As filed with the Securities and Exchange Commission on April
11, 1996
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. 14
[ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[ X ]
Amendment No. 16
[ 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
Lisa Anne Rosen
First Data Investor Services Group, Inc.
One Exchange Place, 4th Floor
Boston, Massachusetts 02109-2873
(Name and Address of Agent for Service)
Copies to:
Paul F. Roye, Esq.
Dechert Price & Rhoads
1500 K Street, N.W., Suite 500
Washington, D.C. 20005
[X] It is proposed that this filing will become effective on
June 25, 1996 pursuant to paragraph (a)(1)) of Rule 485
The Registrant is registering an indefinite number of shares
under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant intends to file the
notice required by Rule 24f-2 with respect to its fiscal year
ended June 30, 1996 on or before August 29, 1996.
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Part A
Item Heading
1. Cover Page Cover
Page
2. Synopsis Prospectus
Summary; Fund Expenses
3. Condensed Financial Information
Not Applicable
4. General Description of Registrant
Cover Page; 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 Offered
How to Purchase Shares; Net Asset Value
8. Redemption or Repurchase How
to Redeem 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 -- "Management;"
Holders of Securities
Miscellaneous
16. Investment Advisory and Other Investment
Advisory
Services and Other
Service Arrangements; See Prospectus -- "Management"
17. Brokerage Allocation and Other
Portfolio Transactions
Practices
18. Capital Stock and Other Securities See
Prospectus -- "Description of Shares" and "Management;"
Additional Information Concerning Shares
19. Purchase, Redemption and Pricing
Purchase and Redemption
of Securities Being Offered
Information; Net Asset Value; Additional
Information Concerning Shares
20. Tax Status Taxes
21. Underwriters
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 add a new portfolio to the Registrant
namely, The Munder International Bond Fund to the
Company.
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 high total
return consistent with reasonable risk to principal. 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 __________, 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 __________, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary 3
The Fund
Expense Table 5
Investment Objective and Policies 7
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 22
Other Information
Net Asset Value 23
Management 24
Taxes 26
Description of Shares 27
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 International Bond Fund is to realize a
high total return consistent with reasonable risk to principal. 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 debt securities 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 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.
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.
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.
3
<PAGE>
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 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. There is no assurance
4
<PAGE>
that the Fund will achieve its investment objective. In addition, there are
certain risks inherent in investing in a non-diversified investment portfolio.
See "Portfolio Instruments and Practices."
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 A SHARES CLASS B SHARES CLASS C 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
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."
5
<PAGE>
"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.
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.
6
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to realize a high total return
consistent with reasonable risk to principal. 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 debt securities 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.
With respect to 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
7
<PAGE>
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.
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.
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 "Additional Information on
Portfolio Investments -- Non-Domestic Bank Obligations."
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
8
<PAGE>
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 "Borrowing" in the Statement of Additional
Information.
9
<PAGE>
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
banks and non-bank dealers of U.S. Government securities that are listed on the
Federal Reserve Bank of New York's list of reporting dealers. 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 futures contracts
10
<PAGE>
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-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
11
<PAGE>
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 ("Section 4(2) paper"). The Fund may also
purchase securities that are not registered under the Securities Act of 1933, as
amended, but which can be sold to qualified institutional buyers in accordance
with Rule 144A under that Act ("Rule 144A securities"). Section 4(2) paper is
restricted as to disposition under 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 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").
12
<PAGE>
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.
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.
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<PAGE>
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 DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of Service fee of 0.25% Initial sales
charge waived or 4.0% of the public reduced for certain
offering price purchases.
CLASS B Maximum CDSC of 5% of Service fee of 0.25%; CDSC waived for certain redemptions;
redemption proceeds; declines distribution fee of shares convert to Class A Shares
to zero after six years 0.75% 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 another
redemption proceeds for distribution fee of class.
redemptions made within the 0.75%
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 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.
14
<PAGE>
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.
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.
15
<PAGE>
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
Offering Net Amount Invested Dealers as a Percentage
Amount of Purchase Price (Net Asset Value) of Offering 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>
* 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.
16
<PAGE>
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 Securities Act of 1933, as amended.
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 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
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<PAGE>
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 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
18
<PAGE>
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. 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.
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<PAGE>
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
YEAR SINCE DOLLAR AMOUNT
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>
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
20
<PAGE>
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 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.
21
<PAGE>
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.
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.
22
<PAGE>
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.
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,
23
<PAGE>
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 February 29, 1996, the Advisor and its
affiliates had approximately $34 billion in assets under active management, of
which $19 billion were invested in equity securities, $6 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.
PORTFOLIO MANAGER
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.
24
<PAGE>
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.
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
25
<PAGE>
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.
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).
26
<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. 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.
27
<PAGE>
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.
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
28
<PAGE>
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 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.
29
<PAGE>
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
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 high total
return consistent with reasonable risk to principal. 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 __________, 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 __________, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
Prospectus Summary 1
The Fund
Expense Table 3
Investment Objective and Policies 4
Portfolio Instruments and Practices 4
Investment Limitations 10
Purchases and Redemptions of Shares 10
Dividends and Distributions 11
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.
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 Year 3 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
3
<PAGE>
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 high total return
consistent with reasonable risk to principal. 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 debt securities 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
4
<PAGE>
commercial paper of a foreign issuer. The Fund may also purchase commercial
paper indexed to certain specific foreign currency exchange rates.
With respect to 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.
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.
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 "Additional Information on
Portfolio Investments -- Non-Domestic Bank Obligations."
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
<PAGE>
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.
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
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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
"Borrowing" 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
banks and non-bank dealers of U.S. Government securities that are listed on the
Federal Reserve Bank of New York's list of reporting dealers. 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
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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 "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-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,
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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 ("Section 4(2) paper"). The Fund may also
purchase securities that are not registered under the Securities Act of 1933, as
amended, but which can be sold to qualified institutional buyers in accordance
with Rule 144A under that Act ("Rule 144A securities"). Section 4(2) paper is
restricted as to disposition under 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 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
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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
borker/dealer with principal offices at One Exchange Place, Boston,
Massachusetts 02109.
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.
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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 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 Investment Adviser, 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.
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
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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.
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
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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 February 29, 1996, the Advisor and its
affiliates had approximately $34 billion in assets under active management, of
which $19 billion were invested in equity securities, $6 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.
PORTFOLIO MANAGER
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.
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
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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 a 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.
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
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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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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 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.
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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.
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<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 high total
return consistent with reasonable risk to principal. 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 __________, 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 __________, 1996
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary.......................................................... 1
The Fund
Expense Table....................................................... 3
Investment Objective and Policies .................................. 4
Portfolio Instruments and Practices ................................ 4
Investment Limitations ............................................. 10
Purchases and Redemptions .......................................... 10
Dividends and Distributions ........................................ 12
Other Information
Net Asset Value..................................................... 12
Management ......................................................... 13
Taxes .............................................................. 14
Description of Shares............................................... 15
Performance ........................................................ 16
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 Y
Shares of the Fund based on estimated operating expenses.
Annual operating expenses:
(as a percentage of average net assets)
Advisory fees ............................................................ .50%
Other expenses ........................................................... .35%
Total Fund operating expenses............................................. .85%
"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:
1 Year 3 Years
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
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.
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to realize a high total return
consistent with reasonable risk to principal. 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 debt securities 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.
With respect to 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
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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.
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.
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 "Additional Information on
Portfolio Investments -- Non-Domestic Bank Obligations."
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
5
<PAGE>
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 "Borrowing" 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
banks and non-bank dealers of U.S. Government securities that are listed on the
Federal Reserve Bank of New York's list of reporting dealers. 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
futures contracts
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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-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
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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 ("Section 4(2) paper"). The Fund may also
purchase securities that are not registered under the Securities Act of 1933, as
amended, but which can be sold to qualified institutional buyers in accordance
with Rule 144A under that Act ("Rule 144A securities"). Section 4(2) paper is
restricted as to disposition under 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 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").
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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
borker/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 Investment Advisor, the Distributor and the
Investment 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 minimun initial investment of $500,000 for Class Y
Shares of the Fund is required for fiduciary and discretionary accounts of
institutions and institutional investors.
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 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.
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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.
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
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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 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
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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 February 29, 1996, the Advisor and its
affiliates had approximately $34 billion in assets under active management, of
which $19 billion were invested in equity securities, $6 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.
PORTFOLIO MANAGER
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.
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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.
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.
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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.
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
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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 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
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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.
17
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 ________,
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 _________, 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 _________, 1996.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. AN INVESTMENT IN
THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
<PAGE>
TABLE OF CONTENTS
Page
General.................................................................... 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
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
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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 debt securities 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.
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 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.
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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-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
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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 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.
5
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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.
6
<PAGE>
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 ordinary investment risk.
Options on particular securities may be more volatile than the underlying
securities,
7
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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 ca9l 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
equivalents equal to the contract value. A call option is also covered if the
Fund holds a call on the same
8
<PAGE>
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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<PAGE>
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 banks and non-bank dealers of U.S. Government
securities that are listed on the Federal Reserve Bank of New York's list of
reporting dealers, subject to the seller's agreement to repurchase them at an
agreed-upon time and price ("repurchase agreements"). The Advisor will review
and continuously monitor the creditworthiness of the seller under a repurchase
agreement, and will require the seller to maintain liquid assets in a segregated
account in an amount that is greater than the repurchase price. Default by, or
bankruptcy of the seller would, however, expose the Fund to possible loss
because of adverse market action or delays in connection with the disposition of
underlying obligations except with respect to repurchase agreements secured by
U.S. Government securities.
The repurchase price under the repurchase agreements described in the
Prospectus generally equals the price paid by the Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements will be held by the
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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<PAGE>
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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<PAGE>
STRIPPED SECURITIES. The Fund may acquire U.S. Government obligations
and their unmatured interest coupons that have been separated ("stripped") by
their holder, typically a custodian bank or investment brokerage firm. Having
separated the interest coupons from the underlying principal of the U.S.
Government obligations, the holder will resell the stripped securities in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" ("TIGRs") and "Certificate of Accrual on Treasury
Securities" ("CATS"). The stripped coupons are sold separately from the
underlying principal, which is usually sold at a deep discount because the buyer
receives only the right to receive a future fixed payment on the security and
does not receive any rights to periodic interest (cash) payments. The underlying
U.S. Treasury bonds and notes themselves are held in book-entry form at the
Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered
securities which are ostensibly owned by the bearer or holder), in trust on
behalf of the owners. Counsel to the underwriters of these certificates or other
evidences of ownership of U.S. Treasury securities have stated that, in their
opinion, purchasers of the stripped securities most likely will be deemed the
beneficial holders of the underlying U.S. Government obligations for federal tax
and securities purposes. The Fund is not aware of any binding legislative,
judicial or administrative authority on this issue.
Only instruments which are stripped by the issuing agency will be
considered U.S. Government obligations. Securities such as CATS and TIGRs which
are stripped by their holder do not qualify as U.S. Government obligations.
Within the past several years the Treasury Department has facilitated
transfers of ownership of zero coupon securities by accounting separately for
the beneficial ownership of particular interest coupon and principal payments 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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<PAGE>
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.
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<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 NRSROs represent their respective opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are general
and are not absolute standards of quality. Consequently, obligations with the
same rating, maturity and interest rate may have different market prices.
OTHER. Subsequent to its purchase by 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;
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<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
1876 Rathmor of the Board of Directors Company
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
Age: 58 Trust.
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,
Glen Arbor, MI 49636 McGregor Fund (a private
Age: 69 philanthropic foundation) 1981-1985;
Managing Partner, Detroit officer of Ernst
& Young, until 1981.
Arthur DeRoy Rodecker Director President, Rodecker & Company,
4000 Town Center Investment Brokers, Inc. since
Suite 101 November 1976; President,
Southfield, MI 48075 RAC Advisors, Inc., Registered
Age: 68 Investment Advisor since February 1979;
President and Trustee, Helen L. DeRoy
Foundation, a charitable foundation; Vice
President and Trustee, DeRoy Testamentary
Foundation, a charitable foundation;
Trustee, Providence Hospital Foundation.
</TABLE>
18
<PAGE>
<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, 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
Vice President and Treasurer Asset Management; Vice President
Suite 300 and Chief Financial Officer of Old
Birmingham, MI 48009 MCM; Audit Manager Arthur
Age: 35 Andersen & Co. (1991 to February 1993);
Secretary of LPM.
Paul Tobias Vice President Executive Vice President and Chief
480 Pierce Street Operating Officer of the
Suite 300 Advisor (since April 1995) and
Birmingham, MI 48009 Executive Vice President of
Age: 43 Comerica, Inc.
Gerald Seizert Vice President Executive Vice President and Chief
480 Pierce Street Investment Officer/Equities of the
Suite 300 Advisor (since April 1995);
Birmingham, MI 48009 Managing Director (1991-1995);
Age: 44 Director (1992-1995) and Vice President
(1984-1991) of Loomis, Sayles and
Company, L.P.
Elyse G. Essick Vice President Vice President and Director of
480 Pierce Street Marketing for the Advisor;
Suite 300 Vice President and Director of
Birmingham, MI 48009 Client Services of Old MCM
Age: 37 (August 1988 to December 1994).
James C. Robinson Vice President Vice President and Chief Investment
480 Pierce Street Officer/Fixed Income for the Advisor;
Suite 300 Vice President and Director of Fixed
Birmingham, MI 48009 Income of Old MCM (1987-1994).
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;
Suite 300 Director and Senior Vice President
Birmingham, MI 48009 of Old MCM (since 1988);
Age: 51 Director of LPM.
Ann F. Putallaz Vice President Vice President and Director of
480 Pierce Street Fiduciary Services of the Advisor
Suite 300 (since January 1995); Director of
Birmingham, MI 48009 Client and Marketing Services of
Age: 50 Woodbridge.
Richard H. Rose Assistant Treasurer Senior Vice President, First Data
First Data Investor Services Investor Services Group, Inc.
Group, Inc. (since May 6, 1994). Formerly,
One Exchange Place Senior Vice President, The Boston
6th Floor Company Advisors, Inc. since
Boston, MA 02109 November 1989.
Age: 39
Patricia L. Bickimer Secretary Vice President and Associate
First Data Investor Services General Counsel, First Data Investor
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 Counsel, First Data Investor Services
First Data Investor Services Group, Inc. (since May 6, 1994).
Group, Inc. Formerly, Assistant Vice President
One Exchange Place, and Counsel with The Boston
4th Floor, Company Advisors, Inc.; Associate
Boston, MA 02109 with Hutchins, Wheeler & Dittmar.
Age: 28
</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>
Aggregate Pension Estimated
Compensation Retirement Annual
from the Benefits 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 respect to the Fund without penalty on 90 days'
written notice to the Fund, as applicable. The Advisory Agreement terminates
automatically in the event of its assignment (as defined in the 1940 Act).
DISTRIBUTION AGREEMENTS. The Company has entered into distribution
agreements, 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 Plans, 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
a Service and Distribution Plan 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 both Service Plans 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, as applicable, 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 by 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; provided 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 Advisory and Other Service Arrangements Advisory Agreement."
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 Advisory and Other Service Arrangements -
Advisory Agreement."
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
decisions or interpretations of current and future statutes and regulations,
could prevent Comerica and certain other institutions from continuing to perform
certain services for Class K Shares of the Fund.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Comerica and/or other institutions in connection with
the provision of services on behalf of Class K Shares of the Fund, the Company
might be required to alter materially or discontinue its arrangements with 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.
25
<PAGE>
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.
26
<PAGE>
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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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, 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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o $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 a 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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<PAGE>
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
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1256 of the Code including "the 40%-60% rule" and the mark-to-market rule. Under
Temporary Regulations, 1256 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
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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 Multi-Season
Growth Fund, the Real Estate Equity Investment Fund, the Mid-Cap Growth Fund,
the Value Fund, the International Bond Fund and the 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 such 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 a Fund are entitled to
participate in the net distributable assets of the particular 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
substantially identical or that the matter does not affect any interest of the
Fund. Under the Rule, the approval
36
<PAGE>
of an investment advisory agreement or any change in a fundamental investment
policy would be effectively acted upon with respect to a Fund only if approved
by a majority of the outstanding shares of such Fund. However, the Rule also
provides that the ratification of the appointment of independent auditors, the
approval of principal underwriting contracts and the election of trustees 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 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.
37
<PAGE>
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
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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."
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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+".
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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.
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<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
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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.
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<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.
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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
*
_____________________
*To be filed by Amendment.
(g) Articles Supplementary with respect
to The Munder International
Bond 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) Form of Investment Advisory
Agreement for The Munder Value
Fund*
(e) Form of Investment Advisory
Agreement for The Munder Mid-Cap
Growth Fund*
(f) Form of Investment Advisory
Agreement for The Munder
International Bond Fund*
(6) (a) Form of Underwriting Agreement7
(b) Notice to Underwriting Agreement
with respect to The Munder
Value Fund and The Munder Mid-Cap
Growth Fund*
(c) Notice to Underwriting Agreement
with respect to The Munder
International Bond Fund
(7) Not Applicable
(8) (a) Form of Custodian Contract8
(b) Notice to Custodian Contract
with respect to The Munder
Value Fund and The Munder Mid-Cap
Growth Fund*
_____________________
*To be filed by Amendment.
(c) Notice to Custodian Contract with
respect to The Munder
International Bond Fund*
(d) Form of Subcustodian Agreement*
(e) Notice to Subcustody Agreement with
respect to The Munder Value
Fund and The Munder Mid-Cap Growth
Fund*
(f) Notice to Subcustody Agreement with
respect to The Munder
International Bond Fund*
(9) (a) Form of Transfer Agency and Service
Agreement9
(b) Notice to Transfer Agency and
Service Agreement with
respect to The Munder Value Fund
and The Munder Mid-Cap
Growth Fund*
(c) Notice to Transfer Agency and
Registrar Agreement with respect to
The Munder International Bond Fund*
(d) Form of Administration Agreement8
(e) Notice to Administration Agreement
with respect to The
Munder Value and The Munder Mid-Cap
Growth Fund*
(f) Notice to Administration Agreement
with respect to The Munder
International Bond 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*
(e) Opinion and Consent of Counsel with
respect to The Munder
International Bond Fund*
_____________________
*To be filed by amendment.
(11) (a) Consent of Dechert Price & Rhoads11
(b) Consent of Ernst & Young LLP11
(c) Consent of Arthur Andersen11
(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
_____________________
*To be filed by amendment.
(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*
(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 March 28, 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:
C
l
a
s
s
A
C
l
a
s
s
B
C
l
a
s
s
C
C
l
a
s
s
K
C
l
a
s
s
Y
The Munder Multi-
Season Growth Fund
3
8
2
1
6
2
4
6
1
4
5
8
5
The Munder Money
Market Fund
1
5
9
1
0
7
3
The Munder Real
Estate Equity
Investment
Fund
1
3
8
4
1
2
8
The Munder Mid-Cap
Growth Fund
4
1
3
2
2
2
2
The Munder Value
Fund
2
1
6
2
3
1
1
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
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.
Item 29. Principal Underwriters.
(a) Funds Distributor, Inc. ("FDI") serves as
Distributor of shares of the Registrant. FDI also
serves as principal underwriter of the following
investment companies other than the Registrant:
HT Insight Funds, d/b/a Harris Insight Funds Waterhouse
Investors Cash Management Mutual Funds
Harris Insight Funds Trust Skyline Funds
The Munder Funds Trust Foreign Fund, Inc.
Panagora Funds PanAgora Funds
BJB Investment Funds BEA Investment Funds,
Inc.
(b) The directors and officers of FDI are set
forth below. Unless otherwise indicated, their address
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
John E. Pelletier Senior Vice
None
President General Counsel
Richard W. Healey Senior Vice President
None
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
Frederick C. Dey Vice President
None
Hannah Shaw Grove Vice President
None
Richard S. Joseph Vice President
None
Donald R. Robertson Senior Vice President
None
Bernard A. Whalen Senior Vice President
None
Maureen F. Walsh Vice President
None
Jean M. O'Leary Assistant Secretary
None
and Clerk
Eric B. Fischman Vice President and
None
Assistant General
Counsel
Dale F. Lampe Vice President
None
Joseph A. Vignone Vice President
None
Paul M. Prescott Vice President
None
Dennis J. Gallant Vice President
None
Linda C. Raftery Vice President
None
Mary A. Nelson Assistant Treasurer None
John J. Pylaum Assistant Treasurer
None
(c) Not Applicable
Item 30. Location of Accounts and Records.
The account books and other documents
required to be maintained by Registrant pursuant to
Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder will be maintained at the offices
of Munder Capital Management at 480 Pierce Street,
Birmingham, MI 48009, at 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 beneficial
interest 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 date the Fund
commences investment operations.
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933, as amended, and the Investment Company Act of
1940, as amended, Registrant has duly caused this Post-
Effective Amendment No. 14 to the Registration
Statement to be signed on its behalf by the undersigned
thereunto duly authorized in the City of Boston, and
Commonwealth of Massachusetts.
The Munder Funds, Inc.
By: *
Lee P. Munder
By: /s/ Lisa Anne Rosen
Lisa Anne Rosen
as Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933, as amended, this Post-Effective Amendment No.
14 to the Registration Statement on Form N-1A has been
signed below by the following persons on behalf of The
Munder Funds, Inc. in the capacity and on the date
indicated:
Signatures Title
Date
* President
and Chief April 11, 1996
Lee P. Munder Executive Officer
* Director
April 11, 1996
Charles W. Elliott
* Director
April 11, 1996
Joseph E. Champagne
* Director
April 11, 1996
Arthur DeRoy Rodecker
* Director
April 11, 1996
Jack L. Otto
* Director
April 11, 1996
Thomas B. Bender
* Director
April 11, 1996
Thomas D. Eckert
* Director
April 11, 1996
John Rakolta, Jr.
* Director
April 11, 1996
David J. Brophy
* Vice
President, April 11, 1996
Terry H. Gardner Treasurer and
Chief Financial
Officer
* By: /s/Lisa Anne Rosen
Lisa Anne Rosen
as Attorney-in-Fact
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