As filed with the Securities and Exchange Commission
on July 28, 1997
Registration Nos. 33-54748
811-7346
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. 28 [ X ]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 30 [ 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
Teresa M.R. Hamlin
First Data Investor Services Group, Inc.
One Exchange Place, 8th Floor
Boston, Massachusetts 02109
Copies to:
Lisa Anne Rosen, Esq. Paul F. Roye, Esq.
Munder Capital Management Dechert Price & Rhoads
480 Pierce Street 1500 K Street, N.W.
Birmingham, Michigan 48009 Washington, DC 20005
[X] It is proposed that this filing will become effective immediately
upon filing pursuant to paragraph (b) of Rule 485.
The Registrant has elected to register an indefinite number of shares
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant will file the notice required by Rule 24f-2 with
respect to its fiscal year ended June 30, 1997 on or before August 29, 1997.
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(b)
Prospectus for The Munder Financial Services Fund
Part A
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Item Heading
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1. Cover Page Cover Page
2. Synopsis Prospectus Summary;
Expense Table
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover Page; Prospectus
Summary; Investment
Objective and Policies;
Portfolio Instruments
and Practices and
Associated Risk Factors;
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
<PAGE>
Part B
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Item Heading
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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;
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 Services Investment Advisory and
Other Service
Arrangements; See
Prospectus -- "Management"
17. Brokerage Allocation and Other Practices Portfolio 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 Redemption
of Securities Being Offered Information; Net Asset
Value; Additional
Information Concerning
Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and
Other Service Agreements
22. Calculation of Performance Data Performance Information
23. Financial Statements Not Applicable
<PAGE>
THE MUNDER FUNDS, INC.
The purpose of this Post-Effective Amendment filing is to make non-material
language changes that the Registrant deems appropriate to the Prospectus and
Statement of Additional Information for The Munder Financial Services Fund
(which was added as a new portfolio of the Registrant in Post-Effective
Amendment No. 25 as filed with the SEC on May 14, 1997), and to add exhibits to
the Registration Statement as required by Form N-1A.
The Prospectuses and Statements of Additional Information for the Munder
Multi-Season Growth Fund, Munder Real Estate Equity Investment Fund, Munder
Mid-Cap Growth Fund, Munder Value Fund, Munder Small-Cap Value Fund, Munder
Equity Selection Fund, Munder Micro-Cap Equity Fund, Munder Money Market Fund,
Munder International Bond Fund, NetNet Fund, Munder All-Season Maintenance Fund,
Munder All-Season Development Fund, Munder All-Season Accumulation Fund and
Munder Short Term Treasury are not included in this filing.
<PAGE>
PROSPECTUS
The Munder Financial Services 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 in the financial services
industry. These companies include commercial, industrial and investment banks,
savings & loan associations, consumer and industrial finance companies,
securities brokerage companies, real estate and leasing companies, investment
management companies, and insurance companies. Because the Fund's portfolio
holdings will be concentrated in the financial services industry, an investment
in the Fund does not represent a balanced investment program. The Fund is a
separate portfolio of the Munder Funds, Inc. (the "Company"), an open-end
investment company that currently offers fifteen 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
July 28, 1997, 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. In addition, the
SEC maintains a Web site (http://www.sec.gov) that contains the Statement of
Additional Information and other information regarding the Fund.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. AN
INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 28, 1997.
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary.......................................... 3
Expense Table............................................... 4
Investment Objective and Policies........................... 5
Portfolio Instruments and Practices
and Associated Risk Factors............................... 7
Investment Limitations...................................... 12
How to Purchase Shares...................................... 12
How to Redeem Shares........................................ 13
Dividends and Distributions................................. 15
Net Asset Value............................................. 15
Management.................................................. 16
Taxes....................................................... 18
Description of Shares....................................... 19
Performance................................................. 20
Shareholder Account Information............................. 20
.........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 Funds Distributor, Inc. (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.
<PAGE>
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 financial services industry, focusing
specifically on commercial, industrial and investment banks, savings & loan
associations, consumer and industrial finance companies, securities brokerage
companies, real estate and leasing companies, investment management companies
and insurance companies which are likely to benefit from growth or consolidation
in the financial services industry. There is no assurance that the Fund will
achieve its investment objective.
Purchasing Shares
Shares of the Fund are offered at net asset value. Shares of the Fund are
offered continuously and may be purchased from 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. Because the Fund will concentrate its investment in the
financial services industry, the net asset value of the Fund may be strongly
affected by changes in the economic climate, broad market shifts, interest rate
movements, moves in a particular dominant stock, or regulatory changes.
Depending on these factors, the net asset value of the Fund may decrease instead
of increase. An investment in the Fund does not represent a balanced investment
program. See "Investment Objective and Policies."
Investment Advisor
As investment advisor for the Fund, Munder Capital Management provides
overall investment management for the Fund, provides research and credit
analysis, is responsible for all purchases and sales of portfolio securities,
maintains records relating to such purchases and sales, and provides reports to
the 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 .75%
Other expenses .25%
Total fund operating expenses 1.00%
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:
1 Year 3 Years
[ ] [ ]
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 Munder Financial Services 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 Munder Financial Services 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 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 providing financial
services, focusing specifically on securities of companies providing services to
consumers and industry that are likely to benefit from growth or consolidation
in the financial services 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 National Market System ("NASDAQ") that are principally engaged in
commercial, industrial and investment banking, savings and loan, consumer and
industrial finance, securities brokerage, real estate and leasing, investment
management or the insurance business. Equity securities include common stock,
preferred stock and securities convertible into common stock. The specific risks
of investing in financial services-related securities are summarized below and
under "Portfolio Instruments and Practices and Associated Risk Factors-Industry
Concentration."
In determining whether a company is principally engaged in the
financial services industry, the adviser must determine that the company derives
more than 50% of its gross income, net sales or net profits from activities in
the financial services industry; or that the company dedicates more than 50% of
its assets to the production of revenues from the financial services industry,
or, if based on available financial information, a question exists whether a
company meets one of these standards, the Adviser determines that the company's
primary business is within the financial services industry.
The Fund may also engage in short selling of securities, lend its
portfolio securities and borrow money for temporary purposes or to meet
redemption requests. In addition, the Fund may enter into transactions in
options on securities, securities indices and foreign currencies, forward
foreign currency contracts, and futures contracts and related options, all of
which may be classified as derivatives. The Fund may also invest in shares of
real estate investment trusts. When deemed appropriate by the Fund's investment
advisor, the Fund may invest cash balanced in repurchase agreements and other
money market investments pending investment in equity securities or to maintain
liquidity in an amount to meet expenses or redemption requests. These investment
techniques are described below and under the heading "Investment Objectives and
Policies" in the Statement of Additional Information.
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.
Under Securities and Exchange Commission regulations, the Fund may not
invest more than 5% of its assets in the equity securities of any company that
derives more than 15% of its revenues from brokerage or investment management
activities.
In addition to more general economic factors, the value of Fund
shares may be susceptible to factors affecting the financial services industry.
Companies in the financial services sector are often faced with the same
obstacles, issues or regulatory burdens, and their securities may react
similarly to and move in unison with these and other market conditions. As a
result, investors should be prepared for volatile, short-term movement in net
asset value.
Financial services companies are subject to extensive governmental
regulation which may limit both the amounts and types of loans and other
financial commitments they can make, and the interest rates and fees they can
charge. Changes in governmental policies and the need for regulatory approval
may have a material effect on these companies. Profitability is largely
dependent on the availability and costs of capital funds, and can fluctuate
significantly when interest rates change. Credit losses resulting from financial
difficulties of borrowers can negatively impact the industry. Legislation is
currently being considered which would reduce the separation between commercial
and investment banking businesses, which if enacted, could significantly impact
financial services companies and the Fund.
Commercial banks, savings and loan institutions and their holding
companies are especially influenced by adverse effects of volatile interest
rates, portfolio concentrations in loans to particular businesses, such as real
estate and energy, and competition from new entrants in their areas of business.
These institutions are subject to extensive federal regulation and, in some
cases, to state regulation as well. However, neither federal insurance of
deposits nor regulation of the bank and savings and loan industries ensures the
solvency or profitability of commercial banks or savings and loan institutions
or their holding companies, or insures against the risk of investing in the
equity securities issued by these institutions.
Investment banking, securities and commodities brokerage and investment
advisory companies also are subject to governmental regulation and investments
in those companies are subject to the risks related to securities and
commodities trading and securities underwriting activities. Insurance companies
also are subject to extensive governmental regulation, including the imposition
of maximum rate levels, which may be inadequate for some lines of business. The
performance of insurance companies will be affected by interest rates, severe
competition in the pricing of services, claims activities, marketing competition
and general economic conditions.
Although securities of large and well-established companies in the
financial services industry 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 the industry and/or increased competition. Securities
of those smaller and/or less seasoned companies may, therefore, expose
shareholders of the Fund to above-average risk.
The Fund may be appropriate for investors who want to pursue growth
aggressively by concentrating a portion of their investment on domestic and
foreign securities within the financial services industry. The Fund is designed
for those investors who are actively interested in, and can accept the risks of,
industry-focused investing. Because of its narrow industry focus, the
performance of the Fund is closely tied to and affected by, the financial
services industry.
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 Ratings Service, a division of
McGraw-Hill Companies Inc. ("S&P") or Moody's Investors Service, Inc.
("Moodys"), 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.
FIXED INCOME SECURITIES. Generally, the market value of fixed-income
securities in the Fund can be expected to vary inversely to changes in
prevailing interest rates. The Fund may purchase zero-coupon bonds (i.e.,
discount debt obligations that do not make periodic interest payments).
Zero-coupon bonds are subject to greater market fluctuations from changing
interest rates than debt obligations of comparable maturities which make current
distributions of interest. The Funds investments in fixed income securities may
include stripped securities, asset-backed securities, and variable and floating
rate securities, which are described in the Statement of Additional Information.
CORPORATE OBLIGATIONS. The Fund may purchase corporate bonds and commercial
paper. These investments may include obligations issued by Canadian and other
foreign corporations and Canadian and other foreign counterparts of U.S.
corporations and europaper, which is U.S. dollar denominated commercial paper of
a foreign issuer.
With the exception discussed above under "Equity Securities," the
Fund will purchase only those securities which are considered to be investment
grade or better (within the four highest rating categories of S&P or Moody's or,
if unrated, of comparable quality. Obligations rated "Baa" by Moody's lack
outstanding investment characteristics and have speculative characteristics.
Adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of obligations rated "BBB" by S&P to pay interest and repay
principal than in the case of higher grade obligations. After purchase by the
Fund, a security may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Fund. Neither event will require the Fund
to sell such security. However, the Advisor will reassess promptly whether the
security represents minimal credit risk and determine if continuing to hold the
security is in the best interests of the Fund. To the extent that the ratings
given by Moody's or S&P or another nationally recognized statistical ratings
organization for securities may change as a result of changes in the ratings
systems or because of corporate reorganization of such rating organizations the
Fund will attempt to use comparable ratings as standards for its investments in
accordance with the investment objective and policies of the Fund. Descriptions
of each rating category are included as Appendix A to the Statement of
Additional Information.
In addition, debt securities with longer maturities, which tend to
produce higher yields, are subject to potentially greater capital appreciation
and depreciation than obligations with shorter maturities. The market value of
the Fund's investments will change in response to changes in interest rates and
the relative financial strength of each issuer. During periods of falling
interest rates, the values of long-term fixed income securities generally rise.
Conversely, during periods of rising interest rates the values of such
securities generally decline. Changes in the financial strength of an issuer or
changes in the ratings of any particular security may also affect the value of
these investments. Fluctuations in the market value of fixed income securities
subsequent to their acquisitions will not affect cash income from such
securities but will be reflected in the Fund's net asset value.
FOREIGN SECURITIES. The Fund may invest up to 25% of its total assets
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 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 foreign 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 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 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
member banks of the Federal Reserve System, any foreign bank or any domestic or
foreign broker/dealer which is recognized as a reporting government securities
dealer. The Advisor will review and continuously monitor the creditworthiness of
the seller under a repurchase agreement, and will require the seller to maintain
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 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.
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. 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.
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 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.
U.S. GOVERNMENT OBLIGATIONS. The Funds may purchase obligations issued or
guaranteed by the U.S. Government and U.S. Government agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of the
U.S. Government, such as those of the Government National Mortgage Association,
are supported by the full faith and credit of the U.S. Treasury. Others, such as
those of the Export-Import Bank of the United States, are supported by the right
of the issuer to borrow from the U.S. Treasury; and still others, such as those
of the Student Loan Marketing Association, are supported only by the credit of
the agency or instrumentality issuing the obligation. No assurance can be given
that the U.S. Government would provide financial support to U.S.
Government-sponsored instrumentalities if it is not obligated to do so by law.
BORROWING. The Fund is authorized to borrow money in amounts up to
5% of the value of the Fund's total assets at the time of such borrowing for
temporary purposes. However, the Fund is authorized to borrow money in amounts
up to 33 1/3% of its assets, as permitted by the 1940 Act, for the purpose of
meeting redemption requests. Borrowed funds are subject to interest costs that
may or may not be offset by amounts 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.
SHORT SALES. The Fund may make short sales of securities. A short sale
is a transaction in which the Fund sells a security it does not own in
anticipation that the market price of that security will decline. When the Fund
makes a short sale, it must borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Fund may
have to pay a fee to borrow particular securities and is often obligated to pay
over any payments received on such borrowed securities. The Fund's obligation to
replace the borrowed security will be secured by collateral deposited with the
broker-dealer, usually cash, U.S. Government securities or other highly liquid
securities similar to those borrowed. The Fund will also be required to deposit
similar collateral with its custodian to the extent necessary so that the value
of both collateral deposits in the aggregate is at all time equal to at least
100% of the current market value of the security sold short. Depending on
arrangements made with the broker-dealer from which it borrowed the security
regarding payment over any payments received by the Fund on such security, the
Fund may not receive any payments (including interest) on its collateral
deposited with such broker-dealer.
If the price of the security sold short increases between the time of
the short sale and the time the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
capital gain. Any gain will be decreased, and any loss increased, by the
transaction costs described above. Although the Fund's gain is limited to the
price at which it sold the security short, its potential loss is theoretically
unlimited.
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 generally will be less than 100%.
INDUSTRY CONCENTRATION. There can be no assurance that a portfolio
consisting primarily of securities issued by companies engaged in the financial
services industry will achieve the Fund's investment objective. Because the Fund
concentrates its investments in securities of companies engaged in financial
services 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 financial services
related activities. In addition to general economic factors, such companies are
generally subject to the changes in government regulations and policies,
interest rate changes, credit losses and price competition. For a discussion of
these and other factors, see "Investment Objectives and Policies".
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. However, 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 Fund's investment policies and limitations are set
forth in full in the Statement of Additional Information.
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 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 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.
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 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.
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 at least 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 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 NASDAQ 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 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 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, 1997, the Advisor and its affiliates had approximately
$__ billion in discretionary assets under management, of which $__ billion were
invested in equity securities, $__ billion were invested in money market or
other short-term instruments, and $__ billion were invested in other fixed
income securities.
Subject to the supervision of the Board of Directors of the Company,
the Advisor provides overall investment management for the Fund, provides
research and credit analysis, is responsible for all purchases and sales of
portfolio securities, maintains books and records with respect to the Fund's
securities transactions and provides periodic and special reports to the Board
of Directors as requested.
For the advisory services provided and expenses assumed by it, the
Advisor has agreed to a fee from the Fund, computed daily and payable monthly,
at an annual rate of .75% of the average daily net assets of the Fund.
The Advisor may, from time to time, make payments to banks,
broker-dealers or other financial institutions for certain services to the Fund
and/or its shareholders, including sub-administration, sub-transfer agency and
shareholder servicing. Such payments are made out of the Advisor's own resources
and do not involve additional costs to the Fund or its shareholders.
Portfolio Managers
Paul D. Tobias, Executive Vice President and Chief Operating Officer of
the Advisor, and Joseph W. Skornicka, equity analyst for the Advisor, are
primarily responsible for the day-to-day management of the investment selections
of the Fund.
Prior to his 1995 association with the Advisor, Mr. Tobias was an
Executive Vice president of Comerica Incorporated responsible for strategic
planning, corporate development, marketing, corporate communications and public
affairs. From 1984 to 1990, Mr. Tobias was employed by McDonald and Company
Securities, Inc. as an investment banker specializing in mergers and
acquisitions. From 1975 to 1984, Mr. Tobias was employed by Comerica where he
held management positions in corporate banking, central loan administration,
small business banking and private banking. Mr. Tobias holds a Bachelor of Arts
Degree cum laude from Albion College and an MBA with distinction from the
University of Michigan. Mr. Tobias is on the Board of Directors of Framlington
Group Limited and Framlington Holdings Limited. He also serves on the Board of
Trustees for Albion College, the Board of Directors for the Goodwill Foundation
and he is Treasurer and on the Board of Trustees of the Judson Center. Mr.
Tobias is an elder of the first Presbyterian Church of Birmingham, Michigan.
Joe Skornicka is an Equity Analyst responsible for equity security analysis
in the banking, thrift, financial services and food industries. Prior to joining
the Advisor in 1994, Mr. Skornicka worked at Woodbridge Capital management as an
Equity Research Analyst. From 1988 to 1994, Mr. Skornicka worked for Comerica
Incorporated's Corporate Development department, most recently as an Assistant
Vice President. While at Comerica, Mr. Skornicka's primary responsibilities
included financial analysis and project management related to the merger and
acquisition activities of the company Mr. Skornicka received a B.A. in Financial
Administration from Michigan State University and M.B.A. from the University of
Michigan.
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.
For an additional description of the services performed by the
Administrator, Transfer Agent and Custodian, see the Statement of Additional
Information.
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 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.
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 Financial
Services Fund, the All-Season Maintenance Fund, the All-Season Development Fund,
the All-Season Accumulation Fund, the Equity Selection Fund, the Micro-Cap
Equity Fund, the Small-Cap Value Fund, the Multi-Season Growth Fund, the Real
Estate Equity Investment Fund, the Mid-Cap Growth Fund, the Value Fund, the
International Bond Fund, the NetNet Fund, the Money Market Fund, and the Short
Term Treasury Fund, each of which, except the International Bond Fund, 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 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.
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 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:
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.
THE MUNDER FINANCIAL SERVICES FUND
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
July 28, 1997
The Munder Financial Services Fund (the "Fund") is currently one of
fifteen 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 July 28,
1997 (the "Prospectus") and has been filed with the Securities and Exchange
Commission ("SEC") as part of the Company's Registration Statement. This
Statement of Additional Information is not a prospectus, and should be read only
in conjunction with the Fund's Prospectus dated July 28, 1997. 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 July 28, 1997.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. AN
INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
<PAGE>
TABLE OF CONTENTS
Page
General ......................................................3
Fund Investments................................................3
Investment Limitations..........................................18
Directors and Officers..........................................19
Investment Advisory and other Service Arrangements..............24
Portfolio Transactions..........................................26
Purchase and Redemption Information.............................28
Net Asset Value.................................................29
Performance Information.........................................29
Taxes...........................................................30
Additional Information Concerning Shares........................35
Miscellaneous...................................................36
Registration Statement..........................................36
APPENDIX A......................................................A-1
APPENDIX B......................................................B-1
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectus in connection with the offering made by the Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. The Prospectus does not
constitute an offering by the Fund or by the Distributor in any jurisdiction in
which such offering may not lawfully be made.
<PAGE>
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 Fund's Prospectus
concerning the investment objective and policies of the Fund. The Fund's
investment objective is a non-fundamental policy and may be changed by the
Fund's Board of Directors without shareholder approval. Compliance with all
percentage limitations described below is determined at the time of investment
unless otherwise indicated.
Asset-Backed Securities. Subject to applicable credit criteria, the Fund may
invest up to 5% of its net assets in asset-backed securities (i.e., securities
backed by mortgages, installment sales contracts, credit card receivables or
other assets). The average life of asset-backed securities varies with the
maturities of the underlying instruments which, in the case of mortgages, have
maximum maturities of forty years. The average life of a mortgage-backed
instrument, in particular, is likely to be substantially less than the original
maturity of the mortgage pools and underlying the securities as the result of
scheduled principal payments and mortgage prepayments. The rate of such mortgage
prepayments, and hence the life of the certificates, will be primarily a
function of current market rates and current conditions in the relevant housing
markets. The relationship between mortgage prepayment and interest rates may
give some high-yielding mortgage-related securities less potential for growth in
value than conventional bonds with comparable maturities. In addition, in
periods of falling interests rates, the rate of mortgage prepayment tends to
increase. During such periods, the reinvestment of prepayment proceeds by a Fund
will generally be at lower rates than the rates that were carried by the
obligations that have been prepaid. Because of these and other reasons, an
asset-backed security's total return may be difficult to predict precisely. To
the extent that the Fund purchases mortgage-related or mortgage-backed
securities at a premium, mortgage prepayments (which may be made at any time
without penalty) may result in some loss of the Fund's principal investment to
the extent of premium paid.
Presently there are several type of mortgage-backed securities issued or
guaranteed by U.S. Government agencies, including guaranteed mortgage
pass-through certificates, which provide the holder with a pro rata interest in
the underlying mortgages, and collateralized mortgage obligations ("CMOs"),
which provide the holder with a specified interest in the cash flow of a pool of
underlying mortgages or other mortgage-backed securities. Issuers of CMOs
frequently elect to be taxed as a pass-through entity known as real estate
mortgage investment conduits, or REMICs. CMOs are issued in multiple classes,
each with a specified fixed or floating interest rate and a final distribution
date. The relative payment rights of the various CMO classes may be structured
in many ways. In most cases, however, payments of principal are applied to the
CMO classes in the order of their respective stated maturities, so that no
principal payments will be made on a CMO class until all other classes having an
earlier stated maturity date are paid in full. The classes may include accrual
certificates (also known as "Z-Bonds"), which only accrue interest at a
specified rate until other specified classes have been retired and are converted
thereafter to interest-paying securities. They may also include planned
amortization classes ("PAC") which generally require, within certain limits,
that specified amounts of principal be applied on each payment date, and
generally exhibit less yield and market volatility than other classes. The Fund
will not purchase "residual" CMO interests, which normally exhibit the greatest
price volatility.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities guaranteed
by the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States, but are
supported by the right of the issuer to borrow from the Treasury. FNMA is a
government-sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation
("FHLMC") include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the United
States, created pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or
by any Federal Home Loan Banks and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder
to timely payment of interest, which is guaranteed by the FHLMC. FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When FHLMC does not guarantee timely
payment of principal, FHLMC may remit the amount due on account of its guarantee
of ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
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. Money borrowed will be subject to interest costs which
may or may not be offset by amounts earned on the borrowed funds. 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 up to 25% of its net assets in
securities of foreign issuers. The Fund's foreign securities may be represented
by American Depositary Receipts ("ADRs") listed on a domestic securities
exchange or included in 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 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.
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) 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.
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 with broker-dealers, banks or other institutions which
the Advisor has determined are creditworthy under guidelines established by the
Boards of Directors.
Lower-Rated Debt Securities. The Fund may acquire convertible securities
rated below investment grade by Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's") in an amount up to 5% of the value of its
total assets. Such securities are also known as junk bonds. The yields on
lower-rated debt and comparable unrated securities generally are higher than the
yields available on higher-rated securities. However, investments in lower-rated
debts and comparable unrated securities generally involve greater volatility of
price and risk of loss of income and principal, including the possibility of
default by or bankruptcy of the issuers of such securities. Lower-rated debt and
comparable unrated securities (a) will likely have some quality and protective
characteristics that, in the judgment of the rating organization, are outweighed
by large uncertainties or major risk exposures to adverse conditions and (b) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. Accordingly,
it is possible that these types of factors could, in certain instances, reduce
the value of securities held in the Fund's portfolio, with a commensurate effect
on the value of each of the Fund's shares.
While the market values of lower-rated debt and comparable unrated
securities tend to react more to fluctuations in interest rate levels than the
market values of higher-rated securities, the market values of certain lower
rated debt and comparable unrated securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions that
higher-rated securities. In addition, lower-rated debt securities and comparable
unrated securities generally present a higher degree of credit risk. Issuers of
lower-rated debt and comparable unrated securities often are highly leveraged
and may not have more traditional methods of financing available to them so that
their ability to service their debt obligations during an economic down turn or
during sustained periods of rising interest rates may be impaired. The risk of
loss due to default by such issuers is significantly greater because lower-rated
debt and comparable unrated securities generally are unsecured and frequently
are subordinated to the prior payment of senior indebtedness. The Fund may incur
additional expenses to the extent that it is required to seek recovery upon a
default in the payment of principal or interest on their portfolio holdings. The
existence of limited markets for lower-rated debt and comparable unrated
securities may diminish the Fund's ability to (a) obtain accurate market
quotations for purposes of valuing such securities and calculating its net asset
value and (b) sell the securities at fair value either to meet redemption
requests or to respond to changes in the economy or in financial markets.
Lower-rated debt securities and comparable unrated securities may have call
or buy-back features that permit their issuers to call or repurchase the
securities from their holders. If an issuer exercises these rights during the
periods of declining interest rates, the Fund may have to replace the security
with a lower yielding securities, thus resulting in a decreased return to the
fund. See Appendix A of the SAI for a description of ratings.
Money Market Instruments. As described in the Prospectus, the Fund may
invest from time to time in "money market instruments," a term that includes,
among other things, bank obligations, commercial paper, variable amount master
demand notes and corporate bonds with remaining maturities of 397 days or less.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Fund will invest in obligations of foreign
banks or foreign branches of U.S. banks only where the Advisor deems the
instrument to present minimal credit risks, such investments may nevertheless
entail risks that are different from those of investments in domestic
obligations of U.S. banks due to differences in political, regulatory and
economic systems and conditions. All investments in bank obligations are limited
to the obligations of financial institutions having more than $1 billion in
total assets at the time of purchase, and investments by the Fund in the
obligations of foreign banks and foreign branches of U.S. banks will not exceed
25% of 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 Ratings Service, a division of
McGraw-Hill Companies ("S&P") or Moody's. In addition, the Fund may acquire
unrated commercial paper and corporate bonds that are determined by the Advisor
at the time of purchase to be of comparable quality to rated instruments that
may be acquired by the Fund as previously described.
The Fund may also purchase variable amount master demand notes, which are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Although the notes are
not normally traded and there may be no secondary market in the notes, the Fund
may demand payment of the principal of the instrument at any time. The notes are
not typically rated by credit rating agencies, but issuers of variable amount
master demand notes must satisfy the same criteria as set forth above for
issuers of commercial paper. If an issuer of a variable amount master demand
note defaulted on its payment obligation, the Fund might be unable to dispose of
the note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Fund 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 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.
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-andwrite 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 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 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.
Real Estate Securities. The Fund may invest up to 5% of its net assets in
shares of real estate investment trusts ("REITs"). REITs pool investors' funds
for investment primarily in income producing real estate or real estate loans or
interests. A REIT is not taxed on income distributed to shareholders if it
complies with several requirements relating to its organization, ownership,
assets, and income and a requirement that it distribute to its shareholders at
least 95% of it taxable income (other than net capital gains) for each taxable
year. REITs can generally be classified as Equity REITs, Mortgage REITs and
Hybrid REITS. Equity REITs, which invest the majority of their assets directly
in real property, derive their income primarily from rents. Equity REITs can
also realize capital gains be selling properties that have appreciated in value.
Mortgage REITs, which invest the majority of their assets in real estate
mortgages, derive their income primarily from interest payments. Hybrid REITs
combine the characteristics of both Equity REITs and Mortgage REITs. The risk
characteristics of REITS include declines in the value of real estate, risks
related to general and local economic conditions, dependency on management
skill, heavy cash flow dependency, possible lack of availability of mortgage
funds, overbuilding, extended vacancies of properties, increased competition,
increases in property taxes and operating expenses, changes in zoning laws,
losses due to costs resulting from the clean-up of environmental problems,
liability to third parties for damages resulting from environmental problems,
casualty or condemnation losses, limitations on rents, changes in neighborhood
values and the appeal of properties to tenants and changes in interest rates.
In addition to these risks, Equity REITs may be affected by changes in the
value of the underlying property owned by the trusts, while Mortgage REITs may
be affected by the quality of any credit extended. Further, Equity and Mortgage
REITs are dependent upon management skills and generally may not be diversified.
Equity and Mortgage REITs are also subject to heavy cash flow dependency,
defaults by borrowers and self-liquidation. In addition, Equity and Mortgage
REITs could possibly fail to qualify for the beneficial tax treatment available
to real estate investment trusts under the Internal Revenue Code of 1986, as
amended, or to maintain their exemptions from registration under the 1940 Act.
The above factors may also adversely affect a borrower's or a lessee's ability
to meet its obligations to the REIT. In the event of a default by a borrower or
lessee, the REIT may experience delays in enforcing its rights as a mortgagee or
lessor and may incur substantial costs associated with protecting investments.
Repurchase Agreements. The Fund may agree to purchase securities from
financial institutions such as member banks of the Federal Reserve System, and
foreign bank or domestic or foreign broker/dealer that is recognized as a
reporting government securities dealer, subject to the seller's agreement to
repurchase them at an agreed-upon time and price ("repurchase agreements"). The
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.
Rights and Warrants. As stated in the Prospectus, the Fund may purchase
warrants, which are privileges issued by corporations enabling the owners to
subscribe to and purchase a specified number of shares of the corporation at a
specified price during a specified period of time. Subscription rights normally
have a short life span to expiration. The purchase of warrants involves the risk
that the Fund could lose the purchase value of a warrant if the right to
subscribe to additional shares is not exercised prior to the warrant's
expiration. Also, the purchase of warrants involves the risk that the effective
price paid for the warrant added to the subscription price of the related
security may exceed the value of the subscribed security's market price such as
when there is no movement in the level of the underlying security. The Fund will
not invest more than 5% of its net assets in warrants. Warrants acquired by the
Fund in units or attached to other securities are not subject to this
restriction.
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.
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 below and Appendix B
to this Statement of Additional Information.
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.
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. 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.
Stripped Securities. The Fund may invest up to 5% of its net assets in U.S.
Government obligations and their unmatured interest coupons that have been
separated ("stripped") by their holder, typically a custodian bank or investment
brokerage firm. Having separated the interest coupons from the underlying
principal of the U.S. Government obligations, the holder will resell the
stripped securities in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of
Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer received only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are ostensibly owned by the
bearer or holder), in trust on behalf of the owners. Counsel to the underwriters
of these certificates have stated that, in their opinion, purchasers of the
stripped securities most likely will be deemed the beneficial holders of the
underlying U.S. Government obligations for federal tax and securities purposes.
The Company is not aware of any binding legislative, judicial or administrative
authority on this issue.
Only instruments which are stripped by the issuing agency will be considered
U.S. Government obligations. Securities such as CATS and TIGRs which are
stripped by their holder do not qualify as U.S. Government obligations.
Within the past several years the Treasury Department has facilitated
transfers of ownership of zero coupon securities by accounting separately for
the beneficial ownership of particular interest coupon and principal payments or
Treasury securities through the Federal Reserve book-entry record-keeping
system. The Federal Reserve program as established by the Treasury Department is
known as "STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities." Under the STRIPS program, the Fund is able to have its beneficial
ownership of zero coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidences
of ownership of the underlying U.S. Treasury securities.
In addition, the Fund may invest in stripped mortgage-backed securities
("SMBS"), which represent beneficial ownership interests in the principal
distributions and/or the interest distributions on mortgage assets. SMBS are
usually structured with two classes that receive different proportions of the
interest and principal distributions on a pool of mortgage assets. One type of
SMBS will have one class receiving some of the interest and most of the
principal from the mortgage assets, while the other class will receive most of
the interest and the remainder of the principal. In the most common case, one
class of SMBS will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the
principal-only or "PO" class). SMBS may be issued by FNMA or FHLMC.
The original principal amount, if any, of each SMBS class represents the
amount payable to the holder thereof over the life of such SMBS class from
principal distributions of the underlying mortgage assets, which will be zero in
the case of an IO class. Interest distributions allocable to a class of SMBS, if
any, consist of interest at a specified rate of its principal amount, if any, or
its notional principal amount in the case of an IO class. The notional principal
amount is used solely for purposes of the determination of interest
distributions and certain other rights of holders of such IO class and does not
represent an interest in principal distributions of the mortgage assets.
Yields on SMBS will be extremely sensitive to the prepayment experience on
the underlying mortgage loans, and there are other associated risks. For IO
classes of SMBS and SMBS that were purchased at prices exceeding their principal
amounts there is a risk that the Fund may not fully recover its initial
investment.
The determination of whether a particular government-issued IO or PO backed
by fixed-rate mortgages is liquid may be made under guidelines and standards
established by the Board of Directors. Such securities may be deemed liquid if
they can be disposed of promptly in the ordinary course of business at a value
reasonably close to that used in the calculation of the Fund's net asset value
per share.
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.
Variable and Floating Rate Instruments. The Fund may invest up to 5% of its
net assets in variable and floating rate instruments. Debt instruments may be
structured to have variable or floating interest rates. These instruments may
include variable amount master demand notes that permit the indebtedness to vary
in addition to providing for periodic adjustments in the interest rates. The
Adviser will consider the earning power, cash flows and other liquidity ratios
of the issuers and guarantors of such instruments and, if the instrument is
subject to a demand feature, will continuously monitor their financial ability
to meet payment on demand. Where necessary to ensure that a variable or floating
rate instrument is equivalent to the quality standards applicable to the Fund,
the issuer's obligation to pay the principal of the instrument will be backed by
an unconditional bank letter or line of credit, guarantee or commitment to lend.
The absence of an active secondary market for certain variable and floating
rate notes could make it difficult to dispose of the instruments, and the Fund
could suffer a loss if the issuer defaulted or during periods that the Fund is
not entitled to exercise its demand rights.
Variable and floating rate instruments held by the Fund will be subject to
the Fund's limitation on illiquid investments when the Fund may not demand
payment of the principal amount within seven days absent a reliable trading
market.
When-Issued Purchases and Forward Commitments (Delayed-Delivery
Transactions). When-issued purchases and forward commitments (delayed-delivery
transactions) are commitments by the Fund to purchase or sell particular
securities with payment and delivery to occur at a future date (perhaps one or
two month later). These transactions permit the Fund to lock-in a price or yield
on a security, regardless of future changes in interest rates.
When the Fund agrees to purchase securities on a when-issued or forward
commitment basis, the Custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the Custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case the Fund may be required subsequently to
place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of the Fund's commitments. It
may be expected that the market value of the Fund's net assets will fluctuate to
a greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. Because the Fund's liquidity and
ability to manage its portfolio might be affected when it sets aside cash or
portfolio securities to cover such purchase commitments, the Advisor expects
that its commitments to purchase when-issued securities and forward commitments
will not exceed 25% of the value of the Fund's total assets absent unusual
market conditions.
The Fund will purchase securities on a when-issued or forward commitment
basis only with the intention of completing the transaction and actually
purchasing the securities. If deemed advisable as a matter of investment
strategy, however, the Fund may dispose of or renegotiate a commitment after it
is entered into, and may sell securities it has committed to purchase before
those securities are delivered to the Fund on the settlement date. In these
cases the Fund may realize a taxable capital gain or loss.
When the Fund engages in when-issued and forward commitment transactions, it
relies on the other party to consummate the trade. Failure of such party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the market value of
the Fund starting on the day the Fund agrees to purchase the securities. The
Fund does not earn interest on the securities it has committed to purchase until
they are paid for an delivered on the settlement date.
<PAGE>
INVESTMENT LIMITATIONS
The Fund is subject to the investment limitations enumerated in this section
which may be changed with respect to the 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 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. 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;
4. 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;
5. Purchase or sell real estate or any interest therein, except
securities issued by companies (including real estate
investment trusts) that invest in real estate or interests
therein.
6. 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; or
7. Invest more than 25% of its total assets in the securities of
issuers conducting their principal business in any one
industry (securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not
considered to represent industries), except that the Fund will
invest more than 25% of its total assets in securities of
companies engaged in the financial services industry, as
defined in the 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 net assets in illiquid securities;
2. 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). In addition, if the
Fund's holdings of illiquid securities exceeds 15% because of changes in the
value of the Fund's investments, the Fund will take action to reduce its
holdings of illiquid securities within a time frame deemed to be in the best
interest of the Fund. Otherwise, the Fund may continue to hold a security even
though it causes the Fund to exceed a percentage limitation because of
fluctuation in the value of the Fund's assets.
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, and their business
addresses and principal occupations during the past five years, are:
<TABLE>
<CAPTION>
Principal Occupation
Name, Address and Age Positions with Company During Past Five Years
<S> <C> <C>
Charles W. Elliott 1/ Chairman of the Board of Directors Senior Advisor to the President -
3338 Bronson Boulevard Western Michigan University since
Kalmazoo, MI 490008 July 1995; prior to that Executive
Age: 64 Vice President - Administration &
Chief Financial Officer, Kellogg
Company from January 1987 through
June 1995; before that Price
Waterhouse. Board of Directors,
Steelcase Financial Corporation.
John Rakolta, Jr. Director and Vice Chairman of the Chairman, Walbridge Aldinger Company
1876 Rathmor Board of Directors (construction company).
Bloomfield Hills, MI 48304
Age: 49
Thomas B. Bender Director Investment Advisor, Financial &
7 Wood Ridge Road Investment Management Group (since
Glen Arbor, MI 49636 April, 1991); Vice President
Age: 63 Institutional Sales, Kidder, Peabody
& Co. (Retired April, 1991).
David J. Brophy Director Professor, University of Michigan;
1025 Martin Place Director, River Place Financial
Ann Arbor, MI 48104 Corp.; Trustee, Renaissance Assets
Age: 60 Trust.
Dr. Joseph E. Champagne Director Corporate and Executive Consultant
319 Snell Road since September 1995; prior to that
Rochester, MI 48306 Chancellor, Lamar University from
Age: 58 September 1994 until September 1995;
before that Consultant to Management,
Lamar University; President and
Chief Executive Officer, Crittenton
Corporation (parent holding company
that owns health care facilities)
and, Crittenton Development Corporation
until August 1993; before that
President, Oakland University of
Rochester, MI, until August 1991;
Member, Board of Directors, Ross
Operating Value of Troy, MI.
Thomas D. Eckert Director President and CEO, Mid-Atlantic
10726 Falls Pointe Drive Group of Pulte Home Corporation
Great Falls, VA 22066 (developer of residential land and
Age: 49 construction of housing units)
Lee P. Munder President President and CEO of the Advisor;
480 Pierce Street Chief Executive Officer and
Suite 300 President of Old MCM, Inc.; Chief
Birmingham, MI 48009 Executive Officer of World Asset
Age: 51 Management; Director, LPM Investment
Services, Inc. ("LPM").
Terry H. Gardner Vice President, Chief Financial Vice President and Chief Financial
480 Pierce Street Officer and Treasurer Officer of the Advisor and World
Suite 300 Asset Management; Vice President and
Birmingham, MI 48009 Chief Financial Officer of Old MCM,
Age: 36 Inc.; Audit Manager Arthur of
Andersen & Co. (1991 to February
1993); Secretary of LPM
Paul Tobias Vice President Executive Vice President and Chief
480 Pierce Street Operating Officer of the Advisor
Suite 300 (since April 1995) and Executive
Birmingham, MI 48009 Vice President of Comerica, Inc.
Age: 45
Gerald Seizert Vice President Executive Vice President and Chief
480 Pierce Street Investment Officer/Equities of the
Suite 300 Advisor (since April 1995); Managing
Birmingham, MI 48009 Director (1991-1995), Director
Age: 44 (1992-1995) and Vice President
(1984-1991) of Loomis, Sayles and
Company, L.P.
<PAGE>
Elyse G. Essick Vice President Vice President and Director of
480 Pierce Street Marketing for the Advisor; Vice
Suite 300 President and Director of Client
Birmingham, MI 48009 Services of Old MCM, Inc. (August
Age: 38 1988 to December 1994).
James C. Robinson Vice President Vice President and Chief Investment
480 Pierce Street Officer/Fixed Income for the
Suite 300 Advisor; Vice President and Director
Birmingham, MI 48009 of Fixed Income of Old MCM, Inc.
Age: 35 (1987-1994).
Leonard J. Barr, II Vice President Vice President and Director of Core
480 Pierce Street Equity Research of the Advisor;
Suite 300 Director and Senior Vice President
Birmingham, MI 48009 of Old MCM, Inc. (since 1988);
Age: 52 Director of LPM.
Ann F. Putallaz Vice President Vice President and Director of
480 Pierce Street Fiduciary Services (since January
Suite 300 1995); Director of Client and
Birmingham, MI 48009 Marketing Services of Woodbridge
Age: 51 Capital Management, Inc.
Richard H. Rose Assistant Treasurer Senior Vice President, First Data
First Data Investor Services Investor Services Group, Inc. (since
Group, Inc. May 6, 1994). Formerly, Senior Vice
One Exchange Place President, The Boston Company
8th Floor Advisors, Inc. since November 1989.
Boston, MA 02109
Age: 41
Lisa A. Rosen Secretary, Assistant Treasurer General Counsel of the Advisor since
480 Pierce Street May 1996; Formerly Counsel, First
Suite 300 Data Investor Services Group, Inc.;
Birmingham, MI 48009 Assistant Vice President and Counsel
Age: 29 with The Boston Company Advisors,
Inc.; Associate with Hutchins,
Wheeler & Dittmar.
Teresa M.R. Hamlin Assistant Secretary Counsel, First Data Investor Service
First Data Investor Services Group, Inc. (since 1995); Formerly,
Group, Inc. Paralegal Manager, The Boston
One Exchange Place Company Advisors, Inc.
8th Floor
Boston, MA 02109
Age: 33
Julie A. Tedesco Assistant Secretary Counsel, First Data Investors
First Data Investor Services Group, Inc. Services Group, Inc. (since May
One Exchange Place 1994); formerly, Assistant Vice
8th Floor President and Counsel of The
Boston, MA 02109 Boston Company Advisors, Inc.
Age: 39 since July, 1992
</TABLE>
1/ Director is an "interested person" of the Company as defined in the 1940
Act.
Directors of the Company receive an aggregate fee from the Company, The
Munder Funds Trust (the "Trust"), The Munder Framlington Funds Trust
("Framlington Trust") and St. Clair Funds, Inc. ("St. Clair") for service on
those organizations' respective Boards of Directors/Trustees comprised of an
annual retainer fee, and a fee for each Board meeting attended; and are
reimbursed for all out-of-pocket expenses relating to attendance at meetings.
The following table summarizes the compensation paid by the Company, the
Trust, Framlington Trust and St. Clair to their respective Trustees/Directors
for the year ended June 30, 1997.
<TABLE>
<CAPTION>
Pension
Retirement
Benefits Accrued Estimated
Aggregate Compensation as Part of Annual Total
from the Company, Fund Expenses Benefits from the
Name of Person and Position the Trust, Framlington Trust upon Fund Complex
and St. Clair Retirement
<S> <C> <C> <C> <C>
Charles W. Elliott $20,000.00 None None $20,000.00
Chairman
John Rakolta, Jr. $18,500.00 None None $18,500.00
Vice Chairman
Thomas B. Bender $20,000.00 None None $20,000.00
Trustee and Director
David J. Brophy $20,000.00 None None $20,000.00
Trustee and Director
Dr. Joseph E. Champagne $20,000.00 None None $20,000.00
Trustee and Director
Thomas D. Eckert $20,000.00 None None $20,000.00
Trustee and Director
</TABLE>
No officer, director or emplyee of the Advisor, Comerica, the Distributor,
the Administrator or Transfer Agent currently receives any compensation from the
Trust or the Company.
<PAGE>
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 0.75% of average daily net assets of the Fund.
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.
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.
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 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.
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 million. Comerica Bank also receives certain transaction based
fees.
<PAGE>
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 portfolio turnover rate of the Fund is calculated by dividing the lesser
of the fund's annual sales or purchases of portfolio securities (exclusive of
purchases or sales of securities whose maturities at the time of acquisition
were one year or less) by the monthly average value of the securities held by
the Fund during the year. Purchases and sales are made for the Fund whenever
necessary, in management's opinion, to meet the Fund's investment objective. The
Fund may engage in short-term trading to achieve its investment objectives.
Portfolio turnover may vary greatly from year to year as well as within a
particular year.
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 the Advisory Agreement, the Advisor agrees to select broker-dealers in
accordance with guidelines established by the Company's Board of Directors from
time to time and in accordance with applicable law. In assessing the terms
available for any transaction, the Advisor shall consider all factors it deems
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker-dealer,
and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In addition, the Advisory Agreement
authorizes the Advisor, subject to the prior approval of the Company's Board of
Directors, to cause the Fund to pay a broker-dealer which furnishes brokerage
and research services a higher commission than that which might be charged by
another broker-dealer for effecting the same transaction, provided that the
Advisor determines in good faith that such commission is reasonable in relation
to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either the particular transaction or the
overall responsibilities of the Advisor to the Fund. Such brokerage and research
services might consist of reports and statistics on specific companies or
industries, general summaries of groups of bonds and their comparative earnings
and yields, or broad overviews of the securities markets and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable to the Advisor by the Fund. It is possible that
certain of the supplementary research or other services received will primarily
benefit one or more other investment companies or other accounts for which
investment discretion is exercised. Conversely, the Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company.
Portfolio securities will not be purchased from or sold to the Advisor, the
Distributor or any affiliated person (as defined in the 1940 Act) of the
foregoing entities except to the extent permitted by SEC exemptive order or by
applicable law.
Investment decisions for the Fund and for other investment accounts managed
by the Advisor are made independently of each other in the light of differing
conditions. However, the same investment decision may be made for two or more of
such accounts. In such cases, simultaneous transactions are inevitable.
Purchases or sales are then averaged as to price and allocated as to amount in a
manner deemed equitable to each such account. While in some cases this practice
could have a detrimental effect on the price or value of the security as far as
the Fund is concerned, in other cases it is believed to be beneficial to the
Fund. To the extent permitted by law, the Advisor may aggregate the securities
to be sold or purchased for the Fund with those to be sold or purchased for
other investment companies or accounts in executing transactions.
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 Prospectus 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 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.
<PAGE>
PURCHASE AND REDEMPTION INFORMATION
Purchases and redemptions are discussed in the Fund's Prospectus 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, 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
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:
P(1 + T)n = ERV
Where: T = average annual total return;
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year (or other) periods at the end of
the applicable period (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:
(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, 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. Capital gains dividends are not eligible for the
dividends received deduction for corporations.
In the case of corporate shareholders, distributions of the Fund for any
taxable year generally qualify for the dividends 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 conclusions expressed
herein, and any such changes or decisions may have a retroactive effect with
respect to the transactions contemplated herein.
Disposition of Shares. Upon a redemption, sales or exchange of his or her
shares, a shareholder will realize a taxable gain or loss depending upon his or
her basis in the shares. Such gain or loss will be treated as capital gain or
loss if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, generally, depending upon shareholder's holding period
for the shares. Any loss realized on a redemption, sale or exchange will be
disallowed to the to the extent the shares disposed of are replaced (including
through reinvestment of dividends) within a period of 61 days beginning 30 days
before and ending 30 days after the shares are disposed of. In such a case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a shareholder on the sale of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received or treated as
having been received by the shareholder with respect to such shares.
Furthermore, a loss realized by a shareholder on the redemption, sale or
exchange of shares of a Fund with respect to which exempt-interest dividends
have been paid will, to the extent of such exempt-interest dividends, be
disallowed if such shares have been held by the shareholder for less than six
months.
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.
Other Taxation. The foregoing discussion related only to U.S. Federal
income tax law as applicable to U.S. persons (i.e., U.S. citizens and resident
and domestic corporations, partnerships, trust and estates). Distributions by
the Fund also may be subject to state and local taxes, and their treatment under
state and local income tax laws may differ from the U.S. Federal income tax
treatment. Shareholders should consult their tax advisers with respect to
particular questions of U.S. Federal, state and local taxation. Shareholders who
are not U.S. persons should consult their tax advisers regarding U.S. and
foreign tax consequences of ownership of shares of the Fund, including the
likelihood that distributions to them would be subject to withholding of U.S.
Federal income tax at a rate of 30% (or at a lower rate under a tax treaty).
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 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
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
The Company is a Maryland corporation. The Company's Articles of
Incorporation authorize the Board of Directors to classify or reclassify any
unissued shares of the Company into one or more classes by setting or changing,
in any one or more respects, their respective designations, preferences,
conversion or other rights, voting powers, restrictions, limitations,
qualifications and terms and conditions of redemption. Pursuant to the authority
of the Company's Articles of Incorporation, the Directors have authorized the
issuance of shares of common stock representing interests in 15 series of
shares. The Fund is currently offered in one class.
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 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.
<PAGE>
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, 200 Clarendon Street, Boston,
Massachusetts 02116 serves as the Company's independent auditors.
Banking Laws. Banking laws and regulations currently prohibit a bank holding
company registered under the Federal Bank Holding Company Act of 1956 or any
bank or non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from underwriting securities, but such banking laws and regulations do not
prohibit such a holding company or affiliate or banks generally from acting as
investment Advisor, administrator, transfer agent or custodian to such an
investment company, or from purchasing shares of such a company as agent for and
upon the order of customers. The Advisor and the Custodian are subject to such
banking laws and regulations.
The Advisor and the Custodian believe they may perform the services for the
Company contemplated by their respective agreements with the Company without
violation of applicable banking laws or regulations. It should be noted,
however, that there have been no cases deciding whether bank and non-bank
subsidiaries of a registered bank holding company may perform services
comparable to those that are to be performed by these companies, and future
changes in either Federal or state statutes and regulations relating to
permissible activities 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.
<PAGE>
APPENDIX A
- - Rated Investments -
Corporate Bonds
Excerpts from Moody's Investors Services, Inc. ("Moody's") description of
its bond ratings:
"Aaa": Bonds that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa": Bonds that are rated "Aa" are judged to be of high-quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as "high-grade" bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A": Bonds that are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
"Baa": Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appears adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
"Ba": Bonds that are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
"B": Bonds that are rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
"Caa": Bonds that are rated "Caa" are of poor standing. These issues may be
in default or present elements of danger may exist with respect to principal or
interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds rated
"Aa" through "B". The modifier I indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
Excerpts from Standard & Poor's Corporation ("S&P") description of its bond
ratings:
"AAA": Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
"AA": Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from "AAA" issues by a small degree. A-1
"A": Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
"BBB": Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
"BB", "B" and "CCC": Bonds rated "BB" and "B" are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. "BB" represents a
lower degree of speculation than "B" and "CCC" the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
To provide more detailed indications of credit quality, the "AA" or "A"
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Commercial Paper
The rating "Prime-1" is the highest commercial paper rating assigned by
Moody's. These issues (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issues rated "Prime-2" (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics of "Prime- I " rated issues, but to
a lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Commercial paper ratings of S&P are current assessments of the likelihood of
timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted "A-l+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A- 1.
Rated Investments -
Commercial Paper
Rated commercial paper purchased by the Fund must have (at the time of
purchase) the highest quality rating assigned to short-term debt securities, or,
if not rated, or rated by only one agency, are determined to be of comparative
quality pursuant to guidelines approved by a Fund's or Underlying Fund's Boards
of Trustees and Directors. Highest quality ratings for commercial paper for
Moody's and S&P are as follows:
Moody's: The rating "Prime-l" is the highest commercial paper rating
category assigned by Moody's. These issues (or related supporting institutions)
are considered to have a superior capacity for repayment of short-term
promissory obligations.
S&P: Commercial paper ratings of S&P are current assessments of the
likelihood of timely payment of debts having original maturities of no more than
365 days. Commercial paper rated in the "A-1 " category by S&P indicates that
the degree of safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety characteristics
are denoted "A-l+".
<PAGE>
APPENDIX B
As stated in the Prospectus, the Fund may enter into certain futures
transactions and options for hedging purposes. Such transactions are described
in this Appendix B.
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 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 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 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 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 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) Financial Statements:
Included in Part A:
None
Included in Part B:
None
(b) Exhibits (the number of each exhibit relates to the exhibit designation
in Form N-1A):
(1) (a) Articles of Incorporation10
(b) Articles of Amendment10
(c) Articles Supplementary10
(d) Articles Supplementary for The Munder Small-Cap Value Fund, The Munder
Equity Selection Fund, The Munder Micro-Cap Equity Fund, and the NetNet Fund11
(e) Articles Supplementary for The Munder Short Term Treasury Fund12
(f) Articles Supplementary for The Munder All-Season Conservative Fund, The
Munder All-Season Moderate Fund and The Munder All-Season Aggressive Fund13
(g) Articles Supplementary with respect to the name
changes of The Munder All-Season Conservative Fund,
The Munder All-Season Moderate Fund and The Munder
All-Season Aggressive Fund to The Munder All-Season
Maintenance Fund, The Munder All-Season Development
Fund and The Munder All-Season Accumulation Fund14
(h) Articles Supplementary for The Munder Financial Services Fund are
filed herein
(2) By-Laws1
(3) Not Applicable
(4) Not Applicable
(5) (a) Form of Investment Advisory Agreement for The Munder Multi-Season
Growth Fund5
(b) Form of Investment Advisory Agreement for The Munder Money Market Fund5
(c) Form of Investment Advisory Agreement for The Munder Real Estate Equity
Investment Fund5
(d) Investment Advisory Agreement for The Munder Value Fund8
(e) Investment Advisory Agreement for The Munder Mid-Cap Growth Fund8
(f) Form of Investment Advisory Agreement for The Munder International Bond
Fund10
(g) Form of Investment Advisory Agreement for the NetNet Fund9
(h) Form of Investment Advisory Agreement for The Munder Small-Cap Value
Fund10
(i) Form of Investment Advisory Agreement for The Munder Micro-Cap Equity
Fund10
(j) Form of Investment Advisory Agreement for The Munder Equity Selection
Fund10
(k) Form of Investment Advisory Agreement for The Munder Short Term
Treasury Fund12
(l) Form of Investment Advisory Agreement for The Munder All-Season
Conservative Fund, The Munder All-Season Moderate Fund and The Munder All-Season
Aggressive Fund13
(m) Form of Investment Advisory Agreement for The Munder Financial
Services Fund is filed herein
(6) (a) Underwriting Agreement8
(b) Notice to Underwriting Agreement with respect to The Munder Value Fund
and The Munder Mid-Cap Growth Fund8
(c) Notice to Underwriting Agreement with respect to The Munder
International Bond Fund8
(d) Notice to Underwriting Agreement with respect to The Munder Small-Cap
Value Fund, The Munder Equity Selection Fund, The Munder Micro-Cap Equity Fund,
and the NetNet Fund10
(e) Form of Notice to Underwriting Agreement with respect to the Munder
Short Term Treasury Fund12
(f) Form of Distribution Agreement with respect to The Munder All-Season
Conservative Fund, The Munder All-Season Moderate Fund and The Munder All-Season
Aggressive Fund13
(g) Form of Distribution Agreement with respect to The Munder Financial
Services Fund is filed herein
(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 Fund8
(c) Notice to Custodian Contract with respect to the Munder International
Bond Fund8
(d) Notice to Custodian Contract with respect to The Munder Small-Cap Value
Fund, The Munder Equity Selection Fund, The Munder Micro-Cap Equity Fund and the
NetNet Fund10
(e) Form of Notice to the Custodian Contract with respect to The Munder
Short Term Treasury Fund12
(f) Form of Sub-Custodian Agreement13
(g) Form of Notice to the Custody Agreement with respect to The Munder
All-Season Conservative Fund, The Munder All-Season Moderate Fund and The Munder
All-Season Aggressive Fund13
(h) Form of Notice to the Custodian Agreement with respect to The
Munder Financial Services Fund is filed herein
(9) (a) Transfer Agency and Service Agreement8
(b) Notice to Transfer Agency and Service Agreement with respect to the
Munder Value Fund and the Munder Mid-Cap Growth Fund8
(c) Notice to Transfer Agency and Service Agreement with respect to the
Munder International Bond Fund8
(d) Notice to Transfer Agency and Service Agreement with respect to The
Munder Small-Cap Value Fund, The Munder Equity Selection Fund, The Munder
Micro-Cap Equity Fund and the NetNet Fund10
(e) Form of Notice to Transfer Agency and Service Agreement with respect to
The Munder Short Term Treasury Fund12
(f) Form of Amendment to the Transfer Agency and Registrar Agreement with
respect to The Munder All-Season Conservative Fund, The Munder All-Season
Moderate Fund and The Munder All-Season Aggressive Fund13
(g) Form of Notice to the Transfer Agency and Registrar Agreement with
respect to The Munder Financial Services Fund is filed herein
(h) Form of Amendment to the Transfer Agency and Registrar Agreement
with respect to The Munder Financial Services Fund is filed herein
(i) Administration Agreement8
(j) Notice to Administration Agreement with respect to The Munder Value and
The Munder Mid-Cap Growth Fund8
(k) Notice to Administration Agreement with respect to The Munder
International Bond Fund8
(l) Notice to Administration Agreement with respect to The Munder Small-Cap
Value Fund, The Munder Equity Selection Fund, The Munder Micro-Cap Equity Fund
and the NetNet Fund10
(m) Form of Notice to Administration Agreement with respect to The Munder
Short Term Treasury Fund12
(n) Form of Amendment to the Administration Agreement with respect to The
Munder All-Season Conservative Fund, The Munder All-Season Moderate Fund and The
Munder All-Season Aggressive Fund13
(o) Form of Notice to Administration Agreement with respect to The
Munder Financial Services Fund is filed herein
(p) Form of Amendment to the Administration Agreement with respect to
The Munder Financial Services Fund is filed herein
(q) Form of Notice to Sub-Administration Agreement with respect to The
Munder Financial Services Fund is filed herein
(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
Fund4
(c) Opinion and Consent of Counsel with respect to The Munder Real Estate
Equity Investment Fund3
(d) Opinion and Consent of Counsel with respect to the Munder Value Fund
and The Munder Mid-Cap Growth Fund8
(e) Opinion and Consent of Counsel with respect to the Munder International
Bond Fund8
(f) Opinion and Consent of Counsel with respect to the NetNet Fund9
(g) Opinion and Consent of Counsel with respect to the Munder Small-Cap
Value Fund, the Munder Equity Selection Fund, and the Munder Micro-Cap Equity
Fund11
(h) Opinion and Consent of Counsel with respect to Munder Short Term
Treasury Fund12
(i) Opinion and Consent of Counsel with respect to The Munder All-Season
Conservative Fund, The Munder All-Season Moderate Fund and The Munder All-Season
Aggressive Fund14
(j) Opinion and Consent of Counsel with respect to The Munder Financial
Services Fund is filed herein
(11) (a) Consent of Ernst & Young LLP11
(b) Consent of Arthur Andersen LLP7
(c) Letter of Arthur Andersen LLP regarding change in independent auditor
required by Item 304 of Regulation S-K7
(d) Powers of Attorney13
(e) Certified Resolution of Board authorizing signature on behalf of
Registrant pursuant to power of attorney14
(12) Not Applicable
(13) Initial Capital Agreement2
(14) Not Applicable
(15) (a) Service Plan for The Munder Multi-Season Growth Fund Class A
Shares5
(b) Service and Distribution Plan for The Munder Multi-Season Growth Fund
Class B Shares5
(c) Service and Distribution Plan for The Munder Multi-Season Growth Fund
Class D Shares5
(d) Service Plan for The Munder Money Market Fund Class A Shares5
(e) Service and Distribution Plan for The Munder Money Market Fund Class B
Shares5
(f) Service and Distribution Plan for The Munder Money Market Fund Class D
Shares5
(g) Service Plan for The Munder Real Estate Equity Investment Fund Class A
Shares5
(h) Service and Distribution Plan for The Munder Real Estate Equity
Investment Fund Class B Shares5
(i) Service and Distribution Plan for The Munder Real Estate Equity
Investment Fund Class D Shares5
(j) Form of Service Plan for The Munder Multi-Season Growth Fund Investor
Shares6
(k) Form of Service Plan for Class K Shares of The Munder Funds, Inc.10
(l) Form of Service Plan for Class A Shares of The Munder Funds, Inc.10
(m) Form of Distribution and Service Plan for Class B Shares for The Munder
Funds, Inc.10
(n) Form of Distribution and Service Plan for Class C Shares for The Munder
Funds, Inc.10
(o) Form of Distribution and Service Plan for the NetNet Fund9
(16) Schedule for Computation of Performance Quotations12
(17) (a) Not Applicable
(18) Form of Amended and Restated Multi-Class Plan13
-------------------------------- 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. 7 to the Registrant's Registration
Statement on August 26, 1994 and incorporated by reference herein.
4. Filed in Post-Effective Amendment No. 2 to the Registrant's Registration
Statement on July 9, 1993 and incorporated by reference herein.
5. Filed in Post-Effective Amendment No. 8 to the Registrant's Registration
Statement on February 28, 1995 and incorporated by reference herein.
6. Filed in Post-Effective Amendment No. 9 to the Registrant's Registration
Statement on April 13, 1995 and incorporated by reference herein.
7. Filed in Post-Effective Amendment No. 12 to the Registrant's
Registration Statement on August 29, 1995 and incorporated by reference herein.
8. Filed in Post-Effective Amendment No. 16 to the Registrant's
Registration Statement on June 25, 1996 and incorporated by reference herein.
9. Filed in Post-Effective Amendment No. 17 to the Registrant's
Registration Statement on August 9, 1996 and incorporated by reference herein.
10. Filed in Post-Effective Amendment No. 18 to the Registrant's
Registration Statement on August 14, 1996 and incorporated by reference herein.
11. Filed in Post-Effective Amendment No. 20 to the Registrant's
Registration Statement on October 28, 1996 and incorporated by reference herein.
12. Filed in Post-Effective Amendment No. 21 to the Registrant's
Registration Statement on December 13, 1996 and incorporated by reference
herein.
13. Filed in Post-Effective Amendment No. 23 to the Registrant's
Registration Statement on February 18, 1997 and incorporated by reference
herein.
14. Filed in Post-Effective Amendment No. 25 to the Registrant's
Registration Statement on May 14, 1997 and incorporated by reference herein.
Item 25. Persons Controlled by or Under Common Control with Registrant.
--------------------------------------------------
Not Applicable
Item 26. Number of Holders of Securities.
-------------------------------
As of May 13, 1997, 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:
<TABLE>
<CAPTION>
Class A Class B Class C Class K Class Y
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Munder Multi-Season Growth Fund 468 1661 39 139 147
Munder Money Market Fund 14 16 7 0 75
Munder Real Estate Equity 47 52 24 3 51
Investment Fund
Munder Mid-Cap Growth Fund 13 19 3 2 24
Munder Value Fund 44 27 8 2 61
Munder International Bond Fund 3 1 1 2 9
Munder Small-Cap Value Fund 18 11 8 2 58
Munder Micro-Cap Equity Fund 12 25 2 2 49
Munder Equity Selection Fund 1 1 1 1 1
Munder Short Term Treasury Fund 2 2 1 3 6
Munder All-Season Maintenance Fund 1 1 0 0 2
Munder All-Season Development Fund 2 1 0 0 4
Munder All-Season Accumulation Fund 1 1 0 0 19
NetNet Fund - as of May 13, 1997, the NetNet Fund had 98 accounts open.
</TABLE>
Item 27. Indemnification.
-------------------
Article VII, Section 7.6 of the Registrant's Articles of
Incorporation ("Section 7.6") provides that the Registrant, including its
successors and assigns, shall indemnify its directors and officers and make
advance payment of related expenses to the fullest extent permitted, and in
accordance with the procedures required, by the General Laws of the State of
Maryland and the Investment Company Act of 1940. Such indemnification shall be
in addition to any other right or claim to which any director, officer, employee
or agent may otherwise be entitled. In addition, Article VI of the Registrant's
By-laws provides that the Registrant shall indemnify its employees and/or agents
in any manner as shall be authorized by the Board of Directors and within such
limits as permitted by applicable law. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. The Registrant may
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Registrant or is serving at the
request of the Registrant as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, partnership, joint venture,
trust or other enterprise or employee benefit plan, against any liability
asserted against and incurred by such person in any such capacity or arising out
of such person's position, whether or not the Registrant would have had the
power to indemnify against such liability. The rights provided by Section 7.6
shall be enforceable against the Registrant by such person who shall be presumed
to have relied upon such rights in serving or continuing to serve in the
capacities indicated therein.
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 Advisor.
-------------------------------------------------------------
Munder Capital Management
--------------------------------------
Position
Name with Adviser
--------- -----------------
Old MCM, Inc. Partner
Munder Group LLC Partner
WAM Holdings, Inc. Partner
Woodbridge Capital Management, Inc. Partner
Lee P. Munder President and Chief
Executive Officer
Leonard J. Barr, II Senior Vice President and
Director of Research
Ann J. Conrad Vice President and
Director of Special
Equity Products
Clark Durant Vice President and Co-
Director of The Private
Management Group
Terry H. Gardner Vice President and Chief
Financial Officer
Elyse G. Essick Vice President and
Director of Client
Services
Sharon E. Fayolle Vice President and
Director of Money Market
Trading
Otto G. Hinzmann Vice President and
Director of Equity
Portfolio
Management
Anne K. Kennedy Vice President and
Director of Corporate Bond
Trading
Richard R. Mullaney Vice President and
Director of The Private
Management Group
Ann F. Putallaz Vice President and
Director of Fiduciary
Services
Peter G. Root Vice President and
Director of Government
Securities Trading
Lisa A. Rosen General Counsel and
Director of Mutual
Fund Operations
James C. Robinson Executive Vice President
and Chief Investment
Officer/Fixed Income
Gerald L. Seizert Executive Vice President
and Chief Investment
Officer/Equity
Paul D. Tobias Executive Vice President
and Chief Operating
Officer
For further information relating to the Investment Adviser's officers,
reference is made to Form ADV filed under the Investment Advisers Act of 1940 by
Munder Capital Management. SEC File No. 801-32415.
<PAGE>
Item 29. Principal Underwriters.
---------------------------
(a) Funds Distributor, Inc. ("FDI"), located at 60 State Street, Boston,
Massachusetts 02109, is the principal underwriter of the Funds. FDI is an
indirectly wholly-owned subsidiary of Boston Institutional Group, Inc. a holding
company, all of whose outstanding shares are owned by key employees. FDI is a
broker dealer registered under the Securities Exchange Act of 1934, as amended.
FDI acts as principal underwriter of the following investment companies other
than the Registrant:
Harris Insight Funds Trust Fremont Mutual Funds, Inc.
The Munder Funds Trust RCM Capital Funds, Inc.
St. Clair Funds, Inc. Monetta Fund, Inc.
The Munder Framlington Funds Trust Monetta Trust
BJB Investment Funds Burridge Funds
The PanAgora Institutional Funds The JPM Series Trust
RCM Equity Funds, Inc. The JPM Series Trust II
Waterhouse Investors Cash Management Fund, Inc. HT Insight Funds, Inc.
LKCM Fund d/b/a Harris Insight Funds
The JPM Pierpont Funds The Brinson Funds
The JPM Institutional Funds WEBS Index Fund, Inc.
The Skyline Funds
(b) The following is a list of the executive officers, directors and
partners of Funds Distributor, Inc.
Director, President and Chief Executive Officer - Marie E. Connolly
Executive Vice President - Richard W. Ingram
Executive Vice President - Donald R. Robertson
Senior Vice President, General Counsel, - John E. Pelletier
Secretary and Clerk
Senior Vice President - Michael S. Petrucelli
Director, Senior Vice President, Treasurer and - Joseph F. Tower, III
Chief Financial Officer
Senior Vice President - Paula R. David
Senior Vice President - Bernard A. Whalen
Director - William J. Nutt
(c) Not Applicable
Item 30. Location of Accounts and Records.
------------------------------------------
The account books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the Investment Company Act
of 1940 and the Rules thereunder will be maintained at the offices of:
(1) Munder Capital Management, 480 Pierce Street or 255
East Brown Street, Birmingham, Michigan 48009
(records relating to its function as investment
advisor)
(2) First Data Investor Services Group, Inc., 53 State
Street, Exchange Place, Boston, Massachusetts 02109
or 4400 Computer Drive, Westborough, Massachusetts
01581 (records relating to its functions as
administrator and transfer agent)
(3) Funds Distributor, Inc., 60 State Street, Boston, Massachusetts 02109
(records relating to its function as distributor)
(4) Comerica Bank, 1 Detroit Center, 500 Woodward Avenue, Detroit, Michigan
48226 (records relating to its function as custodian)
Item 31. Management Services.
--------------------------
Not Applicable
Item 32. Undertakings.
----------------
(a) Not Applicable
(b) Registrant undertakes to file a Post-Effective Amendment
relating to The Munder Financial Services Fund, using
reasonably current financial statements which need not be
certified, within four to six months from the effective date
of the Registration Statement describing the Fund.
(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 call a meeting of Shareholders for
the purpose of voting upon the question of removal of a
Director or Directors when requested to do so by the holders
of at least 10% of the Registrant's outstanding shares of
common stock and in connection with such meeting to comply
with the shareholders' communications provisions of Section
16(c) of the Investment Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that
this Post-Effective Amendment No. 28 to the Registration Statement meets the
requirements for effectiveness pursuant to Rule 485(b) of the Securities Act of
1933, as amended, and the Registrant has duly caused this Post-Effective
Amendment No. 28 to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
28th day of July, 1997.
The Munder Funds, Inc.
By: *
Lee P. Munder
*By: _Teresa M.R. Hamlin
Teresa M.R. Hamlin
as Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signatures Title Date
* President and Chief July 28, 1997
- -------------------------
Lee P. Munder Executive Officer
* Director July 28, 1997
- --------------------------
Charles W. Elliott
* Director July 28, 1997
- -------------------------
Joseph E. Champagne
* Director July 28, 1997
- ---------------------
Thomas B. Bender
* Director July 28, 1997
- -------------------------
Thomas D. Eckert
* Director July 28, 1997
- -------------------------
John Rakolta, Jr.
* Director July 28, 1997
- -------------------------
David J. Brophy
<PAGE>
* Vice President, July 28, 1997
- -------------------------
Terry H. Gardner Treasurer and
Chief Financial
Officer
* By: /s/ Teresa M.R. Hamlin
Teresa M.R. Hamlin
as Attorney-in-Fact
* The Powers of Attorney are incorporated by reference to Post-Effective
Amendment No. 23 filed with the Securities and Exchange Commission on February
18, 1997.
<PAGE>
EXHIBIT INDEX
Exhibit Description
1(h) Articles Supplementary for The Munder Financial Services Fund.
5(m) Form of Investment Advisory Agreement for The Munder Financial
Services Fund.
6(g) Form of Distribution Agreement with respect to The Munder Financial
Services Fund.
8(h) Form of Notice to the Custodian Agreement with respect to The Munder
Financial Services Fund.
9(g) Form of Notice to the Transfer Agency and Registrar Agreement with
respect to The Munder Financial Services Fund.
9(h) Form of Amendment to the Transfer Agency and Registrar Agreement with
respect to The Munder Financial Services Fund.
9(o) Form of Notice to the Administration Agreement with respect to The
Munder Financial Services Fund.
9(p) Form of Amendment to the Administration Agreement with respect to The
Munder Financial Services Fund.
9(q) Form of Notice to the Sub-Administration Agreement with respect to The
Munder Financial Services Fund.
10(j) Opinion and Consent of Counsel with respect to The Munder Financial
Services Fund.
<PAGE>
Exhibit 1(h)
THE MUNDER FUNDS, INC.
ARTICLES SUPPLEMENTARY
THE MUNDER FUNDS, INC., a Maryland corporation registered as an
open-end investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), and having its principal office in the State of Maryland in
Baltimore City, Maryland (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: In accordance with procedures established in the Corporation's
Charter, the Board of Directors of the Corporation, by resolution dated May 6,
1997 pursuant to Section 2-208.1 of the Maryland General Corporation Law, duly
classified 50,000,000 shares of the unissued, authorized capital stock of the
Corporation into the following additional series, designated as follows:
Name of Series Number of Shares Allocated
The Munder Financial Services Fund 50,000,000
SECOND: The shares of the Corporation classified pursuant to Article
First of these Articles Supplementary have been so classified by the Board of
Directors under the authority contained in the Charter of the Corporation. The
number of shares of capital stock of the various series and classes thereof that
the Corporation has authority to issue has been established by the Board of
Directors in accordance with Section 2-105(c) of the Maryland General
Corporation Law.
THIRD: Immediately prior to the effectiveness of the Articles
Supplementary of the Corporation as hereinabove set forth, the Corporation had
the authority to issue two billion, three-hundred million (2,300,000,000) shares
of Common Stock of the par value of $0.01 per share and of the aggregate par
value of twenty-three million dollars ($23,000,000), of which the Board of
Directors had classified one billion, seven hundred and fifty five million
(1,755,000,000) shares into Series and classified the shares of each Series as
follows:
<PAGE>
Previously Classified Shares
Authorized Shares
Name of Series (in millions)
NetNet Fund 50
Authorized
Shares by Class (in millions)
A B Y C K
The Munder Multi-Season Growth Fund 10 60 50 10 50
The Munder Money Market Fund 55 20 500 20 200
The Munder Real Estate Equity Investment
Fund 10 50 10 10 10
The Munder Equity Selection Fund 20 40 20 10 10
The Munder International Bond Fund 20 40 20 10 10
The Munder Mid-Cap Growth Fund 5 10 10 5 10
The Munder Value Fund 5 10 10 5 10
The Munder Micro-Cap Equity Fund 10 15 10 10 10
The Munder Small-Cap Value Fund 10 15 10 10 10
The Munder Short Term Treasury Fund 20 40 20 10 10
The Munder All-Season Maintenance Fund 12.5 12.5 25 N/A N/A
The Munder All-Season Development Fund 12.5 12.5 25 N/A N/A
The Munder All-Season Accumulation Fund 12.5 12.5 25 N/A N/A
As amended hereby, the Corporation's Articles of Incorporation
authorize the issuance of two billion, three-hundred million (2,300,000,000)
shares of Common Stock of the par value of $0.01 per share and having an
aggregate par value of twenty-three million dollars ($23,000,000), of which the
Board of Directors has classified one billion, eight hundred and five million,
(1,805,000,000) (including the 1,755,000,000 shares previously designated)
shares into Series and classified the shares of each Series as follows:
Current Classification of Shares
Authorized Shares
Name of Series (in millions)
NetNet Fund 50
The Munder Financial Services Fund 50
Authorized
Shares by Class (in millions)
A B Y C K
The Munder Multi-Season Growth Fund 10 60 50 10 50
The Munder Money Market Fund 55 20 500 20 200
The Munder Real Estate Equity Investment
Fund 10 50 10 10 10
The Munder Equity Selection Fund 20 40 20 10 10
The Munder International Bond Fund 20 40 20 10 10
The Munder Mid-Cap Growth Fund 5 10 10 5 10
The Munder Value Fund 5 10 10 5 10
The Munder Micro-Cap Equity Fund 10 15 10 10 10
The Munder Small-Cap Value Fund 10 15 10 10 10
The Munder Short Term Treasury Fund 20 40 20 10 10
The Munder All-Season Maintenance Fund 12.5 12.5 25 N/A N/A
The Munder All-Season Development Fund 12.5 12.5 25 N/A N/A
The Munder All-Season Accumulation Fund 12.5 12.5 25 N/A N/A
FOURTH: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of the various series of shares and classes thereof shall be as set
forth in the Corporation's Articles of Incorporation and shall be subject to all
provisions of the Articles of Incorporation relating to shares of the
Corporation generally, and those set forth as follows:
(a) The assets of each Class of a Series shall be invested in the same
investment portfolio of the Corporation.
(b) The dividends and distributions of investment income and capital
gains with respect to each class of shares shall be in such amount as
may be declared from time to time by the Board of Directors, and the
dividends and distributions of each class of shares may vary from the
dividends and distributions of the other classes of shares to reflect
differing allocations of the expenses of the Corporation among the
holders of each class and any resultant differences between the net
asset value per share of each class, to such extent and for such
purposes as the Board of Directors may deem appropriate. The allocation
of investment income or capital gains and expenses and liabilities of
the Corporation among the classes shall be determined by the Board of
Directors in a manner it deems appropriate.
(c) Class A shares of each Series (including fractional shares) may be
subject to an initial sales charge pursuant to the terms of the
issuance of such shares.
(d) The proceeds of the redemption of Class B shares of each Series
(including fractional shares) may be reduced by the amount of any
contingent deferred sales charge payable on such redemption pursuant to
the terms of the issuance of such shares.
(e) The holders of Class A shares, Class B shares and Class Y shares of
each Series shall have (i) exclusive voting rights with respect to
provisions of any service plan or service and distribution plan adopted
by the Corporation pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (a "Plan") applicable to the respective class of the
respective Series and (ii) no voting rights with respect to the
provisions of any Plan applicable to any other class or Series of
shares or with regard to any other matter submitted to a vote of
shareholders which does not affect holders of that respective class of
the respective Series of shares.
(f)(l) Each Class B share of each Series, other than a share purchased
through the automatic reinvestment of a dividend or a distribution with
respect to Class B shares, shall be converted automatically, and
without any action or choice on the part of the holder thereof, into
Class A shares of that Series on the date that is the first business
day of the month in which the sixth anniversary of the issuance of the
Class B shares occurs (the "Conversion Date"). With respect to Class B
shares issued in an exchange or series of exchanges for shares of
capital stock of another investment company or class or series thereof
registered under the Investment Company Act of 1940 pursuant to an
exchange privilege granted by the Corporation, the date of issuance of
the Class B shares for purposes of the immediately preceding sentence
shall be the date of issuance of the original shares of capital stock.
<PAGE>
(2) Each Class B share of a Series purchased through the
automatic reinvestment of a dividend or a distribution with respect to
Class B shares shall be segregated in a separate sub-account. Each time
any Class B shares in a shareholder's Fund account (other than those in
the sub-account) convert to Class A shares, an equal pro rata portion
of the Class B shares then in the sub-account shall also convert
automatically to Class A shares without any action or choice on the
part of the holder thereof. The portion shall be determined by the
ratio that the shareholder's Class B shares of a Series converting to
Class A shares bears to the shareholder's total Class B shares of that
Series not acquired through dividends and distributions.
(3) The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel or a
ruling of the Internal Revenue Service that payment of different
dividends on Class A and Class B shares does not result in the
Corporation's dividends or distributions constituting "preferential
dividends" under the Internal Revenue Code of 1986, as amended, and
that the conversion of shares does not constitute a taxable event under
federal income tax law.
(4) The number of Class A shares of a Series into which a
share of Class B shares is converted pursuant to paragraphs (f)(1) and
(f)(2) hereof shall equal the number (including for this purpose
fractions of a share) obtained by dividing the net asset value per
share of the Class B shares of the Series (for purposes of sales and
redemptions thereof on the Conversion Date) by the net asset value per
share of the Class A shares of the Series (for purposes of sales and
redemptions thereof on the Conversion Date).
<PAGE>
(5) On the Conversion Date, the Class B shares of a Series
converted into Class A shares will cease to accrue dividends and will
no longer be deemed outstanding and the rights of the holders thereof
(except the right to receive (i) the number of Class A shares into
which the Class B shares have been converted and (ii) declared but
unpaid dividends to the Conversion Date) will cease. Certificates
representing Class A shares resulting from the conversion need not be
issued until certificates representing Class B shares converted, if
issued, have been received by the Corporation or its agent duly
endorsed for transfer.
IN WITNESS WHEREOF, The Munder Funds, Inc. has caused these Articles
Supplementary to be signed in its name on its behalf by its authorized officers
who acknowledge that these Articles Supplementary are the act of the
Corporation, that to the best of their knowledge, information and belief, all
matters and facts set forth herein relating to the authorization and approval of
these Articles Supplementary are true in all material respects and that this
statement is made under the penalties of perjury.
Date: May 6, 1997
THE MUNDER FUNDS, INC.
[CORPORATE SEAL]
By: /s/ Terry H. Gardner
Terry H. Gardner
Vice President
Attest:
/s/ Lisa Anne Rosen
Lisa Anne Rosen
Secretary
Exhibit 5(m)
FORM OF
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made this day of , 1997, between The Munder Funds, Inc. (the
"Company") on behalf of the Munder Financial Services Fund (the "Fund") and
Munder Capital Management (the "Advisor"), a Delaware partnership.
WHEREAS, the Company is a Maryland corporation authorized to issue
shares in series and is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and the
Fund is a series of the Company;
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended ("Advisers Act"); and
WHEREAS, the Company wishes to retain the Advisor to render investment
advisory services to the Fund, and the Advisor is willing to furnish such
services to the Fund;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Company and the Advisor as follows:
1. Appointment
The Company hereby appoints the Advisor to act as investment advisor to
the Fund for the periods and on the terms set forth herein. The Advisor accepts
the appointment and agrees to furnish the services set forth herein for the
compensation provided herein.
2. Services as Investment Advisor
Subject to the general supervision and direction of the Board of
Directors of the Company, the Advisor will (a) manage the Fund in accordance
with the Fund's investment objective and policies as stated in the Fund's
Prospectus and the Statement of Additional Information filed with the Securities
and Exchange Commission, as they may be amended from time to time; (b) make
investment decisions for the Fund; (c) place purchase and sale orders on behalf
of the Fund; and (d) employ professional portfolio managers and securities
analysts to provide research services to the Fund. In providing those services,
the Advisor will provide the Fund with ongoing research, analysis, advice and
judgments regarding individual investments, general economic conditions and
trends and long-range investment policy. In addition, the Advisor will furnish
the Fund with whatever statistical information the Fund may reasonably request
with respect to the securities that the Fund may hold or contemplate purchasing.
<PAGE>
The Advisor further agrees that, in performing its duties hereunder, it
will:
(a) comply with the 1940 Act and all rules and regulations thereunder
and under the Advisers Act, the Internal Revenue Code of 1986, as amended (the
"Code"), and all other applicable federal and state laws and regulations, and
with any applicable procedures adopted by the Directors;
(b) use reasonable efforts to manage the Fund so that it will qualify,
and continue to qualify, as a regulated investment company under Subchapter M of
the Code and regulations issued thereunder;
(c) maintain books and records with respect to the Fund's securities
transactions, render to the Board of Directors of the Company such periodic and
special reports as the Board may reasonably request, and keep the Directors
informed of developments materially affecting the Fund's portfolio;
(d) make available to the Fund's administrator and the Company,
promptly upon their request, such copies of its investment records and ledgers
with respect to the Fund as may be required to assist the administrator and the
Company in their compliance with applicable laws and regulations. The Advisor
will furnish the Directors with such periodic and special reports regarding the
Fund as they may reasonably request; and
(e) immediately notify the Company in the event that the Advisor or any
of its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Advisor from serving as investment advisor
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the Securities and Exchange
Commission or other regulatory authority. The Advisor further agrees to notify
the Company immediately of any material fact known to the Advisor respecting or
relating to the Advisor that is not contained in the Company's Registration
Statement regarding the Fund, or any amendment or supplement thereto, but that
is required to be disclosed therein, and of any statement contained therein that
becomes untrue in any material respect.
3. Documents
The Company has delivered properly certified or authenticated copies of
each of the following documents to the Advisor and will deliver to it all future
amendments and supplements thereto, if any:
(a) certified resolution of the Board of Directors of the Company
authorizing the appointment of the Advisor and approving the form of this
Agreement;
(b) the Registration Statement as filed with the Securities and Exchange
Commission and any amendments thereto; and
(c) exhibits, powers of attorneys, certificates and any and all other
documents relating to or filed in connection with the Registration Statement
described above.
4. Brokerage
In selecting brokers or dealers to execute transactions on behalf of
the Fund, the Advisor will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any Fund
transaction, the Advisor will consider all factors it deems relevant, including,
but not limited to, the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction, and in evaluating the best overall terms
available, the Advisor is authorized to consider the brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934, as amended (the "1934 Act")) provided to the Fund and/or other
accounts over which the Advisor or its affiliates exercise investment
discretion. In accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T)
thereunder and subject to any other applicable laws and regulations, the Advisor
and its affiliates are authorized to effect portfolio transactions for the Fund
and to retain brokerage commissions on such transactions
5. Records
The Advisor agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required to be maintained
by the Advisor with respect to the Fund by the 1940 Act. The Advisor further
agrees that all records which it maintains for the Fund is the property of the
Fund and it will promptly surrender any of such records upon request.
6. Standard of Care
The Advisor shall exercise its best judgment in rendering the services
under this Agreement. The Advisor shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Fund or the Fund's
shareholders in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
the Advisor against any liability to the Fund or to its shareholders to which
the Advisor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or by
reason of the Advisor's reckless disregard of its obligations and duties under
this Agreement. As used in this Section 6, the term "Advisor" shall include any
officers, directors, employees, or other affiliates of the Advisor performing
services with respect to the Fund.
7. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Fund will pay the Advisor a fee at an annual rate equal to .75% of the
average daily net assets of the Fund. This fee shall be computed and accrued
daily and payable monthly. For the purpose of determining fees payable to the
Advisor, the value of a Fund's average daily net assets shall be computed at the
times and in the manner specified in the Fund's Prospectus or Statement of
Additional Information.
8. Expenses
The Advisor will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other expenses
to be incurred in its operation, including: taxes, interest, brokerage fees and
commissions, if any, fees of Directors of the Company who are not officers,
directors, or employees of the Advisor; Securities and Exchange Commission fees
and state blue sky fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's proportionate share of insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to investor services, including, without limitation, telephone and
personal expenses; charges of an independent pricing service, costs of preparing
and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers of Board of Directors of the Company; and any extraordinary expenses.
9. Services to Other Companies or Accounts
The investment advisory services of the Advisor to the Fund under this
Agreement are not to be deemed exclusive, and the Advisor, or any affiliate
thereof, shall be free to render similar services to other investment companies
and the clients (whether or not their investment objective and policies are
similar to the Fund) and to engage in the activities. so long as it services
hereunder are not impaired thereby.
10. Duration and Termination
This Agreement shall become effective on the date of this Agreement and
shall continue in effect with respect to the Fund, unless sooner terminated as
provided herein, for two years from such date and shall continue from year to
year thereafter, provided each continuance is specifically approve at least
annually by (i) the vote of a majority of the Board of Directors of the Company
or (ii) a vote of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities, provided that in either event the continuance is
also approved by a majority of the Board of Directors who are not "interested
persons" (as defined in the 1940 Act) of any party to this Agreement, by vote
cast in person at a meeting called for the purpose of voting on such approval.
This Agreement is terminable with respect to the Fund, without penalty, on sixty
(60) days' written notice by the Board of Directors of the Company or by vote of
holders of a "majority" (as defined in the 1940 Act) of the Fund's shares or
upon ninety (90) days' written notice by the Advisor. This Agreement will be
terminated automatically in the event of its "assignment" (as defined in the
1940 Act).
11. Amendment
No provision of this Agreement shall be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement with respect to the Fund shall be
effective until approved by an affirmative vote of (i) a majority of the
outstanding voting securities of the Fund, and (ii) a majority of the Directors
of the Company, including a majority of Directors who are not "interested
persons" (as defined in the 1940 Act) of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, if such
approval is required by applicable law.
12. Use of Name
It is understood that the name of Munder Capital Management or any
derivative thereof or logo associated with that name is the valuable property of
the Advisor and its affiliates, and that the Company and the Fund has the right
to use such name (or derivable or logo) only so long as this Agreement shall
continue with respect to the Fund. Upon termination of this Agreement, the
Company and the Fund shall forthwith cease to use such name (or derivative or
logo) and the Company shall promptly amend its Articles of Incorporation to
change the Fund name to comply herewith.
13. Miscellaneous
(a) This Agreement constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof.
(b) Titles or captions of sections contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provisions thereof.
(c) This Agreement may be executed in several counterparts, all of
which together shall for all purposes constitute one Agreement, binding on all
the parties.
(d) This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and interpreted, construed and enforced in
accordance with the laws of the State of Michigan.
(e) If any provisions of this Agreement or the application thereof to
any party or circumstances shall be determined by any court of competent
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Agreement or the application of such provision to such person circumstance,
other than these as to which it is so determined to be invalid or unenforceable,
shall not be affected thereby, and each provision hereof shall be valid and
shall be enforced to the fullest extent permitted by law.
(f) Notices of any kind to be given to the Advisor by the Company shall
be in writing and shall be duly given if mailed or delivered to the Advisor at
480 Pierce Street, Birmingham, Michigan 48009, or at such other address or to
such individual as shall be specified by the Advisor to the Company. Notices of
any kind to be given to the Company by the Advisor shall be in writing and shall
be duly given if mailed or delivered to 480 Pierce Street, Birmingham, Michigan
48009, or at such the address or to such individual as shall be specified by the
Company to the Advisor.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below on the day and year first above
written.
THE MUNDER FUNDS, INC.
By:
MUNDER CAPITAL MANAGEMENT
By:
Exhibit 6(g)
FORM OF
DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of this ____ day of
______________, 1997 by and between THE MUNDER FUNDS, INC., a Maryland
Corporation (the "Fund"), and FUNDS DISTRIBUTOR, INC., a Massachusetts
corporation ("Funds Distributor").
WHEREAS, the Fund is an open-end management investment company and is
so registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund desires to retain Funds Distributor as Distributor
for the Fund's shares of common stock in the Munder Financial Services Fund (the
"Portfolio"), to provide for the sale and distribution of shares of the
Portfolio (the "Shares"), and Funds Distributor is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein and intending to be legally bound hereby, the parties hereto
agree as follows:
I. DELIVERY OF DOCUMENTS
The Fund has delivered to Funds Distributor copies of each of the
following documents and will deliver to it all future amendments and supplements
thereto, if any:
(a) Resolutions of the Fund's Board of Directors authorizing the execution
and delivery of this Agreement;
(b) The Fund's Articles of Incorporation as filed with the State of
Maryland - Department of Assessments and Taxation on November
18, 1992;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission
("SEC");
(e) The Fund's Registration Statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933 (the
"1933 Act") and the 1940 Act, as filed with the SEC on November
18, 1992, and all amendments thereto; and
(f) The Fund's most recent Prospectuses and Statements of Additional
Information and all amendments and supplements thereto
(collectively, the "Prospectuses").
<PAGE>
II. DISTRIBUTION
1. Appointment of Distributor. The Fund hereby appoints Funds
Distributor as Distributor of the Portfolio's Shares and Funds Distributor
hereby accepts such appointment and agrees to render the services and duties set
forth in this Section II. In the event that the Fund establishes one or more
additional portfolios or classes of shares other than the Portfolio and the
Shares with respect to which it decides to retain Funds Distributor to act as
distributor hereunder, the Fund shall notify Funds Distributor in writing. If
Funds Distributor is willing to render such services, it shall so notify the
Fund in writing whereupon such portfolio and such shares shall become a
Portfolio and Shares hereunder and shall be subject to the provisions of this
Agreement, except to the extent that said provision is modified with respect to
such portfolio or shares in writing by the Fund and Funds Distributor at the
time.
2. Services and Duties.
(a) The Fund agrees to sell through Funds Distributor, as agent,
from time to time during the term of this Agreement, Shares (whether authorized
but unissued or treasury shares, in the Fund's sole discretion) upon the terms
and at the current offering price as described in the applicable Prospectuses.
Funds Distributor will act only in its own behalf as principal in making
agreements with selected dealers or others for the sale and redemption of
Shares, and shall sell Shares only at the offering price thereof as set forth in
the applicable Prospectus. Funds Distributor shall devote appropriate efforts to
effect sales of Shares of the Portfolio, but shall not be obligated to sell any
certain number of Shares.
(b) In all matters relating to the sale and redemption of Shares,
Funds Distributor will act in conformity with the Fund's Articles of
Incorporation, By-Laws and applicable Prospectuses and with the instructions and
directions of the Board of Directors of the Fund and will conform to and comply
with the requirements of the 1933 Act, the 1940 Act, the regulations of the
National Association of Securities Dealers, Inc. and all other applicable
Federal or state laws and regulations.
(c) Funds Distributor will bear the cost of printing and
distributing any Prospectus relating to the Portfolio (including any supplement
or amendment thereto), provided, however, that Funds Distributor shall not be
obligated to bear the expenses incurred by the Fund in connection with (i) the
preparation and printing of any supplement or amendment to a Registration
Statement or Prospectus necessary for the continued effective registration of
the Shares under the 1933 Act or state securities laws; and (ii) the printing
and distribution of any Prospectus, supplement or amendment thereto for existing
shareholders of the Portfolio.
(d) All Shares of the Portfolio offered for sale by Funds
Distributor shall be offered for sale to the public at a price per share (the
"offering price") equal to (i) their net asset value (determined in the manner
set forth in the applicable Prospectuses) plus, except to those classes of
persons set forth in the applicable Prospectuses, (ii) a sales charge which
shall be the percentage of the offering price of such Shares as set forth in the
applicable Prospectuses. The offering price, if not an exact multiple of one
cent, shall be adjusted to the nearest cent. Concessions paid by Funds
Distributor to broker-dealers and other persons shall be set forth in either the
selling agreements between Funds Distributor and such broker-dealers and persons
or, if such concessions are described in the applicable Prospectuses, shall be
as so set forth. No broker-dealer or other person who enters into a selling or
distribution and servicing agreement with Funds Distributor shall be authorized
to act as agent for the Fund in connection with the offering or sale of Shares
to the public or otherwise.
(e) If any Shares sold by Funds Distributor under the terms of this
Agreement are redeemed or repurchased by the Fund or by Funds Distributor as
agent or are tendered for redemption within seven business days after the date
of confirmation of the original purchase of said Shares, Funds Distributor shall
forfeit the amount above the net asset value received by it with respect to such
Shares, provided that the portion, if any, of such amount re-allowed by Funds
Distributor to broker-dealers or other persons shall be repayable to the Fund
only to the extent recovered by Funds Distributor from the broker-dealer or
other persons concerned. Funds Distributor shall include in the form of
agreement with such broker-dealers and other persons a corresponding provision
for the forfeiture by them of their concession with respect to Shares sold by
them or their principals and redeemed or repurchased by the Fund or by Funds
Distributor as agent (or tendered for redemption) within seven business days
after the date of confirmation of such initial purchases.
3. Sales and Redemptions.
(a) The Fund shall pay all costs and expenses in connection with
the registration of the Shares under the 1933 Act, and all expenses in
connection with maintaining facilities for the issue and transfer of the Shares
and for supplying information, prices and other data to be furnished by the Fund
hereunder, and all expenses in connection with preparing, printing and
distributing the Prospectuses except as set forth in subsection 2(c) of Section
II hereof.
(b) The Fund shall execute all documents, furnish all information
and otherwise take all actions which may be reasonably necessary in the
discretion of the Fund's officers in connection with the sale of the Shares in
such states as Funds Distributor may designate to the Fund and the Fund may
approve, and the Fund shall pay all filing fees which may be incurred in
connection with such sale. Funds Distributor shall pay all other expenses
incurred by Funds Distributor in connection with the sale of the Shares, except
as otherwise specifically provided in this Agreement.
(c) The Fund shall have the right to suspend the sale of Shares at
any time in response to conditions in the securities markets or otherwise, and
to suspend the redemption of Shares of any Portfolio at any time permitted by
the 1940 Act or the rules of the SEC ("Rules").
(d) The Fund reserves the right to reject any order for Shares, but
will not do so arbitrarily or without reasonable cause.
<PAGE>
III. LIMITATIONS OF LIABILITY
Funds Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund or any Portfolio in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
IV. CONFIDENTIALITY
Funds Distributor will treat confidentially and as proprietary
information of the Fund all records and other information relative to the Fund,
to the Fund's prior or current shareholders and to those persons or entities who
respond to Funds Distributor's inquiries concerning investment in the Fund, and,
except as provided below, will not use such records and information for any
purpose other than the performance of its responsibilities and duties hereunder.
Any other use by Funds Distributor of the information and records referred to
above may be made only after prior notification to and approval in writing by
the Fund. Such approval shall not be unreasonably withheld and may not be
withheld where: (i) Funds Distributor may be exposed to civil or criminal
contempt proceedings for failure to divulge such information; (ii) Funds
Distributor is requested to divulge such information by duly constituted
authorities; or (iii) Funds Distributor is so requested by the Fund.
V. INDEMNIFICATION
1. Fund Representation. The Fund represents and warrants to Funds
Distributor that at all times the Registration Statement and Prospectuses will
in all material respects conform to the applicable requirements of the 1933 Act
and the Rules thereunder and will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, except that no representation or warranty
in this subsection shall apply to statements or omissions made in reliance upon
and in conformity with written information furnished to the Fund by or on behalf
of and with respect to Funds Distributor expressly for use in the Registration
Statement or Prospectuses.
2. Funds Distributor Representation. Funds Distributor represents
and warrants to the Fund that it is duly organized as a Massachusetts
corporation and is and at all times will remain duly authorized and licensed to
carry out its services as contemplated herein.
3. Fund Indemnification. The Fund, on behalf of the Portfolio,
agrees that the Portfolio will indemnify, defend and hold harmless Funds
Distributor, its several officers and directors, and any person who controls
Funds Distributor within the meaning of Section 15 of the 1933 Act, from and
against any losses, claims, damages or liabilities, joint or several, to which
any of them may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectuses or in any application or other document executed by or on behalf of
a Portfolio, or arise out of or based upon, information furnished by or on
behalf of a Portfolio, filed in any state in order to sell the Shares under the
securities or blue sky laws thereof ("Blue Sky Application"), or arise out of,
or are based upon, the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse Funds Distributor, its several officers and
directors, and any person who controls Funds Distributor within the meaning of
Section 15 of the 1933 Act, for any legal or other expenses reasonably incurred
by any of them in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that neither the Fund nor any
Portfolio shall be liable in any case to the extent that such loss, claim,
damage or liability arises out of, or is based upon, any untrue statement,
alleged untrue statement, or omission or alleged omission made in the
Registration Statement, the Prospectuses, any Blue Sky Application or any
application or other document executed by or on behalf of the Fund in reliance
upon and in conformity with written information furnished to the Fund by or on
behalf of Funds Distributor specifically for inclusion therein.
A Portfolio shall not indemnify any person pursuant to this
subsection 3 unless the court or other body before which the proceeding was
brought has rendered a final decision on the merits that such person was not
liable by reason of his willful misfeasance, bad faith or gross negligence in
the performance of his duties, or his reckless disregard of his obligations and
duties, under this Agreement ("disabling conduct") or, in the absence of such a
decision, a reasonable determination (based upon a review of the facts) that
such person was not liable by reason of disabling conduct has been made by the
vote of a majority of a quorum of Directors of the Fund who are neither
"interested parties" of the Fund (as defined in the 1940 Act) nor parties to the
proceeding, or by an independent legal counsel in a written opinion.
The Portfolio shall advance attorneys' fees and other expenses
incurred by any person in defending any claim, demand, action or suit which is
the subject of a claim for indemnification pursuant to this subsection 3, so
long as: (i) such person shall undertake to repay all such advances unless it is
ultimately determined that he or she is entitled to indemnification hereunder;
and (ii) such person shall provide security for such undertaking, or the
Portfolio shall be insured against losses arising by reason of any lawful
advances, or a majority of a quorum of the disinterested, non-party Directors of
the Fund (or an independent legal counsel in a written opinion) shall determine
based on a review of readily available facts (as opposed to a full trial-type
inquiry) that there is reason to believe that such person ultimately will be
found entitled to indemnification hereunder.
The obligations of the Portfolio under this subsection 3 shall be
the several (and not joint or joint and several) obligation of the Portfolio.
4. Funds Distributor Indemnification. Funds Distributor will
indemnify, defend and hold harmless the Fund, the Portfolio, the Fund's several
officers and Directors and any person who controls the Fund or the Portfolio
within the meaning of Section 15 of the 1933 Act, from and against any losses,
claims, damages or liabilities, joint or several, to which any of them may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect hereof) arise out
of, or are based upon, any breach of its representations, warranties and
agreements herein, or which arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectuses, any Blue Sky Application or any
application or other documents executed by or on behalf of the Fund or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, which
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Fund or any of its several officers and
Directors by or on behalf of Funds Distributor specifically for inclusion
therein, and will reimburse the Fund, the Portfolio, the Fund's several officers
and trustees, and any person who controls the Fund or the Portfolio within the
meaning of Section 15 of the 1933 Act, for any legal or other expenses
reasonably incurred by any of them in investigating, defending or preparing to
defend any such action, proceeding or claim.
5. General Indemnity Provision. No indemnifying party shall be
liable under its indemnity agreement contained in subsection 3 or 4 hereof with
respect to any claim made against such indemnifying party unless the indemnified
party shall have notified the indemnifying party in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the indemnified party (or after
the indemnified party shall have received notice of such service on any
designated agent), but failure to notify the indemnifying party of any such
claim shall not relieve it from any liability which it may otherwise have to the
indemnified party. The indemnifying party will be entitled to participate at its
own expense in the defense or, if it so elects, to assume the defense of any
suit brought to enforce any such liability, and if the indemnifying party elects
to assume the defense, such defense shall be conducted by counsel chosen by it
and reasonably satisfactory to the indemnified party. In the event the
indemnifying party elects to assume the defense of any such suit and retain such
counsel, the indemnified party shall bear the fees and expenses of any
additional counsel retained by the indemnified party.
VI. DURATION AND TERMINATION
This Agreement shall become effective as of the date first above
written, and, unless sooner terminated as provided herein, shall continue until
May 6, 1999. Thereafter, if not terminated, this Agreement shall continue
automatically for successive terms of one year, provided that such continuance
is specifically approved at least annually by a vote of the majority of the
Board of Directors of the Fund, including a majority of the Directors who are
not "interested persons" of the Fund and have no direct or indirect financial
interest in the operation of the Plan, this Agreement, or in any agreement
relating to the Plan (the "Plan Directors"), by vote cast in person at a meeting
called for the purpose of voting on such approval; provided, however, that this
Agreement may be terminated with respect to any Portfolio by the Fund at any
time, without the payment of any penalty, by vote of a majority of the Directors
or by a vote of a "majority of the outstanding voting securities" of such
Portfolio on 60 days' written notice to Funds Distributor, or by Funds
Distributor at any time, without the payment of any penalty, on 60 days' written
notice to the Fund. This Agreement will automatically and immediately terminate
in the event of its "assignment." (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meanings as such terms have in the 1940 Act.)
VII. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged
or terminated except by an instrument in writing signed by the party against
which an enforcement of the change, waiver, discharge or termination is sought.
VIII. NOTICES
Notices of any kind to be given to the Fund hereunder by Funds
Distributor shall be in writing and shall be duly given if mailed or delivered
to the Fund at 480 Pierce Street, Suite 300, Birmingham, Michigan 48009,
Attention: Lee Munder, with a copy to Paul F. Roye, Esq., Dechert Price &
Rhoads, 1500 K Street N.W., Washington, D.C. 20005-1208, or at such other
address or to such individual as shall be so specified by the Fund to Funds
Distributor. Notices of any kind to be given to Funds Distributor hereunder by
the Fund shall be in writing and shall be duly given if mailed or delivered to
Funds Distributor at 60 State Street, Suite 1300, Boston, Massachusetts 02109,
Attention: Marie Connolly or at such other address or to such individual as
shall be so specified by Funds Distributor to the Fund.
IX. MISCELLANEOUS
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section VI hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by Maryland law; provided, however, that
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation of the SEC thereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
THE MUNDER FUNDS, INC.
By:
Name: Lee P. Munder
Title: President
Attest:
FUNDS DISTRIBUTOR, INC.
By:
Name: Marie Connolly
Title: President
Attest:
Exhibit 8(h)
FORM OF NOTICE TO
CUSTODY AGREEMENT
Comerica Bank
One Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226
Gentlemen:
Reference is made to the Custody Agreement between us dated as of May
1, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the
creation of an additional investment portfolio of The Munder Funds, Inc., namely
the Munder Financial Services Fund (the "New Portfolio").
We request that you act as Custodian under the Agreement with respect
to the New Portfolio.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
The Munder Funds, Inc.
By:
Accepted:
Comerica Bank
Date:____________ By:
Exhibit 9(g)
FORM OF NOTICE TO TRANSFER
AGENCY AND REGISTRAR AGREEMENT
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts, 02109
Gentlemen:
Reference is made to the Transfer Agent and Registrar Agreement between us
dated as of June 19, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the
creation of an additional investment portfolio of The Munder Funds, Inc., namely
the Munder Financial Services Fund (the "New Portfolio").
We request that you act as Transfer Agent under the Agreement with
respect to the New Portfolio.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
The Munder Funds, Inc.
By:
Accepted:
First Data Investor
Services Group, Inc.
Date:____________ By:
Exhibit 9(h)
FORM OF
AMENDMENT TO TRANSFER AGENCY AND REGISTRAR AGREEMENT
THIS AMENDMENT dated as of _________, 1997 (the "Amendment") is made to
the Transfer Agency and Registrar Agreement, dated as of the 19th day of June,
1995 (the "Agreement") between THE MUNDER FUNDS, INC. (the "Company") and FIRST
DATA INVESTOR SERVICES GROUP, INC. ("FDISG") (then known as The Shareholder
Services Group, Inc.).
The Company and FDISG agree that the Agreement shall, as of the date
first written above, be amended as follows:
1. Schedule A, "Fee Schedule," of the Agreement shall be deleted in its
entirety and the Schedule A attached hereto shall be substituted in its place;
and
2. Exhibit 1 to the Agreement shall be deleted in its entirety and Exhibit
1 attached hereto shall be substituted in its place.
In all other respects, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first written
above.
THE MUNDER FUNDS, INC.
By: _____________________________
Title:_____________________________
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: _____________________________
Title:_____________________________
TRANSFER AGENT FEES
All Funds except the Munder All-Season Maintenance Fund, Munder All-Season
Accumulation Fund, Munder All-Season Development Fund and Munder Financial
Services Fund
1) Asset Based Charge: Based on the total net assets of
the Companies (as defined below*)
First $2.8 billion of aggregate net
assets @ 2.0 basis points Next $2.2
billion of aggregate net assets @
1.5 basis points Over $5 billion of
aggregate net assets @ 1.0 basis
points
Other Fees: Each IRA account will be charged
$10.00 per annum NSCC Transaction
Charge is $.15 per financial
transaction
2) System Development: Client defined system enhancements
will be agreed upon by Transfer
Agent and Munder Capital and billed
at a rate of $100.00 per hour
*Companies shall include The Munder Funds Trust, The Munder Funds, Inc.
(other than the Munder All-Season Maintenance Fund, Munder All-Season
Accumulation Fund, Munder All-Season Development Fund and Munder Financial
Services Fund) and the Liquidity Plus Money Market Fund of St. Clair Funds, Inc.
Munder All-Season Maintenance Fund, Munder All-Season Accumulation Fund and
Munder All-Season Development Fund
$36,000 per Fund, assuming no more than three classes of shares per
Fund, for a total annual fee of $108,000.
Munder Financial Services Fund
[TO BE DETERMINED]
<PAGE>
Exhibit 1
LIST OF PORTFOLIOS
dated ___________, 1997
Munder Multi-Season Growth Fund
Munder Real Estate Equity Investment Fund
Munder Mid-Cap Growth Fund
Munder Value Fund
Munder Money Market Fund
NetNet Fund
Munder International Bond Fund
Munder Small Cap Value Fund
Munder Equity Selection Fund
Munder Micro-Cap Equity Fund
Munder Short Term Treasury Fund
Munder All-Season Maintenance Fund
Munder All-Season Accumulation Fund
Munder All-Season Development Fund
Munder Financial Services Fund
Exhibit 9(o)
FORM OF NOTICE
TO ADMINISTRATION AGREEMENT
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Gentlemen:
Reference is made to the Administration Agreement between us dated as
of May 1, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the
creation of an additional investment portfolio of The Munder Funds, Inc., namely
the Munder Financial Services Fund (the "New Portfolio").
We request that you act as Administrator under the Agreement with
respect to the New Portfolio.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
The Munder Funds, Inc.
By:
Accepted:
First Data Investor Services
Group, Inc.
Date: ___________ By:
Exhibit 9(p)
FORM OF
AMENDMENT TO ADMINISTRATION AGREEMENT
THIS AMENDMENT dated as of _________, 1997 (the "Amendment") is made to
the Administration Agreement, dated as of the 1st day of May, 1995 (the
"Agreement") between THE MUNDER FUNDS, INC. (the "Company") and FIRST DATA
INVESTOR SERVICES GROUP, INC. ("FDISG") (then known as The Shareholder Services
Group, Inc.).
The Company and FDISG agree that the Agreement shall, as of the date
first written above, be amended as follows:
1. The Fee Schedule of the Agreement shall be deleted in its entirety and
the Fee Schedule attached hereto shall be substituted in its place; and
2. Schedule A to the Agreement shall be deleted in its entirety and
Schedule A attached hereto shall be substituted in its place.
In all other respects, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first written
above.
THE MUNDER FUNDS, INC.
By: _____________________________
Title:_____________________________
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: _____________________________
Title:_____________________________
<PAGE>
FEE SCHEDULE FOR
ADMINISTRATION AND
FUND ACCOUNTING SERVICES
All Funds except the Munder All-Season Maintenance Fund, Munder All-Season
Accumulation Fund, Munder All-Season Development Fund and Munder Financial
Services Fund
A. FEES FOR ADMINISTRATION SERVICES -- (Fund Administration and Fund
Accounting)
The following annual Fund Administration fees apply:
.12% of the first $2.8 billion of the average daily net assets of the
Companies (as defined below); and
.105% of the next $2.2 billion of the Companies' average daily net assets;
and
.10% of the Companies' average daily net assets over $5 billion.
"Companies" shall include The Munder Funds Trust, the Liquidity Plus Money
Market Fund of St. Clair Funds, The Munder Funds, Inc. (other than the Munder
All-Season Maintenance Fund, Munder All-Season Accumulation Fund, Munder
All-Season Development Fund and Munder Financial Services Fund) and The Munder
Framlington Funds Trust.
B. MINIMUM FEES
For Fund Administration Services, a minimum fee of $1.2 million per
annum will apply in the aggregate for all funds of the Companies.
Munder All-Season Maintenance Fund, Munder All-Season Accumulation Fund and
Munder All-Season Development Fund
A. FEES FOR ADMINISTRATION SERVICES -- (Fund Administration and Fund
Accounting)
The following annual Fund Administration fees apply:
$30,000 per annum for each Fund
<PAGE>
Munder Financial Services Fund
A. FEES FOR ADMINISTRATION SERVICES -- (Fund Administration and Fund
Accounting)
[TO BE DETERMINED]
<PAGE>
SCHEDULE A
FUNDS
Munder Multi-Season Growth Fund
Munder Real Estate Equity Investment Fund
Munder Mid-Cap Growth Fund
Munder Value Fund
Munder Money Market Fund
NetNet Fund
Munder International Bond Fund
Munder Small Cap Value Fund
Munder Equity Selection Fund
Munder Micro-Cap Equity Fund
Munder Short Term Treasury Fund
Munder All-Season Conservative Fund
Munder All-Season Aggressive Fund
Munder All-Season Moderate Fund
Munder Financial Services Fund
Exhibit 9(q)
FORM OF NOTICE TO
SUB-ADMINISTRATION AGREEMENT
FDI Distribution Services, Inc.
One Exchange Place
Boston, Massachusetts 02109
Gentlemen:
Reference is made to the Sub-Administration Agreement between us dated
as of May 1, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the
creation of an additional investment portfolio of The Munder Funds, Inc., namely
the Munder Financial Services Fund (the "New Portfolio").
We request that you act as Sub-Administrator under the Agreement with
respect to the New Portfolio.
If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
First Data Investor Services Group, Inc.
By:
Accepted:
FDI Distribution Services, Inc.
Date: By:
<PAGE>
Exhibit 10(j)
July 27, 1997
The Munder Funds, Inc.
480 Pierce Street
Birmingham, MI 48009
Dear Sirs:
In connection with the registration of an indefinite number of shares
of common stock (the "Shares") of The Munder Financial Services Fund (the
"Fund"), a series of The Munder Funds, Inc. (the "Company"), we are familiar
with the registration statement of the Company under the Investment Company act
of 1940 and the registration statement relating to the Company's Shares under
the Securities act of 1933 (File No. 33-54748)(the "Registration Statement"). We
have also examined such other corporate records, agreements, documents and
instruments of the Company as we deemed appropriate.
On the basis of the foregoing, we are of the opinion that the Shares of
the Company being registered under the Securities Act of 1933 in the
Registration Statement, when issued in accordance with the terms set forth
therein, will be legally and validly issued, fully paid and non-assessable by
the Company.
We hereby consent to the filing of this opinion with and as part of the
Registration Statement, and to the use of our name in the prospectus and
statement of additional information contained therein, and any amendments
thereto.
Very truly yours,
/s/ Dechert Price & Rhoads
Dechert Price & Rhoads
