's, S&P or another
nationally recognized statistical rating organization for securities may
change as a result of changes in the rating systems or because of corporate
reorganization of such rating organizations, the Fund will attempt to use
comparable ratings as standards for its investments in accordance with the
investment objective and policies of the Fund. Descriptions of each rating
category are included as Appendix A to the Statement of Additional
Information.
Fixed Income Securities. The market value of fixed income securities held by
the Fund can be expected to vary inversely to changes in prevailing interest
rates. Investors should also recognize that in periods of declining interest
rates the yields of investment portfolios composed primarily of fixed income
securities will tend to be higher than prevailing market rates and, in periods
of rising interest rates, yields will tend to be somewhat lower. The Fund may
purchase zero-coupon bonds (i.e., discount debt obligations that do not make
periodic interest payments). Zero-coupon bonds are subject to greater market
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest.
Forward Foreign Currency Transactions. The Fund normally conducts its
foreign currency exchange transactions either on a spot (cash) basis at the
spot rate prevailing in the foreign currencies or on a forward basis. Under
normal circumstances, the Advisor expects that the Fund will enter into
forward currency contracts (to purchase or sell a specified currency at a
specified future date and price). The Fund generally will not enter into a
forward contract with a term of greater than one year. Although forward
contracts are used primarily to protect the Fund from adverse currency
movements, they may also be used to increase exposure to a currency, and
involve the risk that anticipated currency movements will not be accurately
predicted and the Fund's total return will be adversely affected as a result.
Open positions in forward contracts are covered by the segregation with the
Fund's custodian of cash, U.S. Government securities or other high grade debt
obligations which are marked to market daily.
Bank Obligations. The Fund may purchase debt obligations issued or
guaranteed by supranational organizations such as the World Bank, Asian
Development Bank, European Investment Bank and European Union; debt
obligations of U.S. and foreign banks and bank holding companies and U.S.
dollar-denominated bank obligations, including certificates of deposit,
bankers' acceptances, bank notes, deposit notes and interest-bearing savings
and time deposits, issued by U.S. or foreign banks or savings institutions
having total assets at the time of purchase in excess of $1 billion. For this
purpose, the assets of a bank or savings institution include the assets of
both its domestic and foreign branches. See "Foreign Debt Securities" for a
discussion of the risks associated with investments in obligations of foreign
banks and foreign branches of domestic banks. Foreign bank obligations include
Eurodollar Certificates of Deposit ("ECDs"), Eurodollar Time Deposits
("ETDs"), Canadian Time Deposits ("CTDs"), Schedule Bs, Yankee Certificates of
Deposit ("Yankee CDs") and Yankee Bankers' Acceptances ("Yankee BAs"). A
discussion of these obligations appears in the Statement of Additional
Information under "Fund Investments."
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 market rates and current conditions in the
relevant housing markets. In calculating the weighted average maturity of the
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
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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 a 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 a 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.
Interest Rate and Currency Swaps. For hedging purposes, the Fund may enter
into interest rate and currency swap transactions and purchase or sell
interest rate caps and floors. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations as a technique for managing the portfolio's duration (i.e., the
price sensitivity to changes in interest rates) or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. An interest rate or currency swap is a derivative instrument which
involves an agreement between the Fund and another party to exchange payments
calculated as if they were interest on a fictitious ("notional") principal
amount (e.g., an exchange of floating rate payments by one party for fixed
rate payments by the other). An interest rate cap or floor is a derivative
instrument which entitles the purchaser, in exchange for a premium, to receive
payments of interest on a notional principal amount from the seller of the cap
or floor, to the extent that a specified reference rate exceeds or falls below
a predetermined level.
The Fund usually enters into such transactions on a "net" basis, with the
Fund receiving or paying, as the case may be, only the net amount of the two
payment streams. The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each swap is accrued on a
daily basis and an amount of cash or high-quality liquid securities having an
aggregate net asset value at least equal to the accrued excess is maintained
in a segregated account by the Fund's custodian. If the Fund enters into a
swap on other than a net basis, or sells caps or floors, the Fund maintains a
segregated account in the full amount accrued on a daily basis of the Fund's
obligations with respect to the transaction. Such segregated accounts are
maintained in accordance with applicable regulations of the SEC.
The use of swaps, caps and floors is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Advisor's forecast of
market values, interest rates, currency rates of exchange and other applicable
factors is incorrect, the investment performance of the Fund will diminish
compared with the performance that could have been achieved if these
investment techniques were not used. Moreover, even if the Advisor's forecasts
were correct, a Fund's swap position may correlate imperfectly with the asset
or liability being hedged. In addition, in the event of a default by the other
party to the transaction, the Fund might incur a loss.
U.S. Government Obligations. The Fund may purchase obligations issued or
guaranteed by the U.S. Government and U.S. Government agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of
the U.S. Government, such as those of the Government National Mortgage
Association, are supported by the full faith and credit of the U.S. Treasury.
Others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the U.S. Treasury; and
still others, such as those of the Student Loan Marketing Association, are
supported only by the credit of the agency or instrumentality issuing the
obligation. No assurance can be given that the U.S. Government would provide
financial support to U.S. Government-sponsored instrumentalities if it is not
obligated to do so by law.
Borrowing. The Fund is authorized to borrow money in amounts up to 5% of the
value of the Fund's total assets at the time of such borrowing for temporary
purposes. However, the Fund is authorized to borrow money in amounts up to 33
1/3% of its assets, as permitted by the 1940 Act, for the purpose of meeting
redemption requests. Borrowing by the Fund creates an opportunity for greater
total return but, at the same time, increases exposure to capital risk. In
addition, borrowed funds are subject to interest costs that may offset or
exceed the return earned on the borrowed funds. However, the Fund will not
purchase portfolio securities while borrowings exceed 5% of the Fund's total
assets. For more detailed information with respect to the risks associated
with borrowing, see the heading "Fund Investments" in the Statement of
Additional Information.
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Stripped Securities. The Fund may purchase participations in trusts that
hold U.S. Treasury and agency securities (such as TIGRs and CATS) and also may
purchase Treasury receipts and other stripped securities, which represent
beneficial ownership interests in either future interest payments or the
future principal payments on U.S. Government obligations. These instruments
are issued at a discount to their "face value" and may (particularly in the
case of stripped mortgage-backed securities) exhibit greater price volatility
than ordinary debt securities because of the manner in which their principal
and interest are returned to investors. Stripped securities will normally be
considered illiquid investments and will be acquired subject to the limitation
on illiquid investments unless determined to be liquid under guidelines
established by the Board of Directors.
Repurchase Agreements. The Fund may agree to purchase securities from
financial institutions subject to the seller's agreement to repurchase them at
an agreed-upon time and price ("repurchase agreements"). The financial
institutions with which the Fund may enter into repurchase agreements include
member banks of the Federal Reserve System, any foreign bank or any domestic
or foreign broker/dealer which is recognized as a reporting government
securities dealer. The Advisor will review and continuously monitor the
creditworthiness of the seller under a repurchase agreement, and will require
the seller to maintain the value of the securities 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 the underlying
obligations.
Reverse Repurchase Agreements. The Fund may borrow funds for temporary
purposes by selling portfolio securities to financial institutions such as
banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). Reverse repurchase
agreements involve the risk that the market value of the securities sold by
the Fund may decline below the repurchase price. The Fund would pay interest
on amounts obtained pursuant to a reverse repurchase agreement.
Futures Contracts and Options. The Fund may write call options, buy put
options, buy call options and write secured put options. Such options may be
related to particular securities or to various bond indices. The Fund may also
purchase and write put and call options on foreign currencies (traded on U.S.
and foreign exchanges or over-the-counter) to manage the Fund's exposure to
changes in dollar exchange rates. The Fund may also invest in futures
contracts and options on futures contracts for hedging purposes or to maintain
liquidity. However, the Fund may not purchase or sell a futures contract
unless immediately after any such transaction the sum of the aggregate amount
of margin deposits on its existing futures positions and the amount of
premiums paid for related options is 5% or less of its total assets.
Options trading is a highly specialized activity which entails greater than
ordinary investment risks. A call option for a particular security gives the
purchaser of the option the right to buy, and a writer the obligation to sell,
the underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is the consideration for undertaking the
obligations under the option contract. A put option for a particular security
gives the purchaser the right to sell, and the writer the obligation to
purchase, the underlying security prior to the expiration date of the option,
regardless of the market price of the security. In contrast to an option on a
particular security, an option on a bond index provides the holder with the
right to make or receive a cash settlement upon exercise of the option.
Futures contracts obligate the Fund, at maturity, to take or make delivery
of certain securities or the cash value of a bond or securities index. When
interest rates are rising, futures contracts can offset a decline in value of
the Fund's portfolio securities. When rates are falling, these contracts can
secure higher yields for securities the Fund intends to purchase.
The Fund may purchase and sell call and put options on futures contracts
traded on an exchange or board of trade. When the Fund purchases an option on
a futures contract, it has the right to assume a position as a purchaser or
seller of a futures contract at a specified exercise price at any time during
the option period. When the Fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the option is
exercised. In anticipation of a decline in interest rates, the Fund may
purchase call options on futures contracts as a substitute for the purchase of
futures contracts to hedge against a possible increase in the price of
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securities which the Fund intends to purchase. Similarly, if the value of the
Fund's portfolio securities is expected to decline as a result of an increase
in interest rates, the Fund might purchase put options or sell call options on
futures contracts rather than sell futures contracts. The Fund may also enter
into contracts for the purchase or sale for future delivery of foreign
currencies.
In connection with the Fund's position in a futures contract or option
thereon, the Fund will create a segregated account of liquid assets or will
otherwise cover its position in accordance with applicable requirements of the
SEC.
The use of derivative instruments exposes the 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 the 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 inability
to close out certain hedged positions to avoid adverse tax consequences; (5)
the possible absence of a liquid secondary market for any particular
instrument and possible exchange-imposed price fluctuation limits, either of
which may make it difficult or impossible to close out a position when
desired; (6) leverage risk, that is, the risk that adverse price movements in
an instrument can result in a loss substantially greater than the Fund's
initial investment in that instrument (in some cases, the potential loss is
unlimited); and (7) particularly in the case of privately negotiated
instruments, the risk that the counterparty will fail to perform its
obligations, which could leave the Fund worse off than if it had not entered
into the position. For a further discussion see "Additional Information on
Fund Investments" and Appendix B in the Statement of Additional Information.
Variable and Floating Rate Instruments. 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 (this demand feature
is not required if the instrument is guaranteed by the U.S. Government or an
agency or instrumentality thereof). 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. Unrated variable and
floating rate instruments will be determined by the Advisor to be of
comparable quality at the time of purchase to rated instruments purchasable by
the Fund. The absence of an active secondary market, however, could make it
difficult to dispose of the instruments, and the 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 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.
Guaranteed Investment Contracts. The Fund may make limited investments in
guaranteed investment contracts ("GICs") issued by U.S. insurance companies.
Pursuant to such contracts, the Fund makes a cash contribution to a deposit
fund of the insurance company's general account. The insurance company then
credits to the Fund on a monthly basis interest which is based on an index (in
most cases this index is expected to be the Salomon Brothers CD Index), but is
guaranteed not to be less than a certain minimum rate. A GIC is normally a
general obligation of the issuing insurance company and not funded by a
separate account. The purchase price paid for a GIC becomes part of the
general assets of the insurance company, and the contract is paid from the
company's general assets. The Fund will only purchase GICs from insurance
companies which, at the time of purchase, have assets of $1 billion or more
and meet quality and credit standards established by the Advisor pursuant to
guidelines approved by the Board of Directors. Generally, GlCs 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. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis. These transactions, which involve a
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commitment by the Fund to purchase or sell particular securities with payment
and delivery taking place at a future date (perhaps one or two months later),
permit the Fund to lock-in a price or yield on a security, regardless of
future changes in interest rates. When-issued and forward commitment
transactions involve the risk that the price or yield obtained may be less
favorable than the price or yield available when the delivery takes place. The
Fund will establish a segregated account consisting of cash, U.S. Government
securities or other high grade debt obligations in an amount equal to the
amount of its when-issued purchases and forward commitments. The Fund's when-
issued purchases and forward purchase commitments are not expected to exceed
25% of the value of the Fund's total assets absent unusual market conditions.
The Fund does not intend to engage in when-issued purchases and forward
commitments for speculative purposes but only in furtherance of its investment
objective.
Investment Company Securities. In connection with the management of its
daily cash position, the Fund may invest in securities issued by other
investment companies which invest in short-term debt securities and which seek
to maintain a $1.00 net asset value per share (i.e. "money market funds").
Securities of other investment companies will be acquired within limits
prescribed by the 1940 Act. These limitations, among other matters, restrict
investments in securities of other investment companies to no more than 10% of
the value of the Fund's total assets, with no more than 5% invested in the
securities of any one investment company. As a shareholder of another
investment company, 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 fees and expenses the Fund bears directly in connection
with its own operations.
Illiquid Securities. The Fund will not invest more than 15% of the value of
its net assets (determined at the time of acquisition) in securities that are
illiquid. If, after the time of acquisition, events cause this limit to be
exceeded, the Fund will take steps to reduce the aggregate amount of its
illiquid holdings as soon as reasonably practicable in accordance with the
policies of the SEC. Subject to this limitation are GICs and repurchase
agreements and time deposits which do not provide for payment within seven
days. 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 (the "1933 Act") ("Section 4(2)
paper"). The Fund may also purchase securities that are not registered under
the 1933 Act, but which can be sold to qualified institutional buyers in
accordance with Rule 144A under the 1933 Act ("Rule 144A securities"). Section
4(2) paper is restricted as to disposition under Federal securities laws, and
generally is sold to institutional investors which agree to purchase the paper
for investment and not with a view to public distribution. Any resale by the
purchasers must be 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 who make a market in the Section 4(2) paper, thus
providing liquidity. Rule 144A securities generally must be sold only to other
qualified institutional buyers. If a particular investment in Section 4(2)
paper or Rule 144A securities is not determined to be liquid, that investment
will be included within the Fund's limitation on investments in illiquid
securities. The Advisor will determine the liquidity of such investments
pursuant to guidelines established by the Board of Directors.
Lending of Portfolio Securities. To enhance the return of its portfolio, the
Fund may lend securities in its portfolio representing up to 25% of its total
assets, taken at market value, to securities firms and financial institutions,
provided that each loan is secured continuously by collateral in the form of
cash, high quality money market instruments or short-term U.S. Government
securities adjusted daily to have a market value at least equal to the current
market value of the securities loaned. The risk in lending portfolio
securities, as with other extensions of credit, consists of possible delay in
the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially.
Diversification. The Fund is classified as a non-diversified investment
company under the 1940 Act. As a "non-diversified" investment company, the
Fund is not subject to the provisions of the 1940 Act which would otherwise
limit the proportion of its assets that may be invested in obligations of a
single issuer. Consequently, because the Fund may hold a relatively high
proportion of its assets in a limited number of issuers, an investment in the
Fund may, under certain circumstances, present greater risk to an investor
than an investment in a diversified investment company. Investment return on a
non-diversified portfolio typically is dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio.
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Consequently, the change in value of any one security may affect the overall
value of a non-diversified portfolio more than it would a diversified
portfolio, and thereby subject the market-based net asset value per share of
the non-diversified portfolio to greater fluctuations. In addition, a non-
diversified portfolio may be more susceptible to economic, political and
regulatory developments than a diversified investment portfolio with similar
objectives. The Fund will, however, comply with the diversification
requirements imposed by the Internal Revenue Code of 1986, as amended (the
"Code").
Portfolio Turnover. The Advisor will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with the Fund's
objective and policies. A high portfolio turnover rate involves larger
brokerage commission expenses or transaction costs which must be borne
directly by the Fund, and may result in the realization of short-term capital
gains which are taxable to shareholders as ordinary income. It is anticipated
that the Fund's annual portfolio turnover will range from 200% to 300%.
INVESTMENT LIMITATIONS
The Fund's investment objective and policies may be changed by the Company's
Board of Directors without shareholder approval. However, shareholders will be
notified of any such material change, except where notice is not required. No
assurance can be given that the Fund will achieve its investment objective.
The Fund has also adopted certain fundamental investment limitations that
may be changed only with the approval of a "majority of the outstanding shares
of the Fund" (as defined in the Statement of Additional Information). The
following descriptions summarize several of the Fund's fundamental investment
policies, which are set forth in full in the Statement of Additional
Information.
The Fund may not:
(1) invest 25% or more of its total assets in one or more issuers
conducting their principal business activities in the same industry
(securities issued or guaranteed by the United States Government, its
agencies or instrumentalities are not considered to represent industries);
and
(2) borrow money or issue senior securities (as defined in the 1940 Act)
except (i) to borrow for temporary purposes in amounts not exceeding 5% of
its total assets and (ii) to meet redemption requests, in amounts (when
aggregated with amounts borrowed under clause (i)) not exceeding 33 1/3% of
its total assets.
These investment limitations are applied at the time investment securities
are purchased.
PURCHASES AND REDEMPTIONS OF SHARES
Shares of the Fund are sold on a continuous basis for the Company by the
Distributor, Funds Distributor, Inc. The Distributor is a registered
broker/dealer with principal offices at One Exchange Place, Boston,
Massachusetts 02109.
PURCHASE OF SHARES
Class Y shares of the Fund are sold without an initial or contingent sales
charge to fiduciary and discretionary accounts of institutions, "institutional
investors," Directors, trustees, officers and employees of the Company, The
Munder Funds Trust, the Advisor, the Distributor and the Advisor's investment
advisory clients. "Institutional investors" may include financial institutions
(such as banks, savings institutions and credit unions); pension and profit
sharing and employee benefit plans and trusts; insurance companies; investment
companies; investment advisers; and broker-dealers acting for their own
accounts or for the accounts of such institutional investors. A minimum
initial investment of $500,000 for Class Y Shares of the Fund is required for
fiduciary and discretionary accounts of institutions and institutional
investors.
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Shares of the Fund are sold at net asset value per share next determined on
that day after receipt of a purchase order. Purchase orders by an institution
for Class Y shares must be received by the Distributor or the Fund's Transfer
Agent before the close of regular trading hours (currently 4:00 p.m. New York
City time) on the New York Stock Exchange (the "Exchange"), on any Business
Day (as defined below). Payment for such shares may be made by institutions in
Federal funds or other funds immediately available to the Custodian no later
than 4:00 p.m. (New York City time) on the next Business Day following the
receipt of the purchase order.
It is the responsibility of the institution to transmit orders for purchases
by 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 thereof 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. In addition, an institution may receive fees
from the Fund with respect to the investments of its customers as described
below under "Management." Payments for Class Y Shares of the Fund may, in the
discretion of the Investment Advisor, be made in the form of securities that
are permissible investments for the Fund. For further information see "In-Kind
Purchases" in the Statement of Additional Information.
Purchases may be effected on days which the Exchange is open for business (a
"Business Day"). The Company reserves the right to reject any purchase order.
Payment for orders which are not received or accepted will be returned after
prompt inquiry. The issuance of shares is recorded on the books of the Fund,
and share certificates are not issued unless expressly requested in writing.
Certificates are not issued for fractional shares.
Neither the Company, the Distributor nor the Transfer Agent will be
responsible for the authenticity of telephone instructions for the purchase or
redemption of shares where such instructions are reasonably believed to be
genuine. Accordingly, the Institution will bear the risk of loss. The Company
will attempt to confirm that telephone instructions are genuine and will use
such procedures as are considered reasonable. To the extent that the Company
fails to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such instructions
that prove to be fraudulent or unauthorized.
AUTOMATIC INVESTMENT PLAN ("AIP")
An investor in Class Y Shares of the Fund may arrange for periodic
investments in the Fund through automatic deductions from a checking or
savings account by completing the AIP Application Form. The minimum pre-
authorized investment is $50.
REDEMPTION OF SHARES
Redemption orders are effected at the net asset value per share next
determined after receipt of the order. Shares held by an institution on behalf
of its customers must be redeemed in accordance with instructions and
limitations pertaining to the account at the institution. The Fund 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 brokerage
costs in converting such securities to cash.
Share balances may be redeemed pursuant to arrangements between institutions
and investors. It is the responsibility of an institution to transmit
redemption orders to the Fund's Transfer Agent and to credit its Customers'
accounts with the redemption proceeds on a timely basis. If the Transfer Agent
receives a redemption order prior to 4:00 p.m. (New York City time), the
redemption proceeds for shares of the Fund are normally wired to the redeeming
institution the following Business Day. The Fund 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 Investment Advisor, an earlier
payment could adversely affect the Fund.
EXCHANGES
Class Y Shares of the Fund may be exchanged for Class Y Shares of other
funds of the Company and The Munder Funds Trust, based on their respective net
asset values, without the imposition of any sales charges.
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Any shares involved in an exchange must satisfy the requirements relating to
the minimum initial investment in an investment portfolio of the Company or
The Munder Funds Trust, and the shares involved must be legally available for
sale in the state of the investor's residence. For Federal income tax
purposes, a share exchange is a taxable event and, accordingly, a capital gain
or loss may be realized. Before making an exchange request, shareholders
should consult a tax or other financial advisor and should consider the
investment objective, policies and restrictions of the investment portfolio
into which the shareholder is making an exchange, as set forth in the
applicable prospectus. An investor who is considering an exchange may obtain a
copy of the prospectus for any investment portfolio of the Company or The
Munder Funds Trust by contacting his or her broker or the Fund at (800) 438-
5789. Certain brokers may charge a fee for handling exchanges.
The Company reserves the right to modify or terminate the exchange privilege
at any time. Notice will be given to shareholders of any material
modifications except where notice is not required.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to pay dividends and distributions from the net income and
capital gains, if any, earned on investments held by the Fund. The net income
of the Fund is declared quarterly as a dividend. Generally, dividends are paid
within six business days after quarter-end.
The Fund's net realized capital gains (including net short-term capital
gains), if any, are distributed at least annually. Dividends and capital gains
are paid in the form of additional shares of the same class of the Fund unless
a shareholder requests that dividends and capital gains be paid in cash. In
the absence of this request on the Account Application Form or in a subsequent
request, each purchase of shares is made on the understanding that the Fund's
Transfer Agent is automatically appointed to receive the dividends upon all
shares in the shareholder's account and to reinvest them in full and
fractional shares of the same class of the Fund at the net asset value in
effect at the close of business on the reinvestment date. Dividends are
automatically paid in cash (along with any redemption proceeds) not later than
seven Business Days after a shareholder closes an account with the Fund.
The Fund's expenses are deducted from the income of the Fund before
dividends are declared and paid. These expenses include, but are not limited
to, fees paid to the Advisor, Administrator, Custodian and Transfer Agent;
fees and expenses of officers and Directors; taxes; interest; legal and
auditing fees; brokerage fees and commissions; certain fees and expenses in
registering and qualifying the 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 of Officers'
liability insurance premiums; the expense of using independent pricing
services; and other expenses which are not assumed by the Administrator. Any
general expenses of the Company that are not readily identifiable as belonging
to a particular fund of the Company are allocated among all funds of the
Company by or under the direction of the Board of Directors in a manner that
the Board determines to be fair and equitable. Except as noted in this
Prospectus and the Statement of Additional Information, the Fund's service
contractors bear expenses in connection with the performance of their
services, and the Fund bears the expenses incurred in its operations. The
Advisor, Administrator, Custodian and Transfer Agent may voluntarily waive all
or a portion of their respective fees from time to time.
NET ASSET VALUE
Net asset value for Class Y Shares in the Fund is calculated by dividing the
value of all securities and other assets belonging to the Fund allocable to
that class, less the liabilities charged to that class, by the number of
outstanding shares of that class.
The net asset value per share of the Fund for the purpose of pricing
purchase and redemption orders is determined as of the close of regular
trading hours on the New York Stock Exchange (currently 4:00 p.m., New
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York time) on each business day. Securities traded on a national securities
exchange or on the NASDAQ National Market System are valued at the last sale
price on such exchange or market as of the close of business on the date of
valuation. Securities traded on a national securities exchange or on the
NASDAQ National Market System for which there were no sales on the date of
valuation and securities traded on other over-the-counter markets, including
listed securities for which the primary market is believed to be over-the-
counter, are valued at the mean between the most recently quoted bid and asked
prices. Options will be valued at market value or fair value if no market
exists. Futures contracts will be valued in like manner, except that open
futures contract sales will be valued using the closing settlement price or,
in the absence of such a price, the most recently quoted asked price.
Portfolio securities primarily traded on the London Stock Exchange are
generally valued at the mid-price between the current bid and asked prices.
Portfolio securities which are primarily traded on foreign securities
exchanges, other than the London Stock Exchange, are generally valued at the
preceding closing values of such securities on their respective exchanges,
except when an occurrence subsequent to the time a value was so established is
likely to have changed such value. In such an event, the fair value of those
securities will be determined through the consideration of other factors by or
under the direction of the Board of Directors. Restricted securities and
securities and assets for which market quotations are not readily available
are valued at fair value by the Advisor under the supervision of the Board of
Directors. Debt securities with remaining maturities of 60 days or less are
valued at amortized cost, unless the Board of Directors determines that such
valuation does not constitute fair value at that time. Under this method, such
securities are valued initially at cost on the date of purchase (or the 61st
day before maturity).
The Company does not accept purchase and redemption orders on days which the
New York Stock Exchange is closed. The New York Stock Exchange is currently
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving and
Christmas, and on the preceding Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively.
MANAGEMENT
BOARD OF DIRECTORS
The Company is managed under the direction of its Board of Directors. The
Statement of Additional Information contains the name and background
information of each Director.
INVESTMENT ADVISOR
The investment advisor of the Fund is Munder Capital Management, a Delaware
general partnership with its principal offices at 480 Pierce Street,
Birmingham, Michigan 48009. The Advisor was formed in December 1994. The
principal partners of the Advisor are Old MCM, Inc. ("MCM"), Munder Group LLC,
Woodbridge Capital Management, Inc. ("Woodbridge") and WAM Holdings, Inc.
("WAM"). MCM was founded in February 1985 as a Delaware corporation and was a
registered investment advisor. Woodbridge and WAM are indirect, wholly-owned
subsidiaries of Comerica Incorporated. Mr. Lee P. Munder, the Advisor's chief
executive officer, indirectly owns or controls a majority of the partnership
interests in the Advisor. As of March 31, 1996, the Advisor and its affiliates
had approximately $31 billion in assets under active management, of which $15
billion were invested in equity securities, $7 billion were invested in money
market or other short-term instruments, and $9 billion were invested in other
fixed income securities.
Subject to the supervision of the Board of Directors of the Company, the
Advisor provides overall investment management for the 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 as requested.
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 .50% of the Fund's average daily net assets.
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The Adviser 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 Advisor's own
resources and do not involve additional costs to the Fund or its shareholders.
PORTFOLIO MANAGERS
Gregory A. Prost, CFA, Senior Fixed Income Portfolio Manager of the Advisor
or MCM, has co-managed the Munder Bond Fund and Munder Balanced Fund since
May, 1995. Prior to joining MCM in 1995, he was a Vice President and Senior
Fund Manager for First of America Investment Corp.
Sharon E. Fayolle, Vice President and Director of Money Market Fund Trading
for the Advisor or MCM, is responsible for overseeing the management of cash
portfolios, money market funds and foreign currency trading since May, 1996.
Prior to joining MCM in 1996, she was employed in the investment area of Ford
Motor Company as European Portfolio Manager responsible for investment and
cash management for Ford's European operations.
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
First Data Investor Services Group, Inc. ("First Data"), whose principal
business address is 53 State Street, Boston, Massachusetts 02109 (the
"Administrator"), serves as administrator for the Company. First Data is a
wholly-owned subsidiary of First Data Corporation. The Administrator generally
assists the Company in all aspects of its administration and operations,
including the maintenance of financial records and fund accounting.
First Data also serves as the Company's transfer agent and dividend
disbursing agent ("Transfer Agent"). Shareholder inquiries may be directed to
First Data at P.O. Box 9755, Providence, Rhode Island 02940-9755.
As compensation for these services, the Administrator and Transfer Agent are
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 they provide services, computed daily and payable monthly at
the rate of .12% of the first $2.8 billion of net assets, plus .105% of the
next $2.2 billion of net assets, plus .10% of all net assets in excess of $5
billion with respect to the Administrator and .02% of the first $2.8 billion
of net assets, plus .015% of the next $2.2 billion of net assets, plus .01% of
all net assets in excess of $5 billion with respect to the Transfer Agent.
Administration fees payable by the Company and certain other investment
portfolios advised by the Advisor are subject to a minimum annual fee of $1.2
million to be allocated among each series and class thereof. The Administrator
and Transfer Agent are also entitled to reimbursement for out-of-pocket
expenses. The Administrator has entered into a Sub-Administration Agreement
with the Distributor under which the Distributor provides certain
administrative services with respect to the Fund. The Administrator pays the
Distributor a fee for these services out of its own resources at no cost to
the Fund.
Comerica Bank (the "Custodian"), whose principal business address is One
Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48226, provides
custodial services to the Fund. As compensation for its services, the
Custodian is entitled to receive fees, based on the aggregate average daily
net assets of the Fund and other funds of the Company and Munder Funds Trust
computed daily and payable monthly at an annual rate of .03% of the first $100
million of average daily net assets, .02% of the next $500 million of net
assets and .01% of net assets in excess of $600 million. The Custodian also
receives certain transaction based fees. For an additional description of the
services performed by the Administrator, Transfer Agent and Custodian, see the
Statement of Additional Information.
TAXES
GENERAL
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. Such qualification relieves the Fund of liability
for Federal income taxes to the extent its earnings are distributed in
accordance with the Code.
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Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that the Fund distribute to its
shareholders an amount equal to at least 90% of its investment company taxable
income and 90% of its net tax-exempt interest income for such year. In
general, the Fund's investment company income will be its taxable income
(including dividends, interest, and short-term capital gains) subject to
certain adjustments and excluding the excess of any net long-term capital gain
for the taxable year over the net short-term capital loss, if any, for such
year. The Fund intends to distribute substantially all of its investment
company taxable income each taxable year. Such distributions will be taxable
as ordinary income to the Fund's shareholders who are not currently exempt
from Federal income taxes, whether such income is received in cash or
reinvested in additional shares. (Federal income taxes for distributions to an
IRA or qualified retirement plan are deferred under the Code if applicable
requirements are met.)
Substantially all of the Fund's net realized long-term capital gains, if
any, will be distributed at least annually. The Fund will generally have no
Federal income tax liability with respect to such gains, and the distributions
will be taxable to shareholders who are not currently exempt from Federal
income taxes as long-term capital gains, no matter how long the shareholders
have held their shares.
A taxable gain or loss may also be realized by a holder of shares in the
Fund upon the redemption or transfer of shares depending upon the tax basis of
the shares and their price at the time of the transaction.
The Fund's gains and losses from investments in foreign currency denominated
debt securities and from certain other transactions may be treated as ordinary
income or loss rather than capital gain or loss. This may have the effect of
increasing ordinary dividends paid to shareholders (in the case of such gains)
or decreasing the amounts available for distribution as dividends (in the case
of such losses).
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by the Fund on December 31 of such
year if such dividends are actually paid during January of the following year.
Before purchasing shares in the Funds, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of such shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of
the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, may be subject to tax.
On an annual basis, the Company will send written notices to record owners
of shares regarding the Federal tax status of distributions made by the Fund.
Since this is not an exhaustive discussion of applicable tax consequences, and
since state and local taxes may be different than the Federal taxes described
above, investors may wish to contact their tax advisors concerning investments
in the Fund.
FOREIGN TAXES
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected that the Fund will be
subject to foreign withholding taxes with respect to income received from
sources within foreign countries. If more than 50% of the value of the Fund's
total assets at the close of a taxable year consists of securities of foreign
corporations, the Fund may elect, for U.S. Federal income tax purposes, to
treat certain foreign taxes paid by it, including generally any withholding
taxes and other foreign income taxes, as paid by its shareholders. If the Fund
makes this election, the amount of such foreign taxes paid by the Fund will be
included in its shareholders' income pro rata (in addition to taxable
distributions actually received by them), and the shareholders would be
entitled (a) to credit their proportionate amount of such taxes against their
U.S. Federal income tax liabilities subject to certain limitations described
in the Statement of Additional Information, or (b) if they itemize their
deductions to deduct such proportionate amount from their U.S. income.
The Fund's investments in derivative instruments are subject to special tax
rules, some of which are not entirely clear. As a result, the Fund may be
limited by tax considerations in the extent to which it enters into such
transactions. See the Statement of Additional Information for further
Information.
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<PAGE>
DESCRIPTION OF SHARES
The Fund operates as one series of the Company. The Company was organized as
a Maryland corporation on November 18, 1992 and is also registered under the
1940 Act as an open-end management investment company. The Company's Articles
of Incorporation authorize the Directors to classify and reclassify any
unissued shares into one or more classes of shares. Pursuant to such
authority, the Directors have authorized the issuance of shares of common
stock, representing interests in The Munder Multi-Season Growth Fund, The
Munder Real Estate Equity Investment Fund, The Munder Mid-Cap Growth Fund, The
Munder Value Fund, The Munder International Bond Fund and The Munder Money
Market Fund, respectively, each of which, except The Munder International Bond
Fund, is classified as a diversified investment company under the 1940 Act.
The shares of the Fund are offered as five separate classes of common stock,
$.01 par value per share, designated Class A Shares, Class B Shares, Class C
Shares, Class K Shares and Class Y Shares. All shares represent interests in
the same assets of the Fund and are identical in all respects except that each
class bears different service and distribution expenses and may bear various
class-specific expenses, and each class has exclusive voting rights with
respect to its service and/or distribution plan, if any. Shares of the Fund
issued are fully paid, non-assessable, fully transferable and redeemable at
the option of the holder. Investors may call the Fund at (800) 438-5789 for
more information concerning other classes of Shares of the Fund. This
Prospectus relates only to the Class Y Shares of the Fund.
The Company's shareholders are entitled to one vote for each full share held
and proportionate fractional votes for fractional shares held, and will vote
in the aggregate and not by Fund, except where otherwise required by law or
when the Directors determine that the matter to be voted upon affects only the
interests of the shareholders of a particular Fund. In addition, shareholders
of the Fund will vote in the aggregate and not by Class, except as otherwise
expressly required by law or when the Directors determine that the matter to
be voted on affects only the interests of the holders of a particular class of
shares. The Company is not required and does not currently intend to hold
annual meetings of shareholders for the election of Board members except as
required under the 1940 Act. A meeting of shareholders will be called upon the
written request of at least 10% of the outstanding shares of the Company. The
extent required by law, the Company will assist in shareholder communications
in connection with such a meeting. For further discussion of the voting rights
of shareholders, see "Additional Information Concerning Shares" in the
Statement of Additional Information.
REPORTS TO SHAREHOLDERS
The Fund will seek to eliminate duplicate mailings of prospectuses and
shareholder reports to accounts which have the same primary record owner, and
with respect to joint tenant accounts or tenant in common accounts, accounts
which have the same address. Additional copies of prospectuses and reports to
shareholders are available upon request by calling the Fund at (800) 438-5789.
PERFORMANCE
From time to time, the Company may quote performance and yield data for
Class Y Shares of the Fund in advertisements or in communications to
shareholders. The total return of a class of shares in the Fund may be
calculated on an average annual total return basis, and may also be calculated
on an aggregate total return basis, for various periods. Average annual total
return reflects the average percentage change in value of an investment in a
class of shares in the Fund from the beginning date of the measuring period to
the end of the measuring period. Aggregate total return reflects the total
percentage change in value over the measuring period. Both methods of
calculating total return assume that dividends and capital gains distributions
made during the period are reinvested in the same class of shares.
The yield of a class of shares in the Fund is computed based on the net
income of such class in the Fund during a 30-day (or one month) period (which
period will be identified in connection with the particular yield
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<PAGE>
quotation). More specifically, the Fund's yield for a class of shares is
computed by dividing the per share net income for the class during a 30-day
(or one-month) period by the maximum offering price per share on the last day
of the period and annualizing the result on a semi-annual basis.
The Fund may compare the performance of the Shares to the performance of
other mutual funds with similar investment objectives and to other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds, including,
for example, Lipper Analytical Services, Inc., the Lehman Brothers
Government/Corporate Bond Index, a recognized unmanaged index of government
and corporate bonds, the Standard & Poor's 500 Index, an unmanaged index of a
group of common stocks, the Consumer Price Index, or the Dow Jones Industrial
Average, an unmanaged index of common stocks of 30 industrial companies listed
on the New York Stock Exchange. Performance and yield data as reported in
national financial publications such as Morningstar, Inc., Money Magazine,
Forbes, Barron's, The Wall Street Journal and The New York Times, or in
publications of a local or regional nature, may also be used in comparing the
performance of a class of Shares in the Fund.
Performance will fluctuate and any quotation of performance should not be
considered as representative of future performance of a class of shares in the
Fund. Shareholders should remember that performance is generally a function of
the kind and quality of the instruments held in a fund, portfolio maturity,
operating expenses, and market conditions. Any fees charged by institutions
directly to their customers' accounts in connection with investments in the
Fund will not be included in calculations of yield and performance.
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<PAGE>
THE MUNDER INTERNATIONAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
The Munder International Bond Fund (the "Fund") is currently one of six
series of shares of The Munder 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 Prospectuses dated July 1, 1996
and has been filed with the Securities and Exchange Commission ("SEC") as part
of the Company's Registration Statement. This Statement of Additional
Information is not a prospectus, and should be read only in conjunction with the
Fund's Prospectuses dated July 1, 1996. The contents of this Statement of
Additional Information are incorporated by reference in the Prospectuses in
their entirety. A copy of each 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 July 1, 1996.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by any bank, and are not insured or guaranteed by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency. An investment in
the Fund involves investment risks, including the possible loss of principal.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
General............................................. 3
Fund Investments.................................... 3
Additional Investment Limitations................... 15
Directors and Officers.............................. 17
Investment Advisory and Other Service Arrangements.. 21
Portfolio Transactions.............................. 25
Purchase and Redemption Information................. 27
Net Asset Value..................................... 29
Performance Information............................. 29
Taxes............................................... 32
Additional Information Concerning Shares............ 36
Miscellaneous....................................... 37
Registration Statement.............................. 38
Appendix A.......................................... A-1
Appendix B.......................................... B-1
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
each Prospectus in connection with the offering made by each 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 Prospectuses do not
constitute an offering by the Fund or by the Distributor in any jurisdiction in
which such offering may not lawfully be made.
2
<PAGE>
GENERAL
The Company was organized as a Maryland corporation on November 18,
1992. As stated in each Prospectus, the investment advisor of the Fund is
Munder Capital Management (the "Advisor"). The principal partners of the
Advisor are Old MCM, Inc. ("Old MCM"), Munder Group LLC, Woodbridge Capital
Management, Inc. ("Woodbridge") and WAM Holdings, Inc. ("WAM"). Mr. Lee P.
Munder, the Advisor's Chief Executive Officer, indirectly owns or controls a
majority of the partnership interests of the Advisor. Capitalized terms used
herein and not otherwise defined have the same meanings as are given to them in
the Prospectuses.
FUND INVESTMENTS
The following supplements the information contained in the Fund's
Prospectuses concerning the investment objective and policies of the Fund. The
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 the Fund will achieve its objective. A
description of applicable credit ratings is set forth in Appendix A hereto.
Foreign Debt Securities. Under normal market conditions, at least 65%
of the Fund's assets are invested in bonds of issuers located in at least three
countries other than the United States. The Fund will primarily invest in
foreign debt obligations denominated in foreign currencies, including the
European Currency Unit ("ECU"), which are issued by foreign governments and
governmental agencies, instrumentalities or political subdivisions; debt
securities issued or guaranteed by supranational organizations (as defined
below); corporate debt securities; bank or bank holding company debt securities
and other debt securities including those convertible into foreign stock. For
the purposes of the 65% limitation with respect to the Fund's designation as an
international bond fund, the securities described in this paragraph are
considered "international bonds."
Investors should consider carefully the substantial risks involved in
securities of companies and governments of foreign nations, which are in
addition to the usual risks inherent in domestic investments.
There may be less publicly available information about foreign
companies comparable to the reports and ratings published about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. Foreign markets have substantially less volume than the New York
Stock Exchange and securities of some foreign companies are less liquid and more
volatile than securities of comparable United States companies. Commission
rates in foreign countries, which are generally fixed rather than subject to
negotiation as in the United States, are likely to be higher. In many foreign
countries there is less government supervision and regulation of stock
exchanges, brokers, and listed companies than in the United States.
Investments in companies domiciled in developing countries may be
subject to potentially higher risks than investments in developed countries.
These risks include (i) less social, political and economic stability; (ii) the
small current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict the
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interest; (iv) foreign taxation; (v)
the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (vi)
the absence, until recently in certain Eastern European countries, of a capital
market structure or market-oriented
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<PAGE>
economy; and (vii) the possibility that recent favorable economic developments
in Eastern Europe may be slowed or reversed by unanticipated political or social
events in such countries.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of East European countries expropriated large amounts of
private property in the past, in many cases without adequate compensation, and
there can be no assurance that such expropriation will not occur in the future.
In the event of such expropriation, the Fund could lose a substantial portion of
any investments it has made in the affected countries. Further, no accounting
standards exist in Eastern European countries. Finally, even though certain
Eastern European currencies may be convertible into United States dollars, the
conversion rates may be artificial to the actual market values and may be
adverse to Fund shareholders.
The Advisor endeavors to buy and sell foreign currencies on as
favorable a basis as practicable. Some price spread on currency exchange (to
cover service charges) may be incurred, particularly when the Fund changes
investments from one country to another or when proceeds of the sale of Fund
shares in U.S. dollars are used for the purchase of securities in foreign
countries. Also, some countries may adopt policies which would prevent the Fund
from transferring cash out of the country or withhold portions of interest and
dividends at the source. There is the possibility of expropriation,
nationalization or confiscatory taxation, withholding and other foreign taxes on
income or other amounts, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), default in foreign
government securities, political or social instability or diplomatic
developments that could affect investments in securities of issuers in foreign
nations.
The Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Changes in foreign currency exchange rates will
influence values of portfolio securities from the perspective of U.S. investors,
and may also affect the value of dividends and interest earned, gains and losses
realized on the sale of securities, and net investment income and gains, if any,
to be distributed to shareholders by the Fund. The rate of exchange between the
U.S. dollar and other currencies is determined by the forces of supply and
demand in the foreign exchange markets. These forces are affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors. The Advisor will
attempt to avoid unfavorable consequences and to take advantage of favorable
developments in particular nations where, from time to time, it places the
Fund's investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
Supranational Bank Obligations. Supranational banks are international
banking institutions designed or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., European
Investment Bank, Inter-American Development Bank or The World Bank). Obligations
of supranational banks may be supported by appropriated but unpaid commitments
of their member countries and there is no assurance these commitments will be
undertaken or met in the future.
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-
4
<PAGE>
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.
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 Fund is 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 the Fund to
establish a rate of exchange for a future point in time.
When entering into a contract for the purchase or sale of a security,
the Fund may enter into a forward currency 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 currencies, in order
to reduce risk, the Fund may enter into a forward currency 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 the 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 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 currency 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. The Fund will also incur costs in
connection with forward currency contracts and conversions of foreign currencies
and U.S. dollars.
A separate account consisting of cash or liquid securities equal to
the amount of the Fund's assets that could be required to consummate forward
currency contracts will be established with the Fund's 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
valued 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 the 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 the Fund
holds a forward currency contract (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.
Futures Contracts and Related Options. The Fund currently expects
that it may purchase and sell
futures contracts on interest-bearing securities,
foreign currencies or bond indices, and may purchase and sell
5
<PAGE>
call and put options on futures contracts. For a detailed description of futures
contracts and related options, see Appendix B to this Statement of Additional
Information.
Interest Rate Swap Transactions. The Fund may enter into interest
rate swap agreements for purposes of attempting to obtain a particular desired
return at a lower cost to the Fund than if the Fund had invested directly in an
instrument that yielded that desired return. Interest rate swap transactions
involve the exchange by the Fund with another party of its respective
commitments to pay or receive interest, such as an exchange of fixed rate
payments for floating rate payments. Typically, the parties with which the Fund
will enter into interest rate swap transactions will be brokers, dealers or
other financial institutions known as "counterparties." Certain Federal income
tax requirements may, however, limit the Fund's ability to engage in certain
interest rate transactions. Gains from transactions in interest rate swaps
distributed to shareholders of the Fund will be taxable as ordinary income or,
in certain circumstances, as long-term capital gains to the shareholders.
The Fund's obligations (or rights) under a swap agreement will
generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). The Fund's obligation under a swap agreement
will be accrued daily (offset against any amounts owed to the Fund). Accrued
but unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
securities or other high-grade debt securities, to avoid any potential
leveraging of the Fund's portfolio.
The Fund will not enter into any interest rate swap transaction unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party to the transaction is rated in one of the highest four rating
categories by at least one nationally-recognized statistical rating organization
("NRSRO") or is believed by the Advisor to be equivalent to that rating. If the
other party to a transaction defaults, the Fund will have contractual remedies
pursuant to the agreements related to the transactions.
The use of interest rate swaps is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Advisor is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of the Fund would be lower than it would have been if
interest rate swaps were not used. The swaps market has grown substantially in
recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As
a result, the swaps market has become relatively liquid in comparison with other
similar instruments traded in the interbank market. The swaps market is a
relatively new market and is largely unregulated. It is possible that
developments in the swaps market, including potential government regulation,
could adversely affect the Fund's ability to terminate existing swap agreements
or to realize amounts to be received under such agreements.
Investment Company Securities. The 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 Fund's 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.
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Lending of Portfolio Securities. To enhance the return on its
portfolio, the 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, high quality money market instruments or short-term U.S. Government
securities adjusted daily to have a market value at least equal to the current
market value of the securities loaned. 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 the 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 possible delay in recovery of
the securities or possible loss of rights in the collateral should the borrower
fail financially. In determining whether the Fund will lend securities, the
Advisor will consider all relevant facts and circumstances. The 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.
Money Market Instruments. As described in the Prospectus, the Fund
may invest from time to time in "money market instruments," a term that
includes, among other things, bank obligations, commercial paper, variable
amount master demand notes and corporate bonds with remaining maturities of 397
days or less.
Bank obligations include bankers' acceptances, negotiable certificates
of deposit and non-negotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Fund will invest in obligations of foreign
banks or foreign branches of U.S. banks only where the Advisor deems the
instrument to present minimal credit risks, such investments may nevertheless
entail risks that are different from those of investments in domestic
obligations of U.S. banks due to differences in political, regulatory and
economic systems and conditions. All investments in bank obligations are
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase, and investments by the Fund in the
obligations of foreign banks and foreign branches of U.S. banks will not exceed
25% of such Fund's total assets at the time of purchase.
Investments by the Fund in commercial paper will consist of issues
rated at the time A-1 and/or P-1 by Standard & Poor's Ratings Service, a
division of McGraw-Hill Companies, Inc. ("S&P") or Moody's Investor Services,
Inc. ("Moody's"). In addition, the Fund 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 the
Fund as previously described.
The Fund may also purchase variable amount master demand notes which
are unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Although the notes are
not normally traded and there may be no secondary market in the notes, the Fund
may demand payment of the principal of the instrument at any time. The notes
are not typically rated by credit rating agencies, but issuers of variable
amount master demand notes must satisfy the same criteria as set forth above for
issuers of commercial paper. If an issuer of a variable amount master demand
note defaulted on its payment obligation, the Fund might be unable to dispose of
the note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Fund invests in
variable amount master notes only when the Advisor deems the investment to
involve minimal credit risk.
Options. The Fund may write covered call options, buy put options,
buy call options and write secured put options in an amount not exceeding 25% of
its net assets. Such options may relate to particular securities and foreign
currencies 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
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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. For risks associated with options on
foreign currencies see Appendix B to this Statement of Additional Information .
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
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 Fund to write another call option on the underlying security
with either a different exercise price or expiration date or both, or in the
case of a written put option, will permit the Fund 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 the 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 Fund may write options in connection with buy-and-write
transactions; that is, the Fund may purchase a security and then write a call
option against that security. The exercise price of the call the Fund
determines 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 Fund's maximum gain 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 portfolio 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 the portfolio maintains with its custodian cash
or cash
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equivalents equal to the contract value. A call option is also covered if the
Fund holds a call on the same security or index as the call written where the
exercise price of the call held is (i) equal to or less than the exercise price
of the call written, or (ii) greater than the exercise price of the call written
provided the difference is maintained by the portfolio in cash or cash
equivalents in a segregated account with its custodian. The Fund may also write
call options that are not covered for cross-hedging purposes. The Fund will
limit its investment in uncovered put and call options purchased or written by
the Fund to 25% of the Fund's total assets. The Fund will write put options only
if they are "secured" by cash or cash equivalents maintained in a segregated
account by the Fund's 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 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 Funds 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.
The Fund may purchase put options to hedge against a decline in the
value of its portfolio. By using put options in this way, the 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. The
Fund 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 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 the Fund purchases an option, the premium paid by it is recorded
as an asset of the Fund. When the Fund writes an option, an amount equal to the
net premium (the premium less the commission) received by the Fund is included
in the liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of this asset or deferred credit will be
subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the average of the closing bid and asked
prices. If an option purchased by the Fund expires unexercised the Fund
realizes a loss equal to the premium paid. If the Fund enters into a closing
sale transaction on an option purchased by it, the Fund will realize a gain if
the premium received by the Fund on the closing transaction is more than the
premium paid to purchase the option, or a loss if it is less. If an option
written by the Fund expires on the stipulated expiration date or if the Fund
enters into a closing purchase transaction, it will realize a gain (or loss if
the cost of a closing purchase transaction exceeds the net premium received when
the option is sold) and the deferred credit related to such option will be
eliminated. If an option written by the Fund is exercised, the proceeds of the
sale will be increased by the net premium originally received and the Fund will
realize a gain or loss.
There are several risks associated with transactions in options on
securities and indices. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. An option writer, unable to effect a closing purchase transaction,
will not be able to sell the underlying security (in the case of a covered call
option) or liquidate the segregated account (in the case of a secured put
option) until the option expires or the optioned security is delivered upon
exercise with the result that the writer in such circumstances will be subject
to the risk of market decline or appreciation in the security during such
period.
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There is no assurance that the Fund will be able to close an unlisted
option position. Furthermore, unlisted options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to do so in
connection with the purchase or sale of options.
In addition, a liquid secondary market for particular options, whether
traded over-the-counter or on a national securities exchange ("Exchange") may be
absent for reasons which include the following: there may be insufficient
trading interest in certain options; restrictions may be imposed by an Exchange
on opening transactions or closing transactions or both; trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities; unusual or unforeseen
circumstances may interrupt normal operations on an Exchange; the facilities of
an Exchange or the Options Clearing Corporation may not at all times be adequate
to handle current trading value; or one or more Exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that Exchange (or in that class or series of options)
would cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms.
Currency transactions, including options on currencies and currency
futures, are subject to risks different from those of other portfolio
transactions. Because currency control is of great importance to the issuing
governments and influences economic planning and policy, purchases and sales of
currency and related instruments can be negatively affected by government
exchange controls, blockages, and manipulations or exchange restrictions imposed
by governments. These can result in loses to the Fund if it is unable to
deliver or receive currency or funds in settlement of obligations and could also
cause hedges it has entered into to be rendered useless, resulting in full
currency exposure as well as incurring transaction costs. Buyers and sellers of
currency futures are subject to the same risks that apply to the use of futures
generally. Further, settlement of a currency futures contract for the purchase
of most currencies must occur at a bank based in the issuing nation. Trading
options on currency futures is relatively new, and the ability to establish and
close out positions on such options is subject to the maintenance of a liquid
market which may not always be available. Currency exchange rates may fluctuate
based on factors extrinsic to that country's economy.
Repurchase Agreements. The Fund 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 which is recognized as a
reporting government securities dealer, subject to the seller's agreement to
repurchase them at an agreed-upon time and price ("repurchase agreements"). The
Advisor will review and continuously monitor the creditworthiness of the seller
under a repurchase agreement, and will require the seller to maintain liquid
assets in a segregated account in an amount that is greater than the repurchase
price. Default by, or bankruptcy of the seller would, however, expose 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
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 the Fund under the Investment Company
Act of 1940, as amended (the "1940 Act").
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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 a Fund may decline below the repurchase price. The Fund will pay
interest on amounts obtained pursuant to a reverse repurchase agreement. While
reverse repurchase agreements are outstanding, the Fund will maintain in a
segregated account, cash, U.S. Government securities or other liquid high-grade
debt securities of an amount at least equal to the market value of the
securities, plus accrued interest, subject to the agreement.
Options on Bond Indices and Options on Bond Index Futures Contracts.
The Fund may purchase and sell options on bond indices and options on bond index
futures contracts as a hedge against movements in the bond markets.
Options on bond indices are similar to options on specific securities,
described above, except that, rather than the right to take or make delivery of
the specific security at a specific price, an option on a bond index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of that bond index is greater than, in the case of a call
option, or less than, in the case of a put option, the exercise price of the
option. This amount of cash is equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars
times a specified multiple. The writer of the option is obligated, in return
for the premium received, to make delivery of this amount. Unlike options on
specific securities, all settlements of options on bond indices are in cash, and
gain or loss depends on general movements in the bonds included in the index
rather than price movements in particular bonds.
If the Advisor expects general bond market prices to rise, it might
purchase a bond 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 Fund's futures contract or index option
resulting from the increase in the index. If, on the other hand, the Advisor
expects general bond market prices to decline, it might sell a futures contract,
or purchase a put option, on the index. If that index does in fact decline, the
value of some or all of the securities in the 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 Fund may purchase and write call and put options on bond index
futures contracts. The 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 Fund may purchase put options or write
call options on bond index futures, rather than selling futures contracts, in
anticipation of a decline in general bond market prices or purchase call options
or write put options on bond index futures, rather than purchasing such futures,
to hedge against possible increases in the price of securities which the Fund
intends to purchase.
In connection with transactions in bond index futures, bond index
options and options on bond futures, the Fund 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. The Fund may not 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.
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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 on
Treasury securities through the Federal Reserve book-entry record-keeping
system. The Federal Reserve program as established by the Treasury Department
is known as "STRIPS" or "Separate Trading of Registered Interest and Principal
of Securities." Under the STRIPS program, the Fund is able to have its
beneficial ownership of zero coupon securities recorded directly in the book-
entry record-keeping system in lieu of having to hold certificates or other
evidences of ownership of the underlying U.S. Treasury securities.
In addition, the Fund may invest in stripped mortgage-backed
securities ("SMBS"), which represent beneficial ownership interests in the
principal distributions and/or the interest distributions on mortgage assets.
SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions on a pool of mortgage assets. One
type of SMBS will have one class receiving some of the interest and most of the
principal from the mortgage assets, while the other class will receive most of
the interest and the remainder of the principal. In the most common case, one
class of SMBS will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the principal-
only or "PO" class). SMBS may be issued by FNMA or FHLMC.
The original principal amount, if any, of each SMBS class represents
the amount payable to the holder thereof over the life of such SMBS class from
principal distributions of the underlying mortgage assets, which will be zero in
the case of an IO class. Interest distributions allocable to a class of SMBS,
if any, consist of interest at a specified rate on its principal amount, if any,
or its notional principal amount in the case of an IO class. The notional
principal amount is used solely for purposes of the determination of interest
distributions and certain other rights of holders of such IO class and does not
represent an interest in principal distributions of the mortgage assets.
Yields on SMBS will be extremely sensitive to the prepayment
experience on the underlying mortgage loans, and there are other associated
risks. For IO classes of SMBS and SMBS that were purchased at prices exceeding
their principal amounts there is a risk that a Fund may not fully recover its
initial investment.
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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 a fund's net asset
value per share.
U.S. Government Obligations. The Fund may purchase obligations issued
or guaranteed by the U.S. Government and U.S. Government agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of the
U.S. Government, such as those of the GNMA, are supported by the full faith and
credit of the U.S. Treasury. Others, such as those of the Export-Import Bank of
the United States, are supported by the right of the issuer to borrow from the
U.S. Treasury; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the agency or instrumentality
issuing the obligation. No assurance can be given that the U.S. Government
would provide financial support to U.S. government-sponsored instrumentalities
if it is not obligated to do so by law. Examples of the types of U.S.
Government obligations that may be acquired by the Fund include U.S. Treasury
Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home
Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, FNMA, Government National Mortgage
Association, General Services Administration, Student Loan Marketing
Association, Central Bank for Cooperatives, FHLMC, Federal Intermediate Credit
Banks and Maritime Administration.
Variable and Floating Rate Instruments. Debt instruments may be
structured to have variable or floating interest rates. 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). 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, an
instrument will usually be deemed to have a maturity equal to the longer of the
period remaining until the next interest rate adjustment or the time the Fund
can recover payment of principal as specified in the instrument. Variable rate
U.S. Government obligations held by the Fund, however, will be deemed to have
maturities equal to the period remaining until the next interest rate
adjustment.
The absence of an active secondary market for certain variable and
floating rate notes could make it difficult to dispose of the instruments, and
the Fund could suffer a loss if the issuer defaulted or during periods that the
Fund is not entitled to exercise its demand rights.
Variable and floating rate instruments held by the Fund will be
subject to the Fund's limitation on illiquid investments when the Fund may not
demand payment of the principal amount within seven days absent a reliable
trading market.
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Guaranteed Investment Contracts. The Fund may make limited
investments in guaranteed investment contracts ("GICs") issued by U.S. insurance
companies. Pursuant to such contracts, the Fund makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the Fund on a monthly basis interest which is based on an index
(in most cases this index is expected to be the Salomon Brothers CD Index), but
is guaranteed not to be less than a certain minimum rate. A GIC is normally a
general obligation of the issuing insurance company and not funded by a separate
account. The purchase price paid for a GIC becomes part of the general assets
of the insurance company, and the contract is paid from the company's general
assets. The Fund will only purchase GICs from insurance companies which, at the
time of purchase, have assets of $1 billion or more and meet quality and credit
standards established by the Advisor pursuant to guidelines approved by the
Board of Directors. Generally, GICs are not assignable or transferable without
the permission of the issuing insurance companies, and an active secondary
market in GICs does not currently exist. Therefore, GICs will normally be
considered illiquid investments, and will be acquired subject to the limitation
on illiquid investments.
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. Because the Fund's liquidity and
ability to manage its portfolio might be affected when it sets aside cash or
portfolio securities to cover such purchase commitments, the Advisor expects
that its commitments to purchase when-issued securities and forward commitments
will not exceed 25% of the value of the Fund's total assets absent unusual
market conditions.
The 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 net asset
value of the Fund starting on the day the Fund agrees to purchase the
securities. The Fund does not earn interest on the securities it has committed
to purchase until they are paid for and delivered on the settlement date.
14
<PAGE>
Borrowing. The Fund is authorized to borrow money in amounts 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 the Funds 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, the Fund may be
required to sell some of its portfolio holdings within three days to reduce the
debt and restore the 300% asset coverage, even though it may be disadvantageous
from an investment standpoint to sell securities at that time. Borrowing may
exaggerate the effect on the Fund's net asset value of any increase or decrease
in the market value of securities purchased with borrowed funds. Money borrowed
will be subject to interest costs which may or may not be recovered by an
appreciation of the securities purchased. The 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.
The Fund may, in connection with permissible borrowings, transfer as collateral,
securities owned by the Fund.
Yields and Ratings. The yields on certain obligations, including the
money market instruments in which the 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.
Other. Subsequent to its purchase by the 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 should continue to hold the security in accordance with the
interests of the Fund and applicable regulations of the SEC.
ADDITIONAL INVESTMENT LIMITATIONS
In addition to the fundamental investment limitations disclosed in the
Prospectus, the Fund is subject to the investment limitations enumerated in this
section which may be changed only by a vote of the holders of a majority of the
Fund's outstanding shares (as defined under "Miscellaneous - Shareholder
Approvals").
The Fund may not:
1. Invest more than 25% of its total assets in any one industry
(securities issued or guaranteed by the United States Government, its
agencies or instrumentalities are not considered to represent
industries);
2. Borrow money or issue senior securities (as defined in the 1940 Act)
except that the Fund may borrow (i) for temporary purposes in amounts
not exceeding 5% of its total assets and (ii) to meet redemption
requests, in amounts (when aggregated with amounts borrowed under
clause (i)) not exceeding 33 1/3% of its total assets;
15
<PAGE>
3. Pledge, mortgage or hypothecate its assets other than to secure
borrowings permitted by restriction 2 above (collateral arrangements
with respect to margin requirements for options and futures
transactions are not deemed to be pledges or hypothecations for this
purpose);
4. 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;
5. Underwrite securities of other issuers, except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933, as amended
(the "1933 Act") in selling portfolio securities;
6. 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.
7. 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, but the Fund may make
margin deposits in connection with transactions in options, futures
and options on futures;
8. Make investments for the purpose of exercising control or management;
or
9. Invest in commodities or commodity futures contracts, provided that
this limitation shall not prohibit the purchase or sale by the Fund of
forward currency contracts, financial futures contracts and options on
financial futures contracts, and options on securities, foreign
currencies and on 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. With respect to 50% of the Fund's assets, invest more than 5% of the
Fund's assets (taken at a 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, at the close of each
quarter of its taxable year;
2. Invest more than 15% of its net assets (taken at market value at the
time of purchase) in securities which cannot be readily resold because
of legal or contractual restrictions or which are not otherwise
marketable;
3. Purchase or sell interests in oil, gas or other mineral exploration or
development plans or leases;
4. Invest in warrants if at the time of acquisition more than 5% of its
total assets, taken at market value at the time of purchase, would be
invested in warrants, and if at the time of acquisition more than 2%
of its total assets, taken at market value at the time of purchase,
would be invested in warrants not traded on the New York Stock
Exchange or American
16
<PAGE>
Stock Exchange. For purposes of this restriction, warrants acquired by
the Fund in units or attached to securities may be deemed to be
without value;
5. Invest more than 5% of its total assets in securities of issuers which
together with any predecessors have a record of less than three years
of continuous operation. This restriction shall not apply with respect
to securities issued by a special purpose funding vehicle for a
company with a record of at least three years of continuous operation,
or to real estate investment trusts the sponsor of which has a record
of at least three years of continuous operation;
6. Invest in other investment companies except as permitted under the
1940 Act.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
the Fund's investments will not constitute a violation of such limitation,
except that any borrowing by the Fund that exceeds the fundamental investment
limitations stated above must be reduced to meet such limitations within the
period required by the 1940 Act (currently three days). Otherwise, the Fund may
continue to hold a security even though it causes the Fund to exceed a
percentage limitation because of fluctuation in the value of the Fund's assets.
In order to permit the sale of shares in certain states, the Company may
make commitments more restrictive than the investment policies and limitations
described above.
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, and their business
addresses and principal occupations during the past five years, are:
<TABLE>
<CAPTION>
Positions Principal Occupation
Name, Address and Age With the Company During Past Five Years
- --------------------- -------------------- ----------------------
<S> <C> <C>
Charles W. Elliott/1/ Chairman of the Board of Senior Advisor to the President -
3338 Bronson Boulevard Directors Western Michigan University since
Kalamazoo, MI 49008 July 1995; prior to that Executive Vice
Age: 62 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, Walbridge Aldinger Company
1876 Rathmor of the Board of Directors
Bloomfield Hills, MI 48304
Age: 47
</TABLE>
- -------------------------
/1/Director is an "interested person" of the Company as defined in the 1940 Act.
17
<PAGE>
<TABLE>
<CAPTION>
Positions Principal Occupation
Name, Address and Age With the Company During Past Five Years
- --------------------- -------------------- ----------------------
<S> <C> <C>
Thomas B. Bender Director Investment Advisor, Financial &
7 Wood Ridge Road Investment Management Group
Glen Arbor, MI 49636 (since April, 1991); Vice President
Age: 61 Institutional Sales, Kidder, Peabody & Co.
(Retired April, 1991).
David J. Brophy Director Professor, University of Michigan;
1025 Martin Place Director, River Place Financial
Ann Arbor, MI 48104 Corp.; Trustee, Renaissance Assets Trust.
Age: 58
Dr. Joseph E. Champagne Director Corporate and Executive Consultant since
319 Snell Road September 1995; prior to that Chancellor,
Rochester, MI 48306 Lamar University from September 1994
Age: 56 until September 1995; before that Consultant
to Management, Lamar University; President
and Chief Executive Officer, Crittenton
Corporation, Crittenton Development Corporation
until August 1993; before that President, Oakland
University of Rochester, MI, until August 1991;
Member, Board of Directors, Ross Operating Valve of
Troy, MI.
Thomas D. Eckert Director President and COO, Mid-Atlantic
10726 Falls Pointe Drive Group of Pulte Home Corporation
Great Falls, VA 22066
Age: 47
Jack L. Otto Director Retired; Director of Standard
6532 W. Beech Tree Road Federal Bank; Executive Director, McGregor Fund
Glen Arbor, MI 49636 (a private philanthropic foundation) 1981-1985;
Age: 69 Managing Partner, Detroit officer of Ernst & Young,
until 1981.
Arthur DeRoy Rodecker Director President, Rodecker & Company, Investment Brokers, Inc.
4000 Town Center since November 1976; President, RAC Advisors, Inc., Registered
Suite 101 Investment Advisor since February 1979; President and
Southfield, MI 48075 Trustee, Helen L. DeRoy Foundation, a charitable foundation;
Age: 68 Vice President and Trustee, DeRoy Testamentary Foundation,
a charitable foundation; Trustee, Providence Hospital Foundation.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Positions Principal Occupation
Name, Address and Age With the Company During Past Five Years
- --------------------- -------------------- ----------------------
<S> <C> <C>
Lee P. Munder President President and CEO of the Advisor; Chief
480 Pierce Street, Executive Officer and President of Old
Suite 300, MCM; Chief Executive Officer of World
Birmingham, MI 48009 Asset Management; and Director of LPM
Age: 50 Investment Services, Inc. ("LPM").
Terry H. Gardner Vice President, Vice President and Chief Financial
480 Pierce Street, Chief Financial Officer Officer of the Advisor and World
and Treasurer Asset Management; Vice President
Suite 300 and Chief Financial Officer of Old
Birmingham, MI 48009 MCM; Audit Manager Arthur Andersen & Co.
Age: 35 (1991 to February 1993); Secretary of LPM.
Paul Tobias Vice President Executive Vice President and Chief
480 Pierce Street Operating Officer of the Advisor
Suite 300 (since April 1995) and Executive Vice
Birmingham, MI 48009 President of Comerica, Inc.
Age: 43
Gerald Seizert Vice President Executive Vice President and Chief
480 Pierce Street Investment Officer/Equities of the
Suite 300 Advisor (since April 1995); Managing
Birmingham, MI 48009 Director (1991-1995); Director (1992-1995)
Age: 44 and Vice President (1984-1991) of Loomis,
Sayles and Company, L.P.
Elyse G. Essick Vice President Vice President and Director of Marketing for the Advisor;
480 Pierce Street Vice President and Director of Client Services of Old MCM
Suite 300 (August 1988 to December 1994).
Birmingham, MI 48009
Age: 37
James C. Robinson Vice President Vice President and Chief Investment Officer/Fixed
480 Pierce Street Income for the Advisor; Vice President and
Suite 300 Director of Fixed Income of Old MCM (1987-1994).
Birmingham, MI 48009
Age: 34
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Positions Principal Occupation
Name, Address and Age With the Company During Past Five Years
- --------------------- -------------------- ----------------------
<S> <C> <C>
Leonard J. Barr, II Vice President Vice President and Director of Core
480 Pierce Street Equity Research of the Advisor; Director
Suite 300 and Senior Vice President of Old MCM
Birmingham, MI 48009 (since 1988); Director of LPM.
Age: 51
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: 50 Woodbridge.
Richard H. Rose Assistant Treasurer Senior Vice President, First Data
First Data Investor Investor Services Group, Inc.
Services Group, Inc. (since May 6, 1994). Formerly,
One Exchange Place Senior Vice President, The Boston
6th Floor Company Advisors, Inc. since
Boston, MA 02109 November 1989.
Age: 39
Patricia L. Bickimer Secretary Vice President and Associate
First Data Investor General Counsel, First Data Investor
Services Group, Inc. Services Group, Inc. (since May 6,
One Exchange Place 1994). Formerly, Vice President and
4th Floor Associate General Counsel, The
Boston, MA 02109 Boston Company Advisors, Inc.
Age: 42
Lisa A. Rosen Assistant Secretary General Counsel of the Advisor since
480 Pierce Street May, 1996; Formerly, Counsel, First Data
Suite 300 Investor Services Group, Inc.
Birmingham, MI 48009 Assistant Vice President and
Age: 28 Counsel with The Boston Company
Advisors, Inc.; Associate with Hutchins,
Wheeler & Dittmar.
</TABLE>
Directors of the Company receive an aggregate fee from The Munder
Funds Trust (the "Trust") and the Company comprised of an annual retainer fee,
and a fee for each Board meeting attended; and are reimbursed for all out-of-
pocket expenses relating to attendance at meetings.
20
<PAGE>
The following table summarizes the compensation paid by the Company to
the Directors for the fiscal year ended June 30, 1995.
<TABLE>
<CAPTION>
Pension
Aggregate Retirement Estimated
Compensation Benefits Annual
from the Accrued Benefits Total
Name of Person Trust and as Part of upon from the
Position Company Fund Expenses Retirement Fund Complex
-------- ------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Charles W. Elliott $4,500 None None $4,500
Chairman
John Rakolta, Jr. $7,000 None None $7,000
Vice Chairman
Thomas B. Bender $4,500 None None $4,500
Trustee and Director
David J. Brophy $7,000 None None $7,000
Trustee and Director
Dr. Joseph E. Champagne $4,500 None None $4,500
Trustee and Director
Thomas D. Eckert $7,000 None None $7,000
Trustee and Director
Jack L. Otto $4,500 None None $4,500
Trustee and Director
Arthur DeRoy Rodecker $4,500 None None $4,500
Trustee and Director
</TABLE>
No officer, director or employee of the Advisor, Comerica, the
Distributor, the Administrator or Transfer Agent currently receives any
compensation from the Company.
The Company will not employ Rodecker & Company, Investment Brokers,
Inc. to effect brokerage transactions for the Fund.
INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS
Investment Advisor. The Advisor of the Fund is Munder Capital
Management, a Delaware general partnership. The general partners of the Advisor
are Woodbridge, WAM, Old MCM, and Munder Group, LLC. Woodbridge and WAM are
wholly-owned subsidiaries of Comerica Bank -- Ann Arbor, which, in turn is a
wholly-owned subsidiary of Comerica Incorporated, a publicly-held bank holding
company.
For its services, the Advisor earns a fee at the annual rate of 0.50%
of the Fund's average daily net assets.
21
<PAGE>
If the total expenses borne by the Fund in any fiscal year exceed the
expense limitations imposed by applicable state securities regulations, the
Advisor, Administrator, Custodian and Transfer Agent will bear the amount of
such excess to the extent required by such regulations in proportion to the fees
otherwise payable to them for such year. Such amount borne will be limited to
the amount of the fees paid to them for the applicable period. As of the date
of this Statement of Additional Information, the most restrictive expense
limitation applicable to the Fund limits its aggregate annual expenses,
including management and advisory fees but excluding interest, taxes, brokerage
commissions, and certain other expenses, to 2-1/2% of the first $30 million of
its average net assets, 2% of the next $70 million, and 1-1/2% of its remaining
average net assets.
The Fund's 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 the Fund, at any time without penalty, on
60 days' written notice to the Advisor. The Advisor may also terminate its
advisory relationship with the Fund without penalty on 90 days'
written notice to the Fund. The Advisory Agreement terminates
automatically in the event of its assignment (as defined in the 1940 Act).
Distribution Agreements. 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
shares of the Fund (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 One
Exchange Place, Boston, Massachusetts 02109.
Distribution Services Arrangements - Class A, Class B and Class C
Shares. The Fund has adopted a Service Plan with respect to its Class A Shares
pursuant to which it uses its assets to finance activities relating to the
provision of certain shareholder services. Under the Service Plan, the
Distributor is paid an annual service fee at the rate of 0.25% of the value of
average daily net assets of the Class A Shares of the Fund. The Fund has
adopted Service and Distribution Plans with respect to its Class B and Class C
Shares, pursuant to which it uses its assets to finance activities relating to
the distribution of its shares to investors and 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
Class B and Class C Shares of the Fund and an annual distribution fee at the
rate of 0.75% of the value of average daily net assets of the Class B and Class
C Shares of the Fund.
Under the terms of the Service Plan and both Service and
Distribution Plans (collectively, the "Plans"), each 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, and who have no direct or indirect
financial interest in the operation of that Plan (the "Non-Interested Plan
Directors"). The Plans 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 Plans also must be approved by the Directors in the manner
described above. Each 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 relevant class of the Fund
(as defined in the 1940 Act) on not more than 30
22
<PAGE>
days' written notice to any other party to the Plan. Pursuant to each Plan, the
Distributor will provide the Board of Directors periodic reports of amounts
expended under the Plan and the purpose for which such expenditures were made.
With respect to Class B and Class C Shares of the Fund, the
Distributor expects to pay sales commissions to dealers authorized to sell the
Fund's Class B and Class C Shares at the time of sale. The Distributor will use
its own funds (which may be borrowed) to pay such commissions pending
reimbursement under the relevant 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.
Shareholder Servicing Arrangements - Class K Shares. As stated in the
Fund's Prospectus, Class K Shares are sold to investors through institutions
which enter into Shareholder Servicing Agreements with the Company to provide
support services to their Customers who beneficially own Class K Shares in
consideration of the Fund's payment of not more than .25% (on an annualized
basis) of the average daily net asset value of the Class K Shares beneficially
owned by the Customers.
Services provided by institutions under their service agreements may
include: (i) aggregating and processing purchase and redemption requests for
Class K Shares from Customers and placing net purchase and redemption orders
with the Distributor; (ii) providing Customers with a service that invests the
assets of their accounts in Class K Shares pursuant to specific or pre-
authorized instructions; (iii) processing dividend payments on behalf of
Customers; (iv) providing information periodically to Customers showing their
positions in Class K Shares; (v) arranging for bank wires; (vi) responding to
Customer inquiries relating to the services performed by the institutions; (vii)
providing subaccounting with respect to Class K Shares beneficially owned by
Customers or the information necessary for subaccounting; (viii) if required by
law, forwarding shareholder communications from the Company (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; (ix) forwarding to Customers proxy
statements and proxies containing any proposals regarding the Company's
arrangements with institutions; and (x) providing such other similar services as
the Company may reasonably request to the extent the institutions are permitted
to do so under applicable statutes, rules and regulations.
Pursuant to the Company's agreements with such institutions, the Board
of Directors will review, at least quarterly, a written report of the amounts
expended under the Company's agreements with institutions and the purposes for
which the expenditures were made. In addition, the arrangements with
institutions must be approved annually by a majority of the Board of Directors,
including a majority of the Directors who are not "interested persons" as
defined in the 1940 Act, and have no direct or indirect financial interest in
such arrangements.
The Board of Directors has approved the arrangements with the
institutions based on information provided by the service contractors that there
is a reasonable likelihood that the arrangements will benefit the Fund and its
shareholders by affording the Fund greater flexibility in connection with the
servicing of the accounts of the beneficial owners of their shares in an
efficient manner.
Administration Agreement. First Data Investor Services Group, Inc.
("First Data" or the "Administrator") located at 53 State Street, Boston,
Massachusetts 02109 serves as administrator for the Company pursuant to an
administration agreement, (the "Administration Agreement"). First Data has
agreed to maintain office facilities for the Company; provide accounting and
bookkeeping services for the Fund, including the computation of the 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
23
<PAGE>
reports with the appropriate regulatory agencies; and prepare various materials
required by the SEC or any state securities commission having jurisdiction over
the Company.
The Administration Agreement provides that the Administrator
performing services thereunder shall not be liable under the Agreement except
for its willful misfeasance, bad faith or gross negligence in the performance of
its duties or from the reckless disregard by it of its duties and obligations
thereunder.
Regarding the Administrator's agreement to reimburse the Company in
the event the expenses of the Fund exceed applicable state expense limitations,
see "Investment Advisor."
Custodian and Transfer Agency Agreements. Comerica Bank (the
"Custodian") whose principal business address is One Detroit Center, 500
Woodward Avenue, Detroit, MI 48226, maintains custody of the Fund's assets
pursuant a custodian agreements (the "Custody Agreement") with the Company.
Under the Custody Agreement, the Custodian (i) maintains a separate account in
the name of the Fund, (ii) holds and transfers portfolio securities on account
of the Fund, (iii) accepts receipts and makes disbursements of money on behalf
of the Fund, (iv) collects and receives all income and other payments and
distributions on account of the Fund's securities and (v) makes periodic reports
to the Board of Directors concerning the Fund's operations. The Custodian is
authorized to select one or more domestic or foreign banks or trust companies to
serve as sub-custodian on behalf of the Company. In addition, the Company and
the Custodian have entered into a sub-custody agreement with Boston Safe Deposit
and Trust Company ("Boston Safe") relating to the custody of foreign securities
held by the Fund, and Boston Safe, in turn, has entered into additional
agreements with financial institutions and depositories located in foreign
countries with respect to the custody of such securities.
First Data also serves as the transfer and dividend disbursing agent
for the Fund pursuant to a transfer agency agreement (the "Transfer Agency
Agreement") with the Company, 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 Board of Directors concerning the
operations of the Fund.
Regarding the Custodian's and Transfer Agent's agreement to reimburse
the Company in the event the expenses of the Fund exceed applicable state
expense limitations, see "Investment Advisor."
Comerica. As stated in the Fund's Class K Shares Prospectus, Class K
Shares of the Fund are sold to customers of banks and other institutions. Such
banks and institutions may include Comerica Incorporated (a publicly-held bank
holding company), its affiliates and subsidiaries ("Comerica") and other
institutions that have entered into agreements with the Company providing for
shareholder services for their customers.
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.
24
<PAGE>
It should be noted that 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
es or affiliates, as well as future judicial or administrative
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.
Shareholder Servicing Arrangements - Class K Shares. As stated in the
Fund's Prospectus, Class K Shares are sold to investors through institutions
which enter into Shareholder Servicing Agreements with the Company to provide
support services to their Customers who beneficially own Class K Shares in
the institutions and change its method of operations with respect to
Comerica and certain other institutions. It is not anticipated, however, that
any change in the Fund's method of operations would affect the net asset value
per share of the Fund or result in a financial loss to any holder of Class K
Shares of the Fund.
Other Information Pertaining to Distribution, Administration,
Custodian and Transfer Agency Agreements. As stated in the Prospectuses, the
Administrator and Transfer Agent each receive, as compensation for its services,
fees based on the aggregate average daily net assets of the Company and other
investment portfolios advised by the Advisor. The Custodian 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 the Fund and the
fact that neither the Administrator nor the Transfer Agent is affiliated with
either the Company or the Advisor. The Board also considered its
responsibilities under federal and state law in approving these agreements. In
considering the reasonableness of the fee, the Distributor's activities under
its Distribution Agreements were not considered by the Board.
Comerica Bank provides custodial services to the Fund. As
compensation for its services, Comerica Bank is entitled to receive fees, based
on the aggregate average daily net assets of the Company and certain other
investment portfolios for which Comerica Bank provides services, computed daily
and payable monthly at an annual rate of 0.03% of the first $100 million of
average daily net assets, plus 0.02% of the next $500 million of net assets,
plus 0.01% of all net assets in excess of $600 million. Comerica Bank also
receives certain transaction based fees. Boston Safe serves as the sub-
custodian of foreign securities for the Fund.
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 the Fund.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Transactions on foreign
stock exchanges involve payment for brokerage commissions which are generally
fixed.
Over-the-counter issues, including corporate debt and government
securities, are normally traded on a "net" basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. With respect to over-the-counter transactions, the Advisor will
normally deal directly with dealers who make a market in the instruments
involved except in those circumstances where more favorable prices and execution
are available elsewhere. The cost of foreign and domestic securities purchased
from underwriters includes an underwriting commission or concession, and the
prices at which securities are purchased from and sold to dealers include a
dealer's mark-up or mark-down.
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The Fund 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 Fund will engage in this practice, however, only when the Advisor believes
such practice to be in the Fund's interest.
The portfolio turnover rate of the 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. The 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 the 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 Fund. It is possible
that certain of the supplementary research or other services received will
primarily benefit one or more other investment companies or other accounts for
which investment discretion is exercised. Conversely, the Fund 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 the 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 Fund is concerned, in other cases it is believed to be
beneficial to 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 investment companies or accounts in executing
transactions.
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The Fund will not purchase securities during the existence of any
underwriting or selling group relating to such securities of which the Advisor
or any affiliated person (as defined in the 1940 Act) thereof is a member except
pursuant to procedures adopted by the Company's Board of Directors in accordance
with Rule 10f-3 under the 1940 Act.
Except as noted in each Prospectus and this Statement of Additional
Information, the Fund's service contractors bear all expenses in connection with
the performance of their services and the 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 Board of Directors; taxes; interest; legal and auditing fees;
brokerage fees and commissions; certain fees and expenses in registering and
qualifying the 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. The Advisor, Administrator, Custodian and
Transfer Agent may voluntarily waive all or a portion of their respective fees
from time to time.
PURCHASE AND REDEMPTION INFORMATION
Purchases and redemptions are discussed in the Fund's Prospectuses and
such information is incorporated herein by reference.
Purchases. In addition to the methods of purchasing shares described
in the Prospectuses, the Fund also offers a pre-authorized checking plan by
which investors may accumulate shares of the Fund regularly each month by means
of automatic debits to their checking accounts. There is a $50 minimum on each
automatic debit. Shareholders may choose this option by checking the
appropriate part of the application form or by calling the Fund at (800) 438-
5789. Such a plan is voluntary and may be discontinued by the shareholder at
any time or by the Company on 30 days' written notice to the shareholder.
Letter of Intent. Purchasers who intend to invest $100,000 or more in
Class A Shares of the Fund within 13 months (whether in one lump sum or in
installments the first of which may not be less than 5% of the total intended
amount and each subsequent installment not less than $100, including automatic
investment and payroll deduction plans), and to beneficially hold the total
amount of such shares fully paid for and outstanding simultaneously for at least
one full business day before the expiration of that period, should complete the
Letter of Intent ("LOI") section in the Application. Payment for not less than
5% of the total intended amount must accompany the executed LOI. Those shares
purchased with the first 5% of the intended amount stated in the LOI will be
held as "escrowed shares" for as long as the LOI remains unfulfilled. Although
the escrowed shares are registered in the investor's name, his full ownership of
them is conditional upon fulfillment of the LOI. No escrowed shares can be
redeemed by the investor for any purpose until the LOI is fulfilled or
terminated. If the LOI is terminated for any reason other than fulfillment, the
Transfer Agent will redeem that portion of the escrowed shares required and
apply the proceeds to pay any adjustment that may be appropriate to the sales
commission on all shares (including the escrowed shares) already purchased under
the LOI and apply any unused balance to the investor's account. The LOI is not
a binding obligation to purchase any amount of shares, but its execution will
result in the purchaser paying a lower sales charge at the appropriate quantity
purchase level. A purchase not originally made pursuant to an LOI may be
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<PAGE>
included under a subsequent LOI executed within 90 days of such purchase. In
this case, an adjustment will be made at the end of 13 months from the effective
date of the LOI at the net asset value per share then in effect, unless the
investor makes an earlier written request to the Funds' Distributor upon
fulfilling the purchase of Shares under the LOI. In addition, the aggregate
value of any shares purchased prior to the 90-day period referred to above may
be applied to purchases under a current LOI in fulfilling the total intended
purchases under the LOI. However, no adjustment of sales charges previously
paid on purchases prior to the 90-day period will be made. Shares acquired
through reinvestment of dividends and capital gain distributions are considered
in connection with an investor's fulfillment of the LOI.
Retirement Plans. Shares of the Fund 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.
Redemptions
Systematic Withdrawals. In addition to the methods of redemption
described in the Fund's Prospectus, a systematic withdrawal plan is available in
which a shareholder of the Fund may elect to receive a fixed amount ($50
minimum), monthly, quarterly, semi-annually, or annually, for accounts with a
value of $2,500 or more. Checks are mailed on or about the 10th of each
designated month. All certified shares must be placed on deposit under the plan
and dividends and capital gain distributions, if any, are automatically
reinvested at net asset value for shareholders participating in the plan. If
the checks received by a shareholder through the systematic withdrawal plan
exceed the dividends and capital appreciation of the shareholder's account, the
systematic withdrawal plan will have the effect of reducing the value of the
account. Any gains and/or losses realized from redemptions through the
systematic withdrawal plan are considered a taxable event by the Internal
Revenue Service and must be reported on the shareholders' income tax return.
Shareholders should consult with a tax advisor for information on their specific
financial situations. At the time of initial investment, a shareholder may
request that the check for the systematic withdrawal be sent to an address other
than the address of record. The address to which the payment is mailed may be
changed by submitting a written request, signed by all registered owners, with
their signatures guaranteed. Shareholders may add this option after the account
is already established or change the amount on an existing account by
calling the
Fund at (800) 438-5789. The Fund may terminate the plan on 30 days' written
notice to the shareholder.
Other Information. The Fund reserves the right to suspend or postpone
redemptions during any period when: (i) trading on the New York Stock Exchange
is restricted, as determined by the SEC, or the New York Stock Exchange is
closed for other than customary weekend and holiday closings; (ii) the SEC has
by order permitted such suspension or postponement for the protection of
shareholders; or (iii) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable.
The Fund may involuntarily redeem an investor's shares if the net
asset value of such shares is less than $500; provided that involuntary
redemptions will not result from fluctuations in the value of an investor's
shares. A notice of redemption, sent by first-class mail to the investor's
address of record, will fix a date not less than 30 days after the mailing date,
and shares will be redeemed at the net asset value at the close of business on
that date unless sufficient additional shares are purchased to bring the
aggregate account value up
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<PAGE>
to $500 or more. A check for the redemption proceeds payable to the investor
will be mailed to the investor at the address of record.
Exchanges. In addition to the method of exchanging shares described
in the Fund's Prospectuses, a shareholder exchanging at least $1,000 of shares
(for which certificates have not been issued) and who has authorized expedited
exchanges on the application form filed with the Transfer Agent may exchange
shares by telephoning the Fund at (800) 438-5789. Telephone exchange
instructions must be received by the Transfer Agent by 4:00 p.m., New York City
time. The Fund, Distributor and Transfer Agent reserve the right at any time to
suspend or terminate the expedited exchange procedure or to impose a fee for
this service. During periods of unusual economic or market changes,
shareholders may experience difficulties or delays in effecting telephone
exchanges. Neither the Fund nor the Transfer Agent will be responsible for any
loss, damages, expense or cost arising out of any telephone exchanges effected
upon instructions believed by them to be genuine. The Transfer Agent has
instituted procedures that it believes are reasonably designed to insure that
exchange instructions communicated by telephone are genuine, and could be liable
for losses caused by unauthorized or fraudulent instructions in the absence of
such procedures. The procedures currently include a recorded verification of
the shareholder's name, social security number and account number, followed by
the mailing of a statement confirming the transaction, which is sent to the
address of record.
NET ASSET VALUE
In determining the approximate market value of portfolio investments,
the Company may employ outside organizations, which may use matrix or formula
methods that take into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula methods not been used. All cash, receivables and current payables are
carried on the Company's books at their face value. Other assets, if any, are
valued at fair value as determined in good faith under the supervision of the
Board of Directors.
In-Kind Purchases
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 each 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.
PERFORMANCE INFORMATION
The Fund may, from time to time, include information regarding its
yield or total return in advertisements, sales literature, or reports to
shareholders or prospective investors.
The Fund's 30-day (or one month) standard yield described in each
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
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<PAGE>
Where: a = dividends and interest earned by the Fund during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the period
entitled to receive dividends; and
d = maximum offering price per share on the last day of the
period.
For the purpose of determining interest earned on debt obligations
purchased by the Fund at a discount or premium (variable "a" in the formula),
the Fund computes the yield to maturity of such instrument based on the market
value of the obligation (including actual accrued interest) at the close of
business on the last business day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual accrued interest).
Such yield is then divided by 360 and the quotient is multiplied by the market
value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is in the portfolio. It is assumed in the above
calculation that each month contains 30 days. The maturity of a debt obligation
with a call provision is deemed to be the next call date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. For the
purpose of computing yield on equity securities held by the Fund, dividend
income is recognized by accruing 1/360 of the stated dividend rate of the
security for each day that the security is held by the Fund.
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 the Fund to all shareholder accounts in proportion to the length of
the base period and the Fund's mean (or median) account size. Undeclared earned
income will be subtracted from the offering price per share (variable "d" in the
formula). The Fund's maximum offering price per share for purposes of the
formula includes the maximum sales charge imposed -- currently 4.00% of the per
share offering price for Class A Shares of the Fund.
The 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:
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T = (ERV)/1/n / -1
---
P
Where: T = average annual total return;
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10
year (or other) periods at the end of the
applicable period (or a fractional portion
thereof);
P = hypothetical initial payment of $1,000; and
n = period covered by the computation, expressed in
years.
The Fund may advertise its "aggregate total return" and will compute such
return by determining the aggregate compounded rates of return during specified
periods that likewise equate the initial amount invested to the ending
redeemable value of such investment. The formula for calculating aggregate
total return is as follows:
(ERV)
----- - 1
Aggregate Total Return = P
The calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per share
existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all non-recurring charges at the end of the
measuring period. The Fund's average annual total return and aggregate total
return quotations for Class A Shares will reflect the deduction of the maximum
sales charge charged in connection with the purchase of such shares; and the
Fund's average annual total return and aggregate total return quotations for
Class B Shares will reflect any applicable CDSC; provided that the Fund may also
advertise total return data without reflecting any applicable or CDSC sales
charge imposed on the purchase of Class A Shares or Class B Shares in accordance
with the views of the SEC. Quotations which do not reflect the sales charge
will, of course, be higher than quotations which do.
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
Fund's 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 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. In addition, as stated in the Fund's
Prospectus, the tax-equivalent yield (and hypothetical examples illustrating the
effect of tax-equivalent yields) of the Fund may be quoted in advertisements or
reports to shareholders. Hypothetical examples showing the difference between a
taxable and a tax-free investment may also be provided to shareholders.
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TAXES
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the Fund's
Prospectuses. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectuses is not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisors with specific reference to
their own tax situations.
General. The Fund will elect 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, the Fund generally is exempt from
Federal income tax on its net investment income and net realized capital gains
which it distributes to 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, the Fund must
derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement") and derive less than
30% of its gross income from the sale or other disposition of securities and
certain other investments held for less than three months (the "Short-Short Gain
Test"). Interest (including original issue discount and "accrued market
discount") received by the 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 the 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 a 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 such Fund controls and which are
engaged in the same or similar trades or businesses.
Distributions of net investment income received by the Fund from
investments in debt securities 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.
The Fund intends to distribute to shareholders any excess of net long-term
capital gain over net short-term capital loss ("net capital gain") for each
taxable year. Such gain is distributed as a capital gain dividend and is
taxable to shareholders as long-term capital gain, regardless of the length of
time the shareholder has held the shares, whether such gain was recognized by
the Fund prior to the date on which a shareholder acquired shares of the Fund
and whether the distribution was paid in cash or reinvested in shares. In
addition, investors should be aware that any loss realized upon the sale,
exchange or redemption of shares held for six
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<PAGE>
months or less will be treated as a long-term capital loss to the extent any
capital gain dividends have been paid with respect to such shares. Capital gains
dividends are not eligible for the dividends received deduction for
corporations.
Ordinary income of individuals is taxable at a maximum nominal rate of
39.6%, although because of limitations on itemized deductions otherwise
allowable and the phase-out of personal exemptions, the maximum effective
marginal rate of tax for some taxpayers may be higher. An individual's long-
term capital gains are taxable at a maximum rate of 28%. Capital gains and
ordinary income of corporate taxpayers are both taxed at a nominal maximum rate
of 35%.
If for any taxable year the 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.
The Code imposes a non-deductible 4% excise tax on regulated investment
companies that fail to currently distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income (excess
of capital gains over capital losses). The Fund intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and capital
gain net income each calendar year to avoid liability for this excise tax.
The Company will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or 31% of gross proceeds
realized upon sale 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."
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 the 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.
Foreign Taxes. Income received by the Fund from sources within foreign
countries may be subject to withholding and other foreign taxes. The payment of
such taxes will reduce the amount of dividends and distributions paid to the
Fund's shareholders. So long as the Fund qualifies as a regulated investment
company, certain distribution requirements are satisfied, and more than 50% of
the value of the Fund's assets at the close of the taxable year consists of
securities of foreign corporations, the Fund may elect, for U.S.
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<PAGE>
Federal income tax purposes, to treat foreign income taxes paid by the Fund that
can be treated as income taxes under U.S. income tax principles as paid by its
shareholders. The Fund may qualify for and make this election in some, but not
necessarily all, of its taxable years. If the Fund were to make an election, an
amount equal to the foreign income taxes paid by the Fund would be included in
the income of its shareholders and the shareholders would be entitled (subject
to tax law limitations) to credit their portions of this amount against their
U.S. tax due, if any, or to deduct such portions from their U.S taxable income,
if any. Shortly after any year for which it makes such an election, the Fund
will report to its shareholders, in writing, the amount per share of such
foreign tax that must be included in each shareholder's gross income and the
amount which will be available for deduction or credit. No deduction for foreign
taxes may be claimed by a shareholder who does not itemize deductions.
Shareholders who choose to utilize a credit (rather than a deduction) for
foreign taxes will be subject to the limitation that the credit may not exceed
the shareholder's United States tax (determined without regard to the
availability of the credit) attributable to his or her total foreign source
taxable income. For this purpose, the portion of dividends and distributions
paid by the Fund from its foreign source income will be treated as foreign
source income. The Fund's gains and losses from the sale of securities will
generally be treated as derived from United States sources and certain foreign
currency gains and losses likewise will be treated as derived from United States
sources. The limitation on the foreign tax credit is applied separately to
foreign source "passive income", such as the portion of dividends received from
the Fund which qualifies as foreign source income. In addition, only a portion
of the foreign tax credit will be allowed to offset any alternative minimum tax
imposed on corporations and individuals. Because of these limitations,
shareholders may be unable to claim a credit for the full amount of their
proportionate shares of the foreign income taxes paid by the Fund.
Taxation of Certain Financial Instruments. Special rules govern the
Federal income tax treatment of financial instruments that may be held by the
Fund. These rules may have a particular impact on the amount and timing of
income or gain that the Fund must distribute to shareholders to comply with the
Distribution Requirement, on the income or gain qualifying under the Income
Requirement and on their ability to comply with the Short-Gain Test, all
described above.
Generally, futures contracts, options on futures contracts and certain
foreign currency contracts held by the Fund (collectively, the "Instruments") at
the close of their taxable year are treated for Federal income tax purposes as
sold for their fair market value on the last business day of such year, a
process known as "marking-to-market." With certain exceptions, forty percent of
any gain or loss resulting from such constructive sales will be treated as
short-term capital gain or loss and 60% of such gain or loss will be treated as
long-term capital gain or loss without regard to the period the Fund holds the
Instruments ("the 40%-60% rule"). The amount of any capital gain or loss
actually realized by the Fund in a subsequent sale or other disposition of those
Instruments is adjusted to reflect any capital gain or loss taken into account
by the Fund in a prior year as a result of the constructive sale of the
Instruments. Losses with respect to futures contracts to sell, related options
and certain foreign currency contracts which are regarded as parts of a "tax
straddle" because their values fluctuate inversely to the values of specific
securities held by the Fund are subject to certain loss deferral rules which
limit the amount of loss currently deductible on either part of the straddle to
the amount thereof which exceeds the unrecognized gain (if any) with respect to
the other part of the straddle, and to certain wash sales regulations. Under
short sales rules, which are also applicable, the holding period of the
securities forming part of the straddle will (if they have not been held for the
long-term holding period) be deemed not to begin prior to termination of the
straddle. With respect to certain Instruments, deductions for interest and
carrying charges may not be allowed. Notwithstanding the rules described above,
with respect to certain contracts which are part of a "mixed straddle" which are
properly identified as such, the Fund may make an election which will exempt (in
whole or in part) those identified contracts, from the rules of Section
34
<PAGE>
1256 of the Code including "the 40%-60% rule" and the mark-to-market rule. Under
Temporary Regulations, the Fund may be allowed (in lieu of the foregoing) to
elect to either (1) offset gains or losses from portions which are part of a
mixed straddle by separately identifying each mixed straddle to which such
treatment applies, or (2) establish a mixed straddle account for which gains and
losses would be recognized and offset on a periodic basis during the taxable
year. Under either election, "the 40%-60% rule" will apply to the net gain or
loss attributable to the Instruments, but in the case of a mixed straddle
account election, not more than 50% of any net gain may be treated as long-term
and no more than 40% of any net loss may be treated as short-term.
A foreign currency contract must meet the following conditions in order to
be subject to the marking-to-market rules described above: (1) the contract
must require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract depends;
(2) the contract must be entered into at arm's length at a price determined by
reference to the price in the interbank market; and (3) the contract must be
traded in the interbank market. The Treasury Department has broad authority to
issue regulations under the provisions respecting foreign currency contracts.
Other foreign currency contracts entered into by the Fund may result in the
creation of one or more straddles for Federal income tax purposes, in which case
certain loss deferral, short sales, and wash sales rules and the requirement to
capitalize interest and carrying charges may apply.
Some of the non-U.S. dollar denominated investments that the Fund may make,
such as foreign securities, European Deposit Receipts and foreign currency
contracts, may be subject to the provisions of Subpart J of the Code, which
govern the Federal income tax treatment of certain transactions denominated in
terms of a currency other than the U.S. dollar or determined by reference to the
value of one or more currencies other than the U.S dollar. The types of
transactions covered by these provisions include the following: (1) the
acquisition of, or becoming the obligor under, a bond or other debt instrument
(including, to the extent provided in Treasury regulations, preferred stock);
(2) the accruing of certain trade receivables and payables; and (3) the entering
into or acquisition of any forward contract, futures contract, option and
similar financial instrument, if such instrument is not marked to market under
code Section 1256. The disposition of a currency other than the U.S. dollar by
a U.S. taxpayer is also treated as a transaction subject to the special currency
rules. However, foreign currency-related regulated futures contracts and non
equity options are generally not subject to the special currency rules if they
are or would be treated as sold for their fair market value at year-end under
the marking-to-market rules unless an election is made to have such currency
rules apply. With respect to transactions covered by the special rules, foreign
currency gain or loss is calculated separately from any gain or loss on the
underlying transaction and is normally taxable as ordinary gain or loss. A
taxpayer may elect to treat as capital gain or loss foreign currency gain or
loss arising from certain identified forward contracts, futures contracts and
options that are capital assets in the hands of the taxpayer and which are not
part of a straddle. In accordance with Treasury regulations, certain
transactions that are part of a "Section 988 hedging transaction" (as defined in
the Code and Treasury regulations) may be integrated and treated as a single
transaction or otherwise treated consistently for purposes of the Code. "Section
988 hedging transactions" are not subject to the marking-to-market or loss
deferral rules under the Code. Gain or loss attributable to the foreign
currency component of transactions engaged in by the Fund which are not subject
to the special currency rules (such as foreign equity investments other than
certain preferred stocks) is treated as capital gain or loss and is not
segregated from the gain or loss on the underlying transaction.
Certain debt instruments acquired by the Fund may include "original issue
discount" or "market discount". As a result, the 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 Requirement and must also
be distributed in accordance
35
<PAGE>
with the excise tax distribution rules discussed above, which may cause the Fund
to have to borrow or liquidate securities to generate cash in order to timely
meet these requirements (even though such borrowing or liquidating securities at
that time may be detrimental from the standpoint of optimal portfolio
management). Gain from the sale of a debt instrument having market discount may
be treated for tax purposes as ordinary income to the extent that market
discount accrued during the Fund's ownership of that instrument.
If the 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 the Fund elects to treat the PFIC as a "qualified electing
fund" ("QEF") and the PFIC furnishes certain financial information in the
required form to the Fund, the Fund will instead be required to include in
income each year its allocable share of the ordinary earnings and net capital
gains on the QEF, regardless of whether received, and such amounts will be
subject to the various distribution requirements described above.
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
unissued shares of the Company into one or more classes by setting or changing,
in any one or more respects, their respective designations, preferences,
conversion or other rights, voting powers, restrictions, limitations,
qualifications and terms and conditions of redemption. Pursuant to the
authority of the Company's Articles of Incorporation, the Directors have
authorized the issuance of shares of common stock representing interests in The
Munder Multi-Season Growth Fund, The Munder Real Estate Equity Investment Fund,
The Munder Mid-Cap Growth Fund, The Munder Value Fund, The Munder International
Bond Fund and The Munder Money Market Fund, respectively. The Shares of each
Fund (other than the Money Market Fund) are offered in five separate classes:
Class A, Class B, Class C, Class K and Class Y Shares. The Money Market Fund
offers only Class A, Class B and Class C Shares (which may be acquired only
through an exchange of shares from the corresponding classes of other funds of
the Company and the Trust) and Class Y Shares.
In the event of a liquidation or dissolution of each of the Company or the
Fund, shareholders of a particular Fund would be entitled to receive the assets
available for distribution belonging to the Fund, and a proportionate
distribution, based upon the relative net asset values of the Company's
respective Funds, of any general assets not belonging to any particular Fund
which are available for distribution. Shareholders of the Fund are entitled to
participate in the net distributable assets of the Fund involved on
liquidation, based on the number of shares of the Fund that are held by each
shareholder.
Holders of all outstanding shares of the Fund will vote together in the
aggregate and not by class on all matters, except that only Class A Shares of
the Fund will be entitled to vote on matters submitted to a vote of shareholders
pertaining to the Fund's Class A Plan, only Class B Shares will be entitled to
vote on matters submitted to a vote of shareholders pertaining to the Fund's
Class B Plan, only Class C Shares of the Fund will be entitled to vote on
matters submitted to a vote of shareholders pertaining to the Fund's Class C
Plan, and only Class K Shares of the Fund will be entitled to vote on matters
submitted to a vote of shareholders pertaining to the Class K Plan. Further,
shareholders of the Fund, 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 each Fund in
the matter are
36
<PAGE>
substantially identical or that the matter does not affect any interest of the
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 the Fund only if approved by a majority of the outstanding shares of
the 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.
Shares of the Company have noncumulative voting rights and, accordingly,
the holders of more than 50% of each of the Company's outstanding shares
(irrespective of class) may elect all of the directors. Shares have no
preemptive rights and only such conversion and exchange rights as the Board may
grant in its discretion. When issued for payment as described in each
Prospectus, shares will be fully paid and non-assessable by the Company.
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.
MISCELLANEOUS
Counsel. The law firm of Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, DC 20005, has passed upon certain legal matters in connection with
the shares offered by the Fund and serves as counsel to the Company.
Independent Auditors. Ernst & Young LLP, serves as the Company's
independent auditors.
Banking Laws. Banking laws and regulations currently prohibit a bank
holding company registered under the Federal Bank Holding Company Act of 1956 or
any bank or non-bank affiliate thereof from sponsoring, organizing, controlling
or distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from underwriting securities, but such banking laws and regulations do not
prohibit such a holding company or affiliate or banks generally from acting as
investment Advisor, administrator, transfer agent or custodian to such an
investment company, or from purchasing shares of such a company as agent for and
upon the order of customers. The Advisor and the Custodian are subject to such
banking laws and regulations.
The Advisor and the Custodian believe they may perform the services for the
Company contemplated by their respective agreements with the Company without
violation of applicable banking laws or regulations. It should be noted,
however, that there have been no cases deciding whether bank and non-bank
subsidiaries of a registered bank holding company may perform services
comparable to those that are to be performed by these companies, and future
changes in either Federal or state statutes and regulations relating to
permissible activities 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
37
<PAGE>
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 Fund or
result in a financial loss to any Customer.
Shareholder Approvals. As used in this Statement of Additional Information
and in each Prospectus, a "majority of the outstanding shares" of the Fund means
the lesser of (a) 67% of the shares of the Fund represented at a meeting at
which the holders of more than 50% of the outstanding shares of the Fund or
portfolio are present in person or by proxy, or (b) more than 50% of the
outstanding shares of the Fund or portfolio.
REGISTRATION STATEMENT
This Statement of Additional Information and each of the Fund's
Prospectuses 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 each of the Fund's Prospectuses 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 respects by such reference.
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 which 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 which 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 which are rated B generally lack characteristics of
----
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small .
"Caa": Bonds that are rated Caa are of poor standing. These issues may
------
be in default or present elements of danger may exist with respect to principal
or interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated "Aa" through "B". The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.
A-1
<PAGE>
Excerpts from Standard & Poor's Ratings Service, a division of McGraw-Hill
Companies, Inc. ("S&P") description of its bond ratings:
"AAA": Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
------
pay interest and repay principal is extremely strong.
"AA": Debt rated "AA" has a very strong capacity to pay interest and
-----
repay principal and differs from "AAA" issues by a small degree.
"A": Debt rated "A" has a strong capacity to pay interest and repay
----
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
"BBB": Bonds rated BBB are regarded as having an adequate capacity to pay
------
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
"BB, B and CCC": Bonds rated BB and B are regarded, on balance, as
----------------
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. BB represents a
lower degree of speculation than B and CCC the highest degree of speculation.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
To provide more detailed indications of credit quality, the "AA" or "A"
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Commercial Paper
- ----------------
The rating "Prime-1" is the highest commercial paper rating assigned by
Moody's. These issues (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issues rated "Prime-2" (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics of "Prime-1" rated issues, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted "A-1+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1."
A-2
<PAGE>
APPENDIX A
----------
- Rated Investments -
Commercial Paper
- ----------------
Rated commercial paper purchased by 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+".
A-3
<PAGE>
APPENDIX B
As stated in the Prospectus, the Fund may enter into certain futures
transactions and options for hedging purposes. Such transactions are described
in this Appendix.
I. Interest Rate Futures Contracts
-------------------------------
Use of Interest Rate Futures Contracts. Bond prices are established in
--------------------------------------
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Fund may use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes and
not for speculation. As described below, this would include the use of futures
contract sales to protect against expected increases in interest rates and
futures contract purchases to offset the impact of interest rate declines.
The Fund presently could accomplish a similar result to that which it hopes
to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because
of the liquidity that is often available in the futures market, the protection
is more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Fund, through using futures contracts.
Description of Interest Rate Futures Contracts. An interest rate futures
----------------------------------------------
contract sale would create an obligation by the Fund, as seller, to deliver the
specific type of financial instrument called for in the contract at a specific
future time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until or at near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without making or taking of delivery of securities.
Closing out a futures contract sale is effected by the Fund's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of the sale
exceeds the price of the offsetting purchase, the Fund is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by the Fund entering
into a futures contract sale. If the offsetting sale price exceeds the purchase
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. The Fund would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.
B-1
<PAGE>
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. The Funds may trade in any interest rate futures contracts
for which there exists a public market, including, without limitation, the
foregoing instruments.
Example of Futures Contract Sale. The Fund would engage in an interest
--------------------------------
rate futures contract sale to maintain the income advantage from continued
holding of a long-term bond while endeavoring to avoid part or all of the loss
in market value that would otherwise accompany a decline in long-term securities
prices. Assume that the market value of a certain security held by the Fund
tends to move in concert with the futures market prices of long-term United
States Treasury bonds ("Treasury Bonds"). The adviser wishes to fix the current
market value of the portfolio security until some point in the future. Assume
the portfolio security has a market value of 100, and the adviser believes that,
because of an anticipated rise in interest rates, the value will decline to 95.
The fund might enter into futures contract sales of Treasury bonds for an
equivalent of 98. If the market value of the portfolio security does indeed
decline from 100 to 95, the equivalent futures market price for the Treasury
bonds might also decline from 98 to 93.
In that case, the five point loss in the market value of the portfolio
security would be offset by the five point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example might
incur a loss of 2 points (which might be reduced by an offsetting transaction
prior to the settlement date). In each transaction, transaction expenses would
also be incurred.
Example of Futures Contract Purchase. The Fund would engage in an interest
------------------------------------
rate futures contract purchase when they are not fully invested in long-term
bonds but wish to defer for a time the purchase of long-term bonds in light of
the availability of advantageous interim investments, e.g., shorter term
securities whose yields are greater than those available on long-term bonds.
The Fund's basic motivation would be to maintain for a time the income advantage
from investing in the short-term securities; the Fund would be endeavoring at
the same time to eliminate the effect of all or part of an expected increase in
market price of the long-term bonds that the Fund may purchase.
For example, assume that the market price of a long-term bond that the Fund
may purchase, currently yielding 10% , tends to move in concert with futures
market prices of Treasury bonds. The adviser wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example) when it may purchase the bond. Assume the long-term bond
has a market price of 100, and the adviser believes that, because of an
anticipated fall in interest rates, the price will have risen to 105 (and the
yield will have dropped to about 91/2%) in four months. The Fund might enter
into futures contracts purchases of Treasury bonds for an equivalent price of
98. At the same time, the Fund would assign a pool of investments in short-term
securities that are either maturing in four months or earmarked for sale in four
months, for purchase of the long-term bond at an assumed market price of 100.
Assume these short-term securities are yielding 15%. If the market price of the
long-term bond does indeed rise from 100 to 105, the equivalent futures market
price for Treasury bonds might also rise from 98 to 103. In that case, the 5
point
B-2
<PAGE>
increase in the price that the Fund pays for the long-term bond would be
offset by the 5 point gain realized by closing out the futures contract
purchase.
The adviser could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or below,
it is possible that the Fund would continue with its purchase program for long-
term bonds. The market price of available long-term bonds would have decreased.
The benefit of this price decrease, and thus yield increase, will be reduced by
the loss realized on closing out the futures contract purchase.
If, however, short-term rates remained above available long-term rated, it
is possible that the Fund would discontinue its purchase program for long-term
bonds. The yield on short-term securities in the portfolio, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued
incremental income will be reduced by the loss realized on closing out the
futures contract purchase. In each transaction, expenses would also be
incurred.
II. Index Futures Contracts
-----------------------
General. A bond index assigns relative values of the bonds included in the
-------
index bind the index fluctuates with changes in the market values of the bonds
included. The Chicago Board of Trade has designed a futures contract based on
the Bond Buyer Municipal Bond Index. This Index is composed of 40 term revenue
and general obligation bonds and its composition is updated regularly as new
bonds meeting the criteria of the Index are issued and existing bonds mature.
The Index is intended to provide an accurate indicator of trends and changes in
the municipal bond market. Each bond in the Index is independently priced by
six dealer-to-dealer municipal bond brokers daily. The 40 prices then are
averaged and multiplied by a coefficient. The coefficient is used to maintain
the continuity of the Index when its composition changes.
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.
The 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. The 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, the Fund may utilize index futures contracts in anticipation
of changes in the composition of its portfolio holdings. For example, in the
event that the 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. The 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.
III. Margin Payments
---------------
Unlike purchase or sales of portfolio securities, no price is paid or
received by the 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
B-3
<PAGE>
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 the 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 adviser may elect
to close the position by taking an opposite position, subject to the
availability of a secondary market, which will operate to terminate the Fund's
position in the futures contract. A final determination of variation margin is
then made, additional cash is required to be paid by or released to the Fund,
and the Fund realizes a loss or gain.
IV. Risks of Transactions in Futures Contracts
------------------------------------------
There are several risks in connection with the use of futures by the Fund
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 Adviser. Conversely, the Fund 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 Adviser. 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 the 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 Fund
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.
B-4
<PAGE>
In instances involving the purchase of futures contracts by the Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Custodian and/or
in a margin account with a broker to collateralize the position and thereby
insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced thus producing distortions. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of general
market trends or interest rate movements by the adviser 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 Fund 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 Fund is also subject to the adviser's
ability to predict correctly movements in the direction of the market. For
example, if the 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 Fund may have to sell
securities at a time when they may be disadvantageous to do so.
B-5
<PAGE>
V. Options on Futures Contracts
----------------------------
The Fund may purchase and write options on the futures contracts described
above. A futures option gives the holder, in return for the premium paid, the
right to buy (call) from or sell (put) to the writer of the option a futures
contract at a specified price at any time during the period of the option. Upon
exercise, the writer of, the option is obligated to pay the difference between
the cash value of the futures contract and the exercise price. Like the buyer
or seller of a futures contract, the holder, or writer, of an option has the
right to terminate its position prior to the scheduled expiration of the option
by selling, or purchasing an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss. The 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.
VI. Currency Transactions
---------------------
The Fund may engage in currency transactions in order to hedge the value of
portfolio holdings denominated in particular currencies against fluctuations in
relative value. Currency transactions include forward currency contracts,
currency futures, options on currencies, and currency swaps. A forward currency
contract involves a privately negotiated obligation to purchase or sell (with
delivery generally required) a specific currency at a future date, which may be
any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. A currency swap is an
agreement to exchange cash flows based on the notional difference among two or
more currencies and operates similarly to an interest rate swap as described in
the Statement of Additional Information. The Fund may enter into currency
transactions with counterparties which have received (or the guarantors of the
obligations which have received) a credit rating of A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from a NRSRO or are
determined to be of equivalent credit quality by the Advisor.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure to an
extent greater after netting all transactions intended wholly or partially to
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally
B-6
<PAGE>
quoted in or currently convertible into such currency, other than with respect
to proxy hedging as described below.
The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar.
Proxy hedging entails entering into a commitment or option to sell a currency
whose changes in value are generally considered to be correlated to a currency
or currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Advisor considers
that the Austrian schilling is correlated to the German deutschemark (the
"D-mark"), the Fund holds securities denominated in shillings and the Advisor
believes that the value of the schillings will decline against the U.S. dollar,
the Advisor may enter into a commitment or option to sell D-marks and buy
dollars. Currency hedging involves some of the same risks and considerations as
other transactions with similar instruments. Currency transactions can result in
losses to the Fund if the currency being hedged fluctuates in value to a degree
or in a direction that is not anticipated. Further, there is the risk that the
perceived correlation between various currencies may not be present or may not
be present during the particular time that the Fund is engaging in proxy
hedging. If a Fund enters into a currency hedging transaction, the Fund will
comply with the asset segregation requirements. Under such requirements, the
Fund will segregate liquid, high grade assets with the custodian to the extent
the Fund's obligations are not otherwise "covered" through ownership of the
underlying currency.
Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Buyers and sellers of currency futures are subject to the same risks
that apply to the use of futures generally. Further, settlement of a currency
futures contract for the purchase of most currencies must occur at a bank based
in the issuing nation. Trading options on currency futures is relatively new,
and the ability to establish and close to positions on such options is subject
to the maintenance of a liquid market which may not always be available.
Currency exchange rates may fluctuate based on factors extrinsic to that
country's economy.
VII. Other Matters
-------------
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
B-7
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
---------------------------------
(a) Audited financial Statements as of June 30, 1995 are
incorporated by reference from the Annual Report for the fiscal
period ended June 30, 1995 and include the following:
Auditor's Report
Financial Highlights
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to the Financial Statements
Unaudited Financial Statements as of December 31, 1995 are
incorporated by reference from the Semi-Annual Report dated
December 31, 1995 and include the following:
Financial Highlights
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
No financial statements are incorporated in Part A or
Part B for The Munder International Bond Fund.
(b) Exhibits (the number of each exhibit relates to the
exhibit designation in Form N-1A):
(1) (a) Articles of Incorporation1
(b) Articles of Amendment2
(c) Articles Supplementary3
(d) Articles Supplementary4
(e) Articles Supplementary9
(f) Articles Supplementary with respect to
The Munder Value Fund and The Munder Mid-Cap Growth Fund*
(g) Articles Supplementary with respect to
The Munder International Bond Fund*
(h) Articles Supplementary with respect to
the Net Net Fund*
(2) By-Laws1
(3) Not Applicable
(4) Specimen security for The Munder Multi-
Season Growth Fund2
(5) (a) Form of Investment Advisory Agreement for
The Munder Multi-Season Growth Fund7
(b) Form of Investment Advisory Agreement for
The Munder Money Market Fund7
(c) Form of Investment Advisory Agreement for
The Munder Real Estate Equity Investment Fund7
(d) Investment Advisory Agreement for The
Munder Value Fund is filed herein
(e) Investment Advisory Agreement for The
Munder Mid-Cap Growth Fund is filed herein
(f) Form of Investment Advisory Agreement for
The Munder International Bond Fund is filed herein
(g) Form of Investment Advisory Agreement for
The Net Net Fund*
(6) (a) Underwriting Agreement is filed herein
(b) Notice to Underwriting Agreement with
respect to The Munder Value Fund and The Munder Mid-Cap Growth
Fund is filed herein
(c) Notice to Underwriting Agreement with
respect to The Munder International Bond Fund is filed herein
(d) Notice to Underwriting Agreement with
respect to The Net Net Fund*
(7) Not Applicable
(8) (a) Form of Custodian Contract is filed
herein
(b) Notice to Custodian Contract with
respect to The Munder Value Fund and The Munder Mid-Cap Growth
Fund is filed herein
(c) Notice to Custodian Contract with respect
to The Munder International Bond Fund is filed herein
(d) Notice to Custodian Contract with respect
to The Net Net Fund*
(e) Form of Subcustodian Agreement *
(f) Notice to Subcustody Agreement with
respect to The Munder International Bond Fund*
(g) Notice to Subcustody Agreement with
respect to The Net Net Fund*
(9) (a) Transfer Agency and Service Agreement
is filed herein
(b) Notice to Transfer Agency and Service
Agreement with respect to The Munder Value Fund and The Munder
Mid-Cap Growth Fund is filed herein
(c) Notice to Transfer Agency and Service
Agreement with respect to The Munder International Bond Fund is
filed herein
(d) Notice to Transfer Agency and Service
Agreement with respect to The Net Net Fund*
(e) Administration Agreement is filed
herein
(f) Notice to Administration Agreement with
respect to The Munder Value and The Munder Mid-Cap Growth Fund is
filed herein
(g) Notice to Administration Agreement with
respect to The Munder International Bond Fund is filed herein
(h) Notice to Administration Agreement with
respect to The Net Net Fund*
(10) (a) Opinion and Consent of Counsel with
respect to The Munder Multi-Season Growth Fund2
(b) Opinion and Consent of Counsel with
respect to The Munder Money Market Fund5
(c) Opinion and Consent of Counsel with
respect to The Munder Real Estate Equity Investment Fund4
(d) Opinion and Consent of Counsel with
respect to The Munder Value Fund and The Munder Mid-Cap Growth
Fund is filed herein
(e) Opinion and Consent of Counsel with
respect to The Munder International Bond Fund is filed herein
(f) Opinion and Consent of Counsel with
respect to The Net Net Fund*
(11) (a) Consent of Dechert Price & Rhoads11
(b) Consent of Ernst & Young LLP11
(c) Consent of Arthur Andersen LLP11
(d) Letter of Arthur Andersen LLP regarding
change in independent auditor required by Item 304 of Regulation
S-K.11
(e) Powers of Attorney10
(13) Initial Capital Agreement2
(14) Not Applicable
(15) (a) Service Plan for The Munder Multi-Season
Growth Fund Class A Shares7
(b) Service and Distribution Plan for The
Munder Multi-Season Growth Fund Class B Shares7
(c) Service and Distribution Plan for The
Munder Multi-Season Growth Fund Class D Shares7
(d) Service Plan for The Munder Money Market
Fund Class A Shares7
(e) Service and Distribution Plan for The
Munder Money Market Fund Class B Shares7
(f) Service and Distribution Plan for The
Munder Money Market Fund Class D Shares7
(g) Service Plan for The Munder Real Estate
Equity Investment Fund Class A Shares7
(h) Service and Distribution Plan for The
Munder Real Estate Equity Investment Fund Class B Shares7
(i) Service and Distribution Plan for The
Munder Real Estate Equity Investment Fund Class D Shares7
(j) Form of Service Plan for The Munder
Multi-Season Growth Fund Investor Shares8
(k) Form of Service Plan for The Munder Value
Fund and The Munder Mid-Cap Growth Fund*
(l) Form of Service Plan for The Munder
International Bond Fund*
(m) Distribution and Service Plan for Class A
Shares for The Munder Value Fund*
(n) Distribution and Service Plan for Class B
Shares for The Munder Value Fund*
(o) Distribution and Service Plan for Class C
Shares for The Munder Value Fund*
(p) Distribution and Service Plan for Class A
Shares of The Munder Mid-Cap Growth Fund*
(q) Distribution and Service Plan for Class B
Shares of The Munder Mid-Cap Growth Fund*
(r) Distribution and Service Plan for Class C
Shares of The Munder Mid-Cap Growth Fund*
(s) Distribution and Service Plan for Class A
Shares of The Munder International Bond Fund*
(t) Distribution and Service Plan for Class B
Shares of The Munder International Bond Fund*
(u) Distribution and Service Plan for Class C
Shares of The Munder International Bond Fund*
(v) Form of Distribution and Service Plan for
The Net Net Fund*
(16) Schedule for Computation of Performance
Quotations6
(18) Multi-Class Plan8
- --------------------------------
* To be filed by Amendment
- --------------------------------
1. Filed in Registrant's initial Registration Statement on
November 18, 1992 and incorporated by reference herein.
2. Filed in Pre-Effective Amendment No. 2 to the Registrant's
Registration Statement on February 26, 1993 and incorporated by
reference herein.
3. Filed in Post-Effective Amendment No. 3 to the Registrant's
Registration Statement on July 28, 1993 and incorporated by
reference herein.
4. Filed in Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on August 26, 1994 and incorporated by
reference herein.
5. Filed in Post-Effective Amendment No. 2 to the Registrant's
Registration Statement on July 9, 1993 and incorporated by
reference herein.
6. Filed in Post-Effective Amendment No. 5 to the Registrant's
Registration Statement on March 28, 1994 and incorporated by
reference herein.
7. Filed in Post-Effective Amendment No. 8 to the Registrant's
Registration Statement on February 28, 1995 and incorporated by
reference herein.
8. Filed in Post-Effective Amendment No. 9 to the Registrant's
Registration Statement on April 13, 1995 and incorporated by
reference herein.
9. Filed in Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on May 2, 1995 and
incorporated by reference herein.
10. Filed in Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on May 31, 1995 and
incorporated by reference herein.
11. Filed in Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on August 29, 1995 and
incorporated by reference herein.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
--------------------------------------------------
Not Applicable.
Item 26. Number of Holders of Securities.
-------------------------------
As of June 12, 1996, the number of shareholders of
record of each Class of shares of each Series of the Registrant
that was offered as of that date was as follows:
Class A Class B Class C Class
K Class Y
------------------------------------------------------------
- --------------
The Munder Multi-Season Growth Fund 383 1,626 8 146 91
The Munder Money Market Fund 6 9 2 0 69
The Munder Real Estate Equity 13 8 4 1 28
Investment Fund
The Munder Mid-Cap Growth Fund 7 18 3 2 23
The Munder Value Fund 4 17 2 3 19
Item 27. Indemnification.
---------------
Reference is made to Article 7.6 in the Registrant's
Articles of Incorporation, which are incorporated by reference
herein.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the Registrant by
the Registrant pursuant to the Fund's Articles of Incorporation,
its By-Laws or otherwise, the Registrant is aware that in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act
and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by directors,
officers or controlling persons of the Registrant in connection
with the successful defense of any act, suit or proceeding) is
asserted by such directors, officers or controlling persons in
connection with shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser.
----------------------------------------------------
Munder Capital Management
- -------------------------
Position
Name with Adviser
- ---- ------------
Old MCM, Inc. Partner
Munder Group LLC Partner
WAM Holdings, Inc. Partner
Woodbridge Capital Management, Inc. Partner
Lee P. Munder President and
Chief
Executive Officer
Leonard J. Barr, II Senior Vice
President and
Director of
Research
Ann J. Conrad Vice President
and Director of Special Equity Products
David W. Cornwell Vice President and
Director of Real Estate
Terry H. Gardner Vice President and
Chief Financial Officer
Elyse G. Essick Vice President and
Director of Client Services
Otto G. Hinzmann Vice President and
Director of Equity Portfolio Management
Ann F. Putallaz Vice President and
Director of Fiduciary Services
John P. Richardson Vice President
and Director of Equity Portfolio Management
Lisa A. Rosen General Counsel and
Director of Mutual Fund Operations
James C. Robinson Vice President and
Chief Investment Officer/Fixed Income
Gerald L. Seizert Executive Vice
President and Chief Investment Officer/Equity
Paul D. Tobias Executive Vice
President and Chief Operating Officer
For further information relating to the Investment Adviser's
officers, reference is made to Form ADV filed under the
Investment Advisers Act of 1940 by Munder Capital Management.
SEC File No. 801-32415
Item 29. Principal Underwriters.
----------------------
(a) Funds Distributor, Inc. ("FDI"), located at One
Exchange Place, Boston, Massachusetts 02109, is the principal
underwriter of the Funds. FDI is an indirectly wholly-owned
subsidiary of Boston Institutional Group, Inc. a holding company,
all of whose outstanding shares are owned by key employees. FDI
is a broker dealer registered under the Securities Exchange Act
of 1934, as amended. FDI acts as principal underwriter of the
following investment companies other than the Registrant:
HT Insight Funds, d/b/a Harris Insight Funds
Harris Insight Funds Trust Skyline Funds
The Munder Funds Trust Foreign Fund, Inc.
St. Clair Funds, Inc. BEA Investment Funds, Inc.
BJB Investment Funds Fremont Mutual Funds
PanAgora Funds RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
Waterhouse Investors Cash Managers Mutual Funds
(b) The following is a list of officers, directors and
partners of FDI. The principal address of all officers and
directors is One Exchange Place, Boston, Massachusetts 02109.
Positions and
Positions and
Offices with
Offices with
Name FDI
Registrant
- ---- ------------- -----
- --------
William J. Nutt Chairman None
Marie E. Connolly President, Chief None
Executive Officer
and Director
John E. Pelletier Senior Vice None
President, General
Counsel
Rui M. Moura First Vice None
President
Joseph F. Tower, III Senior Vice None
President, Treasurer,
Chief Financial Officer
Richard W. Ingram Senior Vice President None
Donald R. Roberson Senior Vice President None
Bernard A. Whalen First Vice President None
John W. Gomez Director None
(c) Not Applicable
The information required by this Item 29 with respect
to each director and officer of FDI is incorporated by reference
to Schedule A of Form BD filed by FDI pursuant to the Securities
Exchange Act of 1934 (SEC File No. 20518).
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 Munder Capital Management at 480
Pierce Street, Birmingham, MI 48009, or at 255 East Brown Street,
Street, Birmingham, Michigan, 48009, State Street Bank and Trust
Company, c/o National Financial Data Services, 1004 Baltimore,
Kansas City, Missouri 64105-1807 or at First Data Investor
Services Group, Inc. (f/k/a The Shareholder Services Group,
Inc.), One Exchange Place, Boston, Massachusetts 02109.
Item 31. Management Services.
-------------------
Not Applicable
Item 32. Undertakings.
------------
(a) Not Applicable.
(b) Registrant undertakes to call a meeting of
Shareholders for the purpose of voting upon the question of
removal of a Director or Directors when requested to do so by the
holders of at least 10% of the Registrant's outstanding shares of
common stock and in connection with such meeting to comply with
the shareholders' communications provisions of Section 16(c) of
the Investment Company Act of 1940.
(c) Registrant undertakes to furnish to each person to
whom a prospectus is delivered a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
(d) Registrant undertakes to file a Post-Effective
Amendment relating to The Munder International Bond Fund, using
reasonably current financial statements which need not be
certified, within four to six moths from the effective date of
the Fund's Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies
that this Post-Effective
Amendment No. 16 to the Registration Statement meets the requirements
for effectiveness
pursuant to Rule 485(b) of the Securities Act of 1933, as amended, and
the Registrant has duly
caused this Post-Effective Amendment No. 16 to the Registration
Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City
of Boston and the
Commonwealth of Massachusetts on the 24th day of June, 1996.
The Munder Funds, Inc.
By: *
Lee P. Munder
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the
date indicated.
Signatures Title Date
* President and Chief June 24, 1996
Lee P. Munder Executive Officer
* Director June 24, 1996
Charles W. Elliott
* Director June 24, 1996
Joseph E. Champagne
* Director June 24, 1996
Arthur DeRoy Rodecker
* Director June 24, 1996
Jack L. Otto
* Director June 24, 1996
Thomas B. Bender
* Director June 24, 1996
Thomas D. Eckert
* Director June 24, 1996
John Rakolta, Jr.
* Director June 24, 1996
David J. Brophy
* Vice President, June 24, 1996
Terry H. Gardner Treasurer and
Chief Financial
Officer
* By: _________________________
Lisa Anne Rosen
as Attorney-in-Fact
EXHIBIT INDEX
Exhibit Description
(5)(d) Investment Advisory Agreement for The
Munder Value Fund
(5)(e) Investment Advisory Agreement for The
Munder Mid-Cap Growth Fund
(5)(f) Form of Investment Advisory Agreement for
The Munder International Bond Fund
(6)(a) Underwriting Agreement
(6)(b) Notice to Underwriting Agreement with
respect to The Munder Value Fund and The Munder Mid-Cap Growth
Fund
(6)(c) Notice to Underwriting Agreement with
respect to The Munder International Bond Fund
(8)(a) Form of Custodian Contract
(8)(b) Notice to Custodian Contract with
respect to The Munder Value Fund and The Munder Mid-Cap Growth
Fund
(8)(c) Notice to Custodian Contract with respect
to The Munder International Bond Fund
(9)(a) Transfer Agency and Service Agreement
(9)(b) Notice to Transfer Agency and Service
Agreement with respect to The Munder Value Fund and The Munder
Mid-Cap Growth Fund
(9)(c) Notice to Transfer Agency and Service
Agreement with respect to The Munder International Bond Fund
(9)(e) Administration Agreement
(9)(f) Notice to Administration Agreement with
respect to The Munder Value and The Munder Mid-Cap Growth Fund
(9)(g) Notice to Administration Agreement with
respect to The Munder International Bond Fund
(10)(d) Opinion and Consent of Counsel with
respect to The Munder Value Fund and The Munder Mid-Cap Growth
Fund
(10)(e) Opinion and Consent of Counsel with
respect to The Munder International Bond Fund
shared/bankgrp/munder/parta/ibfbfile.doc
G:\SHARED\BANKGRP\MUNDER\PARTA\PEA12.DOC
6
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made this14th day of August, 1995,
between The Munder Funds, Inc. (the "Company") on behalf of The
Munder Mid-Cap Growth Fund (the "Fund") and Munder Capital Management
(the "Adviser"), a Delaware partnership.
WHEREAS, the Company is a Maryland corporation authorized to
issue shares in series and is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the Fund is a series of the Company;
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers
Act");
WHEREAS, the Company wishes to retain the Adviser to render
investment advisory services to the Fund, and the Adviser is willing
to furnish such services to the Fund;
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between the Company and the
Adviser as follows:
1. Appointment
The Company hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth
herein. The Adviser accepts the appointment and agrees to furnish
the services set forth herein for the compensation provided herein.
2. Services as Investment Adviser
Subject to the general supervision and direction of the Board
of Directors of the Company, the Adviser will (a) manage the Fund in
accordance with the Fund's investment objective and policies as
stated in the Fund's Prospectus and the Statement of Additional
Information filed with the Securities and Exchange Commission, as
they may be, amended from time to time; (b) make investment decisions
for the Fund; (c) place purchase and sale orders on behalf of the
Fund; and (d) employ professional portfolio managers and securities
analysts to provide research services to the Fund. In providing
those services, the Adviser will provide the Fund with ongoing
research, analysis, advice and judgments regarding individual
investments, general economic conditions and trends and long-range
investment policy. In addition, the Adviser will furnish the Fund
with whatever statistical information the Fund may reasonably request
with respect to the securities that the Fund may hold or contemplate
purchasing.
The Adviser further agrees that, in performing its duties
hereunder, it will:
(a) comply with the 1940 Act and all rules and regulations
thereunder the Advisers Act, the Internal Revenue Code of 1986, as
amended (the "Code") and all other applicable federal and state laws
and regulations, and with any applicable procedures adopted by the
Directors;
(b) use reasonable efforts to manage the Fund so that it will
qualify, and continue to qualify, as a regulated investment company
under Subchapter M of the code and regulations issued thereunder;
(c) maintain books and records with respect to the Fund's
securities transactions, render to the Board of Directors of the
Company such periodic and special reports as the Board may reasonably
request, and keep the Directors informed of developments materially
affecting the Fund's portfolio;
(d) make available to the Fund's administrator, and the
Company, promptly upon their request, such copies of its investment
records and ledgers with respect to the Fund as may be required to
assist the administrator and the Company in their compliance with
applicable laws and regulations. The Adviser will furnish the
Directors with such periodic and special reports regarding the Fund
as they may reasonably request.
(e) immediately notify the Company in the event that the
Adviser or any of its affiliates: (1) becomes aware that it is
subject to a statutory disqualification that prevents the Adviser
from serving as investment adviser pursuant to this Agreement; or (2)
becomes aware that it is the subject of an administrative proceeding
or enforcement action by the Securities and Exchange Commission or
other regulatory authority. The Adviser further agrees to notify the
Company immediately of any material fact known to the Adviser
respecting or relating to the Adviser that is not contained in the
Company's Registration Statement regarding the Fund, or any amendment
or supplement thereto, but that is required to be disclosed therein,
and of any statement contained therein that becomes untrue in any
material respect.
3. Documents
The Fund has delivered properly certified or authenticated
copies of each of the following documents to the Adviser and will
deliver to it all future amendments and supplements thereto, if any:
(a) certified resolution of the Board of Directors of the
Company authorizing the appointment of the Adviser and approving the
form of this Agreement;
(b) the Registration Statement as filed with the Securities
and Exchange Commission and any amendments thereto;
(c) exhibits, powers of attorneys, certificates and any and
all other documents relating to or filed in connection with the
Registration Statement described above.
4. Brokerage
In selecting brokers or dealers to execute transactions on
behalf of the Fund, the Adviser will use its best efforts to seek the
best overall terms available. In assessing the best overall terms
available for any Fund transaction, the Adviser will consider all
factors it deems relevant, including, but not limited to, the breadth
of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer
and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or
dealers to execute a particular transaction, and in evaluating the
best overall terms available, the Adviser is authorized to consider
the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended (the
"1934 Act")) provided to the Fund and/or other accounts over which
the Adviser or its affiliates exercise investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T)
thereunder and subject to any other applicable laws and regulations,
the Adviser and its affiliates are authorized to effect portfolio
transactions for the Fund and to retain brokerage commissions on such
transactions.
5. Records
The Adviser agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required to be
maintained by the Adviser with respect to the Fund by the 1940 Act.
The Adviser further agrees that all records which is maintains for
the Fund are the property of the Fund and it will promptly surrender
any of such records upon request.
6. Standard of Care
The Adviser shall exercise its best judgment in rendering the
services under this Agreement. The Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by
the Fund or the Fund's shareholders in connection with the matters to
which this Agreement relates, provided that nothing herein shall be
deemed to protect or purport to protect the Adviser against any
liability to the Fund or to its shareholders to which the Adviser
would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or by reason of the Adviser's reckless disregard o fits
obligations an duties under this Agreement. As used in this Section
6, the term "Adviser" shall include any officers, directors,
employees, or other affiliates of the Adviser performing services
with respect to the Fund.
7. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Fund will pay the Adviser a fee at an annual rate
equal to .75% of the average daily net assets of the Fund. This fee
shall be computed and accrued daily and payable monthly. For the
purpose of determining fees payable to the Adviser, the value of the
Fund's average daily net assets shall be computed at the times and in
the manner specified in the Fund's Prospectus or Statement of
Additional Information.
8. Expenses
The Adviser will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear
certain other expenses to be incurred in its operation, including:
taxes, interest, brokerage fees and commissions, if any, fees of
Directors of the Company who are not officers, directors, or
employees of the Adviser; Securities and Exchange Commission fees and
state blue sky qualification fees; charges of custodians and transfer
and dividend disbursing agents; the Fund's proportionate share of
insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Fund's existence; costs attributable to investor
services, including, without limitation, telephone and personal
expenses; charges of an independent pricing service; costs of
preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of the
shareholders of the Fund and of the officers of Board of Directors of
the Company; and any extraordinary expenses.
9. Reduction of Fees or Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's
administration agreement, but excluding distribution fees, interest,
taxes, brokerage and extraordinary expenses) exceed the expense
limitation of any state having jurisdiction over the Fund, the
Adviser will reduce its fees or reimburse the Fund for such excess
expense in the same proportion as its advisory fee bears to the
Fund's combined fee for investment advice and administration. The
Adviser's obligation to reduce its fees or reimburse the Fund will be
limited to the amount of its fees received pursuant to this
Agreement. Such reduction in fees or reimbursement, if any, will be
estimated, reconciled and, in the case of reimbursement, paid on a
monthly basis.
10. Services to Other Companies or Accounts
The investment advisory services of the Adviser to the Fund
under this Agreement are not to be deemed exclusive, and the Adviser,
or any affiliate thereof, shall be free to render similar services to
other investment companies and the clients (whether or not their
investment objectives and policies are similar to those of the Fund)
and to engage in the activities, so long as it services hereunder are
not impaired thereby.
11. Duration and Termination
This Agreement shall become effective on and shall continue in
effect, unless sooner terminated as provided herein, for two years
from such date and shall continue from year to year thereafter,
provided each continuance is specifically approve at least annually
by (i) the vote of a majority of the Board of Directors of the
Company or (ii) a vote of a "majority" (as defined in the 1940 Act)
of the Fund's outstanding voting securities, provided that in either
event the continuance is also approved by a majority of the Board of
Directors who are not "interested persons" (as defined in the 1940
Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, on sixty (60) days' written
notice by the Board of Directors of the Company or by vote of holders
of a "majority" (as defined in he 1940 Act) of the Fund's shares or
upon ninety (90) days' written notice by the Adviser. This Agreement
will be terminated automatically in the event of its "assignment" (as
defined in he 1940 Act).
12. Amendment
No provision of this Agreement be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge
or termination is sought, and no amendment of this Agreement shall be
effective until approved by an affirmative vote of (i) a majority of
the outstanding voting securities of the Fund, and (ii) a majority of
the Directors of the Company, including a majority of Directors who
are not the Company, including a majority of Directors who are not
interested persons of any party to this Agreement, cast in person at
a meeting called for the purpose of voting on such approval, if such
approval is required by applicable law.
13. Use of Name
It is understood that the name of Munder Capital Management or
any derivative thereof or logo associated with that name is the
valuable property of the Adviser and its affiliates, and that the
Fund has the right to use such name (or derivable or logo) only so
long as this Agreement shall continue with respect to the Fund. Upon
termination of this Agreement, the Fund shall forthwith cease to use
such name (or derivative or logo) and shall promptly amend its
Articles of Incorporation to change its name to comply herewith.
14. Miscellaneous
(a) This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter
hereof.
(b) Titles or captions of sections contained in this
Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope
of this Agreement or the intent of any provisions thereof.
(c) This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
(d) This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and interpreted, construed
and enforced in accordance with the laws of the State of Michigan.
(e) If any provisions of this Agreement or the application
thereof to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid or unenforceable to any
extent, the remainder of this Agreement or the application of such
provision to such person circumstance, other than these as to which
it is so determined to be invalid or unenforceable, shall not be
affected thereby, and each provision hereof shall be valid and shall
be enforced to the fullest extent permitted by law.
(f) Notices of any kind to be given to the Adviser by the
Company shall be in writing and shall be duly given if mailed or
delivered to the Adviser at 480 Pierce Street, Birmingham, Michigan
48009, or at such other address or to such individual as shall be
specified by the Adviser to the Company. Notices of any kind to be
given to the Company by the Adviser shall be in writing and shall be
duly given if mailed or delivered to 480 Piece Street, Birmingham,
Michigan 48009, or at such the address or to such individual as shall
be specified by the Company to the Adviser.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below on the
day and year first above written.
THE MUNDER FUNDS, INC.
By: /s/ Lee Munder
MUNDER CAPITAL MANAGEMENT
By: /s/ Terry H Gardner
P:\SHARED\BANKGRP\MUNDER\AGREEMEN\ADVISORY\ADVMIDCA.DOC 1
P:\SHARED\BANKGRP\MUNDER\AGREEMEN\ADVISORY\ADVMIDCA.DOC
- -INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made this 18th day of August, 1995, between
The Munder Funds, Inc. (the "Company") on behalf of The Munder
Value Fund (the "Fund") and Munder Capital Management (the "Adviser"),
a Delaware partnership.
WHEREAS, the Company is a Maryland corporation authorized to
issue shares in series and is registered as an open-end
management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"), and the Fund is a series of the Company;
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act");
WHEREAS, the Company wishes to retain the Adviser to render
investment advisory services to the Fund, and the Adviser is
willing to furnish such services to the Fund;
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between the Company and
the Adviser as follows:
1. Appointment
The Company hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth
herein. The Adviser accepts the appointment and agrees to furnish
the services set forth herein for the compensation provided herein.
2. Services as Investment Adviser
Subject to the general supervision and direction of the
Board of Directors of the Company, the Adviser will (a) manage the
Fund in accordance with the Fund's investment objective and policies
as stated in the Fund's Prospectus and the Statement of Additional
Information filed with the Securities and Exchange Commission,
as they may be, amended from time to time; (b) make investment
decisions for the Fund; (c) place purchase and sale orders on
behalf of the Fund; and (d) employ professional portfolio managers
and securities analysts to provide research services to the Fund.
In providing those services, the Adviser will provide the Fund with
ongoing research, analysis, advice and judgments regarding individual
investments, general economic conditions and trends and long-range
investment policy. In addition, the Adviser will furnish the
Fund with whatever statistical information the Fund may reasonably
request with respect to the securities that the Fund may hold or
contemplate purchasing.
The Adviser further agrees that, in performing its duties hereunder, it will:
(a) comply with the 1940 Act and all rules and regulations thereunder
the Advisers Act, the Internal Revenue Code of 1986, as amended
(the "Code") and all other applicable federal and state laws
and regulations, and with any applicable procedures adopted by the Directors;
(b) use reasonable efforts to manage the Fund so that it will qualify,
and continue to qualify, as a regulated investment company under
Subchapter M of the code and regulations issued thereunder;
(c) maintain books and records with respect to the Fund's securities
transactions, render to the Board of Directors of the Company such
periodic and special reports as the Board may reasonably request, and
keep the Directors informed of developments materially affecting the
Fund's portfolio;
(d) make available to the Fund's administrator, and the Company,
promptly upon their request, such copies of its investment records
and ledgers with respect to the Fund as may be required to assist
the administrator and the Company in their compliance with applicable
laws and regulations. The Adviser will furnish the Directors with
such periodic and special reports regarding the Fund as they may
reasonably request.
(e) immediately notify the Company in the event that the Adviser or any
of its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment
adviser pursuant to this Agreement; or (2) becomes aware that it is the
subject of an administrative proceeding or enforcement action
by the Securities and Exchange Commission or other regulatory
authority. The Adviser further agrees to notify the Company immediately
of any material fact known to
atement regarding the Fund, or any amendment or supplement
thereto, but that is required to be disclosed therein, and of any
statement contained therein that becomes untrue in any material respect.
3. Documents
The Fund has delivered properly certified or authenticated copies
of each of the following documents to the Adviser and will deliver
to it all future amendments and supplements thereto, if any:
(a) certified resolution of the Board of Directors of the Company
authorizing the appointment of the Adviser and approving the form
of this Agreement;
(b) the Registration Statement as filed with the Securities and
Exchange Commission and any amendments thereto;
(c) exhibits, powers of attorneys, certificates and any and all
other documents relating to or filed in connection with the Registration
Statement described above.
4. Brokerage
In selecting brokers or dealers to execute transactions on behalf of
the Fund, the Adviser will use its best efforts to seek the best
overall terms available. In assessing the best overall terms
available for any Fund transaction, the Adviser will consider
all factors it deems relevant, including, but not limited to,
the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer
and the reasonableness of the commission, if any,for the specific
transaction and on a continuing basis. In selecting brokers
or dealers to execute a particular transaction, and in evaluating
the best overall terms
available, the Adviser is authorized to consider the brokerage and
research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934, as amended (the "1934 Act"))
provided to the Fund and/or other accounts over which the Adviser or its
affiliates exercise investment discretion. In accordance with
Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder
and subject to any other applicable laws
and
regulations, the Adviser and its affiliates are authorized to
effect portfolio transactions for the Fund and to retain
brokerage commissions on such transactions.
5. Records
The Adviser agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required
to be maintained by the Adviser with respect to the Fund by the 1940
Act. The Adviser further agrees that all records which is maintains
for the Fund are the property of the Fund and it will promptly
surrender any of such records upon request.
6. Standard of Care
The Adviser shall exercise its best judgment in rendering the
services under this Agreement. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered
by the Fund or the Fund's shareholders in connection with the matters
to which this Agreement relates, provided that nothing herein shall be
deemed to protect or purport to protect the Adviser against any
liability to the Fund or to its shareholders to which the Adviser
would otherwise be subject by reason of willfull misfeasance, bad
faith or gross negligence on its part in the performance
of it's duties or by reason of the Adviser's reckless disregard
of its
obligations an duties under
this Agreement. As used in this Section 6, the term "Adviser"
shall include any officers, directors, employees, or other affiliates
of the Adviser performing services with respect to the Fund.
7. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Fund will pay the Adviser a fee at an annual rate
equal to .75% of the average daily net assets of the Fund.
This fee shall be computed and accrued daily and payable
monthly. For the purpose of determining fees payable to the Adviser,
the value of the Fund's average daily net assets shall be computed
at the times and in the manner specified in the Fund's Prospectus
or Statement of Additional Information.
8. Expenses
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other
expenses to be incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any, fees of Directors of the
Company who are not officers, directors, or employees of the Adviser;
Securities and Exchange Commission fees and state blue sky qualification fees;
charges of custodians and transfer and dividend disbursing agents; the Fund's
proportionate share of insurance premiums; outside auditing and
legal expenses; cost of maintainance of the Fund's existencee;
costs attributable to investor services, including,
without limitation, telephone and personal expenses; charges of
an independent pricing service; costs of preparing and printing
prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders;
costs of shareholders' reports and meetings of the shareholders
of the Fund and of the officers of Board of Directors of the
Company; and any extraordinary expenses.
9. Reduction of Fees or Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's administration
agreement, but excluding distribution fees, interest, taxes, brokerage
and extraordinary expenses) exceed the expense limitation of any state
having jurisdiction over the Fund, the Adviser will reduce its fees
or reimburse the Fund for such excess expense in the same proportion
as its advisory fee bears to the Fund's combined fee for investment
advice and administration. The Adviser's obligation to reduce it's fees
or reimburse the the Fund will be limited to the amount of its fees
received pursuant to this Agreement. Such reduction in fees or reimbursement,
if any, will be estimated, reconciled and, in the case of
reimbursement, paid on a monthly basis.
10. Services to Other Companies or Accounts
The investment advisory services of the Adviser to the Fund
under this Agreement are not to be deemed exclusive, and the
Adviser, or any affiliate thereof, shall be free to render
similar services to other investment companies and the clients
(whether or not their investment objectives and policies are
similar to those of the Fund) and to engage in the activities,
so long as it services hereunder are not impaired thereby.
11. Duration and Termination
This Agreement shall become effective on and shall continue
in effect, unless sooner terminated as provided herein, for two
years from such date and shall continue from year to year
thereafter, provided each continuance is specifically approve at
least annually by (i) the vote of a majority of the Board of Directors
of the Company or (ii) a vote of a "majority" (as defined in the
1940 Act) of the Fund's outstanding voting securities, provided
that in either event the continuance is also approved by a major
to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval. This Agreement is
terminable, without penalty, on sixty (60) days' written notice
by the Board of Directors of the Company or by vote of
holders of a "majority" (as defined in he 1940 Act) of the Fund's
shares or upon ninety (90) days' written notice by the Adviser.
This Agreement will be terminated automatically in the event of
its "assignment" (as defined in he 1940 Act).
12. Amendment
No provision of this Agreement be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement
shall be effective until approved by an affirmative vote of (i) a
majority of the outstanding voting securities of the Fund, and
(ii) a majority of the Directors of the Company, including a majority
of Directors who are not the Company, including a
meeting called for the purpose of voting on such approval, if such
approval is required by applicable law.
13. Use of Name
It is understood that the name of Munder Capital Management
or any derivative thereof or logo associated with that name
is the valuable property of the Adviser and its affiliates, and
that the Fund has the right to use such name (or derivable or logo)
only so long as this Agreement shall continue with respect to the Fund.
Upon termination of this Agreement, the Fund shall forthwith cease
to use such name (or derivative or logo) and shall promptly amend
its Articles of Incorporation to change its name to comply herewith
14. Miscellaneous
(a) This Agreement constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof.
(b) Titles or captions of sections contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no
way define, limit, extend or describe the scope of this Agreement or
the intent of any provisions thereof.
(c) This Agreement may be executed in several counterparts, all of
which together shall for all purposes constitute one Agreement,
binding on all the parties.
(d) This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and interpreted, construed and
enforced in accordance with the laws of the State of Michigan.
(e) If any provisions of this Agreement or the application thereof to
any party or circumstances shall be determined by any court of
competent jurisdiction to be invalid or unenforceable to any
extent, the remainder of this Agreement or the application of such
provision to such person circumstance, other than these as to which
it is so determined to be invalid or unenforceable, shall not be
affected thereby, and each provision hereof shall be valid and shall
be enforced to the fullest extent permitted by law.
(f) Notices of any kind to be given to the Adviser by the Company
shall be in writing and shall be duly given if mailed or delivered
to the Adviser at 480 Pierce Street, Birmingham, Michigan 48009, or
at such other address or to such individual as shall be specified
by the Adviser to the Company. Notices of any kind to be given to
the Company by the Adviser shall be in writing and shall be duly
given if mailed or delivered to 480 Piece Street, Birmingham,
Michigan 48009, or at such the address or to such
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below on the day and
year first above written.
THE MUNDER FUNDS, INC.
By: /s/ Lee Munder
MUNDER CAPITAL MANAGEMENT
By: /s/ Terry H Gardner
P:\SHARED\BANKGRP\MUNDER\AGREEMEN\ADVISORY\ADVMIDCA.DOC PAGE1
P:\SHARED\BANKGRP\MUNDER\AGREEMEN\ADVISORY\ADVMIDCA.DOC
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made this day of , 1996,
between The Munder Funds, Inc. (the "Company") on behalf of The
Munder International Bond Fund (the "Fund") and Munder Capital
Management (the "Adviser"), a Delaware partnership.
WHEREAS, the Company is a Maryland corporation authorized to
issue shares in series and is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the Fund is a series of the Company;
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers
Act");
WHEREAS, the Company wishes to retain the Adviser to render
investment advisory services to the Fund, and the Adviser is
willing to furnish such services to the Fund;
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between the Company and
the Adviser as follows:
1. Appointment
The Company hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth
herein. The Adviser accepts the appointment and agrees to furnish
the services set forth herein for the compensation provided
herein.
2. Services as Investment Adviser
Subject to the general supervision and direction of the
Board of Directors of the Company, the Adviser will (a) manage the
Fund in accordance with the Fund's investment objective and
policies as stated in the Fund's Prospectus and the Statement of
Additional Information filed with the Securities and Exchange
Commission, as they may be, amended from time to time; (b) make
investment decisions for the Fund; (c) place purchase and sale
orders on behalf of the Fund; and (d) employ professional
portfolio managers and securities analysts to provide research
services to the Fund. In providing those services, the Adviser
will provide the Fund with ongoing research, analysis, advice and
judgments regarding individual investments, general economic
conditions and trends and long-range investment policy. In
addition, the Adviser will furnish the Fund with whatever
statistical information the Fund may reasonably request with
respect to the securities that the Fund may hold or contemplate
purchasing.
The Adviser further agrees that, in performing its duties
hereunder, it will:
(a) comply with the 1940 Act and all rules and regulations
thereunder the Advisers Act, the Internal Revenue Code of 1986, as
amended (the "Code") and all other applicable federal and state
laws and regulations, and with any applicable procedures adopted
by the Directors;
(b) use reasonable efforts to manage the Fund so that it
will qualify, and continue to qualify, as a regulated investment
company under Subchapter M of the code and regulations issued
thereunder;
(c) maintain books and records with respect to the Fund's
securities transactions, render to the Board of Directors of the
Company such periodic and special reports as the Board may
reasonably request, and keep the Directors informed of
developments materially affecting the Fund's portfolio;
(d) make available to the Fund's administrator, and the
Company, promptly upon their request, such copies of its
investment records and ledgers with respect to the Fund as may be
required to assist the administrator and the Company in their
compliance with applicable laws and regulations. The Adviser will
furnish the Directors with such periodic and special reports
regarding the Fund as they may reasonably request.
(e) immediately notify the Company in the event that the
Adviser or any of its affiliates: (1) becomes aware that it is
subject to a statutory disqualification that prevents the Adviser
from serving as investment adviser pursuant to this Agreement; or
(2) becomes aware that it is the subject of an administrative
proceeding or enforcement action by the Securities and Exchange
Commission or other regulatory authority. The Adviser further
agrees to notify the Company immediately of any material fact
known to the Adviser respecting or relating to the Adviser that is
not contained in the Company's Registration Statement regarding
the Fund, or any amendment or supplement thereto, but that is
required to be disclosed therein, and of any statement contained
therein that becomes untrue in any material respect.
3. Documents
The Fund has delivered properly certified or authenticated
copies of each of the following documents to the Adviser and will
deliver to it all future amendments and supplements thereto, if
any:
(a) certified resolution of the Board of Directors of the
Company authorizing the appointment of the Adviser and approving
the form of this Agreement;
(b) the Registration Statement as filed with the
Securities and Exchange Commission and any amendments thereto;
(c) exhibits, powers of attorneys, certificates and any
and all other documents relating to or filed in connection with
the Registration Statement described above.
4. Brokerage
In selecting brokers or dealers to execute transactions on
behalf of the Fund, the Adviser will use its best efforts to seek
the best overall terms available. In assessing the best overall
terms available for any Fund transaction, the Adviser will
consider all factors it deems relevant, including, but not limited
to, the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the
broker or dealer and the reasonableness of the commission, if any,
for the specific transaction and on a continuing basis. In
selecting brokers or dealers to execute a particular transaction,
and in evaluating the best overall terms available, the Adviser is
authorized to consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "1934 Act")) provided to the
Fund and/or other accounts over which the Adviser or its
affiliates exercise investment discretion. In accordance with
Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder and
subject to any other applicable laws and regulations, the Adviser
and its affiliates are authorized to effect portfolio transactions
for the Fund and to retain brokerage commissions on such
transactions.
5. Records
The Adviser agrees to maintain and to preserve for the
periods prescribed under the 1940 Act any such records as are
required to be maintained by the Adviser with respect to the Fund
by the 1940 Act. The Adviser further agrees that all records
which is maintains for the Fund are the property of the Fund and
it will promptly surrender any of such records upon request.
6. Standard of Care
The Adviser shall exercise its best judgment in rendering
the services under this Agreement. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss
suffered by the Fund or the Fund's shareholders in connection with
the matters to which this Agreement relates, provided that nothing
herein shall be deemed to protect or purport to protect the
Adviser against any liability to the Fund or to its shareholders
to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Adviser's
reckless disregard o fits obligations an duties under this
Agreement. As used in this Section 6, the term "Adviser" shall
include any officers, directors, employees, or other affiliates of
the Adviser performing services with respect to the Fund.
7. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Fund will pay the Adviser a fee at an annual rate
equal to .75% of the average daily net assets of the Fund. This
fee shall be computed and accrued daily and payable monthly. For
the purpose of determining fees payable to the Adviser, the value
of the Fund's average daily net assets shall be computed at the
times and in the manner specified in the Fund's Prospectus or
Statement of Additional Information.
8. Expenses
The Adviser will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will
bear certain other expenses to be incurred in its operation,
including: taxes, interest, brokerage fees and commissions, if
any, fees of Directors of the Company who are not officers,
directors, or employees of the Adviser; Securities and Exchange
Commission fees and state blue sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; the Fund's
proportionate share of insurance premiums; outside auditing and
legal expenses; costs of maintenance of the Fund's existence;
costs attributable to investor services, including, without
limitation, telephone and personal expenses; charges of an
independent pricing service; costs of preparing and printing
prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders;
costs of shareholders' reports and meetings of the shareholders of
the Fund and of the officers of Board of Directors of the Company;
and any extraordinary expenses.
9. Reduction of Fees or Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's
administration agreement, but excluding distribution fees,
interest, taxes, brokerage and extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over the Fund,
the Adviser will reduce its fees or reimburse the Fund for such
excess expense in the same proportion as its advisory fee bears to
the Fund's combined fee for investment advice and administration.
The Adviser's obligation to reduce its fees or reimburse the Fund
will be limited to the amount of its fees received pursuant to
this Agreement. Such reduction in fees or reimbursement, if any,
will be estimated, reconciled and, in the case of reimbursement,
paid on a monthly basis.
10. Services to Other Companies or Accounts
The investment advisory services of the Adviser to the Fund
under this Agreement are not to be deemed exclusive, and the
Adviser, or any affiliate thereof, shall be free to render similar
services to other investment companies and the clients (whether or
not their investment objectives and policies are similar to those
of the Fund) and to engage in the activities, so long as it
services hereunder are not impaired thereby.
11. Duration and Termination
This Agreement shall become effective on and shall continue
in effect, unless sooner terminated as provided herein, for two
years from such date and shall continue from year to year
thereafter, provided each continuance is specifically approve at
least annually by (i) the vote of a majority of the Board of
Directors of the Company or (ii) a vote of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting
securities, provided that in either event the continuance is also
approved by a majority of the Board of Directors who are not
"interested persons" (as defined in the 1940 Act) of any party to
this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable,
without penalty, on sixty (60) days' written notice by the Board
of Directors of the Company or by vote of holders of a "majority"
(as defined in he 1940 Act) of the Fund's shares or upon ninety
(90) days' written notice by the Adviser. This Agreement will be
terminated automatically in the event of its "assignment" (as
defined in he 1940 Act).
12. Amendment
No provision of this Agreement be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no
amendment of this Agreement shall be effective until approved by
an affirmative vote of (i) a majority of the outstanding voting
securities of the Fund, and (ii) a majority of the Directors of
the Company, including a majority of Directors who are not the
Company, including a majority of Directors who are not interested
persons of any party to this Agreement, cast in person at a
meeting called for the purpose of voting on such approval, if such
approval is required by applicable law.
13. Use of Name
It is understood that the name of Munder Capital Management
or any derivative thereof or logo associated with that name is the
valuable property of the Adviser and its affiliates, and that the
Fund has the right to use such name (or derivable or logo) only so
long as this Agreement shall continue with respect to the Fund.
Upon termination of this Agreement, the Fund shall forthwith cease
to use such name (or derivative or logo) and shall promptly amend
its Articles of Incorporation to change its name to comply
herewith.
14. Miscellaneous
(a) This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter
hereof.
(b) Titles or captions of sections contained in this
Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any provisions thereof.
(c) This Agreement may be executed in several
counterparts, all of which together shall for all purposes
constitute one Agreement, binding on all the parties.
(d) This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and interpreted, construed
and enforced in accordance with the laws of the State of Michigan.
(e) If any provisions of this Agreement or the application
thereof to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid or unenforceable to
any extent, the remainder of this Agreement or the application of
such provision to such person circumstance, other than these as to
which it is so determined to be invalid or unenforceable, shall
not be affected thereby, and each provision hereof shall be valid
and shall be enforced to the fullest extent permitted by law.
(f) Notices of any kind to be given to the Adviser by the
Company shall be in writing and shall be duly given if mailed or
delivered to the Adviser at 480 Pierce Street, Birmingham,
Michigan 48009, or at such other address or to such individual as
shall be specified by the Adviser to the Company. Notices of any
kind to be given to the Company by the Adviser shall be in writing
and shall be duly given if mailed or delivered to 480 Piece
Street, Birmingham, Michigan 48009, or at such the address or to
such individual as shall be specified by the Company to the
Adviser.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below on
the day and year first above written.
THE MUNDER FUNDS, INC.
By: /s/ Lee Munder
MUNDER CAPITAL MANAGEMENT
By: /s/ Lisa A. Rosen
- -5-
shared/bankgrp/munder/agreemen/adviosry/inadv.doc
THE MUNDER FUNDS, INC.
480 Pierce Street
Birmingham, Michigan 48009
Funds Distributor, Inc.
One Exchange Place
Boston, Massachusetts 02109
Date: January 13, 1995
Re: Underwriting Agreement
Ladies and Gentlemen:
We are a Maryland Corporation operating as an open-end
management investment company (hereinafter referred to as the
"Company"). As such, the Company is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), and its
shares are registered under the Securities Act of 1933, as amended
(the "1933 Act"). The series of shares of common stock ("Funds")
and the Classes thereof ("Classes") authorized for issuance by the
Company and for sale pursuant to this Agreement are listed in
Appendix "A" hereto, as such Appendix may be amended from time to
time. Each Fund constitutes a distinct and separate investment
portfolio. We desire to offer and sell shares of the Funds (the
"Shares") to the public in accordance with the applicable federal
and state securities laws.
You have informed us that your company is registered as a
broker-dealer under the provisions of the Securities Exchange Act of
1934 and that your company is a member of the National Association
of Securities Dealers, Inc. You have indicated your desire to act
as selling agent and distributor for Shares of each Fund. We have
been authorized to execute and deliver this Agreement to you on
behalf of each Fund by consent of our Directors, given at a meeting
at which a majority of our Directors, including a majority of our
Directors who are not otherwise interested persons of the Company
and who are not interested persons of your company, were present and
voted in favor of the consent approving this Agreement.
1. Appointment of Underwriter. Upon the execution of this
Agreement and in consideration of the agreements on your part herein
expressed and upon the terms and conditions set forth herein, we
hereby appoint you as a non-exclusive sales agent for the Shares of
the Funds and agree that we will deliver such Shares as you may
sell. You agree to use your best efforts to promote the sale of
Shares of the Funds, but are not obligated to sell any specific
number of Shares. Nothing herein shall preclude the Company from
appointing other agents for sales of the Funds' shares.
2. Independent Contractor. You will undertake and
discharge your obligations hereunder as an independent contractor
and shall have no authority or power to obligate or bind us by your
actions, conduct or contracts except that you are authorized to
accept orders for the purchase or repurchase of the Shares as our
agent. You may appoint sub-agents or distribute through dealers
(pursuant to the Master Selling Group Agreement attached hereto as
Exhibit A), your own sales representatives or otherwise as you may
determine from time to time, but this Agreement shall not be
construed as authorizing any dealer or other person to accept orders
for sale or repurchase of Shares of the Funds on our behalf or
otherwise act as our agent for any purpose.
3. Public Offering Price. The Shares of each Class of
Shares of a Fund shall be offered for sale to the public at the
public offering price set forth in the then current prospectus for
the Class of Shares. The public offering price will not be less
than the net asset value of the Shares, and may include a front-end
sales commission equal to a percentage of the net asset value of the
Shares. Shares may also be sold subject to a contingent deferred
sales charge, in such amount and on such terms as set forth in the
then current prospectus for the Class of Shares. On each business
day on which the New York Stock Exchange is open for business, we
will furnish you with the net asset value of the Shares which shall
be determined and become effective as of the close of business on
the New York Stock Exchange on that day, as set forth in the then
current effective Prospectus of each Fund. The net asset value so
determined shall apply to all orders for the purchase of our Shares
received by dealers and you prior to such determination, and you are
authorized as our agent to accept orders and confirm sales at such
net asset value plus your sales commission as applicable, provided
that such dealers notify you of the time when they received the
particular order and that the order is placed with you prior to your
close of business on the day on which the applicable net asset value
is determined. To the extent that the Transfer Agent, or Custodian
for the Funds receives payments on behalf of investors, such Agent
shall be required to record the time of such receipt with respect to
each payment, and the applicable net asset value and public offering
price shall be that which is next determined and effective after the
time of receipt by them. In all events, you shall forthwith notify
all of the dealers comprising your selling group and such Agent of
the effective net asset value as received from us. Should we at any
time calculate the net asset value more frequently than once each
business day, you and we will follow procedures with respect to such
additional price or prices comparable to those set forth above in
this Section 3.
4. Sales Commission and Other Compensation. You shall be
entitled to charge a sales commission on the sale of the Shares of
each Class in the amount set forth in the then current effective
Prospectus for such Class, if any. Such commission (subject to any
quantity or other discounts or eliminations of commission as set
forth in the then current effective Prospectus for the Class of
Shares) shall be an amount mutually agreed upon between us and equal
to the difference between the net asset value and the public
offering price of the Shares, if any. You may allow such
sub-agents or dealers such commissions or discounts, including
payments exceeding the total sales commission, as you shall deem
advisable so long as any such commissions or discounts are set forth
in the then current effective Prospectus of such Class to the extent
required by all applicable securities laws. You may retain a
contingent deferred sales charge, if applicable, from the net asset
value of Shares redeemed by the holders thereof, in the amount and
on the terms set forth in the then current prospectus for the Class
of Shares. You may also receive any amounts authorized for payment
to you under a Fund's service and/or distribution plan.
5. Payment for Shares. At or prior to the time of delivery
of any of the Shares, you will pay or cause to be paid to the Fund's
Custodian, for the applicable Fund's account, an amount in cash
equal to the net asset value of such Shares. In the event that you
pay for Shares sold by you prior to your receipt of payment from
purchasers, you are authorized to reimburse yourself for the net
asset value of such Shares when received by you.
6. Registration of Shares. No Shares of any Fund shall be
registered on the books of such Fund until (i) receipt by us of your
written request therefor; (ii) receipt by the Fund's Transfer Agent
of a certificate signed by an officer of the Company stating the
amount to be received therefor; and (iii) receipt of payment of that
amount by the Fund's Custodian. We will provide for the recording
of all Shares purchased in uncertificated form in "book accounts."
Share certificates will be issued only upon specific request in
writing to the Transfer Agent, in which case certificates for shares
in such names and amounts as are specified in such writing will be
delivered by the Transfer Agent as soon as practicable after their
registration on our books.
7. Purchases for Your Own Account. You shall not purchase
the shares for your own account for purposes of resale to the
public, but you may purchase shares for your own investment account
upon written assurance that the purchase is for investment purposes
only and that the Shares will not be resold except through
redemption by us.
8. Allocation of Expenses.
(a) We will pay the expenses:
(i) Of the preparation of our audited and certified financial
statements to be included in any Amendments ("Amendments") to our
Registration Statement under the 1933 Act, including the Prospectus
and Statement of Additional Information of each of the Funds
included therein;
(ii) Of the preparation, including legal fees and the setting of
type, and of printing all Amendments or supplements to the
Registration Statement filed with the Securities and Exchange
Commission, including the copies of the Funds' Prospectuses and
Statement of Additional Information included in the Amendments or
supplements thereto, other than those necessitated by your
(including your "affiliates") activities or related to your
activities where such Amendments or supplements result in expenses
which we would not otherwise have incurred;
(iii) Of the preparation, printing, and distribution of any reports
or communications to existing shareholders of each Fund, including
Prospectuses and Statements of Additional Information;
(iv) Of filing and other fees to federal, state or other securities
regulatory authorities necessary to register and maintain
registration of the Shares; and
(v) Of the Transfer Agent for the Funds, including all costs and
expenses in connection with the issuance, transfer and registration
of the Shares, including but not limited to any taxes and other
Governmental charges in connection therewith.
(b) You will pay or be responsible for:
(i) The expenses of the preparation, excluding legal fees and the
setting of type, and printing of all Amendments and supplements to
the Funds' Prospectuses and Statement of Additional Information, if
the Amendment or supplement arises from or is necessitated by your
(including your "affiliates") activities or related to your
activities where those expenses would not otherwise have been
incurred by us;
(ii) Of printing additional copies, for use by you as sales
literature, of reports or other communications which we have
prepared for distribution to our existing shareholders; and
(iii) Incurred by you in advertising, promoting and selling the
Shares to the public, including the printing of Prospectuses and
Statements of Additional Information for such use;
9. Furnishing of Information. We will furnish to you such
information with respect to each Fund and its Shares, in such form
and signed by such of our officers as you may reasonably request,
and we warrant that the statements therein contained when so signed
will be true and correct. We will also furnish you with such
information and will take such action as you may reasonably request
in order to qualify the Shares for sale to the public under the
securities laws of jurisdictions in which you may wish to offer
them. We will furnish you at least annually with audited financial
statements of our books and accounts certified by independent public
accountants, and, from time to time, with such additional
information regarding our financial condition as you may reasonably
request.
10. Conduct of Business. Other than the Funds' then current
effective Prospectuses and Statement of Additional Information, you
will not issue any sales material or statements except literature or
advertising which conforms to the requirements of all applicable
securities laws and regulations and which have been filed, where
necessary, with the appropriate regulatory authorities. You will
furnish us with copies of all such material prior to their use and
no such material shall be published if we shall reasonably and
promptly object.
You shall comply with the applicable securities laws and
regulations of the jurisdiction where the Shares are offered for
sale and conduct your affairs with us and with dealers, brokers or
investors in accordance with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
11. Other Activities. Your services pursuant to this
Agreement shall not be deemed to be exclusive, and you may render
similar services and act as an underwriter, distributor or dealer
for other investment companies in the offering of their shares.
12. Term of Agreement. This Agreement shall become
effective on the date of its execution written below and shall
remain in effect for a period of two (2) years from the date of its
execution. This Agreement shall continue thereafter for periods not
exceeding one (1) year if approved at least annually (i) by a vote
of a majority of the outstanding voting securities of each Fund or
by a vote of the Directors of the Company, and (ii) by a vote of a
majority of the Directors of the Company who are not interested
persons or parties to this Agreement (other than as Directors of the
Company), cast in person at a meeting called for the purpose of
voting on such approval.
This Agreement: (i) may at any time be terminated
without the payment of any penalty, either by vote of the Directors
of the Company or by a vote of a majority of the outstanding voting
securities of each Fund with respect to such Fund, on sixty (60)
days' written notice to you; (ii) shall immediately terminate with
respect to all the Funds in the event of its assignment; and (iii)
may be terminated with respect to any Fund by you on sixty (60)
days' written notice to us.
13. Suspension of Sales. We reserve the right at all times
to suspend or limit the public offering of the Shares or any Class
thereof upon written notice to you, and to reject any order for the
purchase of the Shares or any Class thereof in whole or in part.
14. Miscellaneous. This Agreement shall be subject to the
laws of the State of Michigan and shall be interpreted and
construed to further and promote the operation of the Company as an
open-end investment company. As used herein the terms "net asset
value," "offering price," "investment company," "open-end
investment company," "assignment," "principal underwriter,"
"interested person," and "majority of the outstanding voting
securities," shall have the meanings set forth in the 1933 Act and
the 1940 Act and the Rules and Regulations thereunder.
15. Liability. Nothing herein shall be deemed to protect
you against any liability to us or to our securities holders to
which you would otherwise be subject by reason of your willful
misfeasance, bad faith or gross negligence in the performance of
your duties hereunder, or by reason of your reckless disregard of
your obligations and duties hereunder.
16. Indemnification. We agree to indemnify and hold you
harmless from and against any and all losses, claims, damages or
liabilities to which you may become subject under the 1933 Act, the
1940 Act or any state securities statute, and to reimburse you for
any legal or other expenses reasonably incurred by you in
connection with any claim or litigation, whether or not resulting in
any liability, insofar as such losses, claims, damages, liabilities,
or litigation arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission of a material fact
contained in the Registration Statement of the Company, including
any Amendment or supplement thereto (the "Registration Statement");
provided, however, that this indemnity shall not apply to any such
losses, claims, damages, liabilities, or litigation arising out of
or based upon any untrue statement or omission or alleged untrue
statement or omission of a material fact contained in the
Registration Statement, which statement or omission was made in
reliance upon information furnished to us by you for inclusion in
the Registration Statement.
You agree to indemnify and hold us harmless from and against
any and all losses, claims, damage or liabilities to which we may
become subject under the 1933 Act, the 1940 Act or any state
securities statute, and reimburse us for any legal or other expenses
reasonably incurred by us in connection with any claim or
litigation, whether or not resulting in any liability, insofar as
such losses, claims, damages, liabilities, or litigation arise out
of or are based upon (i) any untrue statement or omission or
alleged untrue statement or omission of a material fact contained in
the Registration Statement, which statement or omission was made in
reliance upon information furnished to us by you for inclusion in
the Registration Statement; (ii) any failure to deliver a currently
effective prospectus in connection with the sale of Shares; (iii)
any unauthorized use of sales materials or any verbal or written
misrepresentations or any unlawful sales practices concerning the
Shares by you, your agents, representatives or employees; and (iv)
claims by your agents, representatives or employees for commissions,
service fees, or other compensation or remuneration of any type.
If the foregoing meets with your approval, please acknowledge
your acceptance by signing each of the enclosed counterparts hereof
and returning two such counterparts to us, whereupon this shall
constitute a binding agreement as of the date first above written.
Very truly yours,
The Munder Funds, Inc. on behalf of the Funds set forth in Appendix
A (as may be amended)
By: /s/ Terry H. Gardner
Accepted:
Funds Distributor, Inc.
By: /s/ Joseph F. Tower III
APPENDIX "A"
TO
THE MUNDER FUNDS, INC.
UNDERWRITING AGREEMENT
DATED: January 13, 1995
This Agreement applies to:
1. The Munder Multi-Season Growth Fund
* Class A Shares
* Class B Shares
* Class C Shares
* Class D Shares
2. The Munder Money Market Fund
* Class A Shares
* Class B Shares
* Class C Shares
* Class D Shares
3. The Munder Real Estate Equity Investment Fund
* Class A Shares
* Class B Shares
* Class C Shares
* Class D Shares
Funds Distributor, Inc.
Page 8
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July 20, 1995
Funds Distributor, Inc.
One Exchange Place
Boston, Massachusetts, 02109
Gentlemen:
Reference is made to the Underwriting Agreement between us
dated as of January 13, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice
of the creation of two additional investment portfolios of The
Munder Funds, Inc., The Munder Mid-Cap Growth Fund and The Munder
Value Fund (the "New Portfolios").
We request that you act as Underwriter under the Agreement
with respect to the New Portfolios.
If the foregoing is in accordance with your understanding,
please so indicate by signing and returning to us the enclosed
copy hereof.
Very truly yours,
The Munder Funds, Inc.
By: /s/ Terry H. Gardner
Accepted:
Funds Distributor, Inc.
Date: 8/14/95 By: /s/ Marie Connolly
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May 6, 1996
Funds Distributor, Inc.
One Exchange Place
Boston, Massachusetts, 02109
Gentlemen:
Reference is made to the Underwriting Agreement between us
dated as of January 13, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice
of the creation of an additional investment portfolios of The
Munder Funds, Inc., The Munder International Bond Fund (the "New
Portfolio").
We request that you act as Underwriter under the Agreement
with respect to the New Portfolio.
If the foregoing is in accordance with your understanding,
please so indicate by signing and returning to us the enclosed
copy hereof.
Very truly yours,
The Munder Funds, Inc.
By:/s/ Lisa A. Rosen
Accepted:
Funds Distributor, Inc.
Date: By: /s/ Marie Connolly
shared/bankgrp/munder/bdbook/orgmay96/distnot.doc
G:\SHARED\BANKGRP\MUNDER\AGREEMEN\DISTRIBU\NOTICNP.DOC
CUSTODY AGREEMENT
AGREEMENT dated as of May 1, 1995 between The Munder Funds,
Inc. (the "Company"), a Maryland corporation with its principal
place of business at 480 Pierce Street, Birmingham, MI 48009, on
behalf of The Munder Multi-Season Growth Fund, The Munder Money
Market Fund and The Munder Real Estate Equity Investment Fund
(individually, a "Fund" and collectively, the "Funds"), and
Comerica Bank (the "Custodian"), a Michigan banking corporation
and a wholly-owned subsidiary of Comerica Incorporated, with its
principal place of business at One Detroit Center, 500 Woodward
Avenue, Detroit, Michigan.
W I T N E S S E T H:
That for and in consideration of the mutual promises
hereinafter set forth, the Company and the Custodian agree as
follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this
Agreement, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the Chairman
of the Board of Directors, the President, and any Vice President,
the Secretary, the Treasurer or any other person, whether or not
any such person is an officer or employee of the Company, duly
authorized by the Board of Directors of the Company to give Oral
Instructions and Written Instructions on behalf of a Fund and
listed in the certification annexed hereto as Appendix A or such
other certification as may be received by the Custodian from time
to time.
(b) "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency
securities, its successor or successors and its nominee or
nominees.
(c) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement
to be given to the Custodian, which is actually received by the
Custodian and signed on behalf of the Company by any two
Authorized Persons or any two officers thereof.
(d) "Articles of Incorporation" shall mean the Articles of
Incorporation of the Company filed with the Secretary of State of
the state of Maryland on November 18, 1992, as now in effect and
as the same may be amended from time to time.
(e) "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission under Section 17(a) of the Securities
Exchange Act of 1934, as amended, its successor or successors and
its nominee or nominees, in which the Custodian is hereby
specifically authorized to make deposits. The term "Depository"
shall further mean and include any other person to be named in a
Certificate authorized to act as a depository under the 1940 Act,
its successor or successors and its nominee or nominees.
(f) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest
and principal by the Government of the United States or agencies
or instrumentalities thereof, commercial paper, bank certificates
of deposit, bankers' acceptances and short-term corporate
obligations, where the purchase or sale of such securities
normally requires settlement in federal funds on the same day as
such purchase or sale, and repurchase and reverse repurchase
agreements with respect to any of the foregoing types of
securities.
(g) "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from a person reasonably believed by
the Custodian to be an Authorized Person.
(h) "Prospectus" shall mean a Fund's current prospectus and
statement of additional information relating to the registration
of the Fund's Shares under the Securities Act of 1933, as
amended.
(i) "Shares" refers to the shares of common stock, $.01 par
value per share of a Fund, as may be issued by the Fund from time
to time.
(j) "Security" or "Securities" shall be deemed to include
bonds, debentures, notes, stocks, shares, evidences of
indebtedness, options and other securities, commodity interests
and investments, including currency, from time to time of a Fund,
including futures contracts, forward contracts and options on
futures contracts and forward contracts.
(k) "Transfer Agent" shall mean the person which performs as
the transfer agent, dividend disbursing agent and shareholder
servicing agent functions for the Company.
(l) "Written Instructions" shall mean a written communication
actually received by the Custodian signed by two Authorized
Persons or from two persons reasonably believed by the Custodian
to be Authorized Persons by telex or facsimile machine or any
other such system whereby the receiver of such communication is
able to verify through codes or otherwise with a reasonable
degree of certainty the authenticity of the sender of such
communication; however, "Written Instructions" from the Company's
Administrator, The Shareholder Services Group, Inc., to the
Custodian shall mean an electronic communication transmitted by
fund accountants and their managers (who have been provided an
access code by the Administrator) and actually received by the
Custodian.
(m) The "1940 Act" refers to the Investment Company Act of
1940, and the Rules and Regulations thereunder, all as amended
from time to time.
2. Appointment of Custodian.
(a) The Company hereby constitutes and appoints the Custodian
as custodian of all the Securities and monies at the time owned
by or in the possession of the Funds during the period of this
Agreement.
(b) The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set
forth.
(c) The Custodian understands and acknowledges that the Company
intends to issue Shares of separate series and classes, and may
classify and reclassify Shares of such series and classes. The
Custodian shall identify to each such series or class the
property belonging to such series or class and in such reports,
confirmations and notices to the Company called for under this
Agreement shall identify the series or class to which such
report, confirmation or notice pertains. In the event the
Company establishes one or more portfolios other than the Funds
with respect to which the Company wishes to retain the Custodian
to act as custodian, the Company shall so notify the Custodian in
writing. If the Custodian is willing to render such services,
the Custodian shall notify the Company in writing whereupon each
such portfolio shall be deemed to be a Fund hereunder.
3. Compensation.
(a) The Company will compensate the Custodian for its services
rendered under this Agreement in accordance with the fees set
forth in the Fee Schedule annexed hereto as Schedule A and
incorporated herein.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A of this Agreement a
revised Fee Schedule, dated and signed by an Authorized Officer
or authorized representative of each party hereto.
(c) The Custodian will bill the Company as soon as practicable
after the end of each calendar month, and said billings will be
detailed in accordance with the Fee Schedule for the Company.
The Company will promptly pay to the Custodian the amount of such
billing. The Custodian may charge against any monies held on
behalf of a Fund pursuant to this Agreement such compensation and
any expenses incurred by the Custodian (and reimbursable by the
Fund) in the performance of its duties pursuant to this
Agreement. The Custodian shall also be entitled to charge
against any money held on behalf of a Fund pursuant to this
Agreement the amount of any loss, damage, liability or expense
incurred with respect to the Fund, including reasonable counsel
fees, for which it shall be entitled to reimbursement under the
provisions of this Agreement.
The expenses which the Custodian may charge against such
account include, but are not limited to, the expenses of Sub-
Custodians and foreign branches of the Custodian incurred in
settling transactions outside of Detroit, Michigan or New York
City, New York involving the purchase and sale of Securities.
(d) Each Fund will use reasonable efforts to avoid cash
overdrafts in its account and will provide offsetting balances
with respect to any cash overdrafts that may occur from time to
time.
(e) If in any fiscal year the aggregate expenses of any Fund
(as defined under the securities regulations of any state having
jurisdiction over such Fund) exceed the expense limitations of
any such state, the Company may deduct from the total fees to be
paid with respect to such Fund under this Agreement and under the
Administration Agreement, or the Custodian and the Company's
Administrator together will bear, to the extent required by state
law, that portion of the excess as said total fees with respect
to such Fund bear to the total fees otherwise payable for the
fiscal year by the Company pursuant to the aforesaid Agreements
and the Company's investment advisory agreement with respect to
such Fund. Such deduction or payment, if any, with respect to
the Custodian will be limited to the amount of the fee paid
hereunder for the applicable period with respect to the Fund
involved.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets.
The Company will deliver or cause to be delivered to the
Custodian all Securities and monies owned by the Funds, including
cash received from the issuance of Shares, at any time during the
period of this Agreement. The Custodian will not be responsible
for such Securities and monies until actually received by it.
The Company shall instruct the Custodian from time to time in its
sole discretion, by means of Written Instructions, or, in
connection with the purchase or sale of Money Market Securities,
by means of Oral Instructions or Written Instructions, as to the
manner in which and in what amounts Securities and monies are to
be deposited on behalf of the Funds in the Book-Entry System or a
Depository and specifically allocated on the books of the
Custodian to the Funds; provided, however, that prior to the
initial deposit of Securities of the Funds in the Book-Entry
System or a Depository, including a deposit in connection with
the settlement of a purchase or sale, the Custodian shall have
received a Certificate or Written Instructions specifically
approving such deposits by the Custodian in the Book-Entry System
or a Depository. Securities and monies of the Funds deposited in
the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for
customers, including but not limited to accounts which the
Custodian acts in a fiduciary or representative capacity.
(b) Accounts and Disbursements. The Custodian shall establish
and maintain a separate account for each Fund and shall credit to
the separate account all monies received by it for the account of
the Fund and shall disburse the same only:
1. In payment for Securities purchased for the Fund, as
provided in Section 5 hereof;
2. Pursuant to Written Instructions, for the payment of any
expense or liability incurred by the Fund, including but not
limited to the following payments for the account of the Fund:
interest, taxes, management, accounting, transfer agent and legal
fees and operating expenses of the Fund whether or not such
expenses are, in whole or in part, to be capitalized or treated
as deferred expenses;
3. In payment of dividends or distributions with respect to
the Shares of the Fund, as provided in Section 7 hereof;
4. In payment of original issue or other taxes with respect to
the Shares of the Fund, as provided in Section 8 hereof;
5. In payment for Shares which have been redeemed by the Fund,
as provided in Section 8 hereof;
6. Pursuant to Written Instructions, setting forth the name
and address of the Fund and the person to whom the payment is to
be made, the amount to be paid and the purpose for which payment
is to be made;
7. In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Fund, as
provided in Section 3(a) and Section 11(h) hereof; or
8. To a sub-custodian pursuant to Section 11(f) hereof.
(c) Confirmation and Statements. Promptly after the close of
business on each day, the Custodian shall furnish each Fund with
confirmations and a summary of all transfers to or from the
account of the Fund during said day. Where securities purchased
by the Funds are in a tangible bulk of securities registered in
the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of a Depository or the Book-
Entry System, the Custodian shall by book entry or otherwise
identify the quantity of those securities belonging to the Funds.
At least monthly, the Custodian shall furnish each Fund with a
detailed statement of the Securities and monies held for the Fund
under this Agreement. The Custodian shall also furnish the
Company with such periodic and special reports as the Company may
reasonably request, and such other information as may be agreed
upon from time to time.
(d) Registration of Securities and Physical Separation. All
Securities held for the Funds which are issued or issuable only
in bearer form, except such Securities as are held in the Book-
Entry System, shall be held by the Custodian in that form; all
other Securities held for the Fund may be registered in the name
of the Fund, in the name of any duly appointed registered nominee
of the Custodian as the Custodian may from time to time
determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their nominee or
nominees. The Company reserves the right to instruct the
Custodian as to the method of registration and safekeeping of the
Securities of the Funds. The Company agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry
System or a Depository, any Securities which it may hold for the
account of the Funds and which may from time to time be
registered in the name of the Funds. The Custodian shall hold
all such Securities specifically allocated to a Fund which are
not held in the Book-Entry System or a Depository in a separate
account for the Fund in the name of the Fund physically
segregated at all times from those of any other person or
persons.
(e) Segregated Accounts. Upon receipt of a Written Instruction
the Custodian will establish segregated accounts on behalf of the
Funds to hold liquid or other assets as it shall be directed by a
Written Instruction and shall increase or decrease the assets in
such segregated accounts only as it shall be directed by
subsequent Written Instruction.
(f) Collection of Income and Other Matters Affecting
Securities. Unless otherwise instructed to the contrary by a
Written Instruction, the Custodian by itself, or through the use
of the Book-Entry System or a Depository with respect to
Securities therein deposited, shall with respect to all
Securities held for the Funds in accordance with this Agreement:
1. Collect all income due or payable;
2. Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed or retired, or
otherwise become payable. Notwithstanding the foregoing, the
Custodian shall have no responsibility to a Fund for monitoring
or ascertaining any call, redemption or retirement dates with
respect to put bonds which are owned by a Fund and held by the
Custodian or its nominees. Nor shall the Custodian have any
responsibility or liability to a Fund for any loss by a Fund for
any missed payment or other defaults resulting therefrom; unless
the Custodian received timely notification from the Fund
specifying the time, place and manner for the presentment of any
such put bond owned by a Fund and held by the Custodian or its
nominee. The Custodian shall not be responsible and assumes no
liability to a Fund for the accuracy or completeness of any
notification the Custodian may furnish to a Fund with respect to
put bonds;
3. Surrender Securities in temporary form for definitive
Securities;
4. Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect;
5. Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the
account of the Funds all rights and similar Securities issued
with respect to any Securities held by the Custodian hereunder
for the Funds;
6. Transmit promptly to the Company any proxy statement, proxy
materials, notice of a call or conversion or similar
communication received by it as Custodian; and
7. Receive and hold for the account of each Fund all
securities received as a distribution on the Fund's portfolio of
securities as a result of a stock dividend, share split-up or
reorganization, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities
issued with respect to any portfolio securities belonging to the
Fund.
(g) Delivery of Securities and Evidence of Authority. Upon
receipt of Written Instructions and not otherwise, except for
subparagraphs 5, 6, and 7 of this section 4(g) which may be
effected by Oral or Written Instructions, the Custodian, directly
or through the use of the Book-Entry System or a Depository,
shall:
1. Execute and deliver or cause to be executed and delivered
to such persons as may be designated in such Written
Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of a Fund as owner of any
Securities may be exercised;
2. Deliver or cause to be delivered any Securities held for a
Fund in exchange for other Securities or cash issued or paid in
connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege;
3. Deliver or cause to be delivered any Securities held for a
Fund to any protective committee, reorganization committee or
other person in connection with the reorganization, refinancing,
merger, consolidation or recapitalization or sale of assets of
any corporation, and receive and hold under the terms of this
Agreement in the separate account for the Fund certificates of
deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of a Fund
and take such other steps as shall be stated in Written
Instructions to be for the purpose of effecting any duly
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
5. Deliver Securities owned by a Fund upon sale of such
Securities for the account of the Fund pursuant to Section 5;
6. Deliver Securities owned by a Fund upon the receipt of
payment in connection with any repurchase agreement related to
such Securities entered into by the Fund;
7. Deliver Securities owned by a Fund to the issuer thereof,
or its agent, for transfer into the name of the Fund or into the
name of any nominee or nominees of the Custodian or into the name
or nominee name of any agent appointed pursuant to Section 10(f)
or into the name or nominee name of any sub-custodian appointed
pursuant to Section 10(e); or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided, however, that
in any such case, the new Securities are to be delivered to the
Custodian;
8. Deliver Securities owned by a Fund to the broker for
examination in accordance with "street delivery" custom;
9. Deliver Securities owned by a Fund in accordance with the
provisions of any agreement among the Fund, the Custodian and any
broker-dealer or any similar organization or organizations
relating to compliance with the rules of any options clearing
entity or securities or commodities exchange, regarding escrow or
other arrangements in connection with transactions by the Fund;
10. Deliver Securities owned by a Fund in accordance with the
provisions of any agreement among the Fund, the Custodian, and a
futures commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
11. Deliver Securities owned by a Fund for delivery in
connection with any loans of securities made by the Fund but only
against receipt of adequate collateral as agreed upon from time
to time by the Custodian and the Fund which may be in the form of
cash or obligations issued by the United States government, its
agencies or instrumentalities;
12. Deliver Securities owned by a Fund for delivery as security
in connection with any borrowings by the Fund requiring a pledge
of Fund assets, but only against receipt of amounts borrowed;
13. Deliver Securities owned by a Fund upon receipt of Written
Instructions from the Fund for delivery to the Transfer Agent or
to the holders of Shares in connection with distributions in
kind, as may be described from time to time in the Fund's
Prospectus, in satisfaction of requests by holders of Shares for
repurchase or redemption;
14. Deliver Securities as collateral in connection with short
sales of securities by a Fund;
15. Deliver Securities for any purpose expressly permitted by
and in accordance with procedures described in a Fund's
Prospectus or resolution adopted by its Board of Directors signed
by an Authorized Person and certified by the Secretary of the
Company; and
16. Deliver Securities owned by a Fund for any other proper
business purpose, but only upon receipt of, in addition to
Written Instructions, a certified copy of a resolution of the
Board of Directors signed by an Authorized Person and certified
by the Secretary of the Company, specifying the Securities to be
delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper business
purpose, and naming the person or persons to whom delivery of
such Securities shall be made.
(h) Endorsement and Collection of Checks, Etc. The Custodian
is hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received by the Custodian
for the account of a Fund; provided, however, that the Custodian
shall not be liable pursuant to this Agreement for any money,
whether or not represented by check, draft, or other instrument
for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money
directly or by the final crediting of the account representing
the Fund's interest in the Book-Entry System or the Depository.
5. Purchase and Sale of Investments of a Fund.
(a) Promptly after each purchase of Securities for a Fund, the
Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities,
Written Instructions and (ii) with respect to each purchase of
Money Market Securities, either Written Instructions or Oral
Instructions, in either case specifying with respect to each
purchase: (1) the name of the issuer and the title of the
Securities; (2) the number of shares or the principal amount
purchased and accrued interest, if any; (3) the date of purchase
and settlement; (4) the purchase price per unit; (5) the total
amount payable upon such purchase; (6) the name of the person
from whom or the broker through whom the purchase was made, if
any; (7) whether or not such purchase is to be settled through
the Book-Entry System or a Depository; and (8) whether the
Securities purchased are to be deposited in the Book-Entry System
or a Depository. The Custodian shall receive the Securities
purchased by or for the Fund and upon receipt of Securities or,
as appropriate, a copy of the broker's or dealer's confirmation
or payee's invoice, shall pay out of the monies held for the
account of the Fund the total amount payable upon such purchase,
provided that the same conforms to the total amount payable as
set forth in such Written or Oral Instructions.
(b) Promptly after each sale of Securities of a Fund, the Fund
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, Written
Instructions, and (ii) with respect to each sale of Money Market
Securities, either Written Instructions or Oral Instructions, in
either case specifying with respect to such sale: (1) the name
of the issuer and the title of the Securities; (2) the number of
shares or principal amount sold, and accrued interest, if any;
(3) the date of sale; (4) the sale price per unit; (5) the total
amount payable to the Fund upon such sale; (6) the name of the
broker through whom or the person to whom the sale was made; and
(7) whether or not such sale is to be settled through the Book-
Entry System or a Depository. The Custodian shall deliver or
cause to be delivered the Securities to the broker or other
person designated by the Fund upon receipt of the total amount
payable to the Fund upon such sale, provided that the same
conforms to the total amount payable to the Fund as set forth in
such Written or Oral Instructions. Subject to the foregoing, the
Custodian may accept payment in such form as shall be
satisfactory to it, and is customary among dealers in Securities,
and may deliver Securities and arrange for payment in accordance
with the customs prevailing among dealers in Securities.
6. Lending of Securities.
(a) If the Company is permitted by the terms of its Articles of
Incorporation and, as disclosed in its Prospectus to lend
Securities, within 24 hours after each loan of Securities, a
Fund, shall deliver to the Custodian Written Instructions
specifying with respect to each such loan: (i) the name of the
issuer and the title of the Securities; (ii) the number of shares
or the principal amount loaned; (iii) the date of loan and
delivery; (iv) the total amount to be delivered to the Custodian
and specifically allocated against the loan of the Securities,
including the amount of cash collateral and the premium, if any,
separately identified; (v) the name of the broker, dealer or
financial institution to which the loan was made; and
(vi) whether the Securities loaned are to be delivered through
the Book-Entry System or a Depository.
(b) Promptly after each termination of a loan of Securities, a
Fund shall deliver to the Custodian Written Instructions
specifying with respect to each such loan termination and return
of Securities: (i) the name of the issuer and the title of the
Securities to be returned; (ii) the number of shares or the
principal amount to be returned; (iii) the date of termination;
(iv) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting
credits as described in said Written Instructions); (v) the name
of the broker, dealer or financial institution from which the
Securities will be returned; and (vi) whether such return is to
be effected through the Book-Entry System or a Depository. The
Custodian shall receive all Securities returned from the broker,
dealer or financial institution to which such Securities were
loaned and upon receipt thereof shall pay the total amount
payable upon such return of Securities as set forth in the
Written Instructions. Securities returned to the Custodian shall
be held as they were prior to such loan.
7. Payment of Dividends or Distributions.
(a) The Company shall furnish to the Custodian Written
Instructions (i) authorizing the declaration of dividends or
distributions with respect to a Fund on a specified periodic
basis and specifying the date of the declaration of such dividend
or distribution, the date of payment thereof, the record date as
of which shareholders entitled to payment shall be determined,
and the total amount payable to the Transfer Agent on the payment
date, or (ii) setting forth the date of declaration of any
distribution by the Fund, the date of payment thereof, the record
date as of which shareholders entitled to payment shall be
determined, and the total amount payable to the Transfer Agent on
the payment date.
(b) Upon the payment date specified in such Written
Instructions, the Custodian shall pay to the Transfer Agent out
of monies specifically allocated to and held for the account of a
Fund the total amount payable to the Transfer Agent. In lieu of
paying the Transfer Agent cash dividends and distributions, the
Custodian may arrange for the direct payment of cash dividends
and distributions to Shareholders by the Custodian in accordance
with such procedures and controls as are mutually agreed upon
from time to time by and among the Company, the Custodian and the
Transfer Agent.
8. Sale and Redemption of Shares of the Company.
(a) Whenever a Fund shall sell any Shares, the Fund shall
deliver or cause to be delivered to the Custodian Written
Instructions duly specifying:
1. The number of Shares sold, trade date, and price; and
2. The amount of money to be received by the Custodian for the
sale of such Shares.
The Custodian understands and agrees that Written
Instructions may be furnished subsequent to the purchase of
Shares of the Fund and that the information contained therein
will be derived from the sales of Shares as reported to the Fund
by the Transfer Agent.
(b) Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account of the
Fund.
(c) Upon issuance of any Shares in accordance with the
foregoing provisions of this Section 8, the Custodian shall pay
all original issue or other taxes required to be paid in
connection with such issuance upon the receipt of Written
Instructions specifying the amount to be paid.
(d) Except as provided hereafter, whenever any Shares are
redeemed, the Fund shall cause the Transfer Agent to promptly
furnish to the Custodian Written Instructions, specifying:
1. The number of Shares redeemed; and
2. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information
contained in such Written Instructions will be derived from the
redemption of Shares as reported to the Fund by the Transfer
Agent.
(e) Upon receipt from the Transfer Agent of advice setting
forth the number of Shares received by the Transfer Agent for
redemption and that such Shares are valid and in good form for
redemption, the Custodian shall make payment to the Transfer
Agent of the total amount specified in Written Instructions
issued pursuant to paragraph (d) of this Section 8. In lieu of
paying the Transfer Agent said redemption proceeds as stated, the
Custodian may arrange for the direct payment of said proceeds to
Shareholders by the Custodian in accordance with such procedures
and controls as are mutually agreed upon from time to time by and
among the Company, the Custodian and the Transfer Agent.
(f) Notwithstanding the above provisions regarding the
redemption of Shares, whenever such Shares are redeemed pursuant
to any check redemption privilege which may from time to time be
offered by the Fund, the Custodian, unless otherwise instructed
by Written Instructions, shall honor the check presented as part
of such check redemption privilege out of the monies specifically
allocated to the Fund in such advice for such purpose.
9. Indebtedness.
(a) The Company will cause to be delivered to the Custodian by
any bank (excluding the Custodian) from which a Fund borrows
money, a notice or undertaking in the form currently employed by
any such bank setting forth the amount which such bank will loan
to the Fund and the amount of collateral, if any, required for
such loan. The Company shall promptly deliver to the Custodian
Written Instructions stating with respect to each such borrowing:
(i) the name of the bank; (ii) the amount and terms of the
borrowing, which may be set forth by incorporating by reference
an attached promissory note, duly endorsed by the Fund, or other
loan agreement or evidence of indebtedness; (iii) the time and
date, if known, on which the loan is to be entered into (the
"Borrowing Date"); (iv) the date on which the loan becomes due
and payable; (v) the total amount payable to the Fund on the
Borrowing Date; (vi) the market value of Securities, if any, to
be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal
or other amount of any particular Securities; (vii) whether the
Custodian is to deliver such collateral through the Book-Entry
System or a Depository; and (viii) a statement that such loan is
in conformance with the 1940 Act and the Fund's Prospectus.
(b) Upon receipt of the Written Instructions referred to in
subparagraph (a) above, the Custodian shall deliver on the
Borrowing Date the specified collateral (if any) against delivery
by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as
set forth in the Written Instructions. The Custodian may, at the
option of the lending bank (unless the lending bank has not been
appointed a custodian or sub-custodian of the Fund's assets, in
which case the Custodian must), keep any such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note
or loan agreement. The Custodian shall deliver as additional
collateral in the same manner as directed by the Fund from time
to time such Securities specifically allocated to such Fund as
may be specified in Written Instructions to collateralize further
any transaction described in this Section 9. The Fund shall
cause all Securities released from collateral status to be
returned directly to the Custodian, and the Custodian shall
receive from time to time such return of collateral as may be
tendered to it. In the event that the Company fails to specify
in Written Instructions all of the information required by this
Section 9, the Custodian shall not be under any obligation to
deliver any Securities. Collateral returned to the Custodian
shall be held hereunder as it was prior to being used as
collateral.
10. Persons Having Access to Assets of the Fund.
(a) No Director, officer, employee or agent of the Company, and
no officer, director, employee or agent of a Fund's investment
advisers, or any sub-investment adviser of a Fund, or of a Fund's
administrator, shall have physical access to the assets of the
Fund held by the Custodian or be authorized or permitted to
withdraw any investments of the Fund, nor shall the Custodian
deliver any assets of the Fund to any such person. No officer,
director, employee or agent of the Custodian who holds any
similar position with a Fund's investment advisers, with any sub-
investment adviser of a Fund or with a Fund's administrator shall
have access to the assets of the Fund.
(b) The individual employees of the Custodian duly authorized
by the Board of Directors of the Custodian to have access to the
assets of the Funds are listed in the certification annexed
hereto as Appendix C. The Custodian shall advise the Funds of
any change in the individuals authorized to have access to the
assets of the Fund by written notice to the Fund accompanied by a
certified copy of the authorizing resolution of the Custodian's
Board of Directors approving such change.
(c) Nothing in this Section 10 shall prohibit any officer,
employee or agent of the Company, or any officer, director,
employee or agent of the investment advisers, of any sub-
investment adviser of the Funds or of the Funds' administrator,
from giving Oral Instructions or Written Instructions to the
Custodian or executing a Certificate so long as it does not
result in delivery of or access to assets of a Fund prohibited by
paragraph (a) of this Section 10.
11. Concerning the Custodian.
(a) Standard of Conduct. In the performance of its duties
hereunder, the Custodian shall be obligated to exercise care and
diligence and to act in good faith and to use its best efforts
within reasonable limits to insure the accuracy and completeness
of all services under this Agreement. Except as otherwise
provided herein, neither the Custodian nor its nominee shall be
liable for any loss or damage, including counsel fees, resulting
from its action or omission to act or otherwise, except for any
such loss or damage arising out of its negligence, misfeasance or
willful misconduct or that of its employees or agents. The
Custodian may, with respect to questions of law, apply for and
obtain the advice and opinion of counsel to the Company or of its
own counsel, at the expense of the Company, and shall be fully
protected with respect to anything done or omitted by it in good
faith in conformity with such advice or opinion. The Custodian
shall be liable to the Funds for any loss or damage resulting
from the use of the Book-Entry System or a Depository arising by
reason of any negligence, misfeasance or willful misconduct on
the part of the Custodian or any of its employees or agents.
(b) Limit of Duties. Without limiting the generality of the
foregoing, the Custodian shall be under no duty or obligation to
inquire into, and shall not be liable for:
1. The validity of the issue of any Securities purchased by
the Funds, the legality of the purchase thereof, or the propriety
of the amount paid therefor;
2. The legality of the sale of any Securities by the Funds or
the propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any
distribution of any Fund; or
6. The legality of any borrowing.
(c) No Liability Until Receipt. The Custodian shall not be
liable for, or considered to be the Custodian of, any money,
whether or not represented by any check, draft, or other
instrument for the payment of money, received by it on behalf of
a Fund until the Custodian actually receives and collects such
money directly or by the final crediting of the account
representing the Fund's interest in the Book-Entry System or a
Depository.
(d) Amounts Due from Transfer Agent. The Custodian shall not
be under any duty or obligation to take action to effect
collection of any amount due to the Funds from the Transfer Agent
nor to take any action to effect payment or distribution by the
Transfer Agent of any amount paid by the Custodian to the
Transfer Agent in accordance with this Agreement.
(e) Collection Where Payment Refused. The Custodian shall not
be under any duty or obligation to take action to effect
collection of any amount, if the Securities upon which such
amount is payable are in default, or if payment is refused after
due demand or presentation, unless and until (i) it shall be
directed to take such action by a Certificate and (ii) it shall
be assured to its satisfaction of reimbursement of its costs and
expenses in connection with any such action. The Custodian shall
give the Funds prompt notice of each such event.
(f) Appointment of Sub-Custodians. In connection with its
duties under this Agreement, the Custodian may, at its own
expense, enter into sub-custodian agreements with other domestic
banks or trust companies for the receipt of certain securities
and cash to be held by the Custodian for the accounts of the
Funds pursuant to this Agreement; provided that each such bank or
trust company complies with all relevant provisions of the 1940
Act, applicable state securities laws and the rules and
regulations thereunder. The Custodian shall remain responsible
for the performance of all of its duties under this Agreement and
shall hold the Company harmless from the acts and omissions,
under the standards of care provided for herein, of any domestic
bank or trust company that it might choose pursuant to this
Section. The parties hereto acknowledge that they intend to
enter into a Sub-Custodian Agreement with Boston Safe Deposit and
Trust Company or another institution agreeable to them providing
for the custody of certain Securities outside the United States
in accordance with Rule 17f-5 under the 1940 Act.
(g) No Duty to Ascertain Authority. The Custodian shall not be
under any duty or obligation to ascertain whether any Securities
at any time delivered to or held by it for the Fund are such as
may properly be held by the Fund under the provisions of the
Articles of Incorporation and the Prospectus.
(h) Reliance on Certificates and Instructions. The Custodian
shall be entitled to rely upon any Certificate, notice or other
instrument in writing received by the Custodian and reasonably
believed by the Custodian to be genuine and to be signed by two
officers of the Company or Authorized Persons. The Custodian
shall be entitled to rely upon any Written or Oral Instructions
actually received by the Custodian pursuant to the applicable
Sections of this Agreement and reasonably believed by the
Custodian to be genuine and to be given by an Authorized Person
in the case of Oral Instructions or two Authorized Persons in the
case of Written Instructions. The Company agrees to forward to
the Custodian Written Instructions from two Authorized Persons
confirming such Oral Instructions in such manner so that such
Written Instructions are received by the Custodian, whether by
hand delivery, telex or otherwise, by the close of business on
the same day that such Oral Instructions are given to the
Custodian. The Company agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way
affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Company. The Company
agrees that the Custodian shall incur no liability to the Company
in acting upon Oral Instructions given to the Custodian hereunder
concerning such transactions provided such instructions
reasonably appear to have been received from a duly Authorized
Person.
(i) Books and Records. The books and records pertaining to the
Company which are now or hereafter in the possession of the
Custodian shall be the property of the Company. Such books and
records shall be prepared and maintained as required by the 1940
Act and other applicable securities laws and regulations and
shall, to the extent practicable, be maintained separately for
each Fund of the Company. The Company, the Company's authorized
representatives and auditors shall have access to such books and
records at all times during the Custodian's normal business
hours. Upon the reasonable request of the Company, copies of any
such books and records shall be provided by the Custodian to the
Company or the Company's authorized representatives at the
Company's expense.
The Custodian shall provide the Company with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System or a Depository and with such
reports on its own systems of internal accounting control in
accordance with the requirements of the 1940 Act and as the
Company may reasonably request from time to time.
(j) Cooperation with Accountants. The Custodian shall
cooperate with the Company's independent public accountants and
shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary
information is made available to such accountants for the
expression of their opinions, as such may be required from time
to time by the Company.
(k) Compliance with Governmental Rules and Regulations. The
Custodian shall comply with all applicable requirements of the
federal securities and commodities laws, and any other laws,
rules and regulations of governmental authorities having
jurisdiction with respect to the duties to be performed by the
Custodian hereunder. Except as specifically set forth herein,
the Custodian assumes no responsibility for such compliance by
the Company.
12. Term and Termination.
(a) This Agreement shall become effective on the date first set
forth above (the "Effective Date") and shall continue in effect
thereafter until terminated pursuant to paragraph (b) of this
Section 12.
(b) Either of the parties hereto may terminate this Agreement
at any time by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than 60 days after the date of receipt of such notice. In the
event such notice is given by the Company, it shall be
accompanied by a certified resolution of the Board of Directors
of the Company, electing to terminate this Agreement and
designating a successor custodian or custodians, which shall be a
person qualified to so act under the 1940 Act.
In the event such notice is given by the Custodian, the
Company shall, on or before the termination date, deliver to the
Custodian a certified resolution of the Board of Directors of the
Company, designating a successor custodian or custodians. In the
absence of such designation by the Company, the Custodian may
designate a successor custodian, which shall be a person
qualified to so act under the 1940 Act. If the Company fails to
designate a successor custodian, the Company shall upon the date
specified in the notice of termination of this Agreement and upon
the delivery by the Custodian of all Securities (other than
Securities held in the Book-Entry System and other securities
held in uncertificated form which cannot be delivered to the
Company) and monies then owned by the Company, be deemed to be
its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book-Entry
System and other uncertificated securities which cannot be
delivered to the Company.
(c) Upon the date set forth in such notice under paragraph (b)
of this Section 12, this Agreement shall terminate to the extent
specified in such notice, and the Custodian shall upon receipt of
a notice of acceptance by the successor custodian deliver
directly to the successor custodian on that date all Securities
and monies then held by the Custodian on behalf of the Company,
after deducting all fees, expenses and other amounts the payment
or reimbursement of which it shall then be entitled.
13. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by
two of the present officers of the Company setting forth the
names and the signatures of the present Authorized Persons. The
Company agrees to furnish to the Custodian a new certification in
similar form in the event that any such present Authorized Person
ceases to be such an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until
such new certification shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Authorized
Persons as set forth in the last delivered certification.
(b) Annexed hereto as Appendix B is a certification signed by
the present officers of the Company setting forth the names and
the signatures of the three present officers of the Company. The
Company agrees to furnish to the Custodian a new certification in
similar form in the event any such present officer ceases to be
an officer of the Company or in the event that other or
additional officers are elected or appointed. Until such new
certification shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement upon
the signature of the officers as set forth in the last delivered
certification.
(c) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at 411 West Lafayette, 2nd Floor
MasterTrust Mail Code 3438, Detroit, Michigan 48226, Attn: Julie
Elya or at such other place as the Custodian may from time to
time designate in writing.
(d) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Company, shall be
sufficiently given if addressed to the Company and mailed or
delivered to Lee P. Munder, President, The Munder Funds, Inc.,
480 Pierce Street, Suite 300, Birmingham, Michigan 48009, or to
such other place as the Company may from time to time designate
in writing.
(e) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the
same formality as this Agreement, (i) authorized and approved by
a resolution of the Board of Directors of the Company, including
a majority of the members of the Board of Directors of the
Company who are not "interested persons" of the Company (as
defined in the 1940 Act), or (ii) authorized and approved by such
other procedures as may be permitted or required by the 1940 Act.
(f) This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
the Company without the written consent of the Custodian, or by
the Custodian without the written consent of the Company
authorized or approved by a resolution of the Board of Directors
of the Company, and any attempted assignment without such written
consent shall be null and void.
(g) This Agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts.
(h) The captions of the Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
(i) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective representatives
duly authorized as of the day and year first above written.
THE MUNDER FUNDS, INC.
By: /s/ Terry H. Gardner
Name:
Title: Vice President & Chief Financial Officer
COMERICA BANK
By: /s/
Name:
Title:
SCHEDULE A
Annual fee
Computed daily and payable monthly based on the aggregate average
daily net assets of the Ambassador Funds, the St. Clair Funds,
Inc. and The Munder Funds, Inc.
First $100 million of net assets .03%
Next $500 million of net assets .02%
Over $600 million of net assets .01%
Transaction Charges
DTC Trades $2.00 per trade
Fed Book Entry Trade $12.00 per trade
U.S. Physical Trade $25.00 per trade
APPENDIX A
I, Patricia L. Bickimer, Secretary of The Munder Funds,
Inc., a Maryland corporation (the "Company") do hereby certify
that:
The individuals shown on Exhibit A attached hereto have
been duly authorized as Authorized Persons to give Oral
Instructions and Written Instructions on behalf of the Company
and the signatures set forth opposite their respective names are
their true and correct signatures.
THE MUNDER FUNDS, INC.
/s/ Patricia L. Bickimer
Patricia L. Bickimer, Secretary
APPENDIX B
I, Patricia L. Bickimer, Secretary of The Munder Funds,
Inc., a Maryland corporation (the "Company"), do hereby certify
that:
The following individuals serve in the following positions
with the Company and each individual has been duly elected or
appointed to each such position and qualified therefor in
conformity with the Company's Articles of Incorporation and the
signatures set forth opposite their respective names are their
true and correct signatures:
Name Position Signature
Charles W. Elliott Chairman of the Board /s/ Charles W.
Elliott
of Directors
Lee P. Munder President /s/ Lee P. Munder
Terry H. Gardner Vice President and /s/ Terry H. Gardner
Treasurer
Paul Tobias Vice President /s/ Paul Tobias
Richard H. Rose Assistant Treasurer /s/ Richard H. Rose
Patricia L. Bickimer Secretary /s/ Patricia L. Bickimer
Lisa Anne Rosen Assistant Secretary /s/ Lisa Anne Rosen
APPENDIX C - INDIVIDUALS WITH ACCESS
I, _________________________, Secretary of Comerica Bank, a
Michigan banking corporation (the "Custodian"), do hereby certify
that:
The following named individuals have been duly authorized
by the Executive Committee of the Board of Directors of the
Custodian to have access to the assets of The Munder Funds, Inc.,
a Maryland corporation, held by the Custodian in its capacity as
such:
COMERICA BANK
/s/_____________________
Secretary
Exhibit A
Name Signature
Kristopher Belken /s/ Kristopher Belkin
Kim Cabot /s/ Kim Cabot
Kristine Cinquegrana /s/ Kristine
Cinquegrana
Jack Hathaway /s/ Jack Hathaway
Kyle Moran /s/ Kyle Moran
Josephine Ortigissen /s/ Josephine
Ortigissen
Barbara Panzino /s/ Barbara Panzino
[ ] ________________________________
[ ] ________________________________
[ ] ________________________________
[ ] ________________________________
[ ] ________________________________
- - 1 -
munder/agree/custody/CUST.DOC
July 20, 1995
Comerica Bank
One Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226
Gentlemen:
Reference is made to the Custody Agreement between us dated
as of May 1, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice
of the creation of two additional investment portfolios of The
Munder Funds, Inc., The Munder Mid-Cap Growth Fund and The Munder
Value Fund (the "New Portfolios").
We request that you act as Custodian under the Agreement
with respect to the New Portfolios.
If the foregoing is in accordance with your understanding,
please so indicate by signing and returning to us the enclosed
copy hereof.
Very truly yours,
The Munder Funds, Inc.
By: /s/ Lisa A. Rosen
Accepted:
Comerica Bank
Date: By:/s/
G:\SHARED\BANKGRP\MUNDER\AGREEMEN\CUSTODY\NOTICNP.DOC 1
G:\SHARED\BANKGRP\MUNDER\AGREEMEN\CUSTODY\NOTICNP.DOC
May 6, 1996
Comerica Bank
One Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226
Gentlemen:
Reference is made to the Custody Agreement between us dated
as of May 1, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice
of the creation of an additional investment portfolio of The
Munder Funds, Inc., The Munder International Bond Fund (the "New
Portfolio").
We request that you act as Custodian under the Agreement
with respect to the New Portfolio.
If the foregoing is in accordance with your understanding,
please so indicate by signing and returning to us the enclosed
copy hereof.
Very truly yours,
The Munder Funds, Inc.
By:/s/ Lisa A. Rosen
Accepted:
Comerica Bank
Date: By: /s/
shared/bankgrp/munder/bdbook/orgmay96/custnote.doc
G:\SHARED\BANKGRP\MUNDER\AGREEMEN\CUSTODY\NOTICNP.DOC
TRANSFER AGENCY AND REGISTRAR AGREEMENT
AGREEMENT, dated as of June 19, 1995, between THE MUNDER
FUNDS, INC. (the "Fund"), a Maryland corporation having its
offices at 480 Pierce Street, Suite 300, Birmingham, Michigan
48009, and THE SHAREHOLDER SERVICES GROUP, INC. (MA) (the
"Transfer Agent"), a Massachusetts corporation with principal
offices at One Exchange Place, 53 State Street, Boston,
Massachusetts 02109.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in
separate series, with each such series representing interests
in a separate portfolio of securities and other assets;
WHEREAS, the Fund initially intends to offer shares in
those Portfolios identified in the attached Exhibit 1, each
such Portfolio, together with all other Portfolios subsequently
established by the Fund shall be subject to this Agreement in
accordance with Section 17;
WHEREAS, the Fund on behalf of the Portfolios, desires to
appoint the Transfer Agent as its transfer agent, dividend
disbursing agent and agent in connection with certain other
activities and the Transfer Agent desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants
and promises hereinafter set forth, the Fund and the Transfer
Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise
requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the
Articles of Incorporation, Declaration of Trust, Partnership
Agreement, or similar organizational document as the case may
be, of the Fund as the same may be amended from time to time.
(b) "Authorized Person" shall be deemed to
include any person, whether or not such person is an officer or
employee of the Fund, duly authorized to give Oral Instructions
or Written Instructions on behalf of the Fund as indicated in a
certificate furnished to the Transfer Agent pursuant to Section
4(c) hereof as may be received by the Transfer Agent from time
to time.
(c) "Board of Directors" shall mean the Board of
Directors, Board of Trustees or, if the Fund is a limited
partnership, the General Partner(s) of the Fund, as the case
may be.
(d) "Commission" shall mean the Securities and
Exchange Commission.
(e) "Custodian" refers to any custodian or
subcustodian of securities and other property which the Fund
may from time to time deposit, or cause to be deposited or held
under the name or account of such a custodian pursuant to a
Custodian Agreement.
(f) "Fund" shall mean the entity executing this
Agreement, and each Portfolio listed on Exhibit 1 or hereafter
created and made subject to this Agreement in accordance with
Section 17.
(g) "1940 Act" shall mean the Investment Company
Act of 1940.
(h) "Oral Instructions" shall mean instructions,
other than Written Instructions, actually received by the
Transfer Agent from a person reasonably believed by the
Transfer Agent to be an Authorized Person.
(i) "Prospectus" shall mean the most recently
dated Fund Prospectuses and Statements of Additional
Information, including any supplements thereto if any, which
have become effective under the Securities Act of 1933 and the
1940 Act.
(j) "Shares" refers collectively to such shares
of capital stock, beneficial interest or limited partnership
interests, as the case may be, of the Fund as may be issued
from time to time and, if the Fund is a closed-end or a series
fund, as such terms are used in the 1940 Act any other classes
or series of stock, shares of beneficial interest or limited
partnership interests that may be issued from time to time.
(k) "Shareholder" shall mean a holder of shares
of capital stock, beneficial interest or any other class or
series, and also refers to partners of limited partnerships.
(l) "Written Instructions" shall mean a written
communication signed by a person reasonably believed by the
Transfer Agent to be an Authorized Person and actually received
by the Transfer Agent. Written Instructions shall include
manually executed originals and authorized electronic
transmissions, including telefacsimile of a manually executed
original or other process.
2. Appointment of the Transfer Agent. The Fund hereby
appoints and constitutes the Transfer Agent as transfer agent,
registrar and dividend disbursing agent for Shares of the Fund
and as shareholder servicing agent for the Fund. The Transfer
Agent accepts such appointments and agrees to perform the
duties hereinafter set forth.
3. Compensation.
(a) The Fund will compensate or cause the
Transfer Agent to be compensated for the performance of its
obligations hereunder in accordance with the fees set forth in
the written schedule of fees annexed hereto as Schedule A and
incorporated herein. The Transfer Agent will transmit an
invoice to the Fund as soon as practicable after the end of
each calendar month which will be detailed in accordance with
Schedule A, and the Fund will pay to the Transfer Agent the
amount of such invoice within fifteen (15) days after the
Fund's receipt of the Invoice.
In addition, the Fund agrees to pay, and will be
billed separately for, out-of-pocket expenses incurred by the
Transfer Agent in the performance of its duties hereunder.
Out-of-pocket expenses shall include, but shall not be limited
to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule B and
incorporated herein. Schedule B may be modified by the Transfer
Agent upon mutual consent of the parties hereto. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket
expenses reasonably incurred by the Transfer Agent in the
performance of its obligations hereunder. Reimbursement by the
Fund for expenses incurred by the Transfer Agent in any month
shall be made as soon as practicable but no later than 15 days
after the receipt of an itemized bill from the Transfer Agent.
(b) Any compensation agreed to hereunder may be
adjusted from time to time by attaching to Schedule A, a
revised fee schedule executed and dated by the parties hereto.
4. Documents. In connection with the appointment of
the Transfer Agent the Fund shall deliver or caused to be
delivered to the Transfer Agent the following documents on or
before the date this Agreement goes into effect, but in any
case within a reasonable period of time for the Transfer Agent
to prepare to perform its duties hereunder:
(a) If applicable, specimens of the certificates for Shares
of the Fund;
(b) All account application forms and other documents
relating to Shareholder accounts or to any plan, program or
service offered by the Fund;
(c) A signature card bearing the signatures of any officer of
the Fund or other Authorized Person who will sign Written
Instructions or is authorized to give Oral Instructions;
(d) A certified copy of the Articles of Incorporation, as
amended;
(e) A certified copy of the By-laws of the Fund, as amended;
(f) A copy of the resolution of the Board of Directors
authorizing the execution and delivery of this Agreement;
(g) A certified list of Shareholders of the Fund with the
name, address and taxpayer identification number of each
Shareholder, and the number of Shares of the Fund held by each,
certificate numbers and denominations (if any certificates have
been issued), lists of any accounts against which stop transfer
orders have been placed, together with the reasons therefor,
and the number of Shares redeemed by the Fund; and
(h) An opinion of counsel for the Fund with respect to the
validity of the Shares and the status of such Shares under the
Securities Act of 1933, as amended.
5. Further Documentation. The Fund will also furnish
the Transfer Agent with copies of the following documents
promptly after the same shall become available:
(a) each resolution of the Board of Directors
authorizing the issuance of Shares;
(b) any registration statements filed on behalf
of the Fund and all pre-effective and post-effective amendments
thereto filed with the Commission;
(c) a certified copy of each amendment to the
Articles of Incorporation or the By-laws of the Fund;
(d) certified copies of each resolution of the
Board of Directors or other authorization designating
Authorized Persons; and
(e) such other certificates, documents or
opinions as the Transfer Agent may reasonably request in
connection with the performance of its duties hereunder.
6. Representations of the Fund. The Fund represents
to the Transfer Agent that all outstanding Shares are validly
issued, fully paid and non-assessable. When Shares are
hereafter issued in accordance with the terms of the Fund's
Articles of Incorporation and its Prospectus, such Shares shall
be validly issued, fully paid and non-assessable.
7. Distributions Payable in Shares. In the event that
the Board of Directors of the Fund shall declare a distribution
payable in Shares, the Fund shall deliver or cause to be
delivered to the Transfer Agent written notice of such
declaration signed on behalf of the Fund by an officer thereof,
upon which the Transfer Agent shall be entitled to rely for all
purposes, certifying (i) the identity of the Shares involved,
(ii) the number of Shares involved, and (iii) that all
appropriate action has been taken.
8. Duties of the Transfer Agent. The Transfer Agent
shall be responsible for administering and/or performing those
functions typically performed by a transfer agent; for acting
as service agent in connection with dividend and distribution
functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination
with the Custodian) of Shares in accordance with the terms of
the Prospectus, applicable law and this Agreement including
without limitation, those duties specified in Schedule C
attached hereto. In addition, the Fund shall deliver to the
Transfer Agent all notices issued by the Fund with respect to
the Shares in accordance with and pursuant to the Articles of
Incorporation or By-laws of the Fund or as required by law and
shall perform such other specific duties as are set forth in
the Articles of Incorporation including the giving of notice of
any special or annual meetings of shareholders and any other
notices required thereby.
9. Record Keeping and Other Information. The Transfer
Agent shall create and maintain all records required of it
pursuant to its duties hereunder and as set forth in Schedule C
in accordance with all applicable laws, rules and regulations,
including records required by Section 31(a) of the 1940 Act.
All such records shall be the property of the Fund and shall be
available during regular business hours for inspection, copying
and use by the Fund. Where applicable, such records shall be
maintained by the Transfer Agent for the periods and in the
places required by Rule 31a-2 under the 1940 Act. Upon
termination of this Agreement, the Transfer Agent shall deliver
all such records to the Company or such person as the Company
may designate.
Upon reasonable notice by the Fund, the Transfer Agent
shall make available during regular business hours such of its
facilities and premises employed in connection with the
performance of its duties under this Agreement for reasonable
visitation by the Fund, or any person retained by the Fund as
may be necessary for the Fund to evaluate the quality of the
services performed by the Transfer Agent pursuant hereto.
10. Other Duties. In addition to the duties set forth
in Schedule C, the Transfer Agent shall perform such other
duties and functions, and shall be paid such amounts therefor,
as may from time to time be agreed upon in writing between the
Fund and the Transfer Agent. The compensation for such other
duties and functions shall be reflected in a written amendment
to Schedule A or B and the duties and functions shall be
reflected in an amendment to Schedule C, both dated and signed
by authorized persons of the parties hereto.
11. Reliance by Transfer Agent; Instructions.
(a) Provided the standard of care in Section 13
has been met, the Transfer Agent will have no liability when
acting upon Written or Oral Instructions believed to have been
executed or orally communicated by an Authorized Person and
will not be held to have any notice of any change of authority
of any person until receipt of a Written Instruction thereof
from the Fund pursuant to Section 4(c). Provided the standard
of care in Section 13 has been met, the Transfer Agent will
also have no liability when processing Share certificates which
it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper
countersignature of the Transfer Agent.
(b) At any time, the Transfer Agent may apply to
any Authorized Person of the Fund for Written Instructions and
may seek advice from legal counsel for the Fund, or its own
legal counsel, with respect to any matter arising in connection
with this Agreement, and provided the standard of care in
Section 13 has been met, it shall not be liable for any action
taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or in accordance with
the opinion of counsel for the Fund or for the Transfer Agent.
Written Instructions requested by the Transfer Agent will be
provided by the Fund within a reasonable period of time. In
addition, the Transfer Agent, its officers, agents or
employees, shall accept Oral Instructions or Written
Instructions given to them by any person representing or acting
on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions
shall be followed within one business day by confirming Written
Instructions, and that the Fund's failure to so confirm shall
not impair in any respect the Transfer Agent's right to rely on
Oral Instructions. The Transfer Agent shall have no duty or
obligation to inquire into, nor shall the Transfer Agent be
responsible for, the legality of any act done by it upon the
request or direction of a person reasonably believed by the
Transfer Agent to be an Authorized Person.
(c) Notwithstanding any of the foregoing
provisions of this Agreement, the Transfer Agent shall be under
no duty or obligation to inquire into, and shall not be liable
for: (i) the legality of the issuance or sale of any Shares or
the sufficiency of the amount to be received therefor; (ii) the
legality of the redemption of any Shares, or the propriety of
the amount to be paid therefor; (iii) the legality of the
declaration of any dividend by the Board of Directors, or the
legality of the issuance of any Shares in payment of any
dividend; or (iv) the legality of any recapitalization or
readjustment of the Shares.
12. Acts of God, etc. The Transfer Agent will not be
liable or responsible for delays or errors by acts of God or by
reason of circumstances beyond its control, including acts of
civil or military authority, national emergencies, labor
difficulties, mechanical breakdown, insurrection, war, riots,
or failure or unavailability of transportation, communication
or power supply, fire, flood or other catastrophe.
In the event of equipment failures beyond the Transfer
Agent's control, the Transfer Agent shall, at no additional
expense to the Fund, take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
The foregoing obligation shall not extend to computer terminals
located outside of premises maintained by the Transfer Agent.
The Transfer Agent shall enter into and shall maintain in
effect with appropriate parties one or more agreements making
reasonable provision for emergency use of electronic data
processing equipment to the extent appropriate equipment is
available.
13. Duty of Care and Indemnification. The Transfer
Agent shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within
commercially reasonable limits to insure the accuracy and
completeness of all services performed under this Agreement.
The Fund will indemnify the Transfer Agent against and hold it
harmless from any and all losses, claims, damages, liabilities
or expenses of any sort or kind (including reasonable counsel
fees and expenses) resulting from any claim, demand, action or
suit or other proceeding (a "Claim") arising directly or
indirectly from any action or thing which the Transfer Agent
takes or does or omits to take or do (i) at the request or on
the direction of or in reliance on the advice of the Fund; (ii)
upon Oral or Written Instructions; (iii) in reliance on any
records or documents received from the Fund or any Agent of the
Fund, including the prior transfer agent; (iv) under the terms
of this Agreement; and (v) the offer or sale of Shares in
violation of any requirement under Federal or State Securities
Laws, provided that neither the Transfer Agent nor any of its
nominees or sub-contractors shall be indemnified against any
liability to the Fund or to its Shareholders (or any expenses
incident to such liability) arising out of the Transfer Agent's
or such nominee's or such sub-contractor's own willful
misfeasance, bad faith or negligence or reckless disregard of
its duties in connection with the performance of its duties and
obligations specifically described in this Agreement.
In any case in which the Fund may be asked to indemnify
or hold the Transfer Agent harmless, the Fund shall be advised
of all pertinent facts concerning the situation in question.
The Transfer Agent will notify the Fund promptly after
identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Fund
although the failure to do so shall not prevent recovery by the
Transfer Agent except and to the extent the Fund has been
prejudiced thereby. The Fund shall have the option to defend
the Transfer Agent against any Claim which may be the subject
of this indemnification, and, in the event that the Fund so
elects, such defense shall be conducted by counsel chosen by
the Fund and reasonably satisfactory to the Transfer Agent, and
thereupon the Fund shall take over complete defense of the
Claim and the Transfer Agent shall sustain no further legal or
other expenses in respect of such Claim. The Transfer Agent
will not confess any Claim or make any compromise in any case
in which the Fund will be asked to provide indemnification,
except with the Fund's prior written consent. The obligations
of the parties hereto under this Section shall survive the
termination of this Agreement.
14. Consequential Damages. In no event and under no
circumstances shall either party under this Agreement be liable
to the other party for consequential or indirect loss of
profits, reputation or business or any other special damages
under any provision of this Agreement or for any act or failure
to act hereunder.
15. Term and Termination.
(a) This Agreement shall be effective as of the
dates first written above with respect to the Fund's respective
series and shall continue until June 15, 1996 except as
provided in subparagraph (b) of this Section and except that
the Fund may terminate this Agreement if the Transfer Agent
breaches its duty of care set forth in Section 13 and such
breach is not cured within ninety (90) days after written
notice of the breach has been received by the Transfer Agent
from the Fund. After June 15, 1996, this Agreement shall
continue indefinitely until terminated by either party, with or
without cause, upon written notice to the other party given at
least ninety (90) days prior to such date, except that the
Agreement may be terminated at any time as provided in
subparagraph (b) of this Section.
(b) The Transfer Agent represents that it is
currently registered with the appropriate Federal agency for
the registration of Transfer Agents, and that it will remain so
registered for the duration of this Agreement. The Transfer
Agent agrees that it will promptly notify the Fund in the event
of any material change in its status as a registered Transfer
Agent. Should the Transfer Agent fail to be registered with the
appropriate Federal agency as a Transfer Agent at any time
during this Agreement, the Fund may, on written notice to the
Transfer Agent, immediately terminate this Agreement.
(c) Upon termination of this Agreement and
(unless this Agreement is terminated pursuant to subparagraph
(b) of this Section 15, or unless the Transfer Agent has
breached the standard of care in Section 13 and such breach is
incurred on the date notice of termination is given) at the
expense of the Fund, the Transfer Agent will deliver to such
successor a certified list of shareholders of the Fund (with
names and addresses), and all other relevant books, records,
correspondence and other Fund records or data in the possession
of the Transfer Agent, and the Transfer Agent will cooperate
with the Fund and any successor transfer agent or agents in the
substitution process.
16. Confidentiality. Both parties hereto agree that
any non public information obtained hereunder concerning the
other party is confidential and may not be disclosed to any
other person without the consent of the other party, except as
may be required by applicable law or at the request of the
Commission or other governmental agency. The Transfer Agent
agrees that it shall not use any non-public information for any
purpose other than performance of its duties or obligations
hereunder. The obligations of the parties under this Section
shall survive the termination of this Agreement. The parties
further agree that a breach of this Section would irreparably
damage the other party and accordingly agree that each of them
is entitled, without bond or other security, to an injunction
or injunctions to prevent breaches of this provision. Without
limiting the foregoing, the Transfer Agent agrees on behalf of
itself and its nominees, sub-contractors and employees to treat
confidentially all records and other information relative to
the Fund and its prior, present or potential Shareholders.
17. Additional Portfolios. In the event that the Fund
establishes one or more Portfolios in addition to those
identified in Exhibit 1, with respect to which the Fund desires
to have the Transfer Agent render services as transfer agent
under the terms hereof, the Fund shall so notify the Transfer
Agent in writing, and if the Transfer Agent agrees in writing
to provide such services, Exhibit 1 shall be amended to include
such additional Portfolios.
18. Amendment. This Agreement may only be amended or
modified by a written instrument executed by both parties.
19. Subcontracting. On thirty (30) days prior written
notice to the Fund, the Transfer Agent may assign its rights
and delegate its duties hereunder to any wholly-owned direct or
indirect subsidiary of First Data Corporation provided that (i)
the delegate agrees with the Transfer Agent to comply with all
relevant provisions of the 1940 Act; (ii) the Transfer Agent
and such delegate shall promptly provide such information as
the Fund may request, and respond to such question as the
Company may ask, relative to the delegation, including (without
limitation) the capabilities of the delegate; (iii) the
delegation of such duties shall not relieve the Transfer Agent
of any of its duties hereunder;
20. Miscellaneous.
(a) Notices. Any notice or other instrument
authorized or required by this Agreement to be given in writing
to the Fund or the Transfer Agent, shall be sufficiently given
if addressed to that party and received by it at its office set
forth below or at such other place as it may from time to time
designate in writing.
To the Fund:
Lee P. Munder
President, The Munder Funds
480 Pierce Street - Suite 300
Birmingham, Michigan 48009
To the Transfer Agent:
The Shareholder Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President
with a copy to: TSSG General Counsel (same address)
(b) Successors. This Agreement shall extend to
and shall be binding upon the parties hereto, and their
respective successors.
(c) Governing Law. This Agreement shall be
governed exclusively by the laws of the Commonwealth of
Massachusetts without reference to the choice of law provisions
thereof.
(d) Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to
be an original; but such counterparts shall, together,
constitute only one instrument.
(e) Captions. The captions of this Agreement are
included for convenience of reference only and in no way define
or delimit any of the provisions hereof or otherwise affect
their construction or effect.
(f) Use of Transfer Agent's Name. The Fund shall
not use the name of the Transfer Agent in any Prospectus,
Statement of Additional Information, shareholders' report,
sales literature or other material relating to the Fund in a
manner not approved prior thereto in writing; provided, that
the Transfer Agent need only receive notice of all reasonable
uses of its name which merely refer in accurate terms to its
appointment and services hereunder or which are required by any
Government agency or applicable law or rule.
(g) Use of Fund's Name. The Transfer Agent shall
not use the name of the Fund or material relating to the Fund
on any documents or forms for other than internal use in a
manner not approved prior thereto in writing; provided, that
the Fund need only receive notice of all reasonable uses of its
name which merely refer in accurate terms to the appointment of
the Transfer Agent or which are required by any government
agency or applicable law or rule.
(h) Independent Contractors. The parties agree
that they are independent contractors and not partners or
co-venturers.
(i) Entire Agreement; Severability. This
Agreement and the Schedules attached hereto constitute the
entire agreement of the parties hereto relating to the matters
covered hereby and supersede any previous agreements. If any
provision is held to be illegal, unenforceable or invalid for
any reason, the remaining provisions shall not be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
THE MUNDER FUNDS, INC.:
By: /s/ Terry H. Gardner
Title: Vice President &Chief Financial Officer
THE SHAREHOLDER SERVICES GROUP, INC.:
By: /s/Jack Kutner
Title: Executive Vice President
Exhibit 1
LIST OF PORTFOLIOS
dated as of August 10, 1995
The Munder Multi-Season Growth Fund
The Munder Money Market Fund
The Munder Real Estate Equity Investment Fund
The Munder Value Fund
The Munder Mid-Cap Growth Fun
Schedule A
TRANSFER AGENT FEES
1) Asset
Based
Charge:
Based on the total net assets of the
companies (as defined below*)
First $2.8 billion of net assets @
2.0 basis points
Next $2.2 billion of aggregate net
assets @ 1.5 basis points
Over $5 billion of aggregate net
assets @ 1.0 basis points
Other
Fees:
IRA accounts will be charged $10.00
per annum
NSCC Transaction Charge is $.15 per
financial transaction
2) One-
Time
Conversion
Fee:
The conversion expenses are estimated
at $150,000 of which Transfer Agent
will absorb 50%
3) System
Development:
Client defined system enhancements
will be agreed upon by Transfer Agent
and Munder Capital and billed at a
rate of $100.00 per hour
* Companies shall include the Munder Fund Trust, the Munder
Funds, Inc. (and any other investment companies advised by
Munder Capital Management).
Fees will be re-evaluated at first anniversary date.
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for
applicable out-of-pocket expenses, including, but not limited
to the following items:
* Microfiche/microfilm production
* Magnetic media tapes and freight
* Printing costs, including certificates, envelopes, checks
and stationery
* Postage (bulk, pre-sort, ZIP+4, barcoding, first class)
direct pass through to the Fund
* Due diligence mailings
* Telephone and telecommunication costs, including all
lease, maintenance and line costs
* Ad hoc reports
* Proxy solicitations, mailings and tabulations
* Daily & Distribution advice mailings
* Shipping, Certified and Overnight mail and insurance
* Year-end form production and mailings
* Terminals, communication lines, printers and other
equipment specifically required by the Fund
* Duplicating services
* Courier services
* Incoming and outgoing wire charges
* Overtime, as approved by the Fund
* Temporary staff, as approved by the Fund
* Travel and entertainment, as approved by the Fund
* Federal Reserve charges for check clearance
* Record retention, retrieval and destruction costs
* Third party audit reviews
* Customized systems development after the conversion at
the rate of $100.00 per hour
* Insurance
* Such other miscellaneous expenses reasonably incurred by
the Transfer Agent in performing its duties and
responsibilities under this Agreement as approved by the Fund
The Fund agrees that postage and mailing expenses will be
paid on the day of or prior to mailing as agreed with the
Transfer Agent. In addition, the Fund will promptly reimburse
the Transfer Agent for any other unscheduled expenses incurred
by the Transfer Agent whenever the Fund and the Transfer Agent
mutually agree that such expenses are not otherwise properly
borne by the Transfer Agent as part of its duties and
obligations under the Agreement.
Schedule C
DUTIES OF THE TRANSFER AGENT
1. Shareholder Information. The Transfer Agent or
its agent shall maintain a record of the number of Shares held
by each holder of record which shall include name, address,
taxpayer identification and which shall indicate whether such
Shares are held in certificates or uncertificated form, and if
in certificated form shall include certificate numbers and
denominations; historical information regarding the account of
each Shareholder, including dividends and distributions paid
and the date and price for all transactions on a Shareholder's
account; any stop or restraining order placed against
Shareholder's account; any correspondence relating to the
current maintenance of a Shareholder's account; information
with respect to withholdings; and, any information required in
order for the Transfer Agent to perform any calculations
contemplated or required by its Agreement with the Fund. The
Transfer Agent shall keep a record of all redemption checks and
dividend checks returned by postal authorities, and shall
maintain such records as are required for the Fund to comply
with the escheat laws of any State or other authority; shall
keep a record of all redemption checks and dividend checks
returned by the postal authorities for the period of time they
are the Transfer Agent of record and for any records provided
by and receipt acknowledged by both parties from any prior
Transfer Agent by means of a records certification letter;
otherwise the Transfer Agent is not responsible for the said
records. The Transfer Agent shall maintain such records as are
required for The Fund to comply with the escheat laws of any
state or other authority for the period they are Transfer
Agent. The Fund will be responsible for notifying and
instructing the Transfer Agent to commence the escheatment
process on their behalf, for any or all states.
2. Shareholder Services. The Transfer Agent or its
agent will investigate all inquiries from Shareholders of the
Fund relating to Shareholder accounts and will respond to all
communications from Shareholders and others relating to its
duties hereunder and such other correspondence as may from time
to time be mutually agreed upon between the Transfer Agent and
the Fund.
3. Share Certificates.
(a) At the expense of the Fund, it shall supply
the Transfer Agent or its agent with an adequate supply of
blank share certificates to meet the Transfer Agent or its
agent's requirements therefor. Such Share certificates shall be
properly signed by facsimile. The Fund agrees that,
notwithstanding the death, resignation, or removal of any
officer of the Fund whose signature appears on such
certificates, the Transfer Agent or its agent may continue to
countersign certificates which bear such signatures until
otherwise directed by Written Instructions.
(b) The Transfer Agent or its agent shall issue
replacement Share certificates in lieu of certificates which
have been lost, stolen or destroyed, upon receipt by the
Transfer Agent or its agent of properly executed affidavits and
lost certificate bonds, in form satisfactory to the Transfer
Agent or its agent, with the Fund and the Transfer Agent or its
agent as obligees under the bond.
(c) The Transfer Agent or its agent shall also
maintain a record of each certificate issued and/or canceled
the number of Shares represented thereby and the holder of
record. With respect to Shares held in open accounts or
uncertificated form, i.e., no certificate being issued with
respect thereto, the Transfer Agent or its agent shall maintain
comparable records of the record holders thereof, including
their names, addresses and taxpayer identification. The
Transfer Agent or its agent shall further maintain a stop
transfer record on lost and/or replaced certificates.
4. Mailing Communications to Shareholders; Proxy
Materials. The Transfer Agent or its agent will address and
mail to Shareholders of the Fund, all communicators by the Fund
to such Shareholders, including without limitation,
confirmations of purchases and sales of Company shares, monthly
statements, all reports to Shareholders, dividend and
distribution notices and proxy material for the Fund's meetings
of Shareholders. In connection with meetings of Shareholders,
the Transfer Agent or its Agent will prepare Shareholder lists,
mail and certify as to the mailing of proxy materials, process
and tabulate returned proxy cards, report on proxies voted
prior to meetings, act as inspector of election at meetings and
certify Shares voted at meetings.
5. Sales of Shares.
(a) Issuance of Shares. Upon receipt of a
purchase order from or on behalf of an investor for the
purchase of Shares and sufficient information to enable the
Transfer Agent to establish a Shareholder account (if it is a
new account) and to determine which class of Shares the
investor wishes to purchase, and after confirmation of receipt
of payment in the form described in the Prospectus for the
class of Shares involved, the Transfer Agent shall issue and
credit the account of the investor or other record holder with
Shares in the manner described in the Prospectus relating to
such Shares and shall prepare and mail the appropriate
confirmation in accordance with legal requirements.
(b) Suspension of Sale of Shares. The Transfer
Agent or its agent shall not be required to issue any Shares of
the Fund where it has received a Written Instruction from the
Fund or official notice from any appropriate authority that the
sale of the Shares of the Fund has been suspended or
discontinued. The existence of such Written Instructions or
such official notice shall be conclusive evidence of the right
of the Transfer Agent or its agent to rely on such Written
Instructions or official notice.
(c) Returned Checks. In the event that any check
or other order for the payment of money is returned unpaid for
any reason, the Transfer Agent or its agent will: (i) give
prompt notice of such return to the Fund or its designee; (ii)
place a stop transfer order against all Shares issued as a
result of such check or order; and (iii) take such actions as
the Transfer Agent may from time to time deem appropriate.
6. Transfer and Redemption.
(a) Requirements for Transfer or Redemption of
Shares. The Transfer Agent or its agent shall process all
requests to transfer or repurchase Shares in accordance with
the transfer or redemption procedures set forth in the Fund's
Prospectus.
The Transfer Agent or its agent will transfer or
redeem Shares upon receipt of Oral or Written Instructions or
otherwise pursuant to the Prospectus and Share certificates, if
any, properly endorsed for transfer or redemption, accompanied
by such documents as the Transfer Agent or its agent reasonably
may deem necessary.
The Transfer Agent or its agent reserves the right
to refuse to transfer or redeem Shares until it is satisfied
that the endorsement on the instructions is valid and genuine.
The Transfer Agent or its agent also reserves the right to
refuse to transfer or redeem Shares until it is satisfied that
the requested transfer or redemption is legally authorized, and
it shall incur no liability for the refusal, in good faith, to
make transfers or redemptions which the Transfer Agent or its
agent, in its good judgment, deems improper or unauthorized, or
until it is reasonably satisfied that there is no basis to any
claims adverse to such transfer or redemption.
(b) Notice to Custodian and Fund. When Shares
are redeemed, the Transfer Agent shall, upon receipt of the
instructions and documents in proper form, deliver to the
Fund's Custodian and to the Fund or its designee a notification
setting forth the number of Shares to be redeemed. Such
redeemed Shares shall be reflected on appropriate accounts
maintained by the Transfer Agent reflecting outstanding Shares
of the Fund involved and Shares attributed to individual
accounts.
(c) Payment of Redemption Proceeds. The Transfer
Agent shall, upon receipt of the moneys paid to it by the
Custodian for the redemption of Shares, pay such moneys as are
received from the Custodian, all in accordance with the
procedures described in the Written Instruction received by the
Transfer Agent from the Fund. It is understood that the
Transfer Agent may arrange for the direct payment of redemption
proceeds to Shareholders by the Fund's Custodian in accordance
with such procedures and controls as are mutually agreed upon
from time to time by the Fund, the Transfer Agent and the
Fund's Custodian.
The Transfer Agent shall not process or effect any
redemption with respect to Shares of the Fund after receipt by
the Transfer Agent of notification of the suspension of the
determination of the net asset value of the Fund, provided the
Transfer Agent has had a reasonable time to act on such
notification.
7. Dividends.
(a) Notice to Agent and Custodian. Upon the
declaration of each dividend and each capital gains
distribution by the Board of Directors of the Fund with respect
to Shares of the Fund, the Fund shall furnish or cause to be
furnished to the Transfer Agent or its agent a copy of a
resolution of the Fund's Board of Directors certified by the
Secretary of the Fund setting forth the date of the declaration
of such dividend or distribution, the ex-dividend date, the
date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the
amount payable per Share to the shareholders of record as of
that date, the total amount payable to the Transfer Agent or
its agent on the payment date and whether such dividend or
distribution is to be paid in Shares of such class at net asset
value.
On or before the payment date specified in
such resolution of the Board of Directors, the Custodian of the
Fund will pay to the Transfer Agent sufficient cash to make
payment to the shareholders of record as of such payment date.
After deducting any amount required to be withheld
by any applicable tax laws, rules and/or regulations and/or
other applicable laws, the Transfer Agent shall in accordance
with the instructions in proper form from a Shareholder and the
provisions of the applicable dividend resolutions and
Prospectus issue and credit the Account of the Shareholder with
Shares, or, if the Shareholder so elects, pay such dividends or
distributions in cash.
In lieu of receiving from the Fund's Custodian and
paying to Shareholders cash dividends or distributions, the
Transfer Agent may arrange for the direct payment of cash
dividends and distributions to Shareholders by the Fund's
Custodian, in accordance with such procedures and controls as
are mutually agreed upon from time to time by and among the
Fund, the Transfer Agent and the Fund's Custodian.
The Transfer Agent shall prepare, file with the
Internal Revenue Services and other appropriate taxing
authorities, and address and mail to Shareholders such returns,
forms and information relating to dividends and distributions
paid by the Fund as are required to be so prepared, filed and
mailed by applicable laws, rules and/or resolutions. On behalf
of the Fund, the Transfer Agent shall mail certain requests for
Shareholders' certifications under penalties of perjury and pay
on a timely basis to the appropriate Federal authorities any
taxes to be withheld on dividends and distributions paid by the
Fund, all as required by applicable Federal tax laws and
regulations.
(b) Insufficient Funds for Payments. If the
Transfer Agent or its agent does not receive sufficient cash
from the Custodian to make total dividend and/or distribution
payments to all shareholders of the Fund as of the record date,
the Transfer Agent or its agent will, upon notifying the Fund,
withhold payment to all Shareholders of record as of the record
date until sufficient cash is provided to the Transfer Agent or
its agent.
8. Cooperation with Accountants. The Transfer
Agent shall cooperate with the Fund's independent public
accountants and shall take all reasonable action in the
performance of its obligations under its agreement with the
Fund to assure that the necessary information is made available
to such accountants for the expression of their opinions as
such as may be required by the Fund from time to time.
9. Other Services. In accordance with the
Prospectus and such procedures and controls as are mutually
agreed upon from time to time by and among the Fund, the
Transfer Agent and the Fund's Custodian, the Transfer Agent
shall (a) arrange for issuance of Shares obtained through (i)
transfers of funds from Shareholders' accounts at financial
institutions, (ii) a pre-authorized check plan, if any and
(iii) a right of accumulation, if any; (b) arrange for the
exchange of Shares for shares of such other funds designated by
the Fund from time to time; and (c) arrange for systematic
withdrawals from the account of a Shareholder participating in
a systematic withdrawal plan, if any.
Exhibit 1 to Schedule C
SUMMARY OF SERVICES
The services to be performed by the Transfer Agent or its
agent shall include the following:
A. DAILY RECORDS
Maintain daily the following information with
respect to each Shareholder account as received:
* Name and Address (Zip Code)
* Class of Shares
* Taxpayer Identification Number
* Balance of Shares held by Agent
* Beneficial owner code: i.e., male, female, joint tenant,
etc.
* Dividend code (reinvestment)
* Number of Shares held in certificate form
B. OTHER DAILY ACTIVITY
* Answer written inquiries relating to Shareholder accounts
(matters relating to portfolio management, distribution of
Shares and other management policy questions will be referred
to the Fund).
* Process additional payments into established Shareholder
accounts in accordance with Written Instruction.
* Upon receipt of proper instructions and all required
documentation, process requests for repurchase of Shares.
* Identify redemption requests made with respect to
accounts in which Shares have been purchased within an
agreed-upon period of time for determining whether good funds
have been collected with respect to such purchase and process
as agreed by the Transfer Agent in accordance with Written
Instructions set forth by the Fund.
* Examine and process all transfers of Shares, ensuring
that all transfer requirements and legal documents have been
supplied.
* Issue and mail replacement checks.
* Open new accounts and maintain records of exchanges
between accounts.
* Furnish daily requests of transactions in Shares.
* Calculate sales load or compensation payment (front-end
and deferred) and provide such information to the Fund, if any.
* Calculate dealer commissions for the Fund, if any.
* Provide toll-free lines for direct Shareholder use, plus
customer liaison staff with on-line inquiry capacity.
* Mail duplicate confirmations to dealers of their client's
activity, whether executed through the dealer or directly with
the Transfer Agent, if any.
* Identify to each series or class of Shares property
belonging to such series or class, and in such reports,
confirmations and notices to the Fund called for under this
Agreement identify the series or class to which such report,
confirmation or notice pertains.
C. DIVIDEND ACTIVITY
* Calculate and process Share dividends and distributions
as instructed by the Fund.
* Compute, prepare and mail all necessary reports to
Shareholders or various authorities as requested by the Fund.
Report to the Fund reinvestment plan share purchases and
determination of the reinvestment price.
D. MEETINGS OF SHAREHOLDERS
* Cause to be mailed proxy and related material for all
meetings of Shareholders. Tabulate returned proxies (proxies
must be adaptable to mechanical equipment of the Transfer Agent
or its agents) and supply daily reports when sufficient proxies
have been received.
* Prepare and submit to the Fund an Affidavit of Mailing.
* At the time of the meeting, furnish a certified list of
Shareholders, hard copy, microfilm or microfiche and, if
requested by the Fund, Inspection of Election.
E. PERIODIC ACTIVITIES
* Cause to be mailed reports, Prospectuses, and any other
enclosures requested by the Fund (material must be adaptable to
mechanical equipment of Transfer Agent or its agents).
* Receive all notices issued by the Fund with respect to
the Shares in accordance with and pursuant to the Articles of
Incorporation and By-Laws and perform such other specific
duties as are set forth in the Articles of Incorporation and
By-Laws including a giving of notice of a special meeting and
notice of redemption in the circumstances and otherwise in
accordance with all relevant provisions of the Articles of
Incorporation and By-Laws.
* Furnish monthly reports of transactions in shares by type
(custodial, trust, Keogh, IRA, other) including numbers of
accounts.
* Furnish state-by-state registration and sales reports to
the Administrator.
* Provide detail for underwriter or broker confirmations
and other participating dealer Shareholder accounting, in
accordance with such procedures as may be agreed upon between
the Fund and the Transfer Agent, if any.
* Provide Shareholder lists and statistical information
concerning accounts to the Fund.
* Provide timely notification of Company activity and such
other information as may be agreed upon from time to time
between the Transfer Agent and the Custodian, to the Fund or
the Custodian.
10
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July 20, 1995
The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts, 02109
Gentlemen:
Reference is made to the Transfer Agency and Registrar
Agreement between us dated as of June 19, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice
of the creation of two additional investment portfolios of The
Munder Funds, Inc., The Munder Mid-Cap Growth Fund and The Munder
Value Fund (the "New Portfolios").
We request that you act as Transfer Agent under the
Agreement with respect to the New Portfolios.
If the foregoing is in accordance with your understanding,
please so indicate by signing and returning to us the enclosed
copy hereof.
Very truly yours,
The Munder Funds, Inc.
By:
Accepted:
The Shareholder Services Group, Inc.
Date: By:
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May 6, 1996
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts, 02109
Gentlemen:
Reference is made to the Transfer Agency and Registrar
Agreement between us dated as of June 19, 1995 (the
"Agreement").
Pursuant to the Agreement, this letter is to provide
notice of the creation of an additional investment portfolio of
The Munder Funds, Inc., The Munder International Bond Fund (the
"New Portfolio").
We request that you act as Transfer Agent under the
Agreement with respect to the New Portfolio.
If the foregoing is in accordance with your
understanding, please so indicate by signing and returning to
us the enclosed copy hereof.
Very truly yours,
The Munder Funds, Inc.
By: /s/ Lisa A. Rosen
Accepted:
First Data Investor Services Group,
Inc.
Date: By: /s/
shared/bankgrp/munder/bdbook/orgmay96/tanotic.doc
G:\SHARED\BANKGRP\MUNDER\AGREEMEN\CUSTODY\NOTICNP.DOC
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made as of May 1, 1995 by
and between THE SHAREHOLDER SERVICES GROUP, INC., a Massachusetts
corporation ("TSSG"), and THE MUNDER FUNDS, INC., a Maryland
corporation (the "Company").
WHEREAS, the Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company desires to retain TSSG to render
certain administrative services to The Munder Multi-Season Growth
Fund, The Munder Money Market Fund and The Munder Real Estate
Equity Investment Fund (each, a "Fund" and collectively, the
"Funds") of the Company and TSSG is willing to render such
services;
WITNESSETH:
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between the parties
hereto as follows:
1. Appointment. The Company hereby appoints TSSG to act
as Administrator of the Company on the terms set forth in this
Agreement. TSSG accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided for
in the Fee Schedule.
In the event that the Company establishes one or more
portfolios other than the Funds with respect to which the Company
decides to retain TSSG to act as administrator and accounting
services provider, the Company shall so notify TSSG in writing.
If TSSG is willing to render such services, TSSG shall notify the
Company in writing whereupon such portfolio shall be deemed to be
a Fund hereunder. Without limiting the foregoing, it is
understood that the Company will from time to time issue separate
series or classes of shares and may classify and reclassify shares
of any such series or class. TSSG shall identify to each such
series or class property belonging to such series or class and in
such reports, confirmations and notices to the Company called for
under this Agreement shall identify the series or class to which
such report, confirmation or notice pertains.
2. Delivery of Documents. The Company has furnished TSSG
with copies properly certified or authenticated of each of the
following:
(a) Resolutions of the Company's Board of Directors
authorizing the appointment of TSSG to provide administrative
services to the Company and approving this Agreement;
(b) The Company's Articles of Incorporation filed
with the Secretary of State of the state of Maryland on November
18, 1992 and all amendments thereto (the "Charter");
(c) The Company's By-Laws and all amendments thereto
(the "By-Laws");
(d) The Investment Advisory Agreement between Munder
Capital Management (the "Adviser") and the Company dated January
31, 1995, as amended;
(e) The Custody Agreement between Comerica Bank (the
"Custodian") and the Company dated May 1, 1995 (the "Custody
Agreement");
(f) The Transfer Agency and Registrar Agreement
between The Shareholder Services Group, Inc. (the "Transfer
Agent") and the Company dated June 19, 1995;
(g) The Company's Registration Statement on Form N-
1A (the "Registration Statement") under the Securities Act of 1933
and under the 1940 Act (File Nos. 33-54748 and 811-7348) as filed
with the Securities and Exchange Commission ("SEC") on February
28, 1995, relating to the Company's shares of common stock, $.01
par value per share, and all amendments thereto; and
(h) The Company's most recent prospectuses and
statement of additional information (together, the "Prospectus").
The Company will furnish TSSG from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing. Furthermore, the Company will
provide TSSG with any other documents that TSSG may reasonably
request and will notify TSSG as soon as possible of any matter
materially affecting the performance by TSSG of its services under
this Agreement.
3. Duties as Administrator. Subject to the supervision
and direction of the Board of Directors of the Company, TSSG, as
Administrator, will use its best judgment in supervising various
aspects of the Company's administrative operations and undertakes
to perform the following specific services:
(a) Maintaining office facilities (which may be in
the offices of TSSG or a corporate affiliate);
(b) Furnishing statistical and research data, data
processing services, clerical services, internal legal, executive
and administrative services and stationery and office supplies in
connection with the foregoing;
(c) Furnishing corporate secretarial services
including preparation and distribution of materials for Board of
Directors meetings;
(d) Assisting in the preparation of the Company's
Registration Statement and any Pre-Effective and Post-Effective
Amendments to the Company's Registration Statement, Notices of
Annual or Special Meetings of Shareholders and Proxy materials
relating to such Meetings;
(e) Assisting in the determination of the
jurisdictions in which the Company's shares will be registered or
qualified for sale and, in connection therewith, shall be
responsible for the initial registration or qualification and the
maintenance of such registration or qualification of such shares
for sale under the securities laws of any state. Payment of share
registration fees and any fees for qualifying or continuing the
qualification of any Fund as a dealer or broker shall be made by
that Fund;
(f) Providing the services of certain persons who
may be appointed as officers of the Company by the Company's Board
of Directors;
(g) Providing legal advice and counsel to the
Company with respect to regulatory matters, including monitoring
regulatory and legislative developments which may affect the
Company and assisting in the strategic response to such
developments, counseling and assisting the Company in routine
regulatory examinations or investigations of the Company, and
working closely with outside counsel to the Company in response to
any litigation or non-routine regulatory matters;
(h) Accounting and bookkeeping services (including
the maintenance of such accounts, books and records of the Company
as may be required by Section 31(a) of the 1940 Act and the rules
thereunder and agrees that all records that it maintains for the
Company are the property of the Company and further agrees to
surrender promptly to the Company any such records at the
Company's request);
(i) Internal auditing and treasury services;
(j) Valuing the Company's assets and calculating the
net asset value of the shares of each Fund on each business day;
(k) Accumulating information for and, subject to
approval by the Company's Treasurer, preparing reports to the
Company's shareholders of record and the SEC including, but not
necessarily limited to, Annual and Semi-Annual Reports, Semi-
Annual Reports on Form N-SAR and Notices pursuant to Rule 24f-2;
(l) Reviewing and providing advice and counsel on
all sales and advertising materials prepared on behalf of the
Company;
(m) Preparing, signing and filing the Company's tax
returns;
(n) Assisting the Adviser, at the Adviser's request,
in monitoring and developing compliance procedures for the Company
which will include, among other matters, procedures to assist the
Adviser in monitoring compliance with each Fund's investment
objective, policies, restrictions, tax matters and applicable laws
and regulations and performing certain monthly compliance tests;
and
(o) Preparing and furnishing the Company (at the
Company's request) with performance information (including yield
and total return information) calculated in accordance with
applicable U.S. securities laws and reporting to external
databases such information as may reasonably be requested.
Without limiting the foregoing services, it is agreed that
TSSG will perform the following accounting functions on an ongoing
basis:
(a) Journalize each Fund's investment, capital share
and income and expense activities;
(b) Maintain individual ledgers for investment
securities;
(c) Maintain historical tax lots for each security;
(d) Maintain financial records in accordance with
the 1940 Act and the Rules and Regulations thereunder;
(e) Reconcile on a daily basis cash and on a weekly
basis investment balances of the Company with the custodian;
(f) Post to and prepare each Fund's Statement of
Assets and Liabilities and Statement of Operations;
(g) Calculate various contractual expenses (e.g.,
advisory and administration, transfer agency and custody fees):
(h) Monitor the expense accruals and notify Company
management of any proposed adjustments;
(i) Control all disbursements from the Company and
authorize such disbursements upon proper instructions;
(j) Calculate capital gains and losses;
(k) Determine each Fund's net income;
(l) Obtain security market quotes from independent
pricing services approved by the Adviser and the Company's Board
of Directors, or if such quotes are unavailable, then obtain such
prices from the Adviser, and in either case calculate the market
value of each Fund's investments;
(m) Transmit or mail a copy of the daily portfolio
valuation to the Adviser, if requested;
(n) Compute the net asset value of each Fund;
(o) Compute the Fund's yields, total return, expense
ratios, portfolio turnover rate, and portfolio average dollar-
weighted maturity;
(p) Mark securities to market based upon quotes
furnished by the Adviser, an independent pricing agent approved by
the Company's Board of Directors or based upon values derived from
yield data relating to classes of instruments obtained from
reputable sources, provided that any pricing system based on yield
data for selected instruments must be based upon market quotations
for sufficient numbers and types of instruments to be a
representative sample of each class of instrument held by each
Fund, as applicable, both in terms of the types of instruments as
well as the differing quality of instruments;
(q) Assist in monitoring compliance and assist in
the development of compliance procedures for each Fund which will
include among other matters, monitoring compliance with each
Fund's investment objectives, policies, restrictions, tax matters
and applicable laws and regulations;
(r) As appropriate, transmit to the Custodian
instructions received from the Adviser;
(s) Prepare semi-annual financial statements for
each Fund, which will include but not be limited to, the following
items (the form and content of such statements shall be in
accordance with generally accepted accounting principles):
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement, if applicable;
(t) Prepare monthly broker security transactions
summaries;
(u) Prepare monthly security transaction listings;
(v) Supply various Company statistical date as
reasonably requested on an ongoing basis;
(w) Keep all books and records with respect to the
Company's books of account;
(x) Keep records of the Company's securities
transactions, portfolio valuations and securities positions; and
(y) Act as liaison with the Company's independent
public accountants and provide account analyses, fiscal year
summaries, and other audit related schedules. TSSG will take all
reasonable action in the performance of its obligations under this
Agreement to assure that the necessary information is made
available to such accountants for the expression of their
opinions, as such may be required by the Company from time to
time.
In performing its duties as Administrator of the Company,
TSSG (a) will act in accordance with the Articles of
Incorporation, By-Laws, Prospectus and with the instructions and
directions of the Board of Directors of the Company and will
conform to and comply with the requirements of the 1940 Act and
all other applicable federal or state laws and regulations and (b)
will consult with legal counsel to the Company, as necessary and
appropriate.
4. Allocation of Expenses. TSSG shall bear all expenses
in connection with the performance of its services under this
Agreement.
(a) TSSG will from time to time employ or associate
with itself such person or persons as TSSG may believe to be
particularly suited to assist it in performing services under this
Agreement. Such person or persons may be officers and employees
who are employed by both TSSG and the Company. The compensation
of such person or persons shall be paid by TSSG and no obligation
shall be incurred on behalf of the Company in such respect.
(b) TSSG shall not be required to pay any of the
following expenses incurred by the Company: membership dues in
the Investment Company Institute or any similar organization;
investment advisory expenses; costs of printing and mailing stock
certificates, prospectuses, reports and notices; interest on
borrowed money; brokerage commissions; taxes and fees payable to
Federal, state and other governmental agencies; fees of Directors
of the Company who are not affiliated with TSSG; outside auditing
expenses; outside legal expenses; or other expenses not specified
in this Section 4 which may be properly payable by the Company.
(c) For the services to be rendered, the facilities
to be furnished and the payments to be made to TSSG, as provided
for in this Agreement, the Company shall compensate TSSG for its
services rendered pursuant to this Agreement in accordance with
the fees set forth in the Fee Schedule, annexed hereto and
incorporated herein. Such fees do not include out-of-pocket
disbursements of TSSG for which TSSG will be entitled to bill
separately. Out-of-pocket disbursements shall include, but shall
not be limited to, the items specified in Schedule A annexed
hereto and incorporated herein, which schedule may be modified by
mutual consent of the parties hereto.
(d) TSSG will bill the Company as soon as
practicable after the end of each calendar month, and said
billings will be detailed in accordance with the out-of-pocket
schedule. The Company will promptly pay to TSSG the amount of
such billing.
(e) If in any fiscal year the aggregate expenses of
any Fund (as defined under the securities regulations of any state
having jurisdiction over such Fund) exceed the expense limitations
of any such state, the Company may deduct from the total fees to
be paid with respect to such Fund under this Agreement and under
the Investment Advisory Agreement, Custody Agreement, or the
Adviser, TSSG and the Custodian together will bear, to the extent
required by state law, that portion of the excess which bears the
same relation to the total of such excess as said total fees with
respect to such Fund bear to the total fees otherwise payable for
the fiscal year by the Company pursuant to the aforesaid
Agreements and the Company's investment advisory agreement with
respect to such Fund. Such deduction or payment, if any, with
respect to TSSG will be limited to the amount of the fee paid
hereunder for the applicable period with respect to the Fund
involved.
5. Limitation of Liability. TSSG shall not be liable for
any error of judgment or mistake of law or for any loss suffered
by the Company in connection with the performance of its
obligations and duties under this Agreement, except a loss
resulting from TSSG's willful misfeasance, bad faith or gross
negligence in the performance of such obligations and duties, or
by reason of its reckless disregard of its obligations and duties
under this Agreement. The Company will indemnify TSSG against and
hold it harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action or suit not
resulting from the willful misfeasance, bad faith or gross
negligence in the performance of such obligations and duties or by
reason of its reckless disregard thereof. TSSG will indemnify the
Company against and hold it harmless from any and all losses,
claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand,
action or suit, based on TSSG's willful misfeasance, bad faith or
gross negligence in the performance of such obligations and duties
or by reason its reckless disregard thereof.
6. Termination of Agreement.
(a) This Agreement shall become effective on the
date hereof and shall remain in force from year to year unless
terminated pursuant to the provision of sub-section (b) of this
Section 6.
(b) This Agreement may be terminated with respect to
any Fund at any time without payment of any penalty, upon 60 days'
written notice, by vote of the holders of a majority of the
outstanding voting securities of such Fund, or by vote of a
majority of the Board of Directors of the Company, or by TSSG.
(c) Section 9 shall survive the termination of this
Agreement.
(d) In the event of equipment failures beyond TSSG's
control, TSSG shall, at no additional expense to the Company, take
reasonable steps to minimize service interruptions but shall have
no liability with respect thereto. The foregoing obligation shall
not extend to computer terminals located outside of premises
maintained by TSSG. TSSG shall enter into and shall maintain in
effect with appropriate parties one or more agreements making
reasonable provision for emergency use of electronic data
processing equipment to the extent appropriate equipment is
available.
7. Amendment to this Agreement. No provision of this
Agreement may be changed, discharged or terminated orally, but
only by an instrument in writing signed by the party against which
enforcement of the change, discharge or termination is sought.
8. Miscellaneous.
(a) Any notice or other instrument authorized or
required by this Agreement to be given in writing to the Company
or TSSG shall be sufficiently given if addressed to the party and
received by it at its office set forth below or at such other
place as it may from time to time designate in writing.
To the Company:
Lee P. Munder
President, The Munder Funds, Inc.
480 Pierce Street, Suite 300
Birmingham, MI 48009
To TSSG:
The Shareholder Services Group, Inc.
53 State Street - 025-004B
Boston, Massachusetts 02109
Attention: Patricia L. Bickimer, Esq.
(b) This Agreement shall extend to and shall be
binding upon the parties hereto and their respective successors
and assigns, provided that this Agreement shall not be assignable
without the written consent of the other party.
(c) This Agreement shall be construed in accordance
with the laws of the Commonwealth of Massachusetts.
(d) This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original and
which collectively shall be deemed to constitute only one
instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or
effect.
(f) This Agreement and the fee schedule hereto
constitute the entire agreement between the parties hereto with
respect to the matters described herein.
9. Confidentiality. All books, records, information and
data pertaining to the business of the Company that are exchanged
or received pursuant to the performance of TSSG's duties under
this Agreement shall remain confidential and shall not be
voluntarily disclosed to any other person, except as specifically
authorized by the Company or as may be required by law, and shall
not be used by TSSG for any purpose other than the performance of
its responsibilities and duties hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed and delivered by their duly
authorized officers as of the date, first written above.
THE SHAREHOLDER SERVICES GROUP, INC.
By: /s/ Vincent J. Fabiani
Name:
Title Vice President
THE MUNDER FUNDS, INC.
By: /s/ Terry H. Gardner
Name:
Title: Vice President & Chief Financial Officer
FEE SCHEDULE FOR
ADMINISTRATION AND
FUND ACCOUNTING SERVICES
I. FEES FOR ADMINISTRATION SERVICES -- (Fund Administration and
Fund Accounting)
A. The following annual Fund Administration fees apply:
.12% of the first $2.8 billion of the average daily
net assets of the Companies (as defined below); and
.105% of the next $2.2 billion of the Companies'
average daily net assets; and
.10% of the Companies' average daily net assets over
$5 billion.
"Companies" shall include Ambassador Funds, St. Clair Funds, Inc.
and The Munder Funds, Inc.
B. MINIMUM FEES
For Fund Administration Services, a minimum fee of
$1.2 million per annum will apply for all portfolios in the
Ambassador, St. Clair and Munder Fund Families.
SCHEDULE A
OUT-OF- POCKET EXPENSES
Out-of-pocket expenses include, but are not limited
to, the following:
- Postage (including overnight courier services)
- Telephone
- Telecommunications charges (including FAX)
- Duplicating
- Pricing services
- Forms and supplies
- - 5 -
munder\agreements\admin\admn.doc
July 20, 1995
The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Gentlemen:
Reference is made to the Administration Agreement between us
dated as of May 1, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice
of the creation of two additional investment portfolios of The
Munder Funds, Inc., The Munder Mid-Cap Growth Fund and The Munder
Value Fund (the "New Portfolios").
We request that you act as Administrator under the Agreement
with respect to the New Portfolios.
If the foregoing is in accordance with your understanding,
please so indicate by signing and returning to us the enclosed
copy hereof.
Very truly yours,
The Munder Funds, Inc.
By: /s/ Terry H. Gardner
Accepted:
The Shareholder Services Group, Inc.
Date: 8/14/95 By:/s/
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May 6, 1996
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Gentlemen:
Reference is made to the Administration Agreement between
us dated as of May 1, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice
of the creation of an additional investment portfolio of The
Munder Funds, Inc., The Munder International Bond Fund (the "New
Portfolio").
We request that you act as Administrator under the
Agreement with respect to the New Portfolio.
If the foregoing is in accordance with your understanding,
please so indicate by signing and returning to us the enclosed
copy hereof.
Very truly yours,
The Munder Funds, Inc.
By: Lisa A. Rosen
Accepted:
First Data Investor Services Group, Inc.
Date: By:/s/
shared/bankgrp/munder/bdbook/ortmay96/adminotc.doc
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June 24, 1996
The Munder Funds, Inc.
480 Pierce Street
Birmingham, MI 48009
Dear Sirs:
In connection with the registration under the Securities
Act of 1933 of an indefinite number of shares of common stock
(the "Shares") of The Munder Value Fund and The Munder Mid-Cap
Growth Fund (collectively, the "Funds"), each of which is a
series of The Munder Funds, Inc. (the "Company"), we have
examined such matters as we have deemed necessary, and we are of
the opinion that, as permitted by its Articles of Incorporation,
and assuming that the Company or its agent receives consideration
for the Shares in accordance with the provisions of its Articles
of Incorporation, the Shares will be legally and validly issued,
will be fully paid, and will be non-assessable by the Company.
We hereby consent to the use of this opinion as an exhibit
to Post-Effective Amendment No. 16 to the Company's Registration
Statement on Form N-1A filed with the Securities and Exchange
Commission (File No. 33-54748) in connection with the
registration under the Securities Act of 1933 of an indefinite
number of the Shares, and to the use of our name in the
prospectuses and statement of additional information contained
therein or incorporated therein by reference, and any amendments
thereto.
Very truly yours,
/s/ Dechert Price & Rhoads
Dechert Price & Rhoads
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June 24, 1996
The Munder Funds, Inc.
480 Pierce Street
Birmingham, MI 48009
Dear Sirs:
In connection with the registration under the Securities Act
of 1933 of an indefinite number of shares of common stock (the
"Shares") of The Munder International Bond Fund (the "Fund"), a
series of The Munder Funds, Inc. (the "Company"), we have examined
such matters as we have deemed necessary, and we are of the
opinion that, as permitted by its Articles of Incorporation, and
assuming that (i) the Company files Articles Supplementary, in the
form set forth as Exhibit (1)(g) to Post-Effective Amendment No.
16 to the Company's Registration Statement on Form N-1A, with the
Maryland Department of Assessments and Taxation prior to the
issuance of the Shares, and (ii) the Company or its agent receives
consideration for the Shares in accordance with the provisions of
its Articles of Incorporation, the Shares will be legally and
validly issued, will be fully paid, and will be non-assessable by
the Company.
We hereby consent to the use of this opinion as an exhibit
to Post-Effective Amendment No. 16 to the Company's Registration
Statement on Form N-1A filed with the Securities and Exchange
Commission (File No. 33-54748) for the registration under the
Securities Act of 1933 of an indefinite number of the Shares, and
to the sue of our name in the propsectuses and statement of
additional information contained therein and any amendments
thereto.
Very truly yours,
/s/ Dechert Price & Rhoads
Dechert Price & Rhoads
shared/bankgrp/munder/corpdocs/dpropibf.doc
