As filed with the Securities and Exchange Commission
on June 3, 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. 15 [ X ]
----
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 17 [ 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
Paul F. Roye, Esq.
Dechert Price & Rhoads
1500 K Street, N.W., Suite 500
Washington, D.C. 20005
(Name and Address of Agent for Service)
Copies to:
Lisa Anne Rosen
Munder Capital Management
480 Pierce Street
Birmingham, Michigan 48009
[X] It is proposed that this filing will become effective on August 17, 1996
pursuant to paragraph (a)(2) of Rule 485
The Registrant has elected to register an indefinite number of shares
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant filed the notice required by Rule 24f-2 with
respect to its fiscal period ended June 30, 1995 on August 30, 1995.
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THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Part A
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Item Heading
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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
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Part B
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History See Prospectus --
"Management;"
General; Directors
and Officers
13. Investment Objectives and Policies Fund Investments;
Additional
Investment
Limitations;
Portfolio
Transactions
14. Management of the Fund See Prospectus --
"Management;"
Directors and
Officers;
Miscellaneous
15. Control Persons and Principal See Prospectus --
Holders of Securities "Management;"
Miscellaneous
16. Investment Advisory and Other Investment Advisory
Services Services and Other
Service
Arrangements; See
Prospectus --
"Management"
17. Brokerage Allocation and Other Portfolio
Practices Transactions
18. Capital Stock and Other Securities See Prospectus --
"Description of
Shares" and
"Management;"
Additional
Information
Concerning Shares
19. Purchase, Redemption and Pricing Purchase and
of Securities Being Offered Redemption
Information; Net
Asset Value;
Additional
Information
Concerning Shares
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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 Net Net Fund.
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PROSPECTUS
The Net Net Fund (the "Fund") is a mutual fund portfolio that seeks to
provide shareholders long term capital appreciation by investing primarily in
equity securities of companies engaged in the technology and communications
industry, focusing specifically on Internet related companies and companies that
are likely to benefit from the growth of the Internet industry. The Fund is a
separate portfolio of the Munder Funds, Inc. (the "Company"), an open-end
investment company that currently offers seven investment portfolios.
Munder Capital Management (the "Advisor") serves as the investment
advisor of the Fund.
This Prospectus contains information that a prospective investor should
know before investing. Investors are encouraged to read this Prospectus and
retain it for future reference. A Statement of Additional Information dated
August __, 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. The Statement of Additional Information 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 August __, 1996.
<PAGE>
TABLE OF CONTENTS
Prospectus Summary.................................................... __
Expense Table......................................................... __
The Fund.............................................................. __
Investment Objective and Policies..................................... __
Portfolio Instruments and Practices................................... __
Investment Limitations................................................ __
How to Purchase Shares................................................ __
How to Redeem Shares.................................................. __
Dividends and Distributions........................................... __
Net Asset Value....................................................... __
Management............................................................ __
Taxes................................................................. __
Description of Shares................................................. __
Performance........................................................... __
Shareholder Account Information....................................... __
No person has been authorized to give any information, or to make any
representations not contained in this Prospectus, or in the Funds' Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Funds
or the Distributor. This Prospectus does not constitute an offering by the Funds
or by the Distributor in any jurisdiction in which such offering may not
lawfully be made.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing in this Prospectus.
Investment Objective and Policies
The Fund's investment objective is long term capital appreciation. It
seeks to achieve this objective by investing primarily in equity securities of
companies which are engaged in the technology and communications industry,
focusing specifically on Internet related companies and companies which are
likely to benefit from the growth of the Internet industry. There is no
assurance that the Fund will achieve its investment objective. The companies the
Fund will invest in will include Internet access providers, network equipment
manufacturers, computer hardware and software developers, content providers,
developers of search engines, data services, specialty Internet services,
financial services and Internet presence providers.
Purchasing Shares
Shares of the Fund are offered at net asset value. Shares
of the Fund are offered continuously and may be purchased from
<PAGE>
the Distributor or through the Transfer Agent. See "How to
Purchase Shares."
Minimum Investment
$1,000 minimum investment ($50 through Automatic Investment
Plan). $50 minimum for subsequent purchases.
Reinvestment
Automatic reinvestment of dividends and capital gains unless a
shareholder elects to receive cash.
Other Features
Automatic Investment Plan
Automatic Withdrawal Plan
Retirement Plans
Reinvestment Privilege
Dividends and Other Distributions
Dividends from net investment income are declared and paid at least
annually. Capital gains, if any, are distributed at least annually.
Net Asset Value
Determined once daily on each business day.
Redeeming Shares
Shares of the Fund may be redeemed at net asset value by
mail or telephone. See "How to Redeem Shares."
Investment Risks and Special Considerations
The Fund's performance and price per share will change daily based on
many factors, including national and international economic conditions, the
overall level of equity prices, 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 may invest in the securities of emerging
growth companies, which may involve greater price volatility and risk than those
incurred by funds that do not invest in such companies. In addition, the Fund
will concentrate its investments in securities of companies engaged in Internet
related businesses. There is no assurance that the Fund will achieve its
investment objective. See "Investment Objective and Policies."
Investment Advisor
As investment advisor for the Fund, Munder Capital
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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
Company's 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.
Shareholder transaction expenses:
Maximum sales load on purchases None
Maximum sales load on reinvested dividends None
Maximum contingent deferred sales charge None
Redemption Fees None
Annual operating expenses:
(as percentage of average net assets)
Advisory fees 1.00%
12b-1 fees 0.25%
Other expenses 0.25%
Total fund operating expenses 1.50%
With respect to the Fund, the amount of "Other Expenses" in the table
above is based on estimated expenses and projected assets for the current fiscal
year. See "Management" in this Prospectus for a further description of the
Fund's operating expenses. 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:
An investor would pay the following expenses on a $1,000 investment in
the Fund assuming (1) a hypothetical 5% annual return and (2) redemption at the
end of the following time periods:
<PAGE>
1 Year 3 Years
$15 $47
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 Net Net Fund is a series of shares issued by the Munder Funds, Inc.
(the "Company"), an open-end management investment company. The Company was
incorporated under the laws of the State of Maryland on November 18, 1992 and
has registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Fund's principal office is located at 480 Pierce Street, Birmingham,
Michigan 48009 and its telephone number is (800) 438-5789.
INVESTMENT OBJECTIVE AND POLICIES
This Prospectus describes the Net Net Fund. 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 is designed for investors seeking long term capital
appreciation. The Fund focuses on companies with the potential for significant
long term capital appreciation from their involvement in the Internet and
related businesses.
The investment objective of the Fund is to provide shareholders with
long term capital appreciation. The Fund seeks to achieve this objective by
investing primarily in companies principally engaged in the technology and
communications industry, focusing specifically on securities of Internet-related
companies and companies which are likely to benefit from the growth of the
Internet industry. Income is not a primary consideration in the selection of
investments.
Under normal conditions, the Fund will invest at least 65% of its total
assets in equity securities of companies listed on U.S. securities exchanges or
NASDAQ which are principally engaged in the research, design, manufacturing or
distribution of products, processes or services that will provide, or are
expected to benefit from, technological advances or improvements that relate to
the Internet and/or related businesses. Equity securities include common stock,
preferred stock and securities convertible into common stock. The specific risks
of investing in Internet-related securities are summarized under "Portfolio
Instruments and Practices-Industry Concentration."
<PAGE>
The Fund may also invest in short-term money market securities. Under
normal market conditions, short-term money market securities could comprise up
to 35% of the Fund's total assets. The Fund could invest a higher percentage of
its assets in money market securities for temporary defensive purposes.
The Fund's investment objective and all other investment policies,
unless otherwise noted, are non-fundamental and may be changed by the Board of
Directors without shareholder approval.
The Internet is a world-wide network of computers designed to permit
users to share information and transfer data quickly and easily. The World Wide
Web ("WWW") which is a means of graphically interfacing with the Internet, is a
hyper-text based publishing medium containing text, graphics, interactive
feedback mechanisms and links within WWW documents and to other WWW documents.
The Advisor believes that the Internet is the emerging frontier interlinking
computers, telecommunications and broadcast. Consequently, there are
opportunities for continued growth in demand for components, products, media,
services, and systems to assist, facilitate, enhance, store, process, record,
reproduce, retrieve and distribute information, products and services for use by
businesses, institutions and consumers. Companies engaged in these efforts are
the central focus of the Fund. However, older technologies such as telephone,
broadcast, cable, computer and related video, print and photography may also be
represented when the Advisor believes that these companies may successfully
integrate existing technology with new emerging technologies.
The value of Fund shares may be susceptible to factors affecting the
industries described above. These industries may be subject to greater
governmental regulation than many other industries and changes in governmental
policies and the need for regulatory approvals may have a material effect on the
products and services of these industries. In addition, because of its narrow
industry focus, the Fund's performance is closely tied to, and affected by,
these industries. Companies in an industry are often faced with the same
obstacles, issues or regulatory burdens, and their securities may react
similarly and move in unison to these and other market conditions.
Finally, competitive pressures and changing demand may have a
significant effect on the financial condition of companies in these industries.
Such companies spend heavily on research and development and are especially
sensitive to the risk of product obsolescence.
Although securities of large and well-established companies in the
information technology industries will be held in the Fund's portfolio, the Fund
also will invest in medium, small and/or newly-public companies which may be
subject to greater share price fluctuations and declining growth, particularly
in the event of rapid changes in technology and/or increased
<PAGE>
competition. Securities of those smaller and/or less seasoned companies may,
therefore, expose shareholders of the Fund to above-average risk.
PORTFOLIO INSTRUMENTS AND PRACTICES
Investment strategies that are available to the Fund are set forth
below. Additional information concerning certain of these strategies and their
related risks is contained in the Statement of Additional Information.
EQUITY SECURITIES. The Fund will invest in common stocks, and may
invest in warrants and similar rights to purchase common stock. The Fund may
invest up to 5% of its net assets at the time of purchase in warrants and
similar rights (other than those that have been acquired in units or attached to
other securities). Warrants represent rights to purchase securities at a
specific price valid for a specific period of time. The prices of warrants do
not necessarily correlate with the prices of the underlying securities. In
addition, the Fund may invest in convertible bonds and convertible preferred
stock. A convertible security is a security that may be converted either at a
stated price or rate within a specified period of time into a specified number
of shares of common stock. By investing in convertible securities, the Fund
seeks the opportunity, through the conversion feature, to participate in the
capital appreciation of the common stock into which the securities are
convertible, while earning higher current income than is available from the
common stock. Although the Fund may acquire convertible securities that are
rated below investment grade by Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody"), it is expected that investments in
lower-rated convertible securities will not exceed 5% of the value of the total
assets of the Fund at the time of purchase.
FOREIGN SECURITIES. The Fund may invest in the securities of foreign
issuers. There are certain risks and costs involved in investing in securities
of companies and governments of foreign nations, which are in addition to the
usual risks inherent in U.S. investments. Investments in foreign securities
involve higher costs than investments in U.S. securities, including higher
transaction costs as well as the imposition of additional taxes by foreign
governments. In addition, foreign investments may include additional risks
associated with the level of currency exchange rates, less complete financial
information about the issuers, less market liquidity, and political instability.
Future political and economic developments, the possible imposition of
withholding taxes on interest income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls, or the
adoption of other governmental restrictions might adversely affect the payment
of principal and interest on foreign obligations. Additionally, foreign banks
and foreign branches of domestic banks may be subject to less stringent reserve
requirements, and
<PAGE>
to different accounting, auditing and recordkeeping requirements.
Although the Fund may invest in securities denominated in foreign
currencies, portfolio securities and other assets held by the Fund are valued in
U.S. dollars. As a result, the net asset value of the Fund's shares may
fluctuate with U.S. dollar exchange rates as well as with price changes of its
portfolio securities in the various local markets and currencies. In addition to
favorable and unfavorable currency exchange-rate developments, the Fund is
subject to the possible imposition of exchange control regulations or freezes on
convertibility of currency.
Investments in foreign securities may be in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or similar
securities. These securities may not be denominated in the same currency as the
securities they represent. ADRs are receipts typically issued by a United States
bank or trust company evidencing ownership of the underlying foreign securities.
EDRs are receipts issued by a European financial institution evidencing a
similar arrangement. Generally, ADRs, in registered form, are designed for use
in United States securities markets, and EDRs, in bearer form, are designed for
use in the European securities markets.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into
forward currency exchange contracts in an effort to reduce the level of
volatility caused by changes in foreign currency exchange rates. The Fund may
not enter into these contracts for speculative purposes. A forward currency
exchange contract is an obligation to purchase or sell 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 contract. The Fund
will segregate cash or liquid securities to cover its obligation to purchase
foreign currency under a forward foreign currency contract. Although such
contracts tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time they tend to limit any potential gain that
might be realized should the value of such currency increase. The Fund will not
enter into forward foreign currency exchange contracts if as a result, the Fund
will have more than 20% of its total assets committed to consummation of such
forward foreign currency exchange contracts.
FUTURES CONTRACTS AND OPTIONS. The Fund may 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.
Futures contracts obligate the Fund, at maturity, to take or
<PAGE>
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 market advance, 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, the Fund might purchase put options or sell
call options on futures contracts rather than sell futures contracts. 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.
In addition, the Fund, may write covered call options, buy put options,
buy call options and write secured put options on particular securities or
various stock indices. Options trading is a highly specialized activity which
entails greater than ordinary investment risks. A call option for a particular
security gives the purchaser of the option the right to buy, and a writer the
obligation to sell, the underlying security at the stated exercise price at any
time prior to the expiration of the option, regardless of the market price of
the security. The premium paid to the writer is in consideration for undertaking
the obligations under the option contract. A put option for a particular
security gives the purchaser the right to sell the underlying security at the
stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. In contrast to an option on a
particular security, an option on a stock index provides the holder with the
right to make or receive a cash settlement upon exercise of the option.
The use of derivative instruments exposes 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 a portfolio manager anticipates; (2)
imperfect correlation between the price of derivative instruments and movements
in the prices of the securities, interest rates or currencies being hedged; (3)
the fact that skills needed to use these strategies are different than those
needed to select
<PAGE>
portfolio securities; (4) inability to close out certain hedged positions to
avoid adverse tax consequences; (5) the possible absence of a liquid secondary
market for any particular instrument and possible exchange-imposed price
fluctuation limits, either of which may make it difficult or impossible to close
out a position when desired; (6) leverage risk, that is, the risk that adverse
price movements in an instrument can result in a loss substantially greater than
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.
When the Fund invests in a derivative instrument, it may be required to
segregate cash and other high-grade liquid debt securities or certain portfolio
securities to "cover" the Fund's position. Assets segregated or set aside
generally may not be disposed of so long as the Fund maintains the positions
requiring segregation or cover. Segregating assets could diminish the Fund's
return due to the opportunity losses of foregoing other potential investments
with the segregated assets.
The Fund is not a commodity pool, and all futures transactions engaged
in by the Fund must constitute bona fide hedging or other permissible
transactions in accordance with the rules and regulations promulgated by the
Commodity Futures Trading Commission. Successful use of futures and options is
subject to special risk considerations.
For a further discussion see "Additional Information on Fund
Investments" and the Appendix to the Statement of Additional Information.
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 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 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
<PAGE>
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.
INVESTMENT COMPANY SECURITIES. In connection with the management of
daily cash positions, 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, along with other shareholders, its pro rata
portion of the other investment company's expenses, including advisory fees.
These expenses would be in addition to the expenses the Fund bears directly in
connection with its own operations.
LIQUIDITY MANAGEMENT. Pending investment, to meet anticipated
redemption requests, or as a temporary defensive measure if the Advisor
determines that market conditions warrant, the Fund may also invest without
limitation in short-term U.S. Government obligations, high quality money market
instruments, variable and floating rate instruments and repurchase agreements as
described above.
High quality money market instruments may include obligations issued by
Canadian corporations and Canadian counterparts of U.S. corporations and
Europaper, which is U.S. dollar-denominated commercial paper of a foreign
issuer. The Fund may also purchase U.S. dollar-denominated bank obligations,
such as certificates of deposit, bankers' acceptances 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. Short-term obligations purchased by the Fund will either have
short-term debt ratings at the time of purchase in the top two categories by one
or more unaffiliated nationally recognized statistical rating organizations
("NRSROs") or be issued by issuers with such ratings. Unrated instruments
purchased by the Fund will be of comparable quality as determined by the
Advisor.
ILLIQUID SECURITIES. The Fund may invest up to 15% of the total value
of its net assets (determined at time of acquisition) in securities which are
illiquid. Illiquid securities would generally include repurchase agreements and
time deposits with notice/termination dates in excess of seven days, and certain
securities which are subject to trading restrictions because they are not
registered under the Securities Act of 1933, as amended (the "Act"). If, after
the time of acquisition, events cause this
<PAGE>
limit to be exceeded, the Fund will take steps to reduce the aggregate amount of
illiquid securities as soon as reasonably practicable in accordance with the
policies of the SEC.
The Fund may invest in commercial obligations issued in reliance on the
"private placement" exemption from registration afforded by Section 4(2) of the
Act ("Section 4(2) paper"). The Fund may also purchase securities that are not
registered under the Act, but which can be sold to qualified institutional
buyers in accordance with Rule 144A under the Act ("Rule 144A securities").
Section 4(2) paper is restricted as to disposition under the Federal securities
laws, and generally is sold to institutional investors which agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction. Section 4(2) paper
normally is resold to other institutional investors through or with the
assistance of the issuer or investment dealers which make a market in the
Section 4(2) paper, thus providing liquidity. Rule 144A securities generally
must be sold only to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to be
liquid, that investment will be included within the Fund's limitation on
investment in illiquid securities. The Advisor will determine the liquidity of
such investments pursuant to guidelines established by the Company's Board of
Directors. The Fund will limit its investment in restricted securities to 10% of
the Fund's total assets, excluding Rule 144A securities, and will limit its
investment in all restricted securities, including Rule 144A securities, to 15%
of its total assets.
U.S. GOVERNMENT OBLIGATIONS. The Funds may purchase
obligations issued or guaranteed 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
<PAGE>
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.
LENDING OF PORTFOLIO SECURITIES. To enhance the return of the
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.
PORTFOLIO TRANSACTIONS AND TURNOVER. All orders for the purchase or
sale of securities on behalf of the Fund are placed by the Advisor with
broker/dealers that the Advisor selects. A high portfolio turnover rate involves
larger brokerage commission expenses or transaction costs which must be borne
directly by the Fund, and may result in the realization of short-term capital
gains which are taxable to shareholders as ordinary income. The Advisor will not
consider portfolio turnover rate a limiting factor in making investment
decisions consistent with the Fund's objective and policies. It is anticipated
that the Fund's annual portfolio turnover rate will range from 200% to 250%.
INDUSTRY CONCENTRATION. There can be no assurance that a portfolio
consisting primarily of securities issued by companies engaged in Internet and
Internet-related activities will achieve the Fund's investment objective.
Because the Fund concentrates its investments in securities of companies engaged
in Internet related-businesses, its shares do not represent a complete
investment program and their value may fluctuate more than shares of a portfolio
invested in a broader range of industries. The value of Fund shares will also be
especially susceptible to factors affecting companies engaged in Internet and
Internet-related activities. Such companies are generally subject to the rate of
change in technology that is higher than in other industries. Changes in
governmental policies, such as telephone and cable regulations, freedom of
speech and anti-trust regulations may have a material effect on the demand for
Internet services. Many of the products and services of companies engaged in
Internet and Internet-related activities are also subject to relatively high
risks of rapid obsolescence caused by progressive scientific and technological
advances.
<PAGE>
INVESTMENT LIMITATIONS
The Fund's investment objective and policies stated above may be
changed by the Fund's Board of Directors without approval by a majority of the
Fund's outstanding shares. 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 a 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) purchase securities (except U.S. Government securities) if
more than 5% of its total assets will be invested in the securities of
any one issuer, except that up to 25% of the Fund's total assets may be
invested without regard to this 5% limitation;
(2) subject to the foregoing 25% exception, purchase
more than 10% of the outstanding voting securities of any
issuer;
(3) 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
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 directly from Funds
Distributor, Inc. (the "Distributor") or the Transfer Agent. Only the
Distributor is authorized to sell shares of the Fund. The Distributor is a
registered broker/dealer with principal offices at 60 State Street, Boston,
Massachusetts 02109.
Shares will be credited to a shareholder's account at the net asset
value next computed after an order is received by the Distributor. 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
<PAGE>
any class for any period of time.
The minimum initial investment is $1,000 and subsequent investments must be at
least $50.
An account may be opened by mailing a check or other negotiable bank
draft (payable to The Munder Funds) for $1,000 or more with a completed and
signed Account Application Form to The Munder Funds, c/o First Data, 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 per
share net asset value of Fund shares next computed following receipt of payment
by the Transfer Agent. 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.
The completed investment application must indicate a valid taxpayer
identification number and must be certified as such. Failure to provide a
certified taxpayer identification number may result in backup withholding at the
rate of 31%. Additionally, investors may be subject to penalties if they falsify
information with respect to their taxpayer identification numbers.
In addition, investors having an account with a commercial bank that is
a member of the Federal Reserve System may purchase shares of the Fund by
requesting their bank to transmit funds by wire to Boston Safe Deposit and Trust
Company, Boston, MA, ABA #011001234, DDA #16-798-3, Fund Name, Shareholder
Account Number, Account of (Registered Shareholder). Before wiring any funds, an
investor must contact the Fund by calling (800) 438-5789 to confirm the wire
instructions. The investor's name, account number, taxpayer identification or
social security number, and address must be specified in the wire. In addition,
an Account Application Form containing the investor's taxpayer identification
number should be forwarded within seven days of purchase to The Munder Funds c/o
First Data, P.O. Box 9755, Providence, Rhode Island 02940-9755.
Additional investment 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 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 portion in the Application Form. The minimum pre-authorized
investment amount is $50.
<PAGE>
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, P.O. Box 9755, Providence, Rhode Island 02940-9755.
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. If the proceeds of the redemption are less than $50,000, 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."
Expedited Redemption
In addition, a shareholder redeeming at least $1,000 of shares and who
has authorized expedited redemption on the application form filed with the
Transfer Agent may, at the time of such redemption, request that funds be mailed
to the commercial bank or registered broker-dealer previously designated on the
application form by telephoning the Fund at (800) 438-5789 prior to 4:00 p.m.
New York City time. Redemption proceeds will be sent on the next business day
following receipt of the telephone redemption request. If a shareholder seeks to
use an expedited method of redemption of shares recently purchased by check, the
Fund may withhold the redemption proceeds until it is reasonably assured of the
collection of the check representing the purchase, which may take up to 15 days.
The Company, the Distributor and the Transfer Agent reserve the right
at any time to suspend or terminate the expedited 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
<PAGE>
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/wired 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.
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 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.
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
shareholders 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 portion of the Application Form available through the
Transfer Agent.
<PAGE>
Shareholders should realize that if withdrawals exceed capital
appreciation and/or 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.
No Exchanges
Exchanges with the other Munder mutual funds are not permitted. To
purchase shares of another Munder mutual fund, a shareholder may redeem his or
her shares of the Fund and use the redemption proceeds to purchase shares in
accordance with the purchase procedures of the other Munder mutual fund.
DIVIDENDS AND DISTRIBUTIONS
Shareholders of the Fund are entitled to 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 annually as a dividend.
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 Fund unless a shareholder requests that dividends and capital gains be
paid in cash. In the absence of this request on the Account Application Form,
each purchase of shares is made on the understanding that the 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 Fund at the net asset value in effect at the close of business on the
reinvestment date.
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 officers' liability insurance premiums; the expense of using
independent
<PAGE>
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 shares in the Fund is calculated by dividing the
value of all securities and other assets belonging to the Fund, less the
liabilities charged, by the number of outstanding shares.
The net asset value per share of the Fund for the purpose of pricing
purchase and redemption orders is determined as of the close of regular trading
on the New York Stock Exchange (currently 4:00 p.m., New York time) on each
business day.
With respect to the Fund, securities that are 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
Boards 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 Boards of Directors. Debt securities with
remaining maturities of 60 days or less are valued at
<PAGE>
amortized cost, unless the Boards of Directors determine 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 Fund does not accept purchase and redemption orders on days 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 governing Boards 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 principal partners of the Advisor are Old MCM,
Inc., Woodbridge Capital Management, Inc. ("Woodbridge") and WAM Holdings, Inc.
("WAM"). Woodbridge and WAM are indirect, wholly-owned subsidiaries of Comerica
Incorporated. Mr. Lee P. Munder, the Advisor's chief executive officer,
indirectly owns or controls a majority of the partnership interests in the
Advisor. As of March 31, 1996, the Advisor and its affiliates had approximately
$31 billion in discretionary assets under active management, of which $15
billion were invested in equity securities, $7 billion were invested in money
market or other short-term instruments, and $9 billion were invested in other
fixed income securities.
Subject to the supervision of the Board of Directors of the Company,
the Advisor provides overall investment management for the Fund, provides
research and credit analysis, is responsible for all purchases and sales of
portfolio securities, maintains books and records with respect to the Fund's
securities transactions and provides periodic and special reports to the Board
of Directors as requested. Investment decisions for the Fund's portfolio will be
made by a committee of portfolio managers employed by the Advisor.
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 1.00% of the average daily net assets of the Fund.
The Advisor may, from time to time, make payments to banks,
<PAGE>
broker-dealers or other financial institutions for certain services to the Fund
and/or its shareholders, including sub-administration, sub-transfer agency and
shareholder servicing. Such payments are made out of the Advisor's own resources
and do not involve additional costs to the Fund or its shareholders.
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 Fund. 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 Fund'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 their 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, computed daily and payable monthly at the rates 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
Fund 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 The 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.
<PAGE>
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 Fund has adopted a Distribution and Service Plan, pursuant to which
the Fund uses its assets to finance activities relating to the distribution of
its shares to investors and the provision of certain shareholder services (the
"Plan"). Under the Plan, the Distributor is paid a distribution and service fee
at an annual rate of up to 0.25% of the value of the Fund's average daily net
assets.
The Plan permits payments to be made by the Fund to the Distributor for
expenditures incurred by it in connection with the distribution of the Fund's
shares to investors and 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
Funds. The Distributor is also authorized to engage in advertising, the
preparation and distribution of sales literature and other promotional
activities on behalf of the Funds. In addition, the Plan authorizes payments by
the Fund of the cost of preparing, printing and distributing fund prospectuses
and statements of additional information to prospective investors and of
implementing and operating the Plan. Distribution expenses also include an
allocation of overhead of the Distributor and accruals for interest on the
amount of distribution expenses that exceed distribution fees and contingent
deferred sales charges received by the Distributor.
The Plan may be terminated at any time. The Plan provides that amounts
paid as prescribed by the Plan at any time may not cause the limitation on such
payments established by the Plan to be exceeded. The amount of daily
compensation payable to the Distributor with respect to each day will be accrued
each day as a liability of the Fund and will accordingly reduce the Fund's net
assets upon such accrual.
Payments under the Plan 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 Plan and its
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 Plan.
TAXES
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification generally relieves
<PAGE>
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 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.) The dividends received deduction for corporations will
apply to such distributions by the Fund to the extent of the total qualifying
dividends received by the distributing Fund from domestic corporations for the
taxable year and if other applicable tax 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 generally will have no
tax liability with respect to such gains, and the distributions will be taxable
to shareholders who are not currently exempt from Federal income taxes as long
term capital gains, no matter how long the shareholders have held their shares.
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 Fund, 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.
A taxable gain or loss may also be realized by a holder of shares in
the Fund upon the redemption, exchange or transfer of shares depending upon the
tax basis of the shares and their price at the time of the transaction.
<PAGE>
On an annual basis, the Fund will send written notices to record owners
of shares regarding the Federal tax status of distributions made by them.
Foreign Taxes
Income or gain from investments in foreign securities may be subject to
foreign withholding or other taxes. It is expected the Fund may be subject to
foreign withholding taxes with respect to income received from sources within
foreign countries.
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.
The foregoing summarizes some of the important tax considerations
generally affecting the Fund and its shareholders and is not intended as a
substitute for careful tax planning. State and local tax laws may differ from
the Federal laws summarized above. Accordingly, potential investors in the Fund
should consult their tax advisors with respect to their own tax situation.
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, The Net Net Fund and The Munder Money Market Fund, each of which is
classified as a diversified investment company under the 1940 Act. Each share of
the Fund has a par value of $.01 per share and represents a proportionate
interest in the assets of the Fund.
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
<PAGE>
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. The Fund is not required and do not currently intend to hold annual
meetings of shareholders for the election of Board members except as required
under the 1940 Act. A meeting of shareholders will be called upon the written
request of at least 10% of the outstanding shares of the Company. To the extent
required by law, the Fund will assist in shareholder communications in
connection with such a meeting. For a further discussion of the voting rights of
shareholders, see "Additional Information Concerning Shares" in the Statement of
Additional Information.
Reports to Shareholders
The Fund has eliminated 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 and 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 Fund may quote performance data for the Shares
in advertisements or in communications to shareholders. The total return 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 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.
Quotations of total return will reflect the fees for certain
distribution and shareholder services as described in this Prospectus.
The yield of shares in the Fund is computed based on the net income of
such Fund during a 30-day (or one month) period (which period will be identified
in connection with the particular yield quotation). More specifically, the
Fund's yield is computed by dividing the per share net income for the class
during a 30-day (or one-month) period by the maximum offering price per share on
the last day of the period and annualizing the results 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
<PAGE>
by independent services or other financial or industry publications that monitor
the performance of mutual funds, including, for example, Lipper Analytical
Services, Inc., 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 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 the 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
Shareholders may place purchase and redemption orders directly through
the Transfer Agent. See "How to Purchase Shares" and "How to Redeem Shares" for
more information. The Transfer Agent for the Fund is First Data Investor
Services Group, Inc.
Investment by Mail
Send the completed Account Application Form (if initial purchase) or
letter stating Fund name, shareholder's registered name and account number (if
subsequent purchase) with a check to:
First Data
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 Funds 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 "Investments by Mail."
Wire instructions must state the Fund name, the shareholder's registered name
and the shareholder account number. Bank wires should be sent through the
Federal Reserve Bank Wire System to:
<PAGE>
Boston Safe Deposit and Trust Company
Boston, MA
ABA#: 011001234
DDA#: 16-798-3
Account No.
(State Fund name, 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.
Redemptions by Telephone
Call the Fund at (800) 438-5789.
Redemptions by Mail
Send complete instructions, including amount of redemption,
shareholder's registered name, account number, and, if a certificate has been
issued, an endorsed share certificate, to:
First Data
The Munder Funds
P.O. Box 9755
Providence, Rhode Island 02940-9755
Additional Questions
Shareholders with additional questions regarding purchase and
redemption procedures may call the Fund at (800) 438-5789.
NET NET FUND PLEASE PRINT OR TYPE
PLEASE MAIL YOUR COMPLETED APPLICATION ALONG WITH YOUR CHECK TO:
Net Net Fund
c/o First Data Investor Services Group, Inc.
P.O. Box 9755
Providence, RI 02940-9755
If you have questions regarding this application, please
telephone the Transfer Agent at (800) 438-5789
PLEASE CHECK ONE: New Account Change to Existing Options -
Account Number:
1 ACCOUNT REGISTRATION
Name Social Security Number
Joint Owner (if any) (If Joint Tenancy, use Social
<PAGE>
Security of this joint owner)
OR
Uniform Transfer to Minor:
for:
Custodian Name (one custodian only) Minor's Name (one minor
only)
State (Custodian's State of Residence) Minor's Social Security
Number
OR
Trust Corporation Other (please specify)
Trust/Corporation Name
Trust Date Taxpayer Identification Number
2 MAILING ADDRESS
Street Apt.
City State Zip Code Telephone Number
Non-Resident Alien: Yes No
If Yes, Country of Residence
3 INITIAL INVESTMENT
Minimum investment of $1,000. Please be sure to read the prospectus carefully
before investing or sending money. You may request an additional prospectus by
calling (800) 438-5789.
INVESTMENT AMOUNT
By check (Payable to The Munder Funds)
By wire (Account number
assigned by Bank
from which assets
were wired).
*$50 per Fund if the Automatic Investment Plan Option is being established at
this time (please complete section 5).
<PAGE>
4 DISTRIBUTION OPTION
If adding this option to an already existing account, please complete Section
10 for a signature guarantee.
A. Reinvest dividends and capital gains in additional Fund
shares.
B. Pay dividends in cash; reinvest capital gains in
additional Fund shares.
C. Pay dividends and capital gains in cash.
D. Please send my: Dividends Dividends & Capital
Gains (choose one) directly to my checking/savings
account.
I(We) authorize the Net Net Fund to deposit distributions into the following
Checking OR Savings account:
Please Staple Void Check or Deposit Slip Here:
Print Name Address
ABA Number (Bank Routing Number) Account Number Bank Account
Registration
Wiring Instructions
5 AUTOMATIC INVESTMENT PLAN
YES, I(we) wish to participate in the Automatic Investment Plan
(AIP). I(We) authorize First Data Investor Services Group, Inc.
(First Data), the Net Net Fund transfer agent, to invest
automatically $ ($50 minimum) for me(us) on a: Monthly
OR Quarterly (Please choose either the 5th or the
20th of the month) basis and draw a bank draft in payment of each
of these investments against my(our) Checking OR Savings
account. For the purpose of verifying my(our) bank account number, I(we) have
enclosed a blank check or deposit slip marked void and have signed the bank
authorization below.
Name of Fund Checking/Savings Account Number ABA Number
(Bank
Routing
Number)
Please note that your bank will clear and process each bank draft and will
include it with your regular statement. However, acceptance of this
authorization is conditional upon approval of
<PAGE>
your authorization by your bank, which will allow First Data, the transfer agent
for the Net Net Fund, to act as your agent with regard to the Automatic
Investment Plan (AIP). The AIP will automatically terminate without notice if
any bank draft is not paid upon presentation by First Data, to your bank. The
AIP may be modified or terminated at any time, upon thirty (30)-days written
notice.
Signature of Depositor Date
Signature of Joint Depositor (if any) Date
Please Staple Void Check or Deposit Slip Here
6 TELEPHONE REDEMPTION
Please check the box if you want this option.
I (We) authorize First Data to act upon instructions received by
telephone from me (us) to redeem shares of the Net Net Fund.
1. I (We) relieve the Fund or First Data of any liability for the loss, cost or
expense for acting upon such instructions reasonably believed to be from me
(us).
2. I (We) assume responsibility for notifying the Fund within
seven (7) business days if a confirmation for the transaction is
not received or is incorrect.
3. Redemption proceeds will be sent only to my account address
of record.
Name Name
Account # Account #
Date Date
7 AUTHORIZATIONS, CERTIFICATIONS AND SIGNATURES
See Prospectus for complete information. By signing the application, I (we)
hereby certify under the penalty of perjury that the information on this
application is true, complete and correct and that:
(We) understand that this order is subject to acceptance by the
<PAGE>
Net Net Fund.
I (we) agree that the Net Net Fund, Funds Distributor, Inc., First Data, Munder
Capital Management or any of its affiliates, officers, directors or employees
will not be liable for any loss, expense or cost for acting upon instructions or
inquiries reasonably believed to be genuine. 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.
I (we) represent that I am (we are) of legal age and capacity and have read the
Prospectus for the Net Net Fund, and agree to its terms. First Data, is hereby
appointed agent to receive dividends and distributions for automatic
reinvestment unless otherwise directed in Section 4.
I also certify that:
This purchase is for personal investment purposes and the shares acquired
hereunder shall not be resold except through redemption by the Fund.
I (we) understand that this order is subject to acceptance by the Net Net Fund.
Please sign below exactly as the account is to be registered.
Corporation, etc. indicate titles:
Signature Date Name (please print)
Signature Date Name (please print)
8 TAXPAYER IDENTIFICATION
The Internal Revenue Service requires that all taxpayers provide their Taxpayer
Identification Numbers (Social Security Numbers) and sign in the space provided
in the section below. Failure by non-exempt taxpayers to furnish us with the
correct Taxpayer Identification Number will result in withholding of 31% of all
taxable dividends paid and/or withholding on certain other payments (this is
referred to as backup withholding). Please insert your Social Security Number or
Tax Identification Number in the space provided below as indicated by the
following table:
Type of Registration Tax I.D. Number to be Used
Individual Account Social Security # of Applicant
<PAGE>
Joint Account Social Security # of Either Person
Custodian Account for Minor Social Security # of Minor
Trust or Corporation Tax Identification Number
Taxpayer Identification:
I (the Investor) certify under penalties of perjury that:
(1) The Social Security Number or taxpayer identification number shown above is
correct and may be used for any custodial or trust account opened for me by the
Net Net Fund and
(2) I (the Investor) am not subject to backup withholding
because:
(a) I am exempt from Backup Withholding
(b) I have not been notified by the Internal Revenue
Service ("IRS") that I am, as a result of failure
to report all interest or dividends, or
(c) the IRS has notified me that I am no longer
subject to backup withholding.
The certification in this paragraph is required from all non-exempt persons to
prevent backup withholding of 31% of all taxable distribution and gross
redemption proceeds under the Federal income tax law.
Check here if you are subject to backup withholding or have not
received a notice from the IRS advising you that backup withholding has been
terminated.
Authorization:
Signature of Owner Date Title (if signing for
corporation, trusts,
etc.)
Signature of Joint Owner Date Title (if signing for
corporation, trusts,
etc.)
9 SIGNATURE GUARANTEE
If the following option is being established on an existing account, the
shareholder(s) signature(s) need(s) to be signature guaranteed.
Eligible guarantor institutions generally include banks, broker/dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations:
<PAGE>
Option #4 - Distribution Option
Signature of Guaranteed (if required) Name of Guarantor
Shares of the Munder Funds are not deposits or obligations of, or guaranteed or
endorsed by any bank, and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency. All
mutual fund shares involve certain investment risks, including the possible loss
of
principal.
<PAGE>
NET NET FUND
STATEMENT OF ADDITIONAL INFORMATION
The Net Net Fund (the "Fund") is currently one of seven 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 Prospectus dated August __, 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
Company's Prospectuses dated August __, 1996. The contents of this Statement of
Additional Information are incorporated by reference in the Prospectus in their
entirety. A copy of the Prospectus may be obtained through Funds Distributor,
Inc. (the "Distributor"), or by calling (800) 438- 5789. This Statement of
Additional Information is dated August __, 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.
TABLE OF CONTENTS
General.............................................................. __
Fund Investments..................................................... __
Additional Investment Limitations.................................... __
Directors and Officers............................................... __
Investment Advisory and Other Service Arrangements................... __
Portfolio Transactions............................................... __
Purchase and Redemption Information.................................. __
Net Asset Value...................................................... __
Performance Information.............................................. __
Taxes................................................................ __
Additional Information Concerning Shares............................. __
Miscellaneous........................................................ __
Registration Statement............................................... __
Appendix............................................................. __
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectus in connection with the offering made by the Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized
<PAGE>
by the Funds or the Distributor. The Prospectus does not constitute an offering
by the Fund or by the Distributor in any jurisdiction in which such offering may
not lawfully be made.
GENERAL
The Company was organized as a Maryland corporation on November 18,
1992.
As stated in the Prospectus, the investment advisor of the
Fund is Munder Capital Management (the "Advisor"). The principal
partners of the Advisor are Old MCM, Inc., Munder Group LLC,
Woodbridge Capital Management, Inc. ("Woodbridge") and WAM
Holdings, Inc. ("WAM"). Mr. Lee P. Munder, the Advisor's Chief
Executive Officer, indirectly owns or controls a majority of the
partnership interests of the Advisor. Capitalized terms used
herein and not otherwise defined have the same meanings as are
given to them in the Prospectus.
FUND INVESTMENTS
The following supplements the information contained in the Prospectus
concerning the investment objective and policies of the Fund.
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 Investment Company Act of 1940, as amended (the "1940 Act") to
meet redemption requests. This borrowing may be unsecured. The 1940 Act requires
the Fund to maintain continuous asset coverage of 300% of the amount borrowed.
If the 300% asset coverage should decline as a result of market fluctuations or
other reasons, 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 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 a minimum average balance 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.
Foreign Securities. The Fund may invest in securities of
foreign issuers. The Fund typically will only purchase foreign
securities which are represented by American Depositary Receipts
("ADRs") listed on a domestic securities exchange or included in
<PAGE>
the NASDAQ National Market System, or foreign securities listed directly on a
domestic securities exchange or included in the NASDAQ National Market System.
ADRs are receipts typically issued by a United States bank or trust company
evidencing ownership of the underlying foreign securities. Certain such
institutions issuing ADRs may not be sponsored by the issuer. A non-sponsored
depositary may not provide the same shareholder information that a sponsored
depositary is required to provide under its contractual arrangements with the
issuer.
Income and gains on such securities may be subject to foreign
withholding taxes. 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.
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
<PAGE>
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 within the Fund 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.
<PAGE>
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. 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 foreign currency exchange contract for the
amount of the purchase or sale price to protect against variations, between the
date the security is purchased or sold and the date on which payment is made or
received, in the value of the foreign currency relative to the U.S. dollar or
other foreign currency.
When the Advisor anticipates that a particular foreign currency may
decline substantially relative to the U.S. dollar or other leading currencies,
in order to reduce risk, the Fund may enter into a forward contract to sell, for
a fixed amount, the amount of foreign currency approximating the value of some
or all of the Fund's securities denominated in such foreign currency. Similarly,
when the obligations held by 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 foreign currency contract, it will not generally be possible to
match precisely the amount covered by that contract and the value of the
securities involved due to the changes in the values of such securities
resulting from market movements between the date the forward contract is entered
into and the date it matures. In addition, while forward contracts may offer
protection from losses resulting from declines or appreciation in the value of a
particular foreign currency, they also limit potential gains which might result
from changes in the value of such currency. The Fund will also incur costs in
connection with forward foreign currency exchange contracts and conversions of
foreign currencies and U.S. dollars.
A separate account consisting of cash or liquid securities equal to the
amount of the Fund's assets that could be required to consummate forward
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)
<PAGE>
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 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 securities or securities indices,
and may purchase and sell call and put options on futures contracts. For a
detailed description of futures contracts and related options, see the Appendix
to this Statement of Additional Information.
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.
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 the Fund's 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
<PAGE>
with broker-dealers, banks or other institutions which the Advisor has
determined are creditworthy under guidelines established by the Boards of
Directors.
Money Market Instruments. As described in its 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 the 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 Corporation or Moody's
Investors Service, Inc. 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 will invest
in variable amount master notes only when the Advisor deems the investment to
involve minimal credit risk.
Non-Domestic Bank Obligations. Non-domestic bank
<PAGE>
obligations include Eurodollar Certificates of Deposit ("ECDs"), which are U.S.
dollar-denominated certificates of deposit issued by offices of foreign and
domestic banks located outside the United States; Eurodollar Time Deposits
("ETDs"), which are U.S. dollar-denominated deposits in a foreign branch of a
U.S. bank or a foreign bank; Canadian Time Deposits ("CTDs"), which are
essentially the same as ETDs except they are issued by Canadian offices of major
Canadian banks; Schedule Bs, which are obligations issued by Canadian branches
of foreign or domestic banks; Yankee Certificates of Deposit ("Yankee CDs"),
which are U.S. dollar-denominated certificates of deposit issued by a U.S.
branch of a foreign bank and held in the United States; and Yankee Bankers'
Acceptances ("Yankee BAs"), which are U.S. dollar-denominated bankers'
acceptances issued by a U.S. branch of a foreign bank and held in the United
States.
Options. The Fund may write covered call options, buy put options, buy
call options and write secured put options in an amount not exceeding 5% of its
net assets. Such options may relate to particular securities and may or may not
be listed on a national securities exchange and issued by the Options Clearing
Corporation. Options trading is a highly specialized activity which entails
greater than ordinary investment risk. Options on particular securities may be
more volatile than the underlying securities, and therefore, on a percentage
basis, an investment in options may be subject to greater fluctuation than an
investment in the underlying securities themselves.
A call option for a particular security gives the purchaser of the
option the right to buy, and a writer the obligation to sell, the underlying
security at the stated exercise price at any time prior to the expiration of the
option, regardless of the market price of the security. The premium paid to the
writer is in consideration for undertaking the obligations under the option
contract. A put option for a particular security gives the purchaser the right
to sell the underlying security at the stated exercise price at any time prior
to the expiration date of the option, regardless of the market price of the
security.
The writer of an option that wished to terminate its obligation may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after being notified of the exercise of an option. Likewise, an investor who is
the holder of an option may liquidate its position by effecting a "closing sale
transaction." The cost of such a closing purchase plus transaction costs may be
greater than the premium received upon the original option, in which event the
Fund will have incurred a loss in writing the option contract. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected.
<PAGE>
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.
The Fund will write call options only if they are "covered." In the
case of a call option on a security, the option is "covered" if the 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 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
<PAGE>
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 5% 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 Funds' custodian in
an amount not less than the exercise price of the option at all times during the
option period.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the position or take
delivery of the security at the exercise price and the Fund's return will be the
premium received from the put option minus the amount by which the market price
of the security is below the exercise price.
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
<PAGE>
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.
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.
The Fund will not write covered call options against more than 30% of
the value of the equity securities held in the portfolio.
Repurchase Agreements. The Fund may agree to purchase
securities from financial institutions such as banks and non-bank
<PAGE>
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 a 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 depositary. Repurchase
agreements are considered to be loans by a Fund under the 1940 Act.
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.
Stock Index Futures, Options on Stock and Bond Indices and Options on
Stock and Bond Index Futures Contracts. The Fund may purchase and sell stock
index futures, options on stock and bond indices and options on stock and bond
index futures contracts as a hedge against movements in the equity and bond
markets.
A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of securities is made.
<PAGE>
Options on stock and 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 stock or
bond index gives the holder the right to receive, upon exercise of the option,
an amount of cash if the closing level of that stock or 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
stock or bond indices are in cash, and gain or loss depends on general movements
in the stocks included in the index rather than price movements in particular
stocks.
If the Advisor expects general stock or bond market prices to rise, it
might purchase a stock index futures contract, or a call option on that index,
as a hedge against an increase in prices of particular securities it ultimately
wants to buy. If in fact the index does rise, the price of the particular
securities intended to be purchased may also increase, but that increase would
be offset in part by the increase in the value of the Fund's futures contract or
index option resulting from the increase in the index. If, on the other hand,
the Advisor expects general stock or 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 stock or 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 stock and bond index futures, rather than selling futures
contracts, in anticipation of a decline in general stock or bond market prices
or purchase call options or write put options on stock or 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 stock or bond index futures, stock
or bond index options and options on stock index or 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.
<PAGE>
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.
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 includes 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.
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 with respect to a particular Fund only by a vote of
the holders of a majority of the Fund's outstanding shares (as defined under
"Miscellaneous - Shareholder Approvals").
The Fund may not:
1. With respect to 75% 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;
2. Borrow money or issue senior securities (as defined in
the 1940 Act) except that Fund may borrow (i) for
temporary purposes in amounts not exceeding 5% of its
<PAGE>
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 including the amount
borrowed;
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, 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 foreign
currency exchange contracts, financial futures
contracts and options on financial futures contracts,
foreign currency futures contracts, and options on
securities, foreign currencies and securities indices,
as permitted by the Fund's prospectus.
Additional investment restrictions adopted by the Fund, which may be
changed by the Board of Directors, provide that the Fund may not:
1. Invest more than 15% of its total assets in illiquid
securities;
<PAGE>
2. Own more than 10% (taken at market value at the time of
purchase) of the outstanding voting securities of any
single issuer;
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 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>
<S> <C> <C>
Principal Occupation
Name, Address and Age Positions with Company During Past Five Years
Charles W. Elliott 1/ Chairman of the Board of Senior Advisor to the
3338 Bronson Boulevard Directors President and Interim
Kalmazoo, MI 490008 Director of Athletics
Age: 62 -Western Michigan
University since July
1995; prior to that
Executive Vice President
Administration &
Chief Financial Officer,
Kellogg Company from
January 1987 through June
1995; before that Price
Waterhouse. Board of
Directors, Steelcase
Financial Corporation.
John Rakolta, Jr. Director and Vice Chairman, Walbridge
1876 Rathmor Chairman of the Aldinger Company
Bloomfield Hills, MI Board
48304
Age: 47
Thomas B. Bender Director Investment Advisor,
7 Wood Ridge Road Financial & Investment
Glen Arbor, MI 49636 Management Group (since
Age: 61 April, 1991); Vice
President Institutional
Sales, Kidder, Peabody &
Co. (Retired April, 1991).
David J. Brophy Director Professor, University of
1025 Martin Place Michigan; Director, River
Ann Arbor, MI 48104 Place Financial Corp.;
Age: 58 Trustee, Renaissance Assets
Trust.
Dr. Joseph E. Champagne Director Corporate and Executive
319 Snell Road Consultant since September
Rochester, MI 48306 1995; prior to that
Age: 56 Chancellor, Lamar
University from September
1994 until September 1995;
before that Consultant to
Management, Lamar
University; President and
Chief Executive Officer,
Crittenton Corporation,
Crittenton Development
Corporation until August
1993; before that
President, Oakland
University of Rochester,
MI, until August 1991;
Member, Board of Directors,
Ross Operating Valve of
Troy, MI
Thomas D. Eckert Director President and COO, Mid-
10726 Falls Pointe Drive Atlantic Group of Pulte
Great Falls, VA 22066 Home Corporation
Age: 47
<PAGE>
Principal Occupation
Name, Address and Age Positions With Company During Past Five Years
Jack L. Otto Director Retired; Director of
6532 W. Beech Tree Road Standard Federal Bank;
Glen Arbor, MI 49636 Executive Director,
Age: 67 McGregor Funds (a private
philanthropic foundation)
1981-1985; Managing
Partner, Detroit officer
of Ernst & Young, until
1981.
Arthur DeRoy Rodecker Director President, Rodecker &
4000 Town Center Company, Investment
Suite 101 Brokers, Inc. since
Southfield, MI 48075 November 1976; President,
Age: 68 RAC Advisors, Inc.,
Registered Investment
Advisor since
February 1979;
President and Trustee,
Helen L. DeRoy
Foundation, a charitable
foundation; Vice President
and Trustee, DeRoy
Testamentary Foundation,
a charitable foundation;
Trustee, Providence
Hospital Foundation
Lee P. Munder President President and CEO of the
480 Pierce Street Advisor; Chief Executive
Suite 300 Officer and President of
Birmingham, MI 48009 old MCM, Inc.; Director,
Age: 50 LPM Investment Services,
Inc. ("LPM")
Terry H. Gardner Vice President, Vice President and Chief
480 Pierce Street Chief Financial Financial Officer of the
Suite 300 Officer and Treasurer Advisor; Vice President and
Birmingham, MI 48009 Chief Financial Officer of
Age: 35 Old MCM, Inc. (February
1993 to present)
Audit Manager Arthur
Andersen & Co. (1991 to
February 1993); Secretary
of LPM
Paul Tobias Vice President Executive Vice President
480 Pierce Street and Chief Operating Officer
Suite 300 of the Advisor (since April
Birmingham, MI 48009 1995) and Executive Vice
Age: 43 President of Comerica, Inc.
Gerald Seizert Vice President Executive Vice President
480 Pierce Street and Chief Investment
Suite 300 Officer/Equities of the
Birmingham, MI 48009 Advisor (since April 1995);
Age: 44 Managing Director (1991-
1995), Director (1992-1995)
and Vice President (1984-
1991) of Loomis, Sayles and
Company, L.P.
<PAGE>
Principal Occupation
Name, Address and Age Positions With Company During Past Five Years
Elyse G. Essick Vice President Vice President and
480 Pierce Street Director of Marketing for
Suite 300 the Advisor; Vice
Birmingham, MI 48009 President and Director of
Age: 37 Old MCM, Inc. (August 1988
to December 1994).
James C. Robinson Vice President Vice President and Chief
480 Pierce Street Investment Officer/Fixed
Suite 300 Income for the Advisor;
Birmingham, MI 48009 Vice President and
Age: 34 Director of Fixed Income
of Old MCM, Inc. (1987-
1994).
Leonard J. Barr, II Vice President Vice President and
480 Pierce Street Director of Core Equity
Suite 300 Research of the Advisor;
Birmingham, MI 48009 Director and Senior Vice
Age: 51 President of Old MCM, Inc.
(since 1988); Director of
LPM.
Lisa A. Rosen Secretary General Counsel of the
480 Pierce Street Advisor since May, 1996;
Suite 300 Formerly Counsel, First
Birmingham, MI 48009 First Data Investor
Services Group, Inc.;
Assistant Vice President
and Counsel with The
Boston Company Advisors,
Inc.; Associate with
Hutchins, Wheeler &
Dittmar.
Ann F. Putallaz Vice President Vice President and
480 Pierce Street Director of Fiduciary
Suite 300 Services (since January
Birmingham, MI 48009 1995); Director of Client
Age: 50 and Marketing Services of
Woodbridge Capital
Management, Inc.
Richard H. Rose Assistant Treasurer Senior Vice President,
First Data Investor Services First Data Investor
Group, Inc. Services Group, Inc.
One Exchange Place (since May 6, 1994).
6th Floor Formerly, Senior Vice
Boston, MA 02109 President, The Boston
Age: 39 Company Advisors, Inc.
since November 1989.
1/ Director is an "interested person" of the Company as defined in the 1940 Act.
</TABLE>
Directors of the Company receive an aggregate fee from the Company and
The Munder Funds Trust (the "Trust") comprised of an annual retainer fee, and a
fee for each Board meeting attended; and are reimbursed for all out-of-pocket
expenses relating to attendance at meetings.
The following table summarizes the compensation paid by the Trust and
the Company to the Trustees of the Trust and Directors of the Company for the
fiscal year ended June 30, 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Aggregate Pension
Compensation Retirement Estimated
from the Benefits Accrued Annual Total
Trust and as Part of Benefits from the
Name of Person Position Company Fund Expenses upon Retirement Fund Complex
Charles W. Elliott $4,500.00 None None $4,500.00
Chairman
John Rakolta, Jr. $7,000.00 None None $7,000.00
Vice Chairman
Thomas B. Bender $4,500.00 None None $4,500.00
David J. Brophy $7,000.00 None None $7,000.00
Trustee and Director
Dr. Joseph E. Champagne $4,500.00 None None $4,500.00
Trustee and Director
Thomas D. Eckert $7,000.00 None None $7,000.00
Trustee and Director
Jack L. Otto $4,500.00 None None $4,500.00
Trustee and Director
Arthur DeRoy Rodecker $4,500.00 None None $4,500.00
Truste 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 Trust or the Company.
The Company will not employ Rodecker & Company, Investment
Brokers, Inc. to effect brokerage transactions for the Funds.
INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS
Investment Advisor. The Advisor of the Fund is Munder Capital
Management, a Delaware general partnership. The general partners of the Advisor
are Woodbridge, WAM, Old MCM, and Munder Group, LLC. Woodbridge and WAM are
wholly-owned subsidiaries of Comerica Bank -- Ann Arbor, which, in turn is a
wholly-owned subsidiary of Comerica Incorporated, a publicly-held bank holding
company.
Under the terms of the Advisory Agreement, the Advisor furnishes
continuing investment supervision to the Fund and is responsible for the
management of the Fund's portfolio. The responsibility for making decisions to
buy, sell or hold a particular security rests with the Advisor, subject to
review by the Company's Board of Directors.
For the advisory services provided and expenses assumed by it, the
Advisor has agreed to a fee from the Fund, computed daily and payable monthly,
at an annual rate of 1.00% of average daily net assets of the Fund;
<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 with respect to the Fund for such year. Such amount
borne will be limited to the amount of the fees paid to them for the applicable
period with respect to the Fund. As of the date of this Statement of Additional
Information, the most restrictive expense limitation applicable to the Fund
limits its aggregate annual expenses, including management and advisory fees but
excluding interest, taxes, brokerage commissions, and certain other expenses, to
2-1/2% of the first $30 million of its average net assets, 2% of the next $70
million, and 1-1/2% of its remaining average net assets.
The Fund's Advisory Agreement will continue in effect for a period of
two years from its effective date. If not sooner terminated, the Advisory
Agreement will continue in effect for successive one year periods thereafter,
provided that each continuance is specifically approved annually by (a) the vote
of a majority of the Board of Directors who are not parties to the Advisory
Agreement or interested persons (as defined in the 1940 Act), cast in person at
a meeting called for the purpose of voting on approval, and (b) either (i) the
vote of a majority of the outstanding voting securities of the Fund, or (ii) the
vote of a majority of the Board of Directors. The Advisory Agreement is
terminable by vote of the Board of Directors, or by the holders of a majority of
the outstanding voting securities of the Fund, at any time without penalty, on
60 days' written notice to the Advisor. The Advisor may also terminate its
advisory relationship with the Fund without penalty on 90 days' written notice
to the Company. The Advisory Agreement terminates automatically in the event of
its assignment (as defined in the 1940 Act).
Distribution Agreement. The Company has entered into a distribution
agreement, under which the Distributor, as agent, sells shares of the Fund on a
continuous basis. The Distributor has agreed to use appropriate efforts to
solicit orders for the purchase of shares of the Fund, although it is not
obligated to sell any particular amount of shares. The Distributor pays the cost
of printing and distributing prospectuses to persons who are not holders of
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 60 State
Street, Boston, Massachusetts 02109.
Distribution Services Arrangements. The Fund has adopted a
Distribution and Service Plan with respect to its shares pursuant
to which it uses its assets to finance activities relating to the
<PAGE>
distribution of its shares to investors and provision of certain shareholder
services. Under the Distribution and Service Plan, the Distributor is paid an
annual service fee at the rate of 0.25% of the value of average daily net assets
of the Fund.
Under the terms of the Distribution and Service Plan, the Plan
continues from year to year, provided such continuance is approved annually by
vote of the Board of Directors, including a majority of the Board of Directors
who are not interested persons of the Company, and who have no direct or
indirect financial interest in the operation of the Plan (the "Non-Interested
Plan Directors"). The Plan may not be amended to increase the amount to be spent
for the services provided by the Distributor without shareholder approval, and
all amendments of the Plan also must be approved by the Directors in the manner
described above. The Plan may be terminated at any time, without penalty, by
vote of a majority of the Non-Interested Plan Directors or by a vote of a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) on not more than 30 days' written notice to any other party to the
Plan. Pursuant to the Plan, the Distributor will provide the Board of Directors
periodic reports of amounts expended under the Plan and the purpose for which
such expenditures were made.
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 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 to a custodian agreement ("Custody
Agreement") with the Company. Under the Custody Agreement, the
<PAGE>
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 Fund.
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."
Other Information Pertaining to Distribution, Administration, Custodian
and Transfer Agency Agreements. As stated in the Prospectus, the Administrator
and Transfer Agent each receives, as compensation for its services, fees from
the Fund based on the aggregate average daily net assets of the Fund 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
the Company or the Advisor. The Board also considered its responsibility under
federal and state law in approving these agreements.
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 Fund 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
<PAGE>
million. Comerica Bank also receives certain transaction based
fees.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board Members, 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.
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 interests.
In its Advisory Agreements, 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 Agreements
authorize 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
<PAGE>
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.
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 the Prospectuses and this Statement of Additional
Information the Fund's service contractors bear all expenses in connection with
the performance of its 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 directors; taxes; interest; legal and auditing fees; brokerage fees
and commissions; certain fees and
<PAGE>
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 determine 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 Prospectus, 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.
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,
<PAGE>
quarterly, semi-annually, or annually, for accounts with a value of $2,500 or
more. Checks are mailed on or about the 10th of each designated month. All
certified shares must be placed on deposit under the plan and dividends and
capital gain distributions, if any, are automatically reinvested at net asset
value for shareholders participating in the plan. If the checks received by a
shareholder through the systematic withdrawal plan exceed the dividends and
capital appreciation of the shareholder's account, the systematic withdrawal
plan will have the effect of reducing the value of the account. Any gains and/or
losses realized from redemptions through the systematic withdrawal plan are
considered a taxable event by the Internal Revenue Service and must be reported
on the shareholders' income tax return. Shareholders should consult with a tax
advisor for information on their specific financial situations. At the time of
initial investment, a shareholder may request that the check for the systematic
withdrawal be sent to an address other than the address of record. The address
to which the payment is mailed may be changed by submitting a written request,
signed by all registered owners, with their signatures guaranteed. Shareholders
may add this option after the account is already established or change the
amount on an existing account by calling the Fund at (800) 438-5789. The Fund
may terminate the plan on 30 days' written notice to the shareholder.
Other Information. The Fund reserves the right to suspend or postpone
redemptions during any period when: (i) trading on the New York Stock Exchange
is restricted, as determined by the SEC, or the New York Stock Exchange is
closed for other than customary weekend and holiday closings; (ii) the SEC has
by order permitted such suspension or postponement for the protection of
shareholders; or (iii) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable.
The Fund may involuntarily redeem an investor's shares if the net asset
value of such shares is less than $500; provided that involuntary redemptions
will not result from fluctuations in the value of an investor's shares. A notice
of redemption, sent by first-class mail to the investor's address of record,
will fix a date not less than 30 days after the mailing date, and shares will be
redeemed at the net asset value at the close of business on that date unless
sufficient additional shares are purchased to bring the aggregate account value
up to $500 or more. A check for the redemption proceeds payable to the investor
will be mailed to the investor at the address of record.
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
<PAGE>
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 the Prospectus. For further information about this form of payment
please contact the Transfer Agent. In connection with an in-kind securities
payment, the Fund will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by the
Fund and that the Fund receive satisfactory assurances that (1) it will have
good and marketable title to the securities received by it; (2) that the
securities are in proper form for transfer to the Fund; and (3) adequate
information will be provided concerning the basis and other tax matters relating
to the securities.
PERFORMANCE INFORMATION
The Fund, in advertising its "average annual total return" computes its
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:
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, in advertising its "aggregate total return" computes its
returns 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:
<PAGE>
(ERV) - 1
Aggregate Total Return = P
The calculations are made assuming that (1) all dividends and capital
gain distributions are reinvested on the reinvestment dates at the price per
share existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all non-recurring charges at the end of the
measuring period.
The performance of any investment is generally a function of portfolio
quality and maturity, type of investment and operating expenses.
From time to time, in advertisements or in reports to shareholders, the
Fund's total returns may be quoted and compared to those of other mutual funds
with similar investment objectives and to stock or other relevant indices.
TAXES
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the Fund's
Prospectus. 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
Prospectus is not intended as a substitute for careful tax planning. Potential
investors should consult their tax Advisors with specific reference to their own
tax situations.
General. The Fund will elect to be taxed separately 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 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,
<PAGE>
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 the
Fund has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which the Fund does not hold more than 10%
of the outstanding voting securities of such issuer) and no more than 25% of the
value of the Fund's total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses.
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 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.
In the case of corporate shareholders, distributions of the
Fund for any taxable year generally qualify for the dividends
<PAGE>
received deduction to the extent of the gross amount of "qualifying dividends"
received by the Fund for the year and if certain holding period requirements are
met. Generally, a dividend will be treated as a "qualifying dividend" if it has
been received from a domestic corporation.
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
<PAGE>
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.
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 of income or gain
that the Fund must distribute to their respective 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." 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 hold 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 "mixed 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 futures
contracts which are part of a "mixed straddle" to sell related options, and
certain foreign currency contracts which are properly identified
<PAGE>
as such, the Fund may make an election which will exempt (in whole or in part)
those identified futures contracts, options and foreign currency contracts from
the Rules of Section 1256(g) of the Code including "the 40%-60% rule" and the
mark-to-market on gains and losses being treated for Federal income tax purposes
as sold on the last business day of the Fund's taxable year, but gains and
losses will be subject to such short sales, wash sales and loss deferral rules
and the requirement to capitalize interest and carrying charges. Under Temporary
Regulations, the Fund would 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. As
of the date of this Statement of Additional Information, the Treasury Department
has not issued any such regulations. Other foreign currency contracts entered
into by a 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. The
<PAGE>
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 Funds 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.
The Fund may be subject to U.S. Federal income tax on a portion of any
"excess distribution" or a gain from the distribution of passive foreign
investment companies.
ADDITIONAL INFORMATION CONCERNING SHARES
In the event of a liquidation or dissolution of the Company or the Fund,
shareholders of the Fund would be entitled to receive the assets available for
distribution belonging to the Fund, and a proportionate distribution, based upon
the relative net asset value of the Fund, of any general assets not belonging to
the Fund which are available for distribution. Shareholders of the Fund are
entitled to participate in the net distributable assets of the Fund, based on
the number of shares of the Fund that are held by each shareholder.
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 Boards 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
<PAGE>
matter. The Fund is affected by a matter unless it is clear that the interests
of the Fund in the matter are substantially identical to the interests of other
portfolios of the Company or that the matter does not affect any interest of the
Fund. Under the Rule, the approval of an investment advisory agreement or any
change in a fundamental investment policy would be effectively acted upon with
respect to the Fund only if approved by a majority of the outstanding shares of
the Fund. However, the Rule also provides that the ratification of the
appointment of independent auditors, the approval of principal underwriting
contracts and the election of trustees may be effectively acted upon by
shareholders of the Company voting together in the aggregate without regard to a
particular portfolio.
Shares of the Company have noncumulative voting rights and, accordingly,
the holders of more than 50% of the Company's outstanding shares 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 the 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.
<PAGE>
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 shareholder of the Fund.
Shareholder Approvals. As used in this Statement of Additional
Information and in the 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 are present in person or by proxy, or (b) more than 50% of the outstanding
shares of the Fund.
REGISTRATION STATEMENT
This Statement of Additional Information and the Fund's Prospectus do
not contain all the information included in the Fund's registration statement
filed with the SEC under the 1933 Act with respect to the securities offered
hereby, certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The registration statement, including the exhibits filed
therewith, may be examined at the offices of the SEC in Washington, D.C.
Statements contained herein and in the Fund's Prospectus as to the
contents of any contract of other documents referred to are not necessarily
complete, and, in such instance, reference is made to the copy of such contract
or other documents filed as an exhibit to the Fund's registration statement,
each such statement being qualified in all respect by such reference.
APPENDIX
As stated in the Prospectus, the Fund may enter into certain
futures transactions and options for hedging purposes. Such
<PAGE>
transactions are described in this Appendix.
I. 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.
A stock index assigns relative values to the stocks included in the
index and the index fluctuates with changes in the market values of the stocks
included. Some stock index futures contracts are based on broad market indexed,
such as the Standard & Poor's 500 or the New York Stock Exchange Composite
Index. In contrast, certain exchanges offer futures contracts on narrower market
indexes, such as the Standard & Poor's 100 or indexes based on an industry or
market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated by the
Commodity Futures Trading Commission. Transactions on such exchanges are cleared
through a clearing corporation, which guarantees the performance of the parties
to each contract.
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
<PAGE>
time of sale.
Examples of Stock Index Futures Transactions. The following
are examples of transactions in stock index futures (net of
commissions and premiums, if any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
Portfolio Futures
-Day Hedge is Placed-
Anticipate buying $62,500 in Buying 1 Index Futures at 125
Equity Securities Value of Futures =
$62,500/Contract
-Day Hedge is Lifted-
Buy Equity Securities with Actual Sell 1 Index Futures at 130 Cost = $65,000
Value of Futures = Increase in Purchase Price = $65,000/Contract $2,500 Gain on
Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000 Value of Futures Contract - 125 x $500 =
$62,500 Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
-Day Hedge is Placed-
Anticipate Selling $1,000,000 in Sell 16 Index Futures at 125
Equity Securities Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Securities - Own Stock Buy 16 Index Futures at 120
with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
II. Margin Payments
Unlike purchase or sales of portfolio securities, no price is paid or
received by 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 margin in security transactions
in that futures contract margin does not involve the borrowing of funds by the
customer to
<PAGE>
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.
III. 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 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
<PAGE>
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.
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
<PAGE>
futures. Although the Fund intends 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 Advisor'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.
IV. 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
<PAGE>
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.
V. Other Matters
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
---------------------------------
(a) 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 Net Net Fund.
(b) Exhibits (the number of each exhibit relates to the
exhibit designation in Form N-1A):
(1) (a) Articles of Incorporation1
<PAGE>
(b) Articles of Amendment2
(c) Articles Supplementary3
(d) Articles Supplementary4
(e) Articles Supplementary9
(f) Articles Supplementary with respect to The
Munder Value Fund and The Munder Mid-Cap
Growth Fund*
(g) Articles Supplementary with respect to The
Munder International Bond Fund and the Net
Net Fund*
(2) By-Laws1
(3) Not Applicable
(4) Specimen security for The Munder Multi-
Season Growth Fund2
(5) (a) Form of Investment Advisory Agreement for
The Munder Multi-Season Growth Fund7
(b) Form of Investment Advisory Agreement for
The Munder Money Market Fund7
(c) Form of Investment Advisory Agreement for
The Munder Real Estate Equity Investment
Fund7
(d) 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*
(g) Form of Investment Advisory Agreement for
The Net Net 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
<PAGE>
(d) Notice to Underwriting Agreement with respect
to The Net Net 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*
(c) Notice to Custodian Contract with respect to
The Munder International Bond Fund*
(d) Notice to Custodian Contract with respect to
The Net Net Fund*
(e) Form of Subcustodian Agreement*
(f) Notice to Subcustody Agreement with respect
to The Munder Value Fund and The Munder Mid-
Cap Growth Fund*
(g) Notice to Subcustody Agreement with respect
to The Munder International Bond Fund*
(h) Notice to Subcustody Agreement with respect
to The Net Net Fund*
(9) (a) Form of Transfer Agency and Service
Agreement
(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 Service
Agreement with respect to The Munder
International Bond Fund*
(d) Notice to Transfer Agency and Service
Agreement with respect to The Net Net Fund*
(e) Form of Administration Agreement8
(f) Notice to Administration Agreement with
respect to The Munder Value and The Munder
Mid-Cap Growth Fund*
(g) Notice to Administration Agreement with
respect to The Munder International Bond
Fund*
<PAGE>
(h) Notice to Administration Agreement with
respect to The Net Net Fund*
(10) (a) Opinion and Consent of Counsel with respect
to The Munder Multi-Season Growth Fund2
(b) Opinion and Consent of Counsel with respect
to The Munder Money Market Fund5
(c) Opinion and Consent of Counsel with respect
to The Munder Real Estate Equity Investment
Fund4
(d) Opinion and Consent of Counsel with respect
to The Munder Value Fund and The Munder Mid-
Cap Growth Fund*
(e) Opinion and Consent of Counsel with respect
to The Munder International Bond Fund*
(f) Opinion and Consent of Counsel with respect
to The Net Net Fund*
(11) (a) Consent of Dechert Price & Rhoads11
(b) Consent of Ernst & Young LLP11
(c) Consent of Arthur Andersen LLP11
(d) Letter of Arthur Andersen LLP regarding
change in independent auditor required by
Item 304 of Regulation S-K.11
(e) Powers of Attorney10
(13) Initial Capital Agreement2
(14) Not Applicable
(15) (a) Service Plan for The Munder Multi-Season
Growth Fund Class A Shares7
(b) Service and Distribution Plan for The Munder
Multi-Season Growth Fund Class B Shares7
(c) Service and Distribution Plan for The Munder
Multi-Season Growth Fund Class D Shares7
(d) Service Plan for The Munder Money Market
Fund Class A Shares7
(e) Service and Distribution Plan for The Munder
Money Market Fund Class B Shares7
<PAGE>
(f) Service and Distribution Plan for The Munder
Money Market Fund Class D Shares7
(g) Service Plan for The Munder Real Estate
Equity Investment Fund Class A Shares7
(h) Service and Distribution Plan for The Munder
Real Estate Equity Investment Fund Class B
Shares7
(i) Service and Distribution Plan for The Munder
Real Estate Equity Investment Fund Class D
Shares7
(j) Form of Service Plan for The Munder Multi-
Season Growth Fund Investor Shares8
(k) Form of Service Plan for The Munder Value
Fund and The Munder Mid-Cap Growth Fund*
(l) Form of Service Plan for The Munder
International Bond Fund*
(m) Distribution and Service Plan for Class A
Shares for The Munder Value Fund*
(n) Distribution and Service Plan for Class B
Shares for The Munder Value Fund*
(o) Distribution and Service Plan for Class C
Shares for The Munder Value Fund*
(p) Distribution and Service Plan for Class A
Shares of The Munder Mid-Cap Growth Fund*
(q) Distribution and Service Plan for Class B
Shares of The Munder Mid-Cap Growth Fund*
(r) Distribution and Service Plan for Class C
Shares of The Munder Mid-Cap Growth Fund*
(s) Distribution and Service Plan for Class A
Shares of The Munder International Bond
Fund*
(t) Distribution and Service Plan for Class B
Shares of The Munder International Bond
Fund*
(u) Distribution and Service Plan for Class C
Shares of The Munder International Bond
Fund*
(v) Form of Distribution and Service Plan for
The Net Net Fund*
(16) Schedule for Computation of Performance
<PAGE>
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.
<PAGE>
--------------------------------------------------
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:
Class A Class B Class C Class K Class Y
-------------------------------------------
The Munder Multi-Season Growth Fund 382 1624 6 145 85
The Munder Money Market Fund 15 9 1 0 73
The Munder Real Estate Equity 13 8 4 1 28
Investment Fund
The Munder Mid-Cap Growth Fund 4 13 2 2 22
The Munder Value Fund 2 16 2 3 11
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
-------------------------
<PAGE>
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
<PAGE>
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, Waterhouse Investors Cash Management
d/b/a Harris Insight Funds 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
<PAGE>
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
<PAGE>
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 Net Net 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. 15 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 on this 31st day of May, 1996.
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. 15 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 capacities and on the date indicated:
Signatures Title Date
<PAGE>
*_______________________ President and Chief May 31, 1996
Lee P. Munder Executive Officer
*_______________________ Director May 31, 1996
Charles W. Elliott
*_______________________ Director May 31, 1996
Joseph E. Champagne
*_______________________ Director May 31, 1996
Arthur DeRoy Rodecker
*_______________________ Director May 31, 1996
Jack L. Otto
*_______________________ Director May 31, 1996
Thomas B. Bender
*_______________________ Director May 31, 1996
Thomas D. Eckert
*_______________________ Director May 31, 1996
John Rakolta, Jr.
*_______________________ Director May 31, 1996
David J. Brophy
*_______________________ Vice President, May 31, 1996
Terry H. Gardner Treasurer and
Chief Financial
Officer
* By: /s/ Lisa Anne Rosen
------------------------
Lisa Anne Rosen
as Attorney-in-Fact
62796.66
<PAGE>
