MUNDER FUNDS INC, 497, 1997-03-26

MUNDER FUNDS INC
497, 1997-03-26

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THE MUNDER LIFESTYLE FUNDS
480 Pierce Street
Birmingham, Michigan 48009
Telephone (800) 438-5789

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information, which has been filed with the
Securities and Exchange Commission (the "SEC"), provides supplementary
information pertaining to the Class A, Class B, and Class Y shares representing
interests in the Munder All-Season Maintenance Fund (the "Maintenance Fund"),
the Munder All-Season Development Fund (the "Development Fund"), and the Munder
All-Season Accumulation Fund (the "Accumulation Fund") (each a "Fund,"
collectively the "Funds"). The Funds are three diversified series of shares
issued by The Munder Funds, Inc. (the "Company"), an open-end management
investment company. This Statement of Additional Information relates only to the
Funds, which are referred to as The Munder Lifestyle Funds. Each Fund seeks its
investment objective by investing in a portfolio of mutual funds (the
"Underlying Funds") offered by the Company, The Munder Framlington Funds Trust
("Framlington"), and The Munder Funds Trust (the "Trust"). This Statement of
Additional Information is not a prospectus, and should be read only in
conjunction with the Funds' Prospectus dated March 12, 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 March 12, 1997.

Shares of the Funds and the Underlying Funds are not deposits or obligations of,
or guaranteed or endorsed by any bank, and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. An investment in the Funds involves investment risks, including the
possible loss of principal.
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TABLE OF CONTENTS

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<S> <C>
GENERAL..................................................................... 3

INVESTMENT OBJECTIVES AND POLICIES.......................................... 3

FUND INVESTMENTS............................................................ 20

INVESTMENT LIMITATIONS...................................................... 40

DIRECTORS AND OFFICERS...................................................... 42

INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS.......................... 47

PORTFOLIO TRANSACTIONS...................................................... 54

PURCHASE AND REDEMPTION INFORMATION......................................... 56

NET ASSET VALUE............................................................. 58

PERFORMANCE INFORMATION..................................................... 59

TAXES....................................................................... 61

ADDITIONAL INFORMATION CONCERNING SHARES.................................... 65

MISCELLANEOUS............................................................... 66

REGISTRATION STATEMENT...................................................... 68

APPENDIX A.................................................................. 69

APPENDIX B.................................................................. 72
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No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectus in connection with the offering made by the Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Funds or the Distributor. The Prospectus does not
constitute an offering by the Funds or by the Distributor in any jurisdiction in
which such offering may not lawfully be made.

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GENERAL

The Company was organized as a Maryland corporation on November 18, 1992
and is registered under the Investment Company Act of 1940 as an open-end
management investment company. The Funds operate as three diversified series of
shares issued by the Company. The Company's principal office is located at 480
Pierce Street, Birmingham, Michigan 48009 and its telephone number is (800) 438-
5789.

As stated in the Prospectus, the investment advisor of each Fund, and each
of the Underlying Funds, is Munder Capital Management (the "Advisor"). The
principal partners of the Advisor are Old MCM, Inc., Munder Group LLC,
Woodbridge Capital Management, Inc. 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. Framlington Overseas
Investment Management Limited serves as sub-advisor ("Sub-Advisor") to the
Framlington International Growth Fund, the Framlington Emerging Markets Fund,
and the Framlington Healthcare Fund (collectively, the "Framlington Funds"),
which are three series of Framlington. Capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Prospectus.

Assets of the Funds will be allocated among the Underlying Funds within the
ranges set forth in the Prospectus. In addition, each Fund may hold cash, and
may invest cash balances in repurchase agreements and other money market
instruments in an amount to meet redemptions or for day-to-day operating
expenses.

INVESTMENT OBJECTIVES AND POLICIES

The Maintenance Fund's primary investment objective is to provide
shareholders with current income, with capital appreciation as a secondary
objective. The Fund seeks to achieve its objectives by concentrating its
investments in Underlying Funds that invest primarily in fixed income
securities.

The Development Fund's investment objective is to provide shareholders with
high total return through a combination of capital appreciation and current
income. The Fund seeks to achieve its objective by concentrating its investments
in Underlying Funds that invest primarily in equity securities and fixed income
securities.

The Accumulation Fund's investment objective is to provide shareholders
with long-term capital appreciation. The Fund seeks its objective by
concentrating its investments in Underlying Funds that invest primarily in
equity securities.

The following is a description of the investment objectives and policies of
the Underlying Funds.

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EQUITY FUNDS

Accelerating Growth Fund

The investment objective of the Accelerating Growth Fund is to provide
long-term capital appreciation, with income a secondary consideration. The Fund
seeks to achieve its objective by investing primarily in equity securities and
instruments convertible or exchangeable into equity securities. The Fund's
investment portfolio will consist primarily of the stocks of companies
determined by the Advisor to demonstrate accelerating earnings growth and which
are expected to continue expanding earnings at an accelerated pace, maintain a
substantial competitive advantage, have a focused management team and a stable
balance sheet.

Under normal market conditions, at least 65% of the Fund's total assets
will be invested in equity securities. In addition to investing in equity
securities, the Fund is authorized to invest in high quality short-term fixed
income securities as cash reserves or for temporary defensive purposes. See
"INVESTMENT TECHNIQUES AND RISK FACTORS--UNDERLYING FUNDS" in the Prospectus and
"FUND INVESTMENTS" in this Statement of Additional Information for a description
of investment practices of the Fund, including limited investments in warrants,
foreign securities and stock index futures and options.

Equity Selection Fund

The investment objective of the Equity Selection Fund is to provide
shareholders with long-term capital appreciation. The Fund seeks to achieve this
objective by investing in equity securities that a dedicated research team
believes to be of high quality and that, as determined through both fundamental
and technical analysis, are undervalued compared to equity securities of other
companies in the same industry. The Fund generally will invest in issuers that
have market capitalizations of at least $3 billion at the time of purchase. The
Fund will be diversified by industry with proportionate weightings approximately
the same as those of the Standard & Poor's Composite Stock Price 500 Index (the
"S&P 500").

The Fund seeks long-term capital appreciation by investing primarily in
common stocks. Under normal market conditions, the Fund will invest at least 65%
of its total assets in equity securities. In addition to investing in equity
securities, the Fund is also authorized to invest in high quality short-term
fixed income securities as cash reserves or for temporary defensive purposes.
See "INVESTMENT TECHNIQUES AND RISK FACTORS--UNDERLYING FUNDS" in the Prospectus
and "FUND INVESTMENTS" in this Statement of Additional Information for a
description of investment practices of the Fund, including limited investments
in warrants, foreign securities and stock index futures and options.

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Growth & Income Fund

The investment objective of the Growth & Income Fund is to provide capital
appreciation and current income by investing primarily in dividend-paying equity
securities. The Fund is designed for investors seeking current income and
capital appreciation through the equity markets. The Fund will seek to achieve
its objectives principally by investing in a broadly diversified portfolio of
dividend-paying stocks of companies whose prospects for dividend growth and
capital appreciation are considered favorable by the Advisor. In general, the
Advisor selects large, well-known companies that it believes have above-average
and secure dividends. The Fund will seek to produce a current yield greater than
the S&P 500.

The Fund's investment philosophy is founded on the Advisor's belief that
over time, dividend income can account for a significant component of the total
return from equity investments. Over time, reinvested dividend income has
accounted for approximately one-half of the total return of the S&P 500. Second,
dividends are normally a more stable and predictable source of return than
capital appreciation. While the price of a company's stock generally increases
or decreases in response to short-term earnings and market fluctuations, its
dividends are generally less volatile. Finally, the Advisor believes that stocks
which distribute a high level of current income tend to have less price
volatility than those which pay below average dividends.

To achieve its objective, the Fund will invest under normal circumstances
at least 65% of its assets in income-producing common stocks and convertible
preferred stocks. The Fund also may invest in convertible bonds which are debt
securities convertible into or ultimately exchangeable for common stock. The
Fund may invest up to 20% of the value of its total assets in securities that
are rated below investment grade by Standard & Poor's Ratings Service ("S&P"), a
division of McGraw-Hill Companies, Inc., or Moody's Investor Services, Inc.
("Moody's"). In addition to investing in common stocks and convertible
securities, the Fund is authorized to invest in high quality short-term fixed
income securities as cash reserves or for temporary defensive purposes. See
"INVESTMENT TECHNIQUES AND RISK FACTORS--UNDERLYING FUNDS" in the Prospectus and
"FUND INVESTMENTS" in this Statement of Additional Information for a description
of these and other investment practices of the Fund, including investments in
warrants, foreign securities and in stock index futures and options.

International Equity Fund

The investment objective of the International Equity Fund is to provide
long-term capital appreciation by investing primarily in the equity securities
of foreign issuers. These securities will be held directly or in the form of
American Depositary Receipts ("ADRs") or European Depositary Receipts ("EDRs").
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. The
Fund will emphasize companies with a market capitalization of at least $100
million. In selecting issuers, the Advisor may consider, among other factors,
the location of the issuer, its competitive stature, the issuer's past record
and future prospects for growth, and the marketability of its securities.

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On a continuing basis, but at least quarterly, the Advisor creates a list
of securities eligible for purchase by the Fund. The Advisor then calculates the
adjusted market capitalization of all the equity securities, ADRs and EDRs
considered to be eligible for purchase. Market capitalization for equity
securities is calculated by multiplying the market price of the security by the
number of shares outstanding, adjusted for control blocks. A control block is
defined as a block of securities owned by another corporation. The primary
sources of information regarding the existence and size of control blocks are
the S&P Stock reports and the Morgan Stanley Capital International Perspective.
Control blocks will be updated each time the eligible list of securities is
created or a company is added to the eligible universe.

Following calculation of the adjusted market capitalization, the list of
eligible securities is then sorted in descending order of adjusted market
capitalization. Securities with market capitalizations greater than $100 million
are considered for purchase by the Fund. On a regular basis, securities will be
added to the eligible universe as new ADR and EDR facilities and exchange
listings occur, subject to meeting other eligibility requirements. Each time the
list of eligible securities is created, any security held by the Fund that does
not appear on the updated eligibility list will be sold as soon as practicable.

Equity securities on the eligible securities list are continuously
evaluated on the basis of total return in relation to their respective local,
regional and global markets. From the list of eligible securities a portfolio is
constructed that is composed of two major sections. The first section is
designed to provide broad coverage of international markets. Securities
representation generally covers all major markets and industry sectors. The
second section is designed to complement the first section by increasing
exposure to securities that are expected to outperform their markets and
industry sectors on a relative basis. The blending of the two sections is
designed to provide an international portfolio that provides a broad market
exposure to stock markets and has the capability to enhance the value of the
portfolio by adjusting allocations to stocks that are expected to outperform
their respective markets on a relative basis.

The Fund will increase its exposure to the second section when the Advisor
identifies securities that are expected to outperform their markets and the Fund
will conversely increase its exposure to the first section when the Advisor
believes a broader market exposure is required. When the Advisor believes
broader market exposure will benefit the Fund, the Fund may allocate up to 80%
of its assets for investment in the first section securities. When the Advisor
identifies strong potential for specific securities to outperform their relative
benchmarks, the Fund may invest up to 50% of its total assets in the second
section securities.

The Advisor will determine the second section allocation by examining the
relationship each security has with the economic environment of its respective
industry, country market and geographic region. A stock's economic environment
is analyzed by identifying relevant key economic factor relationships with each
stock, sector and market and then determining the level of influence the factors
have in influencing the stock price.

The Fund may invest in the securities of issuers located in countries which
include, but are not limited to, the following: Argentina, Australia, Belgium,
Brazil, Canada, Chile, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, Korea, Luxembourg, Malaysia,

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Mexico, The Netherlands, New Zealand, Norway, Peru, The Philippines, Portugal,
Singapore, Spain, Sweden, Switzerland, Taiwan, Turkey and The United Kingdom. It
is expected that these securities will be traded in the principal trading market
in such countries.

Under normal market conditions, at least 65% of the Fund's total assets
will be invested in the equity securities of foreign issuers and such issuers
will be located in at least three foreign countries. In addition to investing in
stocks, the Fund may, for the purpose of hedging its portfolio, purchase and
write put and call options on foreign stock indices listed on foreign and
domestic stock exchanges. The Fund may also invest in convertible securities,
stock index futures, and, to a limited extent, warrants. The Fund is also
authorized to invest in high quality short-term fixed income securities as cash
reserves or for temporary defensive purposes. See "INVESTMENT TECHNIQUES AND
RISK FACTORS--Foreign Securities" in the Prospectus and "FUND INVESTMENTS--
Foreign Securities" in this Statement of Additional Information.

Micro-Cap Equity Fund

The investment objective of the Micro-Cap Equity Fund is long-term capital
appreciation. The Fund seeks to achieve its objective by investing, under normal
market conditions, at least 65% of its total assets in equity securities of
micro-cap companies that generally have a market capitalization of $200 million
or less at the time of purchase. Such issuers have market capitalizations that
are less than the capitalization of companies which predominate the major market
indices, such as the S&P 500.

The Advisor will generally favor companies that it believes offer
attractive opportunities due to the inefficiencies of the micro-cap market and
that the Advisor believes, through internal research, will have the ability to
grow significantly over the next several years. The Fund will typically invest
in small-sized, emerging growth companies that are positioned to benefit from
changes in technologies, regulations and/or secular trends. These companies may
still be in the developmental stage and may have limited product lines.

The Fund will attempt to provide investors with potentially greater long-
term rewards than those provided by an investment in a fund that seeks capital
appreciation from equity securities of larger, more established companies. Since
smaller capitalization companies are generally not as well known to investors
and have less of an investor following than larger companies, they may provide
opportunities for greater investment gains as a result of inefficiencies in the
marketplace.

Smaller capitalization companies typically are subject to a greater degree
of change in earnings and business prospects than larger, more established
companies. In addition, securities of smaller capitalization companies are
traded in lower volume than those issued by larger companies and may be more
volatile. As a result, the Fund may be subject to greater price volatility than
a fund consisting of larger capitalization stocks. By maintaining a broadly
diversified portfolio, the Advisor will attempt to reduce this volatility.

Under normal market conditions, the Fund will invest at least 65% of its
total assets in equity securities. No more than 25% of the assets of the Fund
will be invested in one industry group. In addition to investing in equity
securities, the Fund is also authorized to invest in high

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quality short-term fixed income securities as cash reserves or for temporary
defensive purposes. See "INVESTMENT TECHNIQUES AND RISK FACTORS" in the
Prospectus and "FUND INVESTMENTS" in this Statement of Additional Information
for a description of investment practices of the Fund, including limited
investments in warrants, foreign securities and stock index futures and options.

Mid-Cap Growth Fund

The investment objective of the Mid-Cap Growth Fund is to provide
shareholders with long-term capital appreciation. It seeks to achieve this
objective by investing primarily in a diversified portfolio of equity securities
of companies that have market capitalizations between $100 million and $5
billion and have demonstrated superior earnings growth, financial stability,
attractive valuation and relative price momentum. Income is not a primary
consideration in the selection of investments. This style which incorporates
both growth investing and value constraints has been nationally recognized as
GARP (Growth at a Reasonable Price) and seeks to produce attractive returns
during various market environments.

The Advisor believes that superior investment returns are derived from
securities of financially stable companies that reward shareholders with
superior earnings growth, are attractively priced and enjoy relative price
momentum. Specifically, the Advisor will examine the earnings growth
characteristics of approximately 10,000 companies for each of the last three
years to determine earnings strength, consistency and momentum. Companies which
have demonstrated superior earnings growth will be further reviewed for
financial stability. Corporate balance sheets will be scrutinized to select
those companies which reinvest a significant portion of profits, demonstrate a
high return on equity and carry a relatively low debt load. Companies that meet
these earnings growth and financial stability criteria are further judged for
their value relative to these criteria and the market. Once determined to be
attractive values, those securities exhibiting relative price momentum to the
Standard & Poor's Mid-Cap Index generally will be favored by the Advisor for the
Fund. Within these parameters, the Advisor typically will establish equity
positions in approximately 50 to 100 companies. Equity securities generally will
be sold from the Fund's portfolio when they consistently fail to achieve any two
or more of the four criteria stated above.

The Fund invests substantially all, and at least 65%, of its total assets
in equity securities of companies with market capitalizations that range between
$100 million and $5 billion. Equity securities include common and preferred
stocks and securities convertible into or exchangeable for common stocks, such
as convertible preferred stocks, convertible debentures or warrants.

The Fund may also invest in short-term money market securities. Under
normal market conditions, short-term money market securities could comprise up
to 35% of the Fund's total assets. The Fund could invest a higher percentage of
its assets in money market securities for temporary defensive purposes.

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Multi-Season Growth Fund

The investment objective of the Multi-Season Growth Fund is to provide
shareholders with long-term capital appreciation. The Fund seeks to achieve this
objective by investing primarily in a diversified portfolio of equity securities
of companies that have demonstrated superior long-term earnings growth,
financial stability, attractive valuation and relative price momentum. Income is
not a primary consideration in the selection of investments. This style which
incorporates both growth investing and value constraints has been nationally
recognized as GARP (Growth at a Reasonable Price) and seeks to produce
attractive returns during various market environments.

The Advisor believes that superior investment returns are derived from
securities of financially stable companies that reward shareholders with
superior earnings growth, are attractively priced and enjoy relative price
momentum. Specifically, the Advisor will examine the earnings growth
characteristics of approximately 5,500 companies for each of the last five years
to determine earnings strength, consistency and momentum. Companies which have
demonstrated superior earnings growth will be further reviewed for financial
stability. Corporate balance sheets will be scrutinized to select those
companies which reinvest a significant portion of profits, demonstrate a high
return on equity and carry a relatively low debt load. Companies that meet these
earnings growth and financial stability criteria are further judged for their
value relative to these criteria and the market. Historically, the median
valuation of the portfolios managed by the Advisor has been no more than a
moderate premium to that of the S&P 500. Once determined to be attractive
values, those securities exhibiting the strongest relative price momentum to the
S&P 500 normally will be chosen by the Advisor for the Fund. Within these
parameters, the Advisor typically will establish equity positions in
approximately 50 to 100 companies. Equity securities generally will be sold from
the Fund's portfolio when they consistently fail to achieve any two or more of
the four criteria stated above.

The Fund invests substantially all, and at least 65%, of its assets in
equity securities. Equity securities include common and preferred stocks and
securities convertible into or exchangeable for common stocks, such as
convertible preferred stocks, convertible debentures or warrants. No more than
25% of the assets of the Fund will be invested in one industry group. In
addition, the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. The Fund may also invest up to 20% of the value
of its total assets in equity securities of foreign issuers, including companies
domiciled in developing countries.

The Fund may invest in short-term money market instruments. Under normal
market conditions, short-term money market instruments could comprise up to 35%
of the Fund's total assets. The Fund could invest a higher percentage of its
assets in money market instruments for temporary defensive purposes.

The Fund's investment objective is a fundamental policy and may not be
changed without the authorization of the holders of a majority of the Fund's
outstanding shares.

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Real Estate Equity Investment Fund

The Real Estate Equity Investment Fund's investment objectives are to
provide shareholders with capital appreciation and current income. It seeks to
achieve these objectives by investing primarily in equity securities of United
States companies which are principally engaged in the real estate industry or
which own significant real estate assets. It will not invest directly in real
estate.

Under normal conditions, the Fund will invest at least 65% of its total
assets in equity securities of companies listed on U.S. securities exchanges or
NASDAQ which are principally engaged in the real estate industry. Equity
securities include common stock, preferred stock and securities convertible into
common stock. A company is "principally engaged" in the real estate industry if
at least 50% of its assets, gross income or net profits are attributable to
ownership, construction, management or sale of residential, commercial or
industrial real estate. Real estate industry companies may include among others:
equity real estate investment trusts, which pool investors' funds for investment
primarily in commercial real estate properties; mortgage real estate investment
trusts, which invest pooled funds in real estate related loans; brokers, home
builders or real estate developers; and companies with substantial real estate
holdings, such as paper and lumber producers and hotel and entertainment
companies. The Fund will invest in real estate investment trusts only if they
are traded on major U.S. exchanges or NASDAQ. The Fund will not invest more than
15% of its total assets in equity real estate investment trusts, excluding self-
managed and/or self-administered trusts. The specific risks of investing in real
estate industry companies are summarized under "INVESTMENT TECHNIQUES AND RISK
FACTORS" in the Prospectus and "FUND INVESTMENTS" in this Statement of
Additional Information.

The Fund may also invest up to 35% of its total assets in equity securities
of issuers whose products and services are related to the real estate industry,
such as manufacturers and distributors of building supplies and financial
institutions which issue or service mortgages. The Fund will invest more than
25% of its total assets in the real estate and real estate related industries.
In addition to these securities, the Fund may invest up to 35% of its total
assets in securities of companies outside the real estate and real estate
related industries believed by the Advisor to be undervalued and to have capital
appreciation potential. Moreover, consistent with its objective of current
income, the Fund may invest in nonconvertible debt securities of companies
outside the real estate and real estate related industries. The debt securities
purchased (except for those described below) will be of investment grade or
better quality (e.g., rated no lower than Baa by Moody's or BBB by S&P or if not
so rated, believed by the Advisor to be of comparable quality). From time to
time, the Fund may invest up to 5% of its total assets in securities rated below
investment grade and in unrated debt securities of issuers which are secured by
real estate assets where the Advisor believes that the securities are trading at
a discount and that the underlying collateral is sufficient to ensure repayment
of principal. In such situations, it is conceivable that the Fund could, in the
event of default, end up holding the underlying real estate directly.

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The Fund's investment objective is fundamental and may not be changed
without the authorization of the holders of a majority of the Fund's outstanding
shares. Unless otherwise noted, all other investment policies of the Fund are
non-fundamental and may be changed by the Board of Directors without shareholder
approval.

Small-Cap Value Fund

The investment objective of the Small-Cap Value Fund is long-term capital
appreciation, with income as a secondary objective. The Fund seeks to achieve
its objective by investing at least 65% of its total assets in equity securities
of small-cap companies that generally have a market capitalization below $750
million at the time of purchase. Such issuers have market capitalizations that
are less than the capitalization of companies which predominate the major market
indices, such as the S&P 500.

The Advisor will generally favor companies that it believes to be
undervalued at the time of purchase. Companies will also exhibit a stable or
improving earnings record and sound finances at the time of purchase. Factors
considered in selecting such issuers include participation in a fast growing
industry, a strategic niche position in a specialized market, adequate
capitalization and fundamental value.

Securities may become undervalued generally because they are temporarily
overlooked or out of favor due to economic conditions, a market decline,
industry conditions or actual or anticipated developments affecting the company.
The Fund may be considered "contrarian" in nature because its investments may be
considered out of favor with general investors.

The Fund will attempt to provide investors with potentially greater long-
term rewards than those provided by an investment in a fund that seeks capital
appreciation from equity securities of larger, more established companies. Since
small capitalization companies are generally not as well known to investors and
have less of an investor following than larger companies, they may provide
opportunities for greater investment gains as a result of inefficiencies in the
marketplace.

Small capitalization companies typically are subject to a greater degree of
change in earnings and business prospects than larger, more established
companies. In addition, securities of small capitalization companies are traded
in lower volume than those issued by larger companies and may be more volatile.
As a result, the Fund may be subject to greater price volatility than a fund
consisting of larger capitalization stocks. By maintaining a broadly diversified
portfolio, the Advisor will attempt to reduce this volatility.

Under normal market conditions, the Fund will invest at least 65% of its
total assets in equity securities. The Fund will typically invest in companies
with lower price/earnings ratios, lower price/cash flow ratios and/or lower
price/book values than the equity markets in general, as

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measured by the Russell 2000 Index of small stocks. In addition, a company's
valuation level will be compared to its own historical valuation. The dividend
yield of portfolio companies is expected to approximate that of the general
equity market. No more than 25% of the assets of the Fund will be invested in
one industry group.

It is the Advisor's intention to invest primarily in domestic equity
securities. In addition to investing in domestic common stocks, the Fund may
invest in other equity securities and equity equivalents. Other equity
securities and equity equivalents include securities that permit the Fund to
receive an equity interest in an issuer, the opportunity to acquire an equity
interest in an issuer, or the opportunity to receive a return on its investment
that permits the Fund to benefit from the growth over time in the equity of an
issuer. Examples of equity securities and equity equivalents include ADRs,
preferred stock, convertible preferred stock and convertible debt securities.
Equity equivalents may also include securities whose value or return is derived
from the value or return of a different security. An example of the type of
derivative security in which the Fund might invest includes depositary receipts.

In addition to investing in equity securities, the Fund is also authorized
to invest in high quality short-term fixed income securities as cash reserves or
for temporary defensive purposes. See "INVESTMENT TECHNIQUES AND RISK FACTORS"
in the Prospectus and "FUND INVESTMENTS" in this Statement of Additional
Information for a description of investment practices of the Fund, including
limited investments in warrants, foreign securities and stock index futures and
options.

Small Company Growth Fund

The investment objective of the Small Company Growth Fund is to provide
long-term capital appreciation. The Fund pursues its objective by investing
primarily in equity securities such as common stocks and instruments convertible
or exchangeable into common stocks.

Securities held by the Fund will generally be issued by smaller companies.
Smaller companies will be considered those companies with market capitalizations
that are less than the capitalization of companies which predominate the major
market indices, such as the S&P 500. The market capitalization of the issuers of
securities purchased by the Fund will be below $750 million at the time of
purchase. In managing the Fund, the Advisor seeks smaller companies with above-
average growth prospects. Factors considered in selecting such issuers include
participation in a fast growing industry, a strategic niche position in a
specialized market, adequate capitalization and fundamental value.

The Fund has been designed to provide investors with potentially greater
long-term rewards than those provided by an investment in a fund that seeks
capital appreciation from equity securities of larger, more established
companies. Since small capitalization companies are generally not as well known
to investors and have less of an investor following than larger companies, they
may provide opportunities for greater investment gains as a result of
inefficiencies in the marketplace.

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Under normal market conditions, at least 65% of the Fund's total assets
will be invested in small company equity securities. In addition to investing in
equity securities, the Fund is also authorized to invest in high quality short-
term fixed income securities as cash reserves or for temporary defensive
purposes. See "INVESTMENT TECHNIQUES AND RISK FACTORS" in the Prospectus and
"FUND INVESTMENTS" in this Statement of Additional Information for a description
of investment practices of the Fund, including limited investments in warrants,
foreign securities and stock index futures and options.

Value Fund

The primary investment objective of the Value Fund is to provide long-term
capital appreciation, with income as a secondary objective. The Fund seeks to
achieve its objective by investing primarily in equity securities of well-
established companies with intermediate to large market capitalizations or
capitalizations which exceed $750 million. The Advisor will generally favor
companies that it believes to be undervalued at the time of purchase. Companies
will also exhibit a stable or improving earnings record and sound finances at
the time of purchase.

Securities may become undervalued generally because they are temporarily
out of favor due to economic conditions, a market decline, industry conditions
or actual or anticipated developments affecting the company. The Fund may be
considered "contrarian" in nature because its investments may be considered out
of favor with general investors. Generally, the Fund will invest at least 65% of
its total assets in equity securities. The Fund will typically invest in
companies with lower price/earnings ratios, lower price/cash flow ratios and/or
lower price/book values than the equity markets in general, as measured by the
S&P 500. In addition, a company's valuation level will be compared to its own
historical valuation. The dividend yield of portfolio companies is expected to
approximate that of the general equity market.

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The Fund will limit its purchase of convertible debt securities that, at
the time of purchase, are rated below investment grade by S&P or Moody's, or if
not rated by S&P or Moody's, are of equivalent investment quality as determined
by the Advisor, to 5% of the value of the Fund's total assets. For more detailed
information with respect to such securities and the risks associated with such
investments see "FUND INVESTMENTS--Lower Rated Debt Securities" in this
Statement of Additional Information.

Framlington International Growth Fund

The investment objective of the Framlington International Growth Fund is to
provide shareholders with long-term capital appreciation. The Fund seeks to
achieve its objective through worldwide investment in equity securities of
companies which, in the opinion of the Sub-Advisor, show above-average
profitability, management quality and growth.

The Fund may invest in the securities of issuers located in countries which
include, but are not limited to, the following: Argentina, Australia, Austria,
Belgium, Brazil, Canada, Chile, China, Czech Republic, Denmark, Egypt, Finland,
France, Germany, Hong Kong, India, Ireland, Italy, Japan, Korea, Luxembourg,
Malaysia, Mexico, The Netherlands, New Zealand, Norway, Peru, The Philippines,
Poland, Portugal, Russia, Singapore, South Africa, Spain, Sweden, Switzerland,
Taiwan, Thailand, Turkey and The United Kingdom.

The Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e., "leverage" its portfolio). 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. When deemed appropriate by the Sub-Advisor, the Fund may invest
cash balances in repurchase agreements and other money market investments to
maintain liquidity in an amount to meet redemptions or for day-to-day operating
purposes.

When the Sub-Advisor believes that market conditions warrant, the Fund may
adopt a temporary defensive position and may invest without limit in money
market securities denominated in U.S. dollars or in the currency of any foreign
country. See "INVESTMENT TECHNIQUES AND RISK FACTORS" in the Prospectus and
"FUND INVESTMENTS" in this Statement of Additional Information.

Framlington Emerging Markets Fund

The investment objective of the Framlington Emerging Markets Fund is to
provide shareholders with long-term capital appreciation. The Fund seeks to
achieve this objective through investing primarily in equity securities (as
defined below) of issuers in emerging market countries. The Fund considers
countries having emerging markets to be all countries that are generally
considered to be emerging or developing countries by the International Bank for
Reconstruction and Development (more commonly referred to as the World Bank) or
the

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International Finance Corporation, as well as countries that are classified by
the United Nations or otherwise regarded by their authorities as emerging.
Currently, the countries not in this category include Ireland, Spain, New
Zealand, Australia, the United Kingdom, Italy, the Netherlands, Belgium,
Austria, France, Canada, Germany, Denmark, the United States, Sweden, Finland,
Norway, Japan, Iceland, Luxembourg and Switzerland. A company will be deemed to
be in an emerging market country if (i) the company is organized under the laws
of, and has a principal office in, an emerging market country; (ii) the
principal trading market for the company's equity securities is in an emerging
market country; or (iii) the company derives at least 50% of its revenues or
profits from goods produced or sold, investments made, or services performed, in
an emerging market country, or has at least 50% of its assets situated in an
emerging market country. Under normal market conditions, the Fund will invest at
least 65% of its total assets in equity securities of issuers in emerging market
countries. Determinations as to eligibility will be made by the Sub-Advisor
based on publicly available information and inquiries made to the companies.

Framlington Healthcare Fund

The investment objective of the Framlington Healthcare Fund is to provide
shareholders with long-term capital appreciation. The Fund seeks to achieve this
objective through investment in companies providing healthcare and medical
services and products worldwide. The Fund will invest in producers of
pharmaceuticals, biotechnology firms, medical device and instrument
manufacturers, distributors of healthcare products, care providers and managers
and other healthcare services companies. Under normal market conditions, the
Fund will invest at least 65% of its total assets in healthcare companies as
described above. The Sub-Advisor considers healthcare companies to include
companies in which at least 50% of sales, earnings or assets arise from or are
dedicated to health services or medical technology activities.

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<PAGE>

NetNet Fund

The investment objective of the NetNet Fund is to provide shareholders with
long term capital appreciation. The Fund seeks to achieve this objective by
investing primarily in companies engaged in Internet and Intranet related
businesses. Income is not a primary consideration in the selection of
investments.

Under normal conditions, the Fund will invest at least 65% of its total
assets in equity securities of companies listed on U.S. securities exchanges or
NASDAQ which are engaged in the research, design, development, manufacturing or
engaged to a significant extent in the business of distributing products,
processes or services for use with Internet and Intranet related businesses.
Equity securities include common stock, preferred stock and securities
convertible into common stock. The specific risks of investing in Internet-
related securities are summarized under "INVESTMENT TECHNIQUES AND RISK FACTORS"
in the Prospectus.

The Fund's investment objective and all other investment policies, unless
otherwise noted, are non-fundamental and may be changed by the Company's Board
of Directors without shareholder approval.

The Internet is a world-wide network of computers designed to permit users
to share information and transfer data quickly and easily. The World Wide Web
("WWW"), which is a means of graphically interfacing with the Internet, is a
hyper-text based publishing medium containing text, graphics, interactive
feedback mechanisms and links within WWW documents and to other WWW documents.
An Intranet is the application of WWW tools and concepts to a company's internal
documents and databases. The Advisor believes that the Internet and the Intranet
are together the emerging frontier interlinking computers, telecommunications
and broadcast. Consequently, there are opportunities for continued growth in
demand for components, products, media, services, and systems to assist,
facilitate, enhance, store, process, record, reproduce, retrieve and distribute
information, products and services for use by businesses, institutions and
consumers. Companies engaged in these efforts are the central focus of the Fund.
Internet and Intranet related businesses include companies engaged in the
research, design, development, manufacturing or distribution of servers,
routers, search engines, bridges and switches, browsers, network applications,
agent software, modems, carriers, firewall and security, e-mail, electronic
commerce, video and publishing for use on the Internet/Intranet.

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<PAGE>

The value of Fund shares may be susceptible to factors affecting the
industries described above. These industries may be subject to greater
governmental regulation than many other industries and changes in governmental
policies and the need for regulatory approvals may have a material effect on the
products and services of these industries. In addition, because of its narrow
industry focus, the Fund's performance is closely tied to, and affected by,
these industries. Companies in an industry are often faced with the same
obstacles, issues or regulatory burdens, and their securities may react
similarly and move in unison to these and other market conditions.

Finally, competitive pressures and changing demand may have a significant
effect on the financial condition of companies in these industries. Such
companies spend heavily on research and development and are especially sensitive
to the risk of product obsolescence.

Although securities of large and well-established companies in the
information technology industries will be held in the Fund's portfolio, the Fund
also will invest in medium, small and/or newly-public companies which may be
subject to greater share price fluctuations and declining growth, particularly
in the event of rapid changes in technology and/or increased competition.
Securities of those smaller and/or less seasoned companies may, therefore,
expose shareholders of the Fund to above-average risk.

FIXED INCOME FUNDS

Bond Fund, Intermediate Bond Fund and U.S. Government Income Fund

The investment objective of the Bond Fund is to provide a high level of
current income and, secondarily, capital appreciation. The Bond Fund's dollar-
weighted average maturity will generally be between six and fifteen years except
during temporary defensive periods, and will be adjusted by the Advisor
according to market conditions. The investment objective of the Intermediate
Bond Fund is to provide a competitive rate of return which over time exceeds the
rate of inflation and the return provided by money market instruments. The
Intermediate Bond Fund's dollar-weighted average maturity will generally be
between three and eight years and will be adjusted by the Advisor according to
market conditions. The investment objective of the U.S. Government Income Fund
is to provide high current income. Under normal market conditions, the U.S.
Government Income Fund's dollar-weighted average maturity will be between six
and fifteen years, and will be adjusted by the Advisor according to market
conditions.

Each of the Bond Fund, Intermediate Bond Fund, and U.S. Government Income
Fund invests substantially all of its assets in debt obligations such as bonds
and debentures, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Obligations"), debt obligations
of domestic and foreign corporations, debt obligations of foreign governments
and their political subdivisions, asset-backed securities and various mortgage-
related securities. These Funds may purchase obligations issued by or on behalf
of states, territories and possessions of the United States, the District of
Columbia and their political subdivisions, agencies, instrumentalities and
authorities. For purposes of the 65% limitation with respect to the Bond Fund
and the Intermediate Bond Fund described below, the securities described in this
paragraph are considered "bonds."

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<PAGE>

Pending investment, to meet anticipated redemption requests, or as a
temporary defensive measure if the Advisor determines that market conditions
warrant, the Bond Funds may invest without limitation in short-term U.S.
Government Obligations, high quality money market instruments and repurchase
agreements. Such obligations may include those issued by foreign banks and
foreign branches of U.S. banks.

The Bond Fund, Intermediate Bond Fund, and U.S. Government Income Fund may
also invest in futures contracts and options and enter into interest rate swap
transactions. See "INVESTMENT TECHNIQUES AND RISK FACTORS" in the Prospectus and
"FUND INVESTMENTS" in this Statement of Additional Information for a discussion
of the risks associated with the use of derivative instruments. During normal
market conditions at least 65% of each of the Bond Fund's and the Intermediate
Bond Fund's total assets will be invested in bonds. During normal market
conditions at least 65% of the U.S. Government Income Fund's total assets will
be invested in U.S. Government Obligations. A further description of the types
of obligations and the various investment techniques used by the Bond Funds is
provided below under "Portfolio Instruments and Practices and Associated Risk
Factors."

International Bond Fund

The investment objective of the International Bond Fund is to realize a
competitive total return through a combination of current income and capital
appreciation. The Fund seeks to achieve its objective by investing primarily in
foreign debt obligations. As an international fund, the Fund may invest in
securities of any issuer and in any currency. Under normal market conditions, at
least 65% of the Fund's assets are invested in bonds of issuers located in at
least three countries other than the United States. The Fund will primarily
invest in foreign debt obligations denominated in foreign currencies, including
the European Currency Unit ("ECU"), which are issued by foreign governments and
governmental agencies, instrumentalities or political subdivisions; debt
securities issued or guaranteed by supranational organizations (e.g., European
Investment Bank, Inter-American Development Bank or the World Bank); corporate
debt securities; bank or bank holding company debt securities and other debt
securities including those convertible into foreign stock. For the purposes of
the 65% limitation with respect to the Fund's designation as an international
bond fund, the securities described in this paragraph are considered
"international bonds." There can be no assurance that the Fund will achieve its
investment objective. Purchasing shares of the Fund should not be considered a
complete investment program, but an important segment of a well-diversified
investment program.

The Fund's dollar-weighted average maturity will generally be between three
and fifteen years except during temporary defensive periods, and will be
adjusted by the Advisor according to market conditions. Pending investment, to
meet anticipated redemption requests, or as a temporary defensive measure if the
Advisor determines that market conditions warrant, the Fund may invest without
limitation in short-term U.S. Government obligations, high quality money market
instruments and repurchase agreements. Such obligations may include those issued
by foreign banks and foreign branches of U.S. banks. The Fund may also invest in
futures contracts and options and enter into interest rate swap transactions. A
further description of the types of obligations and the various investment
techniques used by the Fund, including a description of the risks associated
with the use of derivative instruments, is provided below under "INVESTMENT

18
<PAGE>

TECHNIQUES AND RISK FACTORS" in the Prospectus and "FUND INVESTMENTS" in this
Statement of Additional Information

MONEY MARKET FUNDS

Cash Investment Fund, Money Market Fund and U.S. Treasury Money Market Fund

The investment objective of both the Cash Investment Fund and U.S. Treasury
Money Market Fund is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal. The investment
objective of the Money Market Fund is to provide current income consistent with
the preservation of capital and liquidity. Each Fund seeks to maintain a stable
net asset value of $1.00 per share, although there is no assurance that they
will be able to do so on a continuous basis. In pursuing their respective
investment objectives, the Cash Investment Fund and Money Market Fund may invest
in a broad range of short-term, high quality, U.S. dollar-denominated
instruments, such as bank, commercial and other obligations (including Federal,
state and local government obligations), that are available in the money
markets. The securities in which the Cash Investment Fund and Money Market Fund
may invest are described under "INVESTMENT TECHNIQUES AND RISK FACTORS" in the
Prospectus and "FUND INVESTMENTS" in this Statement of Additional Information.
The U.S. Treasury Money Market Fund seeks to achieve its objective by investing
solely in short-term bonds, bills and notes issued by the U.S. Treasury
(including "stripped" securities as described under "Portfolio Instruments and
Practices and Associated Risk Factors"), and in repurchase agreements relating
to such obligations. Each fund maintains an average dollar-weighted portfolio
maturity of 90 days or less.

Securities acquired by the Cash Investment Fund, Money Market Fund and U.S.
Treasury Money Market Fund will be "Eligible Securities" as defined by the SEC.
Eligible Securities consist of securities that are determined by the Advisor,
under guidelines established by the Boards of Trustees/Directors, to present
minimal credit risks. Appendix A to the Statement of Additional Information
includes a description of applicable ratings.

Assets of the Cash Investment Fund, Money Market Fund and U.S. Treasury
Money Market Fund will be invested solely in U.S. dollar-denominated debt
securities with remaining maturities of 397 days or less as defined by the SEC
(although securities subject to repurchase agreements, variable and floating
rate securities and certain other securities may bear longer maturities), and
the dollar-weighted average portfolio maturity of each Fund will not exceed 90
days.

Although the Cash Investment Fund, Money Market Fund and U.S. Treasury
Money Market Fund expect under normal market conditions to be as fully invested
as possible, each Fund may hold uninvested cash pending investment of late
payments for purchase orders (or other payments) or during temporary defensive
periods. Uninvested cash will not earn income. In general, investments in the
Funds will not earn as high a level of current income as longer-term or lower-
quality securities. Such securities, however, generally have less liquidity,
greater market risk and more fluctuation in market value.

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<PAGE>

FUND INVESTMENTS

The following supplements the information contained in the Prospectus
concerning the investment objectives and policies of the Underlying Funds. With
the exception of Munder Multi-Season Growth Fund and Munder Real Estate Equity
Investment Fund, each Underlying Fund's investment objective is a non-
fundamental policy and may be changed without authorization of the holders of a
majority of such Underlying Fund's outstanding shares. A description of
applicable credit ratings is set forth in Appendix A hereto. For purposes of
this Statement of Additional Information, the Munder Accelerating Growth Fund,
Equity Selection Fund, Growth & Income Fund, International Equity Fund, Micro-
Cap Equity Fund, Mid-Cap Growth Fund (the "Mid-Cap Fund"), Multi-Season Growth
Fund (the "Multi-Season Fund"), Real Estate Equity Investment Fund (the "Real
Estate Fund"), Small-Cap Value Fund, Small Company Growth Fund, Value Fund, the
Framlington Funds and the NetNet Fund are referred to as the "Equity Funds." The
Munder Bond Fund, Intermediate Bond Fund, International Bond Fund and U.S.
Government Income Fund are referred to as the "Fixed Income Funds." The Munder
Cash Investment Fund, Money Market Fund, and U.S. Treasury Money Market Fund are
referred to as the "Money Market Funds." If you require more detailed
information about an Underlying Fund, please call the Distributor at (800) 438-
5789 to obtain the complete prospectus and statement of additional information
for that fund.

Borrowing. The Underlying Funds are authorized to borrow money in amounts
up to 5% of the value of their total assets at the time of such borrowings for
temporary purposes, and are 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 Underlying Funds to maintain continuous asset coverage of 300% of
the amount borrowed. If the 300% asset coverage should decline as a result of
market fluctuations or other reasons, the Underlying Funds may be required to
sell some of their portfolio holdings within three days to reduce the debt and
restore the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. Borrowing may exaggerate
the effect on net asset value of any increase or decrease in the market value of
the portfolio securities. Money borrowed will be subject to interest costs which
may or may not be recovered by an appreciation of the securities purchased. The
Underlying Funds may also be required to maintain minimum average balances in
connection with such borrowing or to pay a commitment or other fees to maintain
a line of credit; either of these requirements would increase the cost of
borrowing over the stated interest rate. The Underlying Funds may, in connection
with permissible borrowings, transfer as collateral, securities owned by the
funds.

Additionally, each Underlying Fund (except the Multi-Season Fund and Money
Market 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 an Underlying Fund may decline below the
repurchase price. An Underlying Fund will pay interest on amounts obtained
pursuant to a reverse repurchase agreement. While reverse repurchase agreements
are outstanding, an Underlying Fund will maintain in a segregated account, cash,
U.S. Government

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<PAGE>

securities or other liquid portfolio securities of an amount at least equal to
the market value of the securities, plus accrued interest, subject to the
agreement.

Foreign Securities. Each Equity Fund (except the Real Estate Fund), each
Fixed Income Fund, and the Cash Investment Fund may invest in the securities of
foreign issuers. The Mid-Cap Fund and the Multi-Season Fund typically will only
purchase foreign securities which are represented by 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.

Under normal market conditions, at least 65% of the International Bond
Fund's assets are invested in bonds of issuers located in at least three
countries other than the United States. The International Bond Fund will
primarily invest in foreign debt obligations denominated in foreign currencies,
including the European Currency Unit, which are issued by foreign governments
and governmental agencies, instrumentalities or political subdivisions; debt
securities issued or guaranteed by supranational organizations (as defined
below); corporate debt securities; bank or bank holding company debt securities
and other debt securities including those convertible into foreign stock. For
the purposes of the 65% limitation with respect to the International Bond Fund's
designation as an international bond fund, the securities described in this
paragraph are considered "international bonds."

Investors should consider carefully the substantial risks involved in
securities of companies and governments of foreign nations, which are in
addition to the usual risks inherent in domestic investments. There may be less
publicly available information about foreign companies comparable to the reports
and ratings published about companies in the United States. Foreign companies
are not generally subject to uniform accounting, auditing and financial
reporting

21
<PAGE>

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 an
Underlying 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 Eastern 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, an Underlying 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 (Sub-Advisor with respect to the Framlington Funds) 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 an Underlying 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 an Underlying 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.

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<PAGE>

Foreign securities markets have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of an Underlying Fund are uninvested and no return
is earned thereon. The inability of an Underlying Fund to make intended security
purchases due to settlement problems could cause the fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result either in losses to an Underlying Fund due to
subsequent declines in value of the portfolio security or, if the fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser.

Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registrations and/or approval in some
emerging market countries. An Underlying Fund could be adversely affected by
delays in or a refusal to grant any required governmental registrations or
approval for such repatriation.

Further, the economies of emerging market countries generally are heavily
dependent upon international trade and, accordingly, have been and may continue
to be adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
by the counties with which they trade.

In many emerging market countries, there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. There is an increased risk,
therefore, of uninsured loss due to lost, stolen, or counterfeit stock
certificates. In addition, the foreign securities markets of many of the
countries in which the Underlying Funds may invest may also be smaller, less
liquid, and subject to greater price volatility than those in the United States.

An Underlying 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 an Underlying 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 a 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
a 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.

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<PAGE>

Forward Foreign Currency Transactions. In order to protect against a
possible loss on investments resulting from a decline or appreciation in the
value of a particular foreign currency against the U.S. dollar or another
foreign currency, the Equity Funds (excluding the Real Estate Fund), and the
Fixed Income Funds are authorized to enter into forward foreign currency
exchange contracts ("forward currency contracts"). These contracts involve an
obligation to purchase or sell a specified currency at a future date at a price
set at the time of the contract. Forward currency contracts do not eliminate
fluctuations in the values of portfolio securities but rather allow an
Underlying 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, an
Underlying 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 (Sub-Advisor with respect to the Framlington Funds)
anticipates that a particular foreign currency may decline substantially
relative to the U.S. dollar or other leading currencies, in order to reduce
risk, an Underlying 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 Underlying Fund's securities denominated in such foreign currency.
Similarly, when the obligations held by an Underlying 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. An Underlying 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 an Underlying Fund's assets that could be required to consummate
forward contracts will be established with the Underlying Funds' Custodian
except to the extent the contracts are otherwise "covered." For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be 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 Underlying Fund. A forward contract to sell a foreign
currency is "covered" if an Underlying 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 an Underlying Fund holds a forward
contract (or call 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.

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Futures Contracts and Related Options. The Equity and Fixed Income Funds
currently expect that they may purchase and sell futures contracts on interest-
bearing securities or securities or bond indices, and may purchase and sell call
and put options on futures contracts. For a detailed description of futures
contracts and related options, see Appendix B to this Statement of Additional
Information.

Interest Rate Swap Transactions. Each of the Fixed Income Funds may enter
into interest rate swap agreements for purposes of attempting to obtain a
particular desired return at a lower cost to those Underlying Funds than if the
Underlying Funds had invested directly in an instrument that yielded that
desired return. Interest rate swap transactions involve the exchange by a
Underlying Fund with another party of its commitments to pay or receive
interest, such as an exchange of fixed rate payments for floating rate payments.
Typically, the parties with which the Underlying Funds will enter into interest
rate swap transactions will be brokers, dealers or other financial institutions
known as "counterparties." Certain Federal income tax requirements may, however,
limit the Underlying Funds' ability to engage in certain interest rate
transactions. Gains from transaction in interest rate swaps distributed to
shareholders of the Underlying Funds will be taxable as ordinary income or, in
certain circumstances, as long-term capital gains to the shareholders.

Each of the Underlying Funds' obligations (or rights) under a swap
agreement will generally be equal only to the net amount to be paid or received
under the agreement based on the relative values of the positions held by each
party to the agreement (the "net amount"). Each of the Fixed Income Funds'
obligations under a swap agreement will be accrued daily (offset against any
amounts owed to the Underlying Fund). Accrued but unpaid net amounts owed to a
swap counterparty will be covered by the maintenance of a segregated account
consisting of cash, U.S. Government securities or other high-grade debt
securities, to avoid any potential leveraging of each of the Underlying Funds'
portfolio.

The Underlying Funds will not enter into any interest rate swap transaction
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the other party to the transaction is rated in one of the highest
four rating categories by at least one nationally-recognized statistical rating
organization ("NRSRO") or is believed by the Advisor to be equivalent to that
rating. If the other party to a transaction defaults, the Underlying Funds will
have contractual remedies pursuant to the agreements related to the
transactions.

The use of interest rate swaps is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Advisor is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of each of the Underlying Funds would be lower than it
would have been if interest rate swaps were not used. The swaps market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swaps market has become relatively liquid
in comparison with other similar instruments traded in the interbank market. The
swaps market is a relatively new market and is largely unregulated. It is
possible that developments in the swaps market, including potential government
regulation, could

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adversely affect the Fixed Income Funds' ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.

Lending of Portfolio Securities. To enhance the return on its portfolio,
each of the Underlying Funds may lend securities in its portfolio (subject to a
limit of 25% of each Fund's (other than the Money Market Fund's) total asset;
and one-third of the Money Market 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 Underlying Funds will receive any interest or
dividends paid on the loaned securities. In addition, it is anticipated that an
Underlying 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 Underlying Funds will lend securities, the Advisor (Sub-Advisor with
respect to the Framlington Funds) will consider all relevant facts and
circumstances. The Underlying Funds will only enter into loan arrangements with
broker-dealers, banks or other institutions which the Advisor (Sub-Advisor) has
determined are creditworthy under guidelines established by the Boards of
Directors or Trustees, as applicable.

Lower-Rated Debt Securities. The Growth & Income Fund may invest up to 20%
of the value of its total assets and each of the Real Estate Fund and Value Fund
may invest up to 5% of the value of its total assets in securities that are
rated below investment grade by Standard & Poor's or Moody's. 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 debt 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 each Underlying Fund's
portfolio, with a commensurate effect on the value of each of the fund's shares.
Therefore, an investment in the Growth & Income, Real Estate or Value Funds
should not be considered as a complete investment program and may not be
appropriate for all investors.

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 than
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

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<PAGE>

economic downturn 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 Underlying Funds may incur additional expenses to the extent
that they are 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 each
of the Underlying 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
periods of declining interest rates, the Underlying Funds may have to replace
the security with a lower yielding security, thus resulting in a decreased
return to the funds.

Money Market Instruments. As described in the Prospectus, the Funds and
the Underlying Funds 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 Funds and the Underlying Funds will invest
in obligations of foreign banks or foreign branches of U.S. banks only where the
Advisor (Sub-Advisor with respect to the Framlington Funds) 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 a fund in the obligations of foreign banks
and foreign branches of U.S. banks will not exceed 25% of such Fund's total
assets at the time of purchase.

Investments by a Fund or an Underlying Fund in commercial paper will
consist of issues rated at the time A-1 and/or P-1 by S&P or Moody's Investor
Services, Inc. ("Moody's"). In addition, the Funds and the Underlying Funds may
acquire unrated commercial paper and corporate bonds that are determined by the
Advisor (Sub-Advisor) at the time of purchase to be of comparable quality to
rated instruments that may be acquired by such Fund as previously described.

The Funds and the Underlying Funds 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, an investor may demand payment of the principal of the instrument
at any time. The notes are not typically rated by credit rating agencies,

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<PAGE>

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, an
investor 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 Funds and the Underlying Funds invest in variable
amount master notes only when the Advisor (Sub-Advisor) deems the investment to
involve minimal credit risk.

Mortgage-Related Securities. Subject to applicable credit criteria, each
Fixed Income Fund and the Cash Investment Fund may purchase asset-backed
securities (i.e., securities backed by mortgages, installment sales contracts,
credit card receivables or other assets). 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.

Municipal Obligations. The Cash Investment Fund may, when deemed
appropriate by the Advisor in light of the Underlying Fund's investment
objective, invest in high quality municipal obligations issued by state and
local governmental issuers, the interest on which may be taxable or tax-exempt
for Federal income tax purposes, provided that such obligations carry yields
that are competitive with those of other types of money market instruments of
comparable quality. The Cash Investment Fund does not expect to invest more
than 5% of its net assets in such municipal obligations during its current
fiscal year.

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Non-Domestic Bank Obligations. Non-domestic bank obligations include
Eurodollar Certificates of Deposit, 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, which are U.S. dollar-
denominated deposits in a foreign branch of a U.S. bank or a foreign bank;
Canadian Time Deposits, 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, 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, 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 Underlying Funds may write covered call options, buy put
options, buy call options and write secured put options in an amount not
exceeding 5% of their 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. For risks associated with options on foreign currencies,
see Appendix B to this Statement of Additional Information.

A call option for a particular security gives the purchaser of the option
the right to buy, and a writer the obligation to sell, the underlying security
at the stated exercise price at any time prior to the expiration of the option,
regardless of the market price of the security. The premium paid to the writer
is in consideration for undertaking the obligations under the option contract.
A put option for a particular security gives the purchaser the right to sell the
underlying security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security.

The writer of an option that wished to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." The cost of such a closing purchase plus transaction costs may be
greater than the premium received upon the original option, in which event the
relevant Underlying Fund will have incurred a loss in the transaction. There is
no guarantee that either a closing purchase or a closing sale transaction can be
effected.

Effecting a closing transaction in the case of a written call option will
permit the Underlying Funds to write another call option on the underlying
security with either a different exercise price or expiration date or both, or
in the case of a written put option, will permit the funds to write another put
option to the extent that the exercise price thereof is secured by deposited
cash or short-term securities. Also, effecting a closing transaction will
permit the cash or proceeds from the concurrent sale of any securities subject
to the option to be used for other Underlying Fund investments. If an
Underlying Fund desires to sell a particular security from its

29
<PAGE>

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 Multi-Season, Real Estate, NetNet, Framlington and International Bond
Funds may write options in connection with buy-and-write transactions; that is,
the Underlying Funds may purchase a security and then write a call option
against that security. The exercise price of the call the Underlying Funds
determine to write will depend upon the expected price movement of the
underlying security. The exercise price of a call option may be below ("in-the-
money"), equal to ("at-the-money") or above ("out-of-the-money") the current
value of the underlying security at the time the option is written. Buy-and-
write transactions using in-the-money call options may be used when it is
expected that the price of the underlying security will remain flat or decline
moderately during the option period. Buy-and-write transactions using out-of-
the-money call options may be used when it is expected that the premiums
received from writing the call option plus the appreciation in the market price
of the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call options
are exercised in such transactions, the maximum gain to the relevant Underlying
Fund will be the premium received by it for writing the option, adjusted upwards
or downwards by the difference between the fund's purchase price of the security
and the exercise price. If the options are not exercised and the price of the
underlying security declines, the amount of such decline will be offset in part,
or entirely, by the premium received.

The Underlying Funds (excluding the Mid-Cap, Multi-Season, Real Estate,
Value, and International Bond Funds) will write call options only if they are
"covered." In the case of a call option on a security, the option is "covered"
if an Underlying Fund owns the security underlying the call or has an absolute
and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount as are held in a segregated account by its custodian)
upon conversion or exchange of other securities held by it. For a call option
on an index, the option is covered if an Underlying Fund maintains with its
Custodian cash or cash equivalents equal to the contract value. A call option
is also covered if an Underlying 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 Mid-Cap, Multi-Season, Real Estate and Value Funds may write
call options that are not covered for cross-hedging purposes. Each of the Mid-
Cap, Multi-Season, Real Estate and Value Funds will limit its investment in
uncovered put and call options purchased or written by the Fund to 5% of the
Fund's total assets. The International Bond Fund will limit its investment in
uncovered put and call options purchased or written by the Fund to 25% of the
Fund's total assets. The Underlying Funds will write put options only if they
are "secured" by cash or cash equivalents maintained in a segregated account by
the funds' custodian in an amount not less than the exercise price of the option
at all times during the option period.

The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the relevant Underlying Fund's gain will be
limited to the premium received. If the market price of the underlying security
declines or

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otherwise is below the exercise price, the Underlying Fund may elect to close
the position or take delivery of the security at the exercise price and the
fund's return will be the premium received from the put option minus the amount
by which the market price of the security is below the exercise price.

Each of the Underlying Funds may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in this way, an
Underlying Fund will reduce any profit it might otherwise have realized in the
underlying security by the amount of the premium paid for the put option and by
transaction costs. Each of the Underlying Funds may purchase call options to
hedge against an increase in the price of securities that it anticipates
purchasing in the future. The premium paid for the call option plus any
transaction costs will reduce the benefit, if any, realized by the relevant
Underlying 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 an Underlying Fund purchases an option, the premium paid by it is
recorded as an asset of the fund. When the Underlying 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 Underlying Fund expires unexercised
the fund realizes a loss equal to the premium paid. If the Underlying Fund
enters into a closing sale transaction on an option purchased by it, the
Underlying 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 Underlying 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 Underlying 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 an Underlying Fund will be able to close an
unlisted option position. Furthermore, unlisted options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to do so in
connection with the purchase or sale of options.

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<PAGE>

In addition, a liquid secondary market for particular options, whether
traded over-the-counter or on a national securities exchange ("Exchange") may be
absent for reasons which include the following: there may be insufficient
trading interest in certain options; restrictions may be imposed by an Exchange
on opening transactions or closing transactions or both; trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities; unusual or unforeseen
circumstances may interrupt normal operations on an Exchange; the facilities of
an Exchange or the Options Clearing Corporation may not at all times be adequate
to handle current trading value; or one or more Exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that Exchange (or in that class or series of options)
would cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms.

Currency transactions, including options on currencies and currency
futures, are subject to risks different from those of other portfolio
transactions. Because currency control is of great importance to the issuing
governments and influences economic planning and policy, purchases and sales of
currency and related instruments can be negatively affected by government
exchange controls, blockages, and manipulations or exchange restrictions imposed
by governments. These can result in losses to the Underlying Fund if it is
unable to deliver or receive currency or funds in settlement of obligations and
could also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as the incurring of transaction costs. Buyers
and sellers of currency futures are subject to the same risks that apply to the
use of futures generally. Further, settlement of a currency futures contract
for the purchase of most currencies must occur at a bank based in the issuing
nation. Trading options on currency futures is relatively new, and the ability
to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.

The Mid-Cap Fund and Value Fund will not purchase put or call options if
aggregate premiums paid for such options would exceed 25% of the Underlying
Fund's total assets. The Multi-Season Fund will not purchase put or call
options if aggregate premiums paid for such options would exceed 20% of the
Underlying Fund's total assets. The Real Estate Fund will not hedge more than
30% of its total assets and will not write covered call options against more
than 15% of the value of the equity securities held in its portfolio. The
Framlington Funds and the NetNet Fund will not write covered call options
against more than 30% of the value of the equity securities held in its
portfolio.

Real Estate Securities. The Real Estate Fund may invest without limit 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

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<PAGE>

REITs can also realize capital gains by 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
Real Estate Fund will not invest in real estate directly, but only in securities
issued by real estate companies. However, the Real Estate Fund may be subject to
risks similar to those associated with the direct ownership of real estate (in
addition to securities markets risks) because of its policy of concentration in
the securities of companies in the real estate industry. These 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 (the "Code"), 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 Funds and the Underlying Funds may agree to
enter into repurchase agreements with financial institutions such as member
banks of the Federal Reserve System, any foreign bank or any domestic or foreign
broker/dealer that is recognized as a reporting government securities dealer,
subject to the seller's agreement to repurchase them at an agreed-upon time and
price ("repurchase agreements"). The Advisor (Sub-Advisor with respect to the
Framlington Funds) 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. With respect to the Money
Market Funds, the securities held subject to a repurchase agreement may have
stated maturities exceeding thirteen months, provided the repurchase agreement
itself matures in 397 days.

The repurchase price under the repurchase agreements described in each
Prospectus generally equals the price paid by a fund plus interest negotiated on
the basis of current short-term rates (which may be more or less than the rate
on the securities underlying the repurchase agreement).

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<PAGE>

Securities subject to repurchase agreements will be held, as applicable, by
the Trust's, Framlington's or 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 or
Underlying Fund under the 1940 Act.

Rights and Warrants. As stated in the Prospectus, the Equity Funds 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 an Underlying 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. Each Underlying Fund will not invest more
than 5% of its total assets, taken at market value, in warrants, or more than 2%
of its total assets, taken at market value, in warrants not listed on the New
York or American Stock Exchanges. Warrants acquired by an Underlying Fund in
units or attached to other securities are not subject to this restriction.

Stand-by Commitments. The Cash Investment Fund may enter into stand-by
commitments with respect to municipal obligations held by it. Under a stand-by
commitment, a dealer agrees to purchase at the Underlying Fund's option a
specified municipal obligation at its amortized cost value to the fund plus
accrued interest, if any. Stand-by commitments may be exercisable by an
Underlying Fund at any time before the maturity of the underlying municipal
obligations and may be sold, transferred or assigned only with the instruments
involved.

The Company expects that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Cash Investment Fund may pay for a stand-by
commitment either separately in cash or by paying a higher price for municipal
obligations which are acquired subject to the commitment (thus reducing the
yield to maturity otherwise available for the same securities). The total
amount paid in either manner for outstanding stand-by commitments held by the
Underlying Fund will not exceed 1/2 of 1% of the value of the Underlying Fund's
total assets calculated immediately after each stand-by commitment is acquired.

Stock Index Futures, Options on Stock and Bond Indices and Options on Stock
and Bond Index Futures Contracts. The Equity and Fixed Income Funds (except the
International Bond Fund) may purchase and sell stock index futures, options on
stock and bond indices and options on stock index futures contracts as a hedge
against movements in the equity and bond markets. The International Bond Fund
may purchase and sell options on bond index futures contracts as a hedge against
movements in the 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.

34
<PAGE>

Options on stock and bond indices are similar to options on specific
securities, described above, except that, rather than the right to take or make
delivery of the specific security at a specific price, an option on a stock or
bond index gives the holder the right to receive, upon exercise of the option,
an amount of cash if the closing level of that stock or bond index is greater
than, in the case of a call option, or less than, in the case of a put option,
the exercise price of the option. This amount of cash is equal to such
difference between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount. Unlike options on specific securities, all settlements of options
on stock or bond indices are in cash, and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stocks.

If the Advisor (Sub-Advisor with respect to the Framlington Funds) 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 Underlying Funds' futures contract or index option resulting
from the increase in the index. If, on the other hand, the Advisor (Sub-
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 Underlying
Funds' portfolio may also be expected to decline, but that decrease would be
offset in part by the increase in the value of the Underlying Funds' position in
such futures contract or put option.

The Underlying Funds (except the International Bond Fund) may purchase and
write call and put options on stock index futures contracts and each such
Underlying Fund and the International Bond Fund may purchase and write call and
put options on bond index futures contracts. Each such Underlying 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, such
Underlying Funds may purchase put options or write call options on stock and
bond index futures (only bond index futures in the case of the International
Bond Fund), 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 such
Underlying Funds intend 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, such Underlying
Funds will be required to deposit as "initial margin" an amount of cash and
short-term U.S. Government securities equal to from 5% to 8% of the contract
amount. Thereafter, subsequent payments (referred to as "variation margin") are
made to and from the broker to reflect changes in the value of the option or
futures contract. No such Underlying Fund may at any time commit more than 5%
of its total assets to initial margin deposits on futures contracts, index
options and options on futures contracts.

35
<PAGE>

Stripped Securities. The Fixed Income and Money Market Funds may acquire
U.S. Government Obligations and their unmatured interest coupons that have been
separated ("stripped") by their holder, typically a custodian bank or investment
brokerage firm. Having separated the interest coupons from the underlying
principal of the U.S. Government Obligations, the holder will resell the
stripped securities in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of
Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are ostensibly owned by the
bearer or holder), in trust on behalf of the owners. Counsel to the
underwriters of these certificates or other evidences of ownership of U.S.
Treasury securities have stated that, in their opinion, purchasers of the
stripped securities most likely will be deemed the beneficial holders of the
underlying U.S. Government obligations for federal tax and securities purposes.
The Trust 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, an Underlying 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 Fixed Income Funds may invest in stripped mortgage-backed
securities ("SMBS"), which represent beneficial ownership interests in the
principal distributions and/or the interest distributions on mortgage assets.
SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions on a pool of mortgage assets. One
type of SMBS will have one class receiving some of the interest and most of the
principal from the mortgage assets, while the other class will receive most of
the interest and the remainder of the principal. In the most common case, one
class of SMBS will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the principal-
only or "PO" class). SMBS may be issued by FNMA or FHLMC.

The original principal amount, if any, of each SMBS class represents the
amount payable to the holder thereof over the life of such SMBS class from
principal distributions of the underlying mortgage assets, which will be zero in
the case of an IO class. Interest distributions allocable to a class of SMBS,
if any, consist of interest at a specified rate on its principal amount,

36
<PAGE>

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 an Underlying 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 Trustees. 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 an Underlying Fund's net
asset value per share.

Supranational Bank Obligations. Supranational banks are international
banking institutions designed or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., The World
Bank). Obligations of supranational banks may be supported by appropriated but
unpaid commitments of their member countries and there is no assurance these
commitments will be undertaken or met in the future.

U.S. Government Obligations. The Funds and the Underlying Funds may
purchase obligations issued or guaranteed by the U.S. Government and, except in
the case of the U.S. Treasury Money Market Fund, 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 Funds include U.S. Treasury
Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home
Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, FNMA, Government National Mortgage
Association, General Services Administration, Student Loan Marketing
Association, Central Bank for Cooperatives, FHLMC, Federal Intermediate Credit
Banks and Maritime Administration.

Variable and Floating Rate Instruments. Debt instruments may be structured
to have variable or floating interest rates. Variable and floating rate
obligations purchased by an Underlying Fund may have stated maturities in excess
of an Underlying Fund's maturity limitation if the Underlying Fund can demand
payment of the principal of the instrument at least once during such period on
not more than thirty days' notice (this demand feature is not required if the
instrument is guaranteed by the U.S. Government or an agency thereof). These
instruments may

37
<PAGE>

include variable amount master demand notes that permit the indebtedness to vary
in addition to providing for periodic adjustments in the interest rates. The
Advisor (Sub-Advisor with respect to the Framlington Funds) 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 an Underlying 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 Money Market Funds will invest in variable and floating rate instruments
only when the Advisor deems the investment to involve minimal credit risk.

In determining average weighted portfolio maturity of the Underlying Funds,
an instrument will usually be deemed to have a maturity equal to the longer of
the period remaining until the next interest rate adjustment or the time the
Underlying Fund involved can recover payment of principal as specified in the
instrument. Variable rate U.S. Government obligations held by the Underlying
Funds, however, will be deemed to have maturities equal to the period remaining
until the next interest rate adjustment.

The absence of an active secondary market for certain variable and floating
rate notes could make it difficult to dispose of the instruments, and an
Underlying Fund could suffer a loss if the issuer defaulted or during periods
that an Underlying Fund is not entitled to exercise its demand rights.

Variable and floating rate instruments held by an Underlying Fund will be
subject to the fund's limitation on illiquid investments when the fund may not
demand payment of the principal amount within seven days absent a reliable
trading market.

Guaranteed Investment Contracts. The Fixed Income Funds and the Cash
Investment Fund may make limited investments in guaranteed investment contracts
("GICs") issued by U.S. insurance companies. Pursuant to such contracts, an
Underlying Fund makes cash contributions to a deposit fund of the insurance
company's general account. The insurance company then credits to the Underlying
Fund on a monthly basis interest which is based on an index (in most cases this
index is expected to be the Salomon Brothers CD Index), but is guaranteed not to
be less than a certain minimum rate. A GIC is normally a general obligation of
the issuing insurance company and not funded by a separate account. The
purchase price paid for a GIC becomes part of the general assets of the
insurance company, and the contract is paid from the company's general assets.
An Underlying Fund will only purchase GICs from insurance companies which, at
the time of purchase, have assets of $1 billion or more and meet quality and
credit standards established by the Advisor pursuant to guidelines approved by
the Board of Trustees. Generally, GICs are not assignable or transferable
without the permission of the issuing insurance companies, and an active
secondary market in GICs does not currently exist. Therefore, GICs will
normally be considered illiquid investments, and will be acquired subject to the
limitation on illiquid investments.

38
<PAGE>

When-Issued Purchases and Forward Commitments (Delayed-Delivery
Transactions). When-issued purchases and forward commitments (delayed-delivery
transactions) are commitments by an Underlying Fund to purchase or sell
particular securities with payment and delivery to occur at a future date
(perhaps one or two months later). These transactions permit the Underlying Fund
to lock-in a price or yield on a security, regardless of future changes in
interest rates.

When an Underlying 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 Underlying 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
Underlying Fund's commitments. It may be expected that the market value of the
Underlying 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 an Underlying 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 an Underlying Fund's total assets absent unusual market conditions.

An Underlying 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, an Underlying 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 Underlying Fund on the
settlement date. In these cases the Underlying Fund may realize a taxable
capital gain or loss.

When an Underlying 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 Underlying 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
an Underlying Fund starting on the day the fund agrees to purchase the
securities. The Underlying Fund does not earn interest on the securities it has
committed to purchase until they are paid for and delivered on the settlement
date.

Yields and Ratings. The yields on certain obligations, including the money
market instruments in which each Fund and Underlying Fund may invest (such as
commercial paper and bank obligations), are dependent on a variety of factors,
including general money market conditions, conditions in the particular market
for the obligation, the financial condition of the issuer, the size of the
offering, the maturity of the obligation and the ratings of the issue. The
ratings of S&P, Moody's, Duff & Phelps Credit Rating Co., Thomson Bank Watch,
Inc., and

39
<PAGE>

other nationally recognized statistical NRSROs represent their respective
opinions as to the quality of the obligations they undertake to rate. Ratings,
however, are general and are not absolute standards of quality. Consequently,
obligations with the same rating, maturity and interest rate may have different
market prices.

With respect to each of the Money Market Funds, securities (other than U.S.
Government securities) must be rated (generally, by at least two NRSROs) within
the two highest rating categories assigned to short-term debt securities. In
addition, each of the Cash Investment Fund and the Money Market Fund (a) will
not invest more than 5% of its total assets in securities rated in the second
highest rating category by such NRSROs and will not invest more than 1% of its
total assets in such securities of any one issuer, and (b) intends to limit
investments in the securities of any single issuer (other than securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities) to not
more than 5% of the Underlying Fund's total assets at the time of purchase,
provided that the Underlying Fund may invest up to 25% of its total assets in
the securities of any one issuer for a period of up to three business days.
Unrated and certain single rated securities (other than U.S. Government
securities) may be purchased by the Money Market Funds, but are subject to a
determination by the Advisor, in accordance with procedures established by the
Boards of Trustees and Directors, that the unrated and single rated securities
are of comparable quality to the appropriate rated securities.

Other. Subsequent to its purchase by an Underlying Fund, a rated security
may cease to be rated or its rating may be reduced below the minimum rating
required for purchase by the Underlying Fund. The Boards of Trustees and
Directors, as applicable, or the Advisor (Sub-Advisor with respect to the
Framlington Funds), pursuant to guidelines established by the Boards, will
consider such an event in determining whether the Underlying Fund involved
should continue to hold the security in accordance with the interests of the
fund and applicable regulations of the SEC.

It is possible that unregistered securities purchased by an Underlying Fund
in reliance upon Rule 144A under the Securities Act of 1933, as amended, could
have the effect of increasing the level of the Underlying Fund's illiquidity to
the extent that qualified institutional buyers become, for a period,
uninterested in purchasing these securities.

INVESTMENT LIMITATIONS

Each Fund is subject to the investment limitations enumerated in this
section which may be changed with respect to a particular Fund only by a vote of
the holders of a majority of such Fund's outstanding shares (as defined under
"Miscellaneous -- Shareholder Approvals").

No Fund may:

1. Invest more than 25% of its total assets in any one industry
(securities issued or guaranteed by the United States Government, its
agencies or instrumentalities are not considered to represent
industries); this limitation does not apply to investment by the Funds
in investment companies;

40
<PAGE>

2. With respect to 75% of the Fund's assets invest more than 5% of the
Fund's assets (taken at market value at the time of purchase) in the
outstanding securities of any single issuer or own more than 10% of
the outstanding voting securities of any one issuer, in each case
other than securities issued by other investment companies or
securities issued or guaranteed by the United States Government, its
agencies or instrumentalities;

3. Borrow money or enter into reverse repurchase agreements except that
the Funds may (i) borrow money or enter into reverse repurchase
agreements for temporary purposes in amounts not exceeding 5% of its
total assets and (ii) borrow money to meet redemption requests, in
amounts (when aggregated with amounts borrowed under clause (i)) not
exceeding 33 1/3% of its total assets;

4. Issue any senior security (as defined in Section 18(f) of the 1940
Act) except as permitted under the 1940 Act.

5. Make loans of securities to other persons in excess of 25% of a Fund's
total assets; provided the Funds may invest without limitation in
short-term debt obligations (including repurchase agreements) and
publicly distributed debt obligations;

6. Underwrite securities of other issuers, except insofar as a Fund may
be deemed an underwriter under the Securities Act of 1933, as amended,
in selling portfolio securities; or

7. Purchase or sell real estate or any interest therein, including
interests in real estate limited partnerships, except securities
issued by companies (including real estate investment trusts) that
invest in real estate or interests therein.

Additional investment restrictions adopted by each Fund, which may be
changed by the Board of Directors of the Company without shareholder vote,
provide that a Fund may not invest more than 15% of its net assets (taken at
market value at the time of purchase) in securities which cannot be readily
resold because of legal or contractual restrictions and which are not otherwise
marketable.

If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
a Fund's investments will not constitute a violation of such limitation, except
that any borrowing by a Fund that exceeds the fundamental investment limitations
stated above must be reduced to meet such limitations within the period required
by the 1940 Act (currently three days). Otherwise, a Fund may continue to hold
a security even though it causes the Fund to exceed a percentage limitation
because of fluctuation in the value of the Fund's assets.

41
<PAGE>

DIRECTORS AND OFFICERS

The trustees, 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 Position with Company During Last Five Years
- --------------------- --------------------- ----------------------
<S> <C> <C>

Charles W. Elliott /1/ Chairman of the Board Senior Advisor to the President - Western
3338 Bronson Boulevard of Directors Michigan University since July 1995;
Kalmazoo, MI 49008 Executive Vice President - Administration
Age: 64 & Chief Financial Officer, Kellogg Company
from January 1987 through June 1995;
before that Price Waterhouse. Board of
Directors, Steelcase Financial Corporation.

John Rakolta, Jr. Director and Vice Chairman, Walbridge Aldinger Company
1876 Rathmor Chairman of the Board
Bloomfield Hills, MI 48304 of Directors
Age: 49

Thomas B. Bender Director Investment Advisor, Financial & Investment
7 Wood Ridge Road Management Group (since April, 1991); Vice
Glen Arbor, MI 49636 President Institutional Sales, Kidder, Peabody
Age: 63 & Co. (Retired April, 1991).

David J. Brophy Director Professor, University of Michigan; Director,
1025 Martin Place River Place Financial Corp.; Trustee,
Ann Arbor, MI 48104 Renaissance Assets Trust.
Age: 60

</TABLE>

- ----------------------

/1/ Director is an "interested person" of the Company as defined in the 1940
Act.

42
<PAGE>

Dr. Joseph E. Champagne Director Corporate and Executive Consultant since
319 Snell Road September 1995; prior to that Chancellor,
Rochester, MI 48306 Lamar University from September 1994
Age: 58 until September 1995; before that
Consultant to Management, Lamar University;
President and Chief Executive Officer,
Crittenton Corporation, Crittenton
Development Corporation until August 1993;
before that President, Oakland University
of Rochester, MI, until August 1991;
Member, Board of Directors, Ross Operating
Valve of Troy, MI

Thomas D. Eckert Director President and COO, Mid-Atlantic Group of
10726 Falls Pointe Drive Pulte Home Corporation
Great Falls, VA 22066
Age: 49

Jack L. Otto Director Retired; Director of Standard Federal Bank;
6532 W. Beech Tree Road Executive Director, McGregor Fund (a
Glen Arbor, MI 49636 private philanthropic foundation) 1981-1985;
Age: 70 Managing Partner, Detroit office of
Ernst & Young, until 1981.

Arthur DeRoy Rodecker Director President, Rodecker & Company, Investment
4000 Town Center Brokers, Inc. since November 1976; President,
Suite 101 RAC Advisors, Inc., Registered Investment
Southfield, MI 48075 Advisor since February 1979; President and
Age: 69 Trustee, Helen L. DeRoy Foundation, a charitable
foundation; Vice President and Trustee, DeRoy
Testamentary Foundation, a charitable foundation;
Trustee, Providence Hospital Foundation.

Lee P. Munder President President and CEO of the Advisor; Chief Executive
480 Pierce Street Officer and President of Old MCM; Chief Executive
Birmingham, MI 48009 Officer of World Asset Management; and Director,
Age: 51 LPM Investment Services, Inc. ("LPM").

</TABLE>

43
<PAGE>

Terry H. Gardner Vice President, Chief Vice President and Chief Financial Officer of the
480 Pierce Street Financial Officer and Advisor and World Asset Management; Vice President
Suite 300 Treasurer and Chief Financial Officer of Old MCM; Audit
Birmingham, MI 48009 Manager of Arthur Andersen & Co. (1991 to February
Age: 36 1993); Secretary of LPM.

Paul Tobias Vice President Executive Vice President and Chief Operating
480 Pierce Street Officer of the Advisor (since April 1995) and
Suite 300 Executive Vice President of Comerica, Inc.
Birmingham, MI 48009
Age: 45

Gerald Seizert Vice President Executive Vice President and Chief Investment
480 Pierce Street Officer/Equities of the Advisor (since April
Suite 300 1995); Managing Director (1992-1995) and Vice
Birmingham, MI 48009 President (1984-1991) of Loomis, Sayles and
Age: 44 Company, L.P.

Elyse G. Essick Vice President Vice President and Director of Marketing for
480 Pierce Street the Advisor; Vice President and Director of
Suite 300 Client Services of Old MCM (August 1988 to
Birmingham, MI 48009 December 1994).
Age: 38

James C. Robinson Vice President Vice President and Chief Investment
480 Pierce Street Officer/Fixed Income for the Advisor;
Suite 300 Vice President and Director of Fixed Income
Birmingham, MI 48009 of Old MCM (1987-1994).
Age: 35

Leonard J. Barr, II Vice President Vice President and Director of Core Equity
480 Pierce Street Research of the Advisor; Director and Senior
Suite 300 Vice President of Old MCM (since 1988);
Birmingham, MI 48009 Director of LPM.
Age: 52

</TABLE>

44
<PAGE>

Ann F. Putallaz Vice President Vice President and Director of Fiduciary
480 Pierce Street Services of the Advisor (since January 1995);
Suite 300 Director of Client and Marketing Services of
Birmingham, MI 48009 Woodbridge.
Age: 51

Richard H. Rose Assistant Treasurer Senior Vice President, First Data Investor
First Data Investor Services Group, Inc. (since May 6, 1994).
Services Group, Inc. Formerly, Senior Vice President, The Boston
One Exchange Place Company Advisors, Inc. since November 1989.
8th Floor
Boston, MA 02109
Age: 41

Lisa A. Rosen Secretary, Assistant General Counsel of the Advisor since May, 1996.
480 Pierce Street Treasurer Formerly, Counsel, First Data Investor Services
Suite 300 Group, Inc.; Assistant Vice President and
Birmingham, MI 48009 Counsel with The Boston Company Advisors,
Age: 29 Inc.; Associate with Hutchins, Wheeler &
Dittmar.

Teresa M.R. Hamlin Assistant Secretary Counsel, First Data Investor Services Group, Inc. (Since 1995).
First Data Investor Formerly, Paralegal Manager, The Boston Company Advisors, Inc.
Services Group, Inc.
One Exchange Place
8th Floor
Age: 33

Julie A. Tedesco Assistant Secretary Counsel, First Data Investor Services Group,
First Data Investor Inc. (since May, 1994). Formerly Assistant
Services Group, Inc. Vice President and Counsel of The Boston
One Exchange Place Company Advisors, Inc. since July, 1992.
8th Floor
Boston, MA 02109
Age: 39

</TABLE>

Directors of the Company and Trustees of the Trust receive an aggregate fee from
the Company, the Trust, Framlington and St. Clair Funds, Inc. ("St. Clair") for
service on those organizations' respective Boards of Directors and 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.

45
<PAGE>

The following table summarizes the compensation paid by the Trust and the
Company to their respective Directors/Trustees for the fiscal year ended June
30, 1996. Neither Framlington nor St. Clair had operations during the fiscal
year ended June 30, 1996.

<TABLE>
<CAPTION>
Pension
Retirement
Aggregate Benefits Estimated
Compensation Accrued as Annual Total
from the Part of Benefits from the
Trust and Fund Upon Fund
Name of Position the Company Expenses Retirement Complex

<S> <C> <C> <C> <C>
Charles W. Elliott $14,000.00 None None $14,000.00
Chairman

John Rakolta, Jr. $14,000.00 None None $14,000.00
Vice Chairman

Thomas B. Bender $14,000.00 None None $14,000.00

David J. Brophy $14,000.00 None None $14,000.00
Trustee and Director

Dr. Joseph E. Champagne $14,000.00 None None $14,000.00
Trustee and Director

Thomas D. Eckert $14,000.00 None None $14,000.00
Trustee and Director

Jack L. Otto $14,000.00 None None $14,000.00
Trustee and Director

Arthur DeRoy Rodecker $14,000.00 None None $14,000.00
Trustee and Director

</TABLE>

No officer, director or employee of the Advisor, Comerica Incorporated
("Comerica"), the Distributor, the Administrator or the Transfer Agent currently
receives any compensation from the Company.

The Company will not employ Rodecker & Company, Investment Brokers, Inc. to
effect brokerage transactions for the Funds.

46
<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS

Investment Advisor. The Advisor of each Fund is Munder Capital Management,
a Delaware general partnership. The Advisor replaced Munder Capital Management,
Inc. as investment advisor to the investment portfolios of the Company on
January 31, 1995, upon the closing of an agreement (the "Joint Venture
Agreement") among Old MCM, Inc., Comerica, Woodbridge and WAM, pursuant to which
Old MCM, Inc. contributed its investment advisory business and Comerica
contributed the investment advisory businesses of its indirect subsidiaries,
Woodbridge and World Asset Management, to the Advisor. 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.

The Investment Advisory Agreement ("Advisory Agreement") between the
Advisor and the Company on behalf of each Fund was approved by the Board of
Directors of the Company on February 4, 1997 and will continue in effect until
February 4, 1999, and from year to year thereafter only if its 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 each Fund, or (ii) the vote of a majority of
the Board of Directors. The Advisory Agreement is terminable with respect to a
Fund by vote of the Board of Directors, or by the holders of a majority of the
outstanding voting securities of the Fund, at any time without penalty, on 60
days' written notice to the Advisor. The Advisor may also terminate its advisory
relationship with respect to a 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).

Under the terms of the Advisory Agreement, the Advisor furnishes continuing
investment supervision to the Funds and is responsible for the management of the
Funds' portfolios. The responsibility for making decisions to buy, sell or hold
a particular security rests with the Advisor, subject to review by the Company's
Boards of Directors. For the advisory services provided to the Funds and
expenses assumed by it, the Advisor has agreed to a fee from each Fund, computed
daily and payable monthly on a separate Fund-by-Fund basis, at an annual rate of
.35% of each Funds' average daily net assets.

The Advisor serves as investment advisor to each of the Underlying Funds,
and for the advisory services provided and expenses assumed by it, the Advisor
has agreed to a fee from each Underlying Fund. The Advisor expects to
voluntarily reimburse expenses during the Trust's and the Company's current
fiscal year with respect to the Mid-Cap Growth Fund, Real Estate Equity
Investment Fund and Value Fund. The Advisor may discontinue such fee waivers
and/or expense reimbursements at any time, in its sole discretion. See
"MANAGEMENT--Investment Advisor" in the Prospectus for a description of the
advisory fees received by the Advisor from the Underlying Funds.

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<PAGE>

Pursuant to a sub-advisory agreement with the Advisor, Framlington Overseas
Investment Management Limited provides sub-advisory services to the Framlington
Funds, and receives a fee from the Advisor for such sub-advisory services. See
"MANAGEMENT--Sub-Advisor" in the Prospectus for a description of the sub-
advisory services and fees received by the Sub-Advisor.

For the period July 1, 1995 to October 27, 1995, the Advisor received fees,
after waivers, if any, at an effective rate of .75% of the average daily net
assets of each of the Accelerating Growth Fund, Growth & Income Fund,
International Equity Fund, and Small Company Growth Fund; .50% of the average
daily net assets of each of the Bond Fund, Intermediate Bond Fund, and U.S.
Government Income Fund; and .35% of the average daily net assets of the Cash
Investment Fund and the U.S. Treasury Money Market Fund.

For the period October 28, 1995 to June 30, 1996, the Advisor received
fees, after waivers, if any, at an effective rate of .75% of the average daily
net assets of each of the Accelerating Growth Fund, Growth & Income Fund,
International Equity Fund, and Small Company Growth Fund; and .50% of the
average daily net assets of each of the Bond Fund, Intermediate Bond Fund, and
U.S. Government Income Fund; and .35% of the average daily net assets of the
Cash Investment Fund and the U.S. Treasury Money Market Fund.

For the fiscal year ended June 30, 1996 (and for the Mid-Cap Growth Fund
and Value Fund for the period of commencement of operations to June 30, 1996)
the Advisor received fees, after waivers, if any, at an effective rate of .75%
of average daily net assets of the Multi-Season Growth Fund; .68% of average
daily net assets of the Real Estate Equity Investment Fund; .73% of average
daily net assets of the Value Fund; .71% of average daily net assets of the Mid-
Cap Growth Fund; and .40% of average daily net assets of the Money Market Fund.

The International Bond Fund did not commence operations until October 2,
1996; the NetNet Fund did not commence operation until August 19, 1996; the
Micro-Cap Equity Fund and Small-Cap Value Fund did not commence operations until
December 26, 1996; and the Framlington International Growth, Framlington
Emerging Markets, and Framlington Healthcare Fund Funds did not commence
operations until December 31, 1996. The Equity Selection Fund had not commenced
operations as of the date of this Statement of Additional Information.

Portfolio Managers -- The Underlying Funds. The Portfolio Managers
primarily responsible for the management of the investment selections of the
portfolios of the Underlying Funds, together with information as to their
principal business occupations during the past five years, are shown below.

Leonard J. Barr II, CFA, Senior Vice President and Director of Research of the
Advisor, has co-managed the Multi-Season Growth Fund since its inception in
April, 1993. From April, 1988 to February, 1995, he was Vice President and
Director of Research for MCM.

Ann J. Conrad, CFA, Vice President and Director of Specialty Equity Products of
the Advisor or Woodbridge since June, 1992, has managed the Accelerating Growth
Fund since the Fund's inception in December. From December, 1965 to June, 1992,
she was Director of Equity Strategy for Comerica Capital Management, Inc.

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Arnold Kent Douville, Senior Portfolio Manager of the Advisor, began his
investment career as an associate in the Capital Markets group of the investment
banking firm, Drexel Burnham Lambert. Mr. Douville joined MCM in 1989 and
specializes in managing mid-cap growth portfolios for institutional clients. Mr.
Douville has co-managed the Mid-Cap Growth Fund since its inception in August,
1995. Prior to beginning his investment career, Mr. Douville worked as a cost
analyst for The Analytic Sciences Corporation (TASC). Mr. Douville earned his
B.S. degree in economics from the United States Air Force Academy and his M.B.A.
from the University of Chicago Graduate School of Business.

Edward Eberle, Value Portfolio Manager of the Advisor, has been co-manager of
the Value Fund since October, 1996 and has been co-manager of the Small-Cap
Value Fund since March, 1997. Prior to October 1996, Mr. Eberle acted as the
primary analyst for Value Fund, assisting the manager with portfolio decisions.
He is also a member of the Advisor's asset allocation team. Prior to joining the
Advisor in 1995, Mr. Eberle served as Executive Vice President and Portfolio
Manager for Westpointe Financial Corporation and as a member of the Board of
Directors for Westpointe Capital Management and Dart Investors Bermuda Limited.
Mr. Eberle received a B.A. in Finance from Michigan State University.

Sharon E. Fayolle, Vice President and Director of Money Market Trading for the
Advisor or MCM, is responsible for overseeing the management of cash portfolios,
money market funds and foreign currency trading since May, 1996. She has co-
managed the International Bond Fund since October, 1996. Prior to joining MCM in
1996, she was employed in the investment area of Ford Motor Company as European
Portfolio Manager responsible for investment and cash management for Ford's
European operations (August, 1981 to April, 1996).

Michael P. Gura, CFA, Senior Portfolio Manager of the Advisor, has been co-
manager of the Small Company Growth Fund since March 1997. Prior to joining the
Advisor in 1995, Mr. Gura was a Vice President, Senior Equity Analyst for
Woodbridge Capital Management, Inc. From 1989-1994, Mr. Gura was an investment
officer at Manufacturers National Bank Trust Investment Department where he was
responsible for equity research covering the retailing, apparel, specialty
chemical and environmental industries. From 1986-1989, Mr. Gura served as a
Financial/Tax Planning analyst for Manufacturers National Bank. Mr. Gura
received an M.S. in Finance with Distinction and a B.B.A. from Walsh College, is
a member of the Financial Analyst Society of Detroit and a Certified Financial
Planner.

Otto Hinzmann, Jr., Vice President and Director of Equity Portfolio Management
of the Advisor or MCM since January, 1987, has managed the Growth & Income Fund
since February, 1995. Prior to 1987, he was Director of Equity Strategy for
Comerica Bank.

Peter K. Hoglund, CFA, Portfolio Manager/Strategic Projects of the Advisor, has
been manager of the Real Estate Equity Investment Fund since October, 1996.
Prior to being appointed as manager, Mr. Hoglund acted as the primary analyst
for this Fund, assisting the former manager with portfolio decisions. Prior to
joining MCM in May, 1993, Mr. Hoglund was in the Investment Banking Division of
Morgan Stanley & Co., Inc. (July, 1988 to July, 1990) where he was a financial
analyst. Mr. Hoglund received both his B.A. and M.B.A. from the University of
Michigan and is a Chartered Financial Analyst.

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<PAGE>

Todd B. Johnson, Chief Investment Officer of the Advisor, is currently the co-
manager of the International Equity Fund (previously, from January, 1996 to
October, 1996, was the portfolio manager). Mr. Johnson previously served as a
portfolio manager at Woodbridge (June, 1991 to December, 1994) and Manufacturers
Bank (June, 1986 to June, 1992). Mr. Johnson received a B.A. in Finance from
Michigan State University and an M.B.A. from Wayne State University.

Anne K. Kennedy, Vice President and Director of Corporate Bond Trading of the
Advisor or MCM, has managed the Intermediate Bond Fund since March, 1995. In
addition to managing the corporate bond trading function, Ms. Kennedy is
responsible for managing institutional fixed income portfolios. From June, 1987
to September, 1991, she was involved in several investment related areas for
Ford Motor Company.

Simon Key, Chief Investment Officer of the Sub-Advisor, is the primary portfolio
manager for the Framlington Emerging Markets Fund. Mr. Key heads the asset
allocation committee of the Sub-Advisor, and is responsible for overall asset
allocation strategy. Prior to joining Framlington in 1989, Mr. Key was with the
Bank of England as economist and deputy head of the European team. He graduated
from the University of East Anglia with a BA in economics and philosophy, and
went on to complete a MSc in economics at the University of London.

Antony Milford, Head of the Specialist Desk for the Sub-Advisor, is the primary
portfolio manager for the Framlington Healthcare Fund. Mr. Milford is a member
of the Sub-Advisor's asset allocation committee and has been managing funds for
Framlington since 1971, covering most geographic regions. Mr. Milford has
managed a healthcare portfolio for the Sub-Advisor since 1989. He graduated
from Oxford with a Classics degree.

Theodore Miller, Senior Portfolio Manager of the Advisor, has been co-manager of
the International Equity Fund since October, 1996. Prior to being appointed co-
manager, Mr. Miller acted as the primary analyst for the Fund, assisting the
manager with portfolio decisions. Prior to joining the Advisor, Mr. Miller
worked in Derivatives Marketing for Interacciones Global Inc (1993--1995), in
Equity Sales/Trader for McDonald & Co. Securities Inc. (1991--1993) and started
his career in 1986 and was a derivative and equity transaction execution
specialist with various New York investment banks. Mr. Miller received his B.S.
from the University of Pittsburgh and his M.B.A. from Indiana University.

Lee P. Munder, CFA, President and Chief Executive Officer of the Advisor or MCM
since MCM's inception in 1985. Mr. Munder has co-managed the Multi-Season Growth
Fund since its inception in April, 1993 and managed the Real Estate Equity
Investment Fund since its inception to October, 1996. Mr. Munder began his
investment career in 1969 as Chief Trust Investment Officer for Security Bank
and Trust of Southgate, Michigan. From 1973 to 1985 he served as portfolio
manager at Loomis Sayles & Co., Inc. serving in later years as Vice President
and Senior Partner. In 1985, Mr. Munder left Loomis Sayles & Co., Inc. and
founded MCM.

Gregory A. Prost, CFA, Senior Fixed Income Portfolio Manager of the Advisor or
MCM, has co-managed the Bond Fund since May, 1995 and the International Bond
Fund since October, 1996. Prior to joining MCM in 1995, he was a Vice President
and Senior Fund Manager for First of America Investment Corp. (May, 1987 to May,
1995).

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<PAGE>

James C. Robinson, Vice President and Chief Investment Officer--Fixed Income of
the Advisor or MCM since 1987, has co-managed the Bond Fund, Intermediate Bond
Fund and U.S. Government Income Fund since March, 1995. In his position, Mr.
Robinson oversees the Advisor's fixed income strategy and manages institutional
portfolios. Prior to his joining MCM in 1987, he was a Senior Fixed Income
Portfolio Manager for the National Bank of Detroit Trust Investment Department.

Peter G. Root, Vice President and Director of Government Securities Trading of
the Advisor, has managed the U.S. Government Income Fund since March, 1995. Mr.
Root joined MCM in 1991 and as a Senior Portfolio Manager has been responsible
for fixed income portfolios. From August, 1988 to February, 1991 he was an
Investment Manager for Society National Bank.

Gerald Seizert, CFA, CIC, is Executive Vice President and Chief Investment
Officer of all equity management of the Advisor. Mr. Seizert has co-managed the
Value Fund since October, 1996 and managed the Value Fund from its inception in
August, 1995 through October, 1996. Mr. Seizert has co-managed the Small-Cap
Value Fund since March, 1997 and managed the Small-Cap Value Fund from its
inception in December, 1996 through March, 1997. Prior to joining the Advisor in
1995, Mr. Seizert served as Director and Managing Partner of the Detroit office
of Loomis, Sayles & Company, L.P. Before his 1984 affiliation with Loomis, he
served as Vice President, Trust Investments for First of America Bank. Earlier,
1977-1979, Mr. Seizert served as a Credit Analyst at Bank One of Columbus, N.A.
Mr. Seizert received his B.B.A. degree and an M.B.A from The University of
Toledo and is a Chartered Financial Analyst and Chartered Investment Counselor.

Carl Wilk, Senior Portfolio Manager of the Advisor, has been co-manager of the
Small Company Growth Fund since October, 1996. Prior to being appointed co-
manager, Mr. Wilk acted as the primary analyst for the Fund assisting the
manager with portfolio decisions. Prior to joining the Advisor in 1995, Mr. Wilk
was a Senior Equity Research Analyst at Woodbridge. Prior responsibilities
include experience as an Investment Analyst at Manufacturers Bank, N.A. from
1986 to 1992 for their core growth equity investment process. In addition, Mr.
Wilk performed various financial positions in the banking and brokerage industry
from 1984 to 1986. Mr. Wilk received a B.S. in Finance, M.B.A. from Wayne State
University and is a Certified Financial Planner.

Jeffrey A. Wrona, CFA, Senior Portfolio Manager of the Advisor, began his
investment career as a Fixed Income Research Analyst for the investment banking
firm, Drexel Burnham Lambert. Mr. Wrona joined MCM in 1990 and specializes in
managing mid-cap growth portfolios for institutional clients. Mr. Wrona has co-
managed the Mid-Cap Growth Fund since its inception in August, 1995. Prior to
beginning his investment career, Mr. Wrona worked as a product design engineer
for Ford Motor Company (September, 1987 to August, 1988). Mr. Wrona earned his
B.S. degree in engineering from the University of Michigan and his M.B.A. from
the University of Michigan Graduate School of Business.

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<PAGE>

Distribution Agreement. The Company has entered into a distribution
agreement under which the Distributor, as agent, sells shares of each Fund on a
continuous basis. The Distributor has agreed to use appropriate efforts to
solicit orders for the purchase of shares of each 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 Funds (excluding preparation and printing expenses necessary for
the continued registration of the shares) and of printing and distributing all
sales literature. The Distributor's principal offices are located at 60 State
Street, Boston, Massachusetts 02109.

Distribution Services Arrangements. Each Fund has adopted a Service and
Distribution Plan with respect to its Class A shares pursuant to which it uses
its assets to finance activities relating to the distribution of Class A shares
to investors and the provision of certain services to holders of Class A shares.
Under such Plans, the Distributor is paid an annual service fee at the rate of
0.25% of the value of average daily net assets of the Class A shares of the Fund
and an annual distribution fee at the rate of 0.05% of the value of average
daily net assets of the Class A shares of the Fund. Each Fund has adopted a
Service and Distribution Plan with respect to its Class B shares, pursuant to
which it uses its assets to finance activities relating to the distribution of
Class B shares to investors and the provision of certain services to the holders
of Class B shares. Under such Plans, the Distributor is paid an annual service
fee of 0.25% of the value of average daily net assets of the Class B shares of
each Fund and an annual distribution fee at the rate of 0.75% of the value of
average daily net assets of the Class B shares of each Fund.

Under the terms of the Service and Distribution Plans (collectively, the
"Plans"), each Plan continues from year to year, provided such continuance is
approved annually by vote of the Board of Directors, including a majority of the
Board of Directors who are not interested persons of the Company, as applicable,
and who have no direct or indirect financial interest in the operation of that
Plan (the "Non-Interested Plan Directors"). The Plans may not be amended to
increase the amount to be spent for the services provided by the Distributor
without shareholder approval, and all amendments of the Plans also must be
approved by the Directors in the manner described above. Each Plan may be
terminated at any time, without penalty, by vote of a majority of the Non-
Interested Plan Directors or, with respect to a Fund, by a vote of a majority of
the outstanding voting securities of the relevant class of that Fund (as defined
in the 1940 Act) upon not more than 30 days' written notice to any other party
to the Plan. Pursuant to each Plan, the Distributor will provide the Board of
Directors periodic reports of amounts expended under the Plan and the purposes
for which such expenditures were made.

The Directors have determined that the Plans will benefit the Company, each
Fund, and their shareholders by (i) providing an incentive for broker or bank
personnel to provide continuous shareholder servicing after the time of sale;
(ii) facilitating portfolio management flexibility through cash flow into the
Funds; and (iii) maintaining a competitive sales structure in the mutual fund
industry.

With respect to Class A and Class B shares of each Fund, the Distributor
expects to pay sales commissions to dealers authorized to sell the Fund's Class
A and Class B shares at the time of sale. The Distributor will use its own funds
(which may be borrowed) to pay such commissions pending reimbursement pursuant
to the Service and Distribution Plan. In addition, the Advisor

52
<PAGE>

may use its own resources to make payments to the Distributor or dealers
authorized to sell the Fund's shares to support their sales efforts.

Administration Agreement. First Data Investor Services Group, Inc. ("First
Data"), located at 53 State Street, Boston, Massachusetts 02109, serves as
administrator for the Company pursuant to an administration agreement (the
"Administration Agreement"). First Data has agreed to maintain office facilities
for the Company; provide accounting and bookkeeping services for the Funds,
including the computation of each Fund's net asset value, net income and
realized capital gains, if any; furnish statistical and research data, clerical
services, and stationery and office supplies; prepare and file various reports
with the appropriate regulatory agencies; and prepare various materials required
by the 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 Funds' assets pursuant to a
custodian agreement (the "Custody Agreement") with the Company. Under the
Custody Agreement, the Custodian (i) maintains a separate account in the name of
each Fund, (ii) holds and transfers portfolio securities on account of each
Fund, (iii) accepts receipts and makes disbursements of money on behalf of each
Fund, (iv) collects and receives all income and other payments and distributions
on account of each Fund's securities and (v) makes periodic reports to the
Boards of Directors concerning each Fund's operations. The Custodian is
authorized to select one or more domestic or foreign banks or trust companies to
serve as sub-custodian on behalf of the Company.

First Data also serves as the transfer and dividend disbursing agent for
the Funds pursuant to a transfer agency agreement (the "Transfer Agency
Agreement") with the Company, under which First Data (i) issues and redeems
shares of each Fund, (ii) addresses and mails all communications by each Fund to
its record owners, including reports to shareholders, dividend and distribution
notices and proxy materials for its meetings of shareholders, (iii) maintains
shareholder accounts, (iv) responds to correspondence by shareholders of the
Funds and (v) makes periodic reports to the Boards of Directors concerning the
operations of each Fund.

Other Information Pertaining to Distribution, Administration, Custodian and
Transfer Agency Agreements. As stated in the Prospectus, the Administrator is
entitled to receive an annual fee of $30,000 per Fund and the Transfer Agent is
entitled to receive an annual fee of $36,000 per Fund as compensation for their
respective services. 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 the
respective agreements, the experience and qualifications of the respective
service contractors, the reasonableness of the fees payable by the Company in
comparison to the charges of competing vendors, the impact of the fees on the
estimated total ordinary operating expense ratio of each

53
<PAGE>

Fund and the fact that neither the Administrator nor the Transfer Agent is
affiliated with either the Company or the Advisor. The Board also considered its
responsibilities under federal and state law in approving these agreements.

Comerica Bank provides custodial services to the Funds. As compensation for
its services, Comerica Bank is entitled to receive fees, based on the aggregate
average daily net assets of the Funds (other than assets invested in investment
portfolios advised by the Advisor) 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, and 0.01% of all net assets in
excess of $600 million. Comerica Bank also receives certain transaction based
fees.

PORTFOLIO TRANSACTIONS

Subject to the general supervision of the Directors, the Advisor makes
decisions with respect to and places orders for all purchases and sales of
portfolio securities for each Fund. The Funds purchase only Class Y shares of
the Underlying Funds, which are sold without an initial or contingent deferred
sales charge to the Funds.

Over-the-counter issues, including corporate debt and government
securities, are normally traded on a "net" basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. With respect to over-the-counter transactions, the Advisor will
normally deal directly with dealers who make a market in the instruments
involved except in those circumstances where more favorable prices and execution
are available elsewhere. The cost of securities purchased from underwriters
includes an underwriting commission or concession, and the prices at which
securities are purchased from and sold to dealers include a dealer's mark-up or
mark-down.

The portfolio turnover rate of a Fund and an Underlying Fund is calculated
by dividing the lesser of such 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 each Fund and Underlying Fund whenever necessary, in management's opinion,
to meet such fund's investment objective. Each Fund expects to have an annual
portfolio turnover rate not exceeding 50% for its initial fiscal year. The
Underlying Funds may engage in short-term trading to achieve their investment
objectives. Portfolio turnover may vary greatly from year to year as well as
within a particular year.

In the Advisory Agreement, the Advisor agrees to select broker-dealers in
accordance with guidelines established by the 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 Funds to pay a broker-dealer which furnishes

54
<PAGE>

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 Funds. Such brokerage and
research services might consist of reports and statistics on specific companies
or industries, general summaries of groups of bonds and their comparative
earnings and yields, or broad overviews of the securities markets and the
economy.

Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable to the Advisor by the Funds. It is possible that
certain of the supplementary research or other services received will primarily
benefit one or more other investment companies or other accounts for which
investment discretion is exercised. Conversely, a 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 each Fund, the Underlying Funds, and for other
investment accounts managed by the Advisor (Sub-Advisor with respect to the
Framlington Funds) 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 a Fund or Underlying Fund is concerned, in other cases it is
believed to be beneficial to a Fund or Underlying Fund. To the extent permitted
by law, the Advisor may aggregate the securities to be sold or purchased for a
Fund or Underlying Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions.

A 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.

The Funds are required to identify the securities of their regular brokers
or dealers (as defined in Rule 10b-1 under the 1940) Act or their parents held
by them as of the close of their most recent fiscal year. As of June 30, 1996
the Funds held no such securities.

Except as noted in the Prospectus and this Statement of Additional
Information the Funds' service contractors bear all expenses in connection with
the performance of their services and the Funds bear the expenses incurred in
their operations. These expenses include, but are not limited to, fees paid to
the Advisor, Administrator, Custodian and Transfer Agent; fees and expenses of

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<PAGE>

officers and Board of Directors; taxes; interest; legal and auditing fees;
brokerage fees and commissions; certain fees and expenses in registering and
qualifying each Fund and its shares for distribution under Federal and state
securities laws; expenses of preparing prospectuses and statements of additional
information and of printing and distributing prospectuses and statements of
additional information to existing shareholders; the expense of reports to
shareholders, shareholders' meetings and proxy solicitations; fidelity bond and
directors' and officers' liability insurance premiums; the expense of using
independent pricing services; and other expenses which are not assumed by the
Administrator. Any general expenses of the Company that are not readily
identifiable as belonging to a particular investment portfolio of the Company
are allocated among all investment portfolios of the Company by or under the
direction of the Board of Directors in a manner that the Board of Directors
determines to be fair and equitable. The Advisor, Administrator, Custodian and
Transfer Agent may voluntarily waive all or a portion of their respective fees
from time to time.

PURCHASE AND REDEMPTION INFORMATION

Purchases and redemptions are discussed in the Funds' Prospectus and such
information is incorporated herein by reference.

Purchases. In addition to the methods of purchasing shares described in the
Prospectus, the Funds also offer a pre-authorized checking plan by which
investors may accumulate shares of the Funds 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 Funds at (800) 438-5789. Such a
plan is voluntary and may be discontinued by the shareholder at any time or by
the Company on 30 days' written notice to the shareholder.

Letter of Intent. Purchasers who intend to invest $100,000 or more in Class
A shares of a Fund within 13 months (whether in one lump sum or in installments,
the first of which may not be less than 5% of the total intended amount and each
subsequent installment not less than $100, including automatic investment and
payroll deduction plans), and to beneficially hold the total amount of such
shares fully paid for and outstanding simultaneously for at least one full
business day before the expiration of that period, should complete the Letter of
Intent ("LOI") section in the Application. Payment for not less than 5% of the
total intended amount must accompany the executed LOI. Those shares purchased
with the first 5% of the intended amount stated in the LOI will be held as
"escrowed shares" for as long as the LOI remains unfulfilled. Although the
escrowed shares are registered in the investor's name, his full ownership of
them is conditional upon fulfillment of the LOI. No escrowed shares can be
redeemed by the investor for any purpose until the LOI is fulfilled or
terminated. If the LOI is terminated for any reason other than fulfillment, the
Transfer Agent will redeem that portion of the escrowed shares required and
apply the proceeds to pay any adjustment that may be appropriate to the sales
commission on all shares (including the escrowed shares) already purchased under
the LOI and apply any unused balance to the investor's account. The LOI is not a
binding obligation to purchase any amount of shares, but its execution will
result in the purchaser paying a lower sales charge at the appropriate quantity
purchase level. A purchase not originally made pursuant to an LOI may be
included under a subsequent LOI executed within 90 days of such purchase. In
this case, an adjustment will be

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made at the end of 13 months from the effective date of the LOI at the net asset
value per share then in effect, unless the investor makes an earlier written
request to the Funds' Distributor upon fulfilling the purchase of shares under
the LOI. In addition, the aggregate value of any shares purchased prior to the
90-day period referred to above may be applied to purchases under a current LOI
in fulfilling the total intended purchases under the LOI. However, no adjustment
of sales charge previously paid on purchases prior to the 90-day period will be
made. Shares acquired through reinvestment of dividends and capital gain
distributions are considered in connection with an investor's fulfillment of the
LOI.

Retirement Plans. Shares of any of the Funds may be purchased in connection
with various types of tax deferred retirement plans, including individual
retirement accounts ("IRAs"), qualified plans, deferred compensation for public
schools and charitable organizations (403(b) plans) and simplified employee
pension IRAs. An individual or organization considering the establishment of a
retirement plan should consult with an attorney and/or an accountant with
respect to the terms and tax aspects of the plan. A $10.00 annual custodial fee
is also charged on IRAs. This custodial fee is due by December 15 of each year
and may be paid by check or shares liquidated from a shareholder's account.

Redemptions

Systematic Withdrawals. In addition to the methods of redemption described
in the Funds' Prospectus, a systematic withdrawal plan is available in which a
shareholder of the Funds may elect to receive a fixed amount ($50 minimum),
monthly, quarterly, semi-annually, or annually, for accounts with a value of
$2,500 or more. Checks are mailed on or about the 10th of each designated month.
All certified shares must be placed on deposit under the plan and dividends and
capital gain distributions, if any, are automatically reinvested at net asset
value for shareholders participating in the plan. If the checks received by a
shareholder through the systematic withdrawal plan exceed the dividends and
capital appreciation of the shareholder's account, the systematic withdrawal
plan will have the effect of reducing the value of the account. Any gains and/or
losses realized from redemptions through the systematic withdrawal plan are
considered a taxable event by the Internal Revenue Service and must be reported
on the shareholders' income tax return. Shareholders should consult with a tax
advisor for information on their specific financial situations. At the time of
initial investment, a shareholder may request that the check for the systematic
withdrawal be sent to an address other than the address of record. The address
to which the payment is mailed may be changed by submitting a written request,
signed by all registered owners, with their signatures guaranteed. Shareholders
may add this option after the account is already established, change the amount
on an existing account by calling the Funds at (800) 438-5789. The Funds may
terminate the plan on 30 days' written notice to the shareholder.

Redemption proceeds are normally paid in cash; however, each Fund may pay
the redemption price in whole or part by a distribution in kind of securities
from the portfolio of the particular Fund, in lieu of cash, in conformity with
applicable rules of the SEC. If shares are redeemed in kind, the redeeming
shareholder might incur transaction costs in converting the assets into cash.
The Funds are obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of its net assets during any 90-day period for any one
shareholder.

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<PAGE>

Other Information. The Funds reserve 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 Funds 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.

Exchanges. In addition to the method of exchanging shares described in the
Funds' Prospectus, a shareholder exchanging at least $1,000 of shares (for which
certificates have not been issued) and who has authorized expedited exchanges on
the application form filed with the Transfer Agent may exchange shares by
telephoning the Funds at (800) 438-5789. Telephone exchange instructions must be
received by the Transfer Agent by 4:00 p.m., New York City time. The Funds,
Distributor and Transfer Agent reserve the right at any time to suspend or
terminate the expedited exchange procedure or to impose a fee for this service.
During periods of unusual economic or market changes, shareholders may
experience difficulties or delays in effecting telephone exchanges. Neither the
Funds nor the Transfer Agent will be responsible for any loss, damages, expense
or cost arising out of any telephone exchanges effected upon instructions
believed by them to be genuine. The Transfer Agent has instituted procedures
that it believes are reasonably designed to insure that exchange instructions
communicated by telephone are genuine, and could be liable for losses caused by
unauthorized or fraudulent instructions in the absence of such procedures. The
procedures currently include a recorded verification of the shareholder's name,
social security number and account number, followed by the mailing of a
statement confirming the transaction, which is sent to the address of record.

NET ASSET VALUE

In determining the approximate market value of portfolio investments, the
Company may employ outside organizations, which may use matrix or formula
methods that take into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula methods not been used. All cash, receivables and current payables are
carried on the Company's books at their face value. Other assets, if any, are
valued at fair value as determined in good faith under the supervision of the
Board Members.

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<PAGE>

PERFORMANCE INFORMATION

Yield and Performance of the Funds

The Funds' 30-day (or one month) standard yield described in the Prospectus
is calculated for each Fund in accordance with the method prescribed by the SEC
for mutual funds:

YIELD = 2[( a - b +1)/6/ -1]
-------
cd

Where: a = dividends and interest earned by a Fund during the period;

b = expenses accrued for the period (net of reimbursements);

c = average daily number of shares outstanding during the period
entitled to receive dividends; and

d = maximum offering price per share on the last day of the period.

For the purpose of determining interest earned on debt obligations
purchased by a Fund at a discount or premium (variable "a" in the formula), each
Fund computes the yield to maturity of such instrument based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual accrued interest).
Such yield is then divided by 360 and the quotient is multiplied by the market
value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is in the portfolio. It is assumed in the above
calculation that each month contains 30 days. The maturity of a debt obligation
with a call provision is deemed to be the next call date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. For the
purpose of computing yield on equity securities held by a Fund, dividend income
is recognized by accruing 1/360 of the stated dividend rate of the security for
each day that the security is held by the Fund.

Interest earned on tax-exempt obligations that are issued without original
issue discount and have a current market discount is calculated by using the
coupon rate of interest instead of the yield to maturity. In the case of tax-
exempt obligations that are issued with original issue discount but which have
discounts based on current market value that exceed the then-remaining portion
of the original issue discount (market discount), the yield to maturity is the
imputed rate based on the original issue discount calculation. On the other
hand, in the case of tax-exempt obligations that are issued with original issue
discount but which have the discounts based on current market value that are
less than the then-remaining portion of the original issue discount (market
premium), the yield to maturity is based on the market value.

With respect to mortgage or other receivables-backed debt obligations
purchased at a discount or premium, the formula generally calls for amortization
of the discount or premium. The amortization schedule will be adjusted monthly
to reflect changes in the market value of such debt obligations. Expenses
accrued for the period (variable "b" in the formula) include all recurring

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<PAGE>

fees charged by a Fund to all shareholder accounts in proportion to the length
of the base period and the Fund's mean (or median) account size. Undeclared
earned income will be subtracted from the offering price per share (variable "d"
in the formula).

Total Return of the Funds

Each Fund that advertises its "average annual total return" computes such
return by determining the average annual compounded rate of return during
specified periods that equates the initial amount invested to the ending
redeemable value of such investment according to the following formula:

T = (ERV)/1/n / -1
---
P

Where: T = average annual total return;

ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year (or other) periods at the
end of the applicable period (or a fractional portion thereof);

P = hypothetical initial payment of $1,000; and

n = period covered by the computation, expressed in years.

Each Fund that advertises its "aggregate total return" computes such
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, a
Fund's yields or total returns may be quoted and compared to those of other
mutual funds with similar investment objectives and to stock or other relevant
indices. For example, a Fund's yield may be compared to the IBC/Donoghue's Money
Fund Average, which is an average compiled by Donoghue's

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<PAGE>

MONEY FUND REPORT of Holliston, MA 01746, a widely recognized independent
publication that monitors the performance of money market funds, or to the data
prepared by Lipper Analytical Services, Inc., a widely recognized independent
service that monitors the performance of mutual funds. Hypothetical examples
showing the difference between a taxable and a tax-free investment may also be
provided to shareholders.

TAXES

The following summarizes certain additional tax considerations generally
affecting the Funds and their shareholders that are not described in the Funds'
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Funds or their shareholders, and the discussion here and in the
applicable Prospectus is not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisors with specific reference to
their own tax situations.

General. Each Fund intends to elect and qualify to be taxed separately as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). As a regulated investment company, each 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, each Fund must
derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement") 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
Test").

In addition to the foregoing requirements, at the close of each quarter of
its taxable year, at least 50% of the value of each Fund's assets must consist
of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which a
Fund has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which a Fund does not hold more than 10% of
the outstanding voting securities of such issuer) and no more than 25% of the
value of each Fund's total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which such Fund controls and
which are engaged in the same or similar trades or businesses.

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<PAGE>

Distributions of net investment income received by a Fund from investments
in debt securities and any net realized short-term capital gains distributed by
a Fund will be taxable to shareholders as ordinary income and will not be
eligible for the dividends received deduction for corporations.

Each Fund intends to distribute to shareholders any excess of net long-term
capital gain over net short-term capital loss ("net capital gain") for each
taxable year. Such gain is distributed as a capital gain dividend and is taxable
to shareholders as long-term capital gain, regardless of the length of time the
shareholder has held the 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 a Fund for any
taxable year generally qualify for the dividends received deduction to the
extent of the gross amount of "qualifying dividends" received by such Fund for
the year and if certain holding period requirements are met. Generally, a
dividend will be treated as a "qualifying dividend" if it has been received from
a domestic corporation.

If for any taxable year any 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 such 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 Funds 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). Each 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 distributions, including gross proceeds
realized upon sale or other dispositions paid to any shareholder (i) who has
provided either an uncertified or 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 Trust that he is not subject
to backup withholding or that he is an "exempt recipient."

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<PAGE>

If an Underlying Fund derives dividends from domestic corporations, a
portion of the income distributions of a Fund which invests in that Underlying
Fund may be eligible for the 70% deduction for dividends received by
corporations. Shareholders will be informed of the portion of dividends which so
qualify. The dividends-received deduction is reduced to the extent the shares
held by the Underlying Fund with respect to which the dividends are received are
treated as debt-financed under federal income tax law and is eliminated if
either those shares or the shares of the Underlying Fund or the Fund are deemed
to have been held by the Underlying Fund, the Fund or the shareholders, as the
case may be, for less than 46 days.

Income received by an Underlying Fund from sources within a foreign country
may be subject to withholding and other taxes imposed by that country. If more
than 50% of the value of an Underlying Fund's total assets at the close of its
taxable year consists of stock or securities of foreign corporations, the
Underlying Fund will be eligible and may elect to "pass-through" to its
shareholders, including a Fund, the amount of foreign income and similar taxes
paid by the Underlying Fund. Pursuant to this election, the Fund would be
required to include in gross income (in addition to taxable dividends actually
received), its pro rata share of foreign income and similar taxes in computing
its taxable income or to use it as a foreign tax credit against its U.S. federal
income taxes, subject to limitations. A Fund, would not, however, be eligible to
elect to "pass-through" to its shareholders the ability to claim a deduction or
credit with respect to foreign income and similar taxes paid by the Underlying
Fund.

Disposition of Shares. Upon a redemption, sale 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 the shareholder's holding
period for the shares. Any loss realized on a redemption, sale or exchange will
be disallowed to the extent the shares disposed of are replaced (including
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 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.

In some cases, shareholders will not be permitted to take sales charges
into account for purposes of determining the amount of gain or loss realized on
the disposition of their stock. This prohibition generally applies where (1) the
shareholder incurs a sales charge in acquiring the stock of a Fund, (2) the
stock is disposed of before the 91st day after the date on which it was
acquired, and (3) the shareholder subsequently acquires the stock of the same or
another fund and the otherwise applicable sales charge is reduced under a
"reinvestment right" received upon the initial purchase of regulated investment
company shares. The term "reinvestment right" means any right to acquire stock
of one or more funds without the payment of a sales charge or with the

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<PAGE>

payment of a reduced sales charge. Sales charges affected by this rule are
treated as if they were incurred with respect to the stock acquired under the
reinvestment right. This provision may be applied to successive acquisitions of
Fund shares.

Although each Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all Federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, each Fund may be subject
to the tax laws of such states or localities.

Taxation of the Underlying Funds. Each Underlying Fund intends to elect and
qualify to be taxed as a regulated investment company under the Code. In any
year in which an Underlying Fund qualifies as a regulated investment company and
timely distributes all of its taxable income, the Underlying Fund generally will
not pay any federal income or excise tax.

Distributions of an Underlying Fund's investment company taxable income are
taxable as ordinary income to a Fund which invests in the Underlying Fund.
Distributions of the excess of an Underlying Fund's net long-term capital gain
over its net short-term capital loss, which are properly designated as "capital
gain dividends," are taxable as long-term capital gain to a Fund which invests
in the Underlying Fund, regardless of how long the Fund held the Underlying
Fund's shares, and are not eligible for the corporate dividends-received
deduction. Upon the sale or other disposition by a Fund of shares of an
Underlying Fund, the Fund generally will realize a capital gain or loss which
will be long-term or short-term, generally depending upon the holding period for
the shares.

Certain of the bonds purchased by a Fund may be treated as bonds that were
originally issued at a discount. Original issue discount represents interest for
federal income tax purposes and can generally be defined as the difference
between the price at which a security was issued and its stated redemption price
at maturity. Original issue discount is treated for federal income tax purposes
as income earned by a Fund even though the Fund doesn't actually receive any
cash, and therefore is subject to the distribution requirements of the Code. The
amount of income earned by the Fund generally is determined on the basis of a
constant yield to maturity which takes into account the semi-annual compounding
of accrued interest.

If a Fund invests in certain high yield original issue discount obligations
issued by corporations, a portion of the original issue discount accruing on the
obligation may be eligible for the deduction for dividends received by
corporations. In such event, dividends of investment company taxable income
received from the Fund by its corporate shareholders, to the extent attributable
to such portion of accrued original issue discount, may be eligible for this
deduction for dividends received by corporations if so designated by the Fund in
a written notice to shareholders.

In addition, some of the bonds may be purchased by a Fund at a discount
which exceeds the original issue discount on such bonds, if any. This additional
discount represents market discount for federal income tax purposes. The gain
realized on the disposition of any bond having market discount will be treated
as ordinary income to the extent it does not exceed the accrued

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<PAGE>

market discount on such bond (unless the Fund elects for all its debt securities
acquired after the first day of the first taxable year to which the election
applies having a fixed maturity date of more than one year from the date of
issue to include market discount in income in tax years to which it is
attributable). Generally, market discount accrues on a daily basis for each day
the bond is held by a Fund at a constant rate over the time remaining to the
bond's maturity.

Other Taxation

The foregoing discussion relates only to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and domestic
corporations, partnerships, trusts 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).

ADDITIONAL INFORMATION CONCERNING SHARES

The Company is a Maryland corporation. The Company's Articles of
Incorporation authorize the Board of Directors to classify or reclassify any
unissued shares of the Company into one or more classes by setting or changing,
in any one or more respects, their respective designations, preferences,
conversion or other rights, voting powers, restrictions, limitations,
qualifications and terms and conditions of redemption. Pursuant to the authority
of the Company's Articles of Incorporation, the Directors have authorized the
issuance of shares of common stock representing interests in the Equity
Selection Fund, Micro-Cap Equity Fund, Mid-Cap Fund, Multi-Season Fund, Real
Estate Fund, Small-Cap Value Fund, Value Fund, International Bond Fund, Money
Market Fund, NetNet Fund, Maintenance Fund, Development Fund and Accumulation
Fund, respectively. The Munder Lifestyle Funds are offered in three separate
classes: Class A, Class B and Class Y shares.

At a board meeting on February 4, 1997, the Directors adopted a plan
pursuant to Rule 18f-3 under the 1940 Act ("Multi-Class Plan") on behalf of each
Fund. The Multi-Class Plan provides that shares of each class of a Fund are
identical, except for one or more expense variables, certain related rights,
exchange privileges, class designation and sales loads assessed due to differing
distribution methods.

In the event of a liquidation or dissolution of each of the Company or an
individual portfolio of the Company, shareholders of a particular portfolio
would be entitled to receive the assets available for distribution belonging to
such portfolio, and a proportionate distribution, based upon the relative net
asset values of the Company's respective portfolios, of any general assets not
belonging to any particular portfolio which are available for distribution.
Shareholders of a portfolio are entitled to participate in the net distributable
assets of the particular portfolio involved on liquidation, based on the number
of shares of the portfolio that are held by each shareholder.

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<PAGE>

Holders of all outstanding shares of a particular Fund will vote together
in the aggregate and not by class on all matters, except that only Class A
shares of a Fund will be entitled to vote on matters submitted to a vote of
shareholders pertaining to the Fund's Class A Plan, and only Class B shares will
be entitled to vote on matters submitted to a vote of shareholders pertaining to
the Fund's Class B Plan. Further, shareholders of all of the funds of the
Company, as well as those of any other fund now or hereafter offered by the
Company, will vote together in the aggregate and not separately on a portfolio-
by-portfolio basis, except as required by law or when permitted by the Board of
Directors. Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Company shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each portfolio affected by the matter. A portfolio is affected by a matter
unless it is clear that the interests of each portfolio in the matter are
substantially identical or that the matter does not affect any interest of the
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to a Fund only if approved by a majority of the outstanding shares
of such portfolio. However, the Rule also provides that the ratification of the
appointment of independent auditors, the approval of principal underwriting
contracts and the election of directors may be effectively acted upon by
shareholders of the Company voting together in the aggregate without regard to a
particular portfolio.

Shares of the Company have noncumulative voting rights and, accordingly,
the holders of more than 50% of each of the Company's outstanding shares
(irrespective of class) may elect all of the directors. Shares have no
preemptive rights and only such conversion and exchange rights as the Board may
grant in its discretion. When issued for payment as described in the Prospectus,
shares will be fully paid and non-assessable by the Company.

Shareholder meetings to elect Directors will not be held unless and until
such time as required by law. At that time, the Directors then in office will
call a shareholders' meeting to elect Directors. Except as set forth above, the
Directors will continue to hold office and may appoint successor Directors.
Meetings of the shareholders of the Company shall be called by the Directors
upon the written request of shareholders owning at least 10% of the outstanding
shares entitled to vote.

MISCELLANEOUS

Counsel. The law firm of Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, DC 20005, has passed upon certain legal matters in connection with
the shares offered by the Funds and serves as counsel to the Company.

Independent Auditors. Ernst & Young LLP, 200 Clarendon Street, Boston, MA
02116, serves as the Company's independent auditors.

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

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<PAGE>

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 any
Fund or result in a financial loss to any shareholder of a Fund.

Shareholder Approvals. As used in this Statement of Additional Information
in the Prospectus, a "majority of the outstanding shares" of a Fund or
investment portfolio means the lesser of (a) 67% of the shares of the particular
Fund or portfolio represented at a meeting at which the holders of more than 50%
of the outstanding shares of such Fund or portfolio are present in person or by
proxy, or (b) more than 50% of the outstanding shares of such Fund or portfolio.

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REGISTRATION STATEMENT

This Statement of Additional Information and the Funds' Prospectuses do not
contain all the information included in the Funds' registration statement filed
with the SEC under the 1933 Act with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The registration statement, including the exhibits filed
therewith, may be examined at the offices of the SEC in Washington, D.C.

Statements contained herein and in the Funds' Prospectuses as to the
contents of any contract of other documents referred to are not necessarily
complete, and, in such instance, reference is made to the copy of such contract
or other documents filed as an exhibit to the Funds' registration statement,
each such statement being qualified in all respects by such reference.

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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.

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Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated "Aa" through "B". The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.

Excerpts from Standard & Poor's Corporation ("S&P") description of its bond
ratings:

"AAA": Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

"AA": Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from "AAA" issues by a small degree.

"A": Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

"BBB": Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.

"BB", "B" and "CCC": Bonds rated "BB" and "B" are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. "BB" represents a
lower degree of speculation than "B" and "CCC" the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

To provide more detailed indications of credit quality, the "AA" or "A"
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.

Commercial Paper
- ----------------

The rating "Prime-1" is the highest commercial paper rating assigned by
Moody's. These issues (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issues rated "Prime-2" (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics of "Prime-1" rated issues, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.

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Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted "A-1+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1."

APPENDIX A
- ----------

- - Rated Investments -

Commercial Paper
- ----------------

Rated commercial paper purchased by a Fund or an Underlying 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-1" is the highest commercial paper rating
category assigned by Moody's. These issues (or related supporting institutions)
are considered to have a superior capacity for repayment of short-term
promissory obligations.

S&P: Commercial paper ratings of S&P are current assessments of the
likelihood of timely payment of debts having original maturities of no more than
365 days. Commercial paper rated in the "A-1" category by S&P indicates that the
degree of safety regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety characteristics are
denoted "A-1+".

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APPENDIX B

As stated in the Prospectus, the Underlying Funds may enter into certain
futures transactions and options for hedging purposes. Such transactions are
described in this Appendix.

I. Interest Rate Futures Contracts
-------------------------------

Use of Interest Rate Futures Contracts. Bond prices are established in both
the cash market and the futures market. In the cash market, bonds are purchased
and sold with payment for the full purchase price of the bond being made in
cash, generally within five business days after the trade. In the futures
market, only a contract is made to purchase or sell a bond in the future for a
set price on a certain date. Historically, the prices for bonds established in
the futures markets have tended to move generally in the aggregate in concert
with the cash market prices and have maintained fairly predictable
relationships. Accordingly, the Funds may use interest rate futures contracts as
a defense, or hedge, against anticipated interest rate changes and not for
speculation. As described below, this would include the use of futures contract
sales to protect against expected increases in interest rates and futures
contract purchases to offset the impact of interest rate declines.

The Funds presently could accomplish a similar result to that which it hopes
to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Funds, through using futures contracts.

Description of Interest Rate Futures Contracts. An interest rate futures
contract sale would create an obligation by a Fund, as seller, to deliver the
specific type of financial instrument called for in the contract at a specific
future time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specific future time at a specific price. The specific
securities delivered or taken, respectively, at settlement date, would not be
determined until or at near that date. The determination would be in accordance
with the rules of the exchange on which the futures contract sale or purchase
was made.

Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without making or taking of delivery of securities.
Closing out a futures contract sale is effected by the Fund's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of the sale
exceeds the price of the offsetting purchase, the Fund is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the Fund entering into
a futures contract sale. If the offsetting sale price exceeds the purchase
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.

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Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. The Funds would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.

A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. The Funds may trade in any interest rate futures contracts for
which there exists a public market, including, without limitation, the foregoing
instruments.

Example of Futures Contract Sale. The Funds would engage in an interest rate
futures contract sale to maintain the income advantage from continued holding of
a long-term bond while endeavoring to avoid part or all of the loss in market
value that would otherwise accompany a decline in long-term securities prices.
Assume that the market value of a certain security held by a particular Fund
tends to move in concert with the futures market prices of long-term United
States Treasury bonds ("Treasury Bonds"). The adviser wishes to fix the current
market value of the portfolio security until some point in the future. Assume
the portfolio security has a market value of 100, and the adviser believes that,
because of an anticipated rise in interest rates, the value will decline to 95.
The fund might enter into futures contract sales of Treasury bonds for an
equivalent of 98. If the market value of the portfolio security does indeed
decline from 100 to 95, the equivalent futures market price for the Treasury
bonds might also decline from 98 to 93.

In that case, the five point loss in the market value of the portfolio
security would be offset by the five point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.

The adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.

If interest rate levels did not change, the Fund in the above example might
incur a loss of 2 points (which might be reduced by an offsetting transaction
prior to the settlement date). In each transaction, transaction expenses would
also be incurred.

Example of Futures Contract Purchase. The Funds would engage in an interest
rate futures contract purchase when they are not fully invested in long-term
bonds but wish to defer for a time the purchase of long-term bonds in light of
the availability of advantageous interim investments, e.g., shorter term
securities whose yields are greater than those available on long-term bonds. A
Fund's basic motivation would be to maintain for a time the income advantage
from investing in the short-term securities; the Fund would be endeavoring at
the same time to eliminate the effect

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<PAGE>

of all or part of an expected increase in market price of the long-term bonds
that the Fund may purchase.

For example, assume that the market price of a long-term bond that the Fund
may purchase, currently yielding 10%, tends to move in concert with futures
market prices of Treasury bonds. The adviser wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example) when it may purchase the bond. Assume the long-term bond
has a market price of 100, and the adviser believes that, because of an
anticipated fall in interest rates, the price will have risen to 105 (and the
yield will have dropped to about 91/2%) in four months. The Fund might enter
into futures contracts purchases of Treasury bonds for an equivalent price of
98. At the same time, the Fund would assign a pool of investments in short-term
securities that are either maturing in four months or earmarked for sale in four
months, for purchase of the long-term bond at an assumed market price of 100.
Assume these short-term securities are yielding 15%. If the market price of the
long-term bond does indeed rise from 100 to 105, the equivalent futures market
price for Treasury bonds might also rise from 98 to 103. In that case, the 5
point increase in the price that the Fund pays for the long-term bond would be
offset by the 5 point gain realized by closing out the futures contract
purchase.

The adviser could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or below,
it is possible that the Fund would continue with its purchase program for long-
term bonds. The market price of available long-term bonds would have decreased.
The benefit of this price decrease, and thus yield increase, will be reduced by
the loss realized on closing out the futures contract purchase.

If, however, short-term rates remained above available long-term rated, it
is possible that the Fund would discontinue its purchase program for long-term
bonds. The yield on short-term securities in the portfolio, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued incremental
income will be reduced by the loss realized on closing out the futures contract
purchase. In each transaction, expenses would also be incurred.

II. Index Futures Contracts
-----------------------

General. A bond index assigns relative values of the bonds included in the
index and 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.

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A stock index assigns relative values to the stocks included in the index
and the index fluctuates with changes in the market values of the stocks
included. Some stock index futures contracts are based on broad market indexed,
such as the Standard & Poor's 500 or the New York Stock Exchange Composite
Index. In contrast, certain exchanges offer futures contracts on narrower market
indexes, such as the Standard & Poor's 100 or indexes based on an industry or
market segment, such as oil and gas stocks.

Futures contracts are traded on organized exchanges regulated by the
Commodity Futures Trading Commission. Transactions on such exchanges are cleared
through a clearing corporation, which guarantees the performance of the parties
to each contract.

A Fund will sell index futures contracts in order to offset a decrease in
market value of its portfolio securities that might otherwise result from a
market decline. A Fund will purchase index futures contracts in anticipation of
purchases of securities. In a substantial majority of these transactions, a Fund
will purchase such securities upon termination of the long futures position, but
a long futures position may be terminated without a corresponding purchase of
securities.

In addition, a Fund may utilize index futures contracts in anticipation of
changes in the composition of its portfolio holdings. For example, in the event
that a Fund expects to narrow the range of industry groups represented in its
holdings it may, prior to making purchases of the actual securities, establish a
long futures position based on a more restricted index, such as an index
comprised of securities of a particular industry group. A Fund may also sell
futures contracts in connection with this strategy, in order to protect against
the possibility that the value of the securities to be sold as part of the
restructuring of the portfolio will decline prior to the time of sale.

Examples of Stock Index Futures Transactions. The following are examples of
transactions in stock index futures (net of commissions and premiums, if any).

ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price

Portfolio Futures
- -----------------

-Day Hedge is Placed-
Anticipate buying $62,500 in Equity Buying 1 Index Futures at 125
Securities Value of Futures = $62,500/Contract

-Day Hedge is Lifted-
Buy Equity Securities with Actual Cost Sell 1 Index Futures at 130
= $65,000 Value of Futures = $65,000/Contract
Increase in Purchase Price = $2,500 Gain on Futures = $2,500

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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 Equity Sell 16 Index Futures at 125
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

III. Margin Payments

Unlike purchase or sales of portfolio securities, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the broker or in a segregated account
with the Custodian an amount of cash or cash equivalents, known as initial
margin, based on the value of the contract. The nature of initial margin in
futures transactions is different from that of margin in security transactions
in that futures contract margin does not involve the borrowing of funds by the
customer to finance the transactions. Rather, the initial margin is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract assuming all
contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying instruments fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
marking-to-the-market. For example, when a particular Fund has purchased a
futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and
the Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where the Fund has purchased a
futures contract and the price of the futures contract has declined in response
to a decrease in the underlying instruments, the position would be less valuable
and the Fund would be required to make a variation margin payment to the broker.
At any time prior to expiration of the futures contract, the 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

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futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or gain.

IV. Risks of Transactions in Futures Contracts
------------------------------------------

There are several risks in connection with the use of futures by the
Underlying Funds as hedging devices. One risk arises because of the imperfect
correlation between movements in the price of the futures and movements in the
price of the instruments which are the subject of the hedge. The price of the
future may move more than or less than the price of the instruments being
hedged. If the price of the futures moves less than the price of the instruments
which are the subject of the hedge, the hedge will not be fully effective but,
if the price of the instruments being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had not hedged at
all. If the price of the instruments being hedged has moved in a favorable
direction, this advantage will be partially offset by the loss on the futures.
If the price of the futures moves more than the price of the hedged instruments,
the Fund involved will experience either a loss or gain on the futures which
will not be completely offset by movements in the price of the instruments which
are the subject of the hedge. To compensate for the imperfect correlation of
movements in the price of instruments being hedged and movements in the price of
futures contracts, the Fund may buy or sell futures contracts in a greater
dollar amount than the dollar amount of instruments being hedged if the
volatility over a particular time period of the prices of such instruments has
been greater than the volatility over such time period of the futures, or if
otherwise deemed to be appropriate by the Adviser. Conversely, the Funds may buy
or sell fewer futures contracts if the volatility over a particular time period
of the prices of the instruments being hedged is less than the volatility over
such time period of the futures contract being used, or if otherwise deemed to
be appropriate by the 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 a Fund is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest its cash at that time because
of concern as to possible further market decline or for other reasons, the Funds
will realize a loss on the futures contract that is not offset by a reduction in
the price of the instruments that were to be purchased.

In instances involving the purchase of futures contracts by the Funds, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Custodian and/or
in a margin account with a broker to collateralize the position and thereby
insure that the use of such futures is unleveraged.

In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and

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<PAGE>

futures markets. Second, with respect to financial futures contracts, the
liquidity of the futures market depends on participants entering into off-
setting transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures market
could be reduced thus producing distortions. Third, from the point of view of
speculators, the deposit requirements in the futures market are less onerous
than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of general
market trends or interest rate movements by the adviser may still not result in
a successful hedging transaction over a short time frame.

Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures investment position, and in the event of adverse price
movements, the Funds would continue to be required to make daily cash payments
of variation margin. However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.

Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.

Successful use of futures by the Funds is also subject to the adviser's
ability to predict correctly movements in the direction of the market. For
example, if a particular Fund has hedged against the possibility of a decline in
the market adversely affecting securities held by it and securities prices
increase instead, the Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. The Funds may have to
sell securities at a time when they may be disadvantageous to do so.

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V. Options on Futures Contracts
----------------------------

The Underlying Funds may purchase and write options on the futures
contracts described above. A futures option gives the holder, in return for the
premium paid, the right to buy (call) from or sell (put) to the writer of the
option a futures contract at a specified price at any time during the period of
the option. Upon exercise, the writer of, the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer, of
an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. A Fund will be required to deposit initial margin and variation
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. Net option
premiums received will be included as initial margin deposits.

Investments in futures options involve some of the same considerations that
are involved in connection with investments in future contracts (for example,
the existence of a liquid secondary market). In addition, the purchase or sale
of an option also entails the risk that changes in the value of the underlying
futures contract will not correspond to changes in the value of the option
purchased. Depending on the pricing of the option compared to either the futures
contract upon which it is based, or upon the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. In general, the market prices of options can be
expected to be more volatile than the market prices on underlying futures
contract. Compared to the purchase or sale of futures contracts, however, the
purchase of call or put options on futures contracts may frequently involve less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.

VI. Currency Transactions
---------------------

The Fund may engage in currency transactions in order to hedge the value of
portfolio holdings denominated in particular currencies against fluctuations in
relative value. Currency transactions include forward currency contracts,
currency futures, options on currencies, and currency swaps. A forward currency
contract involves a privately negotiated obligation to purchase or sell (with
delivery generally required) a specific currency at a future date, which may be
any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. A currency swap is an
agreement to exchange cash flows based on the notional difference among two or
more currencies and operates similarly to an interest rate swap as described in
the Statement of Additional Information. The Fund may enter into currency
transactions with counterparties which have received (or the guarantors of the
obligations which have received) a credit rating of A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from a NRSRO or are
determined to be of equivalent credit quality by the Advisor.

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The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.

The Fund will not enter into a transaction to hedge currency exposure to an
extent greater after netting all transactions intended wholly or partially to
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging as described below.

The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.

To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Advisor considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
the Fund holds securities denominated in shillings and the Advisor believes that
the value of the schillings will decline against the U.S. dollar, the Advisor
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that the Fund is engaging in proxy hedging. If a Fund
enters into a currency hedging transaction, the Fund will comply with the asset
segregation requirements. Under such requirements, the Fund will segregate
liquid, high grade assets with the custodian to the extent the Fund's
obligations are not otherwise "covered" through ownership of the underlying
currency.

Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as

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incurring transaction costs. Buyers and sellers of currency futures are subject
to the same risks that apply to the use of futures generally. Further,
settlement of a currency futures contract for the purchase of most currencies
must occur at a bank based in the issuing nation. Trading options on currency
futures is relatively new, and the ability to establish and close to positions
on such options is subject to the maintenance of a liquid market which may not
always be available. Currency exchange rates may fluctuate based on factors
extrinsic to that country's economy.

VII. Other Matters
-------------

Accounting for futures contracts will be in accordance with generally
accepted accounting principles.

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