<PAGE>
As filed with the Securities and Exchange Commission
on August 25, 1999
Registration Nos. 33-54748
811-7346
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ---- [ ]
Post-Effective Amendment No. 39 [X]
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 39 [X]
(Check appropriate box or boxes)
The Munder Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
480 Pierce Street, Birmingham, Michigan 48009
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number: (248) 647-9200
Cynthia Surprise
Vice President and Associate Counsel
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, MA 02111
(Name and Address of Agent for Service)
Copies to:
Terry H. Gardner Jane Kanter, Esq.
Munder Capital Management Dechert Price & Rhoads
480 Pierce Street 1775 Eye Street, NW
Birmingham, Michigan 48009 Washington, DC 20006
[X] It is proposed that this filing will become effective 60 days after filing
pursuant to paragraph (a)(1) of Rule 485
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for the Munder Funds
(Equity Funds Class A, B and C Shares)
Part A
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<TABLE>
<CAPTION>
Item Heading
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<S> <C> <C>
1. Cover Page Front and Back Cover Pages
2. Synopsis Risk/Return Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Funds Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Distribution
Arrangements; Pricing of Fund Shares;
Distributions; Federal Tax Considerations
7. Purchase of Securities Being Offered Your Investment; Distribution Arrangements;
Pricing of Fund Shares
8. Redemption or Repurchase Your Investment; Distribution Arrangements
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder Funds
(Class K Shares)
Part A
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<TABLE>
<CAPTION>
Item Heading
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<S> <C> <C>
1. Cover Page Front and Back Cover Pages
2. Synopsis Risk/Return Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Funds Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Pricing of
Fund Shares; Distributions; Federal Tax
Considerations
7. Purchase of Securities Being Offered Your Investment; Pricing of Fund Shares
8. Redemption or Repurchase Your Investment
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder Funds
(Class Y Shares)
Part A
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<TABLE>
<CAPTION>
Item Heading
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<S> <C> <C>
1. Cover Page Front and Back Cover Pages
2. Synopsis Risk/Return Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Funds Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Pricing of
Fund Shares; Distributions; Federal Tax
Considerations
7. Purchase of Securities Being Offered Your Investment; Pricing of Fund Shares
8. Redemption or Repurchase Your Investment
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder Funds
(Income Funds Class A, B and C Shares)
Part A
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<TABLE>
<CAPTION>
Item Heading
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<S> <C> <C>
1. Cover Page Front and Back Cover Pages
2. Synopsis Risk/Return Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Funds Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Distribution
Arrangements; Pricing of Fund Shares;
Distributions; Federal Tax Considerations
7. Purchase of Securities Being Offered Your Investment; Distribution Arrangements;
Pricing of Fund Shares
8. Redemption or Repurchase Your Investment; Distribution Arrangements
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder Funds
(Money Market Funds Class A, B and C Shares)
Part A
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<TABLE>
<CAPTION>
Item Heading
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<S> <C> <C>
1. Cover Page Front and Back Cover Pages
2. Synopsis Risk/Return Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Funds Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Distribution
Arrangements; Pricing of Fund Shares;
Distributions; Federal Tax Considerations
7. Purchase of Securities Being Offered Your Investment; Distribution Arrangements;
Pricing of Fund Shares
8. Redemption or Repurchase Your Investment; Distribution Arrangements
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder Funds
(Lifestyle Funds Class A and B Shares)
Part A
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<TABLE>
<CAPTION>
Item Heading
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<S> <C> <C>
1. Cover Page Front and Back Cover Pages
2. Synopsis Risk/Return Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Funds Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Distribution
Arrangements; Pricing of Fund Shares;
Distributions; Federal Tax Considerations
7. Purchase of Securities Being Offered Your Investment; Distribution Arrangements;
Pricing of Fund Shares
8. Redemption or Repurchase Your Investment; Distribution Arrangements
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder Funds
(Lifestyle Funds Class Y Shares)
Part A
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<TABLE>
<CAPTION>
Item Heading
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<S> <C> <C>
1. Cover Page Front and Back Cover Pages
2. Synopsis Risk/Return Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Funds Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Pricing of
Fund Shares; Distributions; Federal Tax
Considerations
7. Purchase of Securities Being Offered Your Investment; Pricing of Fund Shares
8. Redemption or Repurchase Your Investment
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder Funds
(Munder Short Term Treasury Fund - Michigan Municipal Shares)
Part A
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<TABLE>
<CAPTION>
Item Heading
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<S> <C> <C>
1. Cover Page Front and Back Cover Pages
2. Synopsis Risk/Return Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Fund Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Pricing of
Fund Shares; Distributions; Federal Tax
Considerations
7. Purchase of Securities Being Offered Your Investment; Pricing of Fund Shares
8. Redemption or Repurchase Your Investment
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder Funds
(Munder NetNet Fund Class A, B and C Shares)
Part A
- ------
<TABLE>
<CAPTION>
Item Heading
---- -------
<S> <C> <C>
1. Cover Page Front and Back Cover Pages
2. Synopsis Risk/Return Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Fund Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Distribution
Arrangements; Pricing of Fund Shares;
Distributions; Federal Tax Considerations
7. Purchase of Securities Being Offered Your Investment; Distribution Arrangements;
Pricing of Fund Shares
8. Redemption or Repurchase Your Investment; Distribution Arrangements
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Statement of Additional Information
(Munder Funds)
Part B
- ------
<TABLE>
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History See Prospectus --"Management;" History and
General Information; Management of the Fund
13. Investment Objectives and Policies Fund Investments; Investment Limitations;
Portfolio Transactions
14. Management of the Funds Management of the Fund; Other Information
15. Control Persons and Principal Other Information; Control Persons and
Holders of Securities Principal Holders of Securities
16. Investment Advisory Services and Investment Advisory and Other Service
Other Services Arrangements; See Prospectus --"Management"
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Additional Information Concerning Shares
19. Purchase, Redemption and Pricing of Additional Purchase and Redemption
Securities Being Offered Information; Net Asset Value; Additional
Information Concerning Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and Other Service
Arrangements
22. Calculation of Performance Data Performance Information
23. Financial Statements Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Statement of Additional Information
(Munder Lifestyle Funds)
Part B
- ------
<TABLE>
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History See Prospectus --"Management;" History and
General Information; Management of the Fund
13. Investment Objectives and Policies Fund Investments; Investment Limitations;
Portfolio Transactions
14. Management of the Funds Management of the Fund; Other Information
15. Control Persons and Principal Other Information; Control Persons and
Holders of Securities Principal Holders of Securities
16. Investment Advisory Services and Investment Advisory and Other Service
Other Services Arrangements; See Prospectus --"Management"
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Additional Information Concerning Shares
19. Purchase, Redemption and Pricing of Additional Purchase and Redemption
Securities Being Offered Information; Net Asset Value; Additional
Information Concerning Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and Other Service
Arrangements
22. Calculation of Performance Data Performance Information
23. Financial Statements Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
The purposes of this Post-Effective Amendments filing are to (i) to rewrite
and streamline the Prospectuses for the Munder All-Season Aggressive Fund,
Munder All-Season Conservative Fund, Munder All-Season Moderate Fund, Munder
Equity Selection Fund, Munder Growth Opportunities Fund, Munder International
Bond Fund, Munder Micro-Cap Equity Fund, Munder Money Market Fund, Munder
Multi-Season Growth Fund, Munder NetNet Fund, Munder Real Estate Equity
Investment Fund, Munder Short Term Treasury Fund, Munder Small-Cap Value Fund
and Munder Value Fund; (ii) to conform the Prospectuses for all the Funds to the
requirements of amended From N-1A; (iii) to separate the Prospectus for Class A,
B and C Shares for the Munder NetNet Fund and (iv) to incorporate supplements to
the Prospectuses and Statements of Additional Information.
The Prospectuses and the Statement of Additional Information for the Munder
Future Technology Fund are not included in this Post-Effective Amendment.
<PAGE>
Class A, B & C Shares
[Munder Logo]
Prospectus
October 26, 1999
The Munder Equity Funds
Balanced
Equity Selection
Growth & Income
Growth Opportunities
International Equity
Micro-Cap Equity
Multi-Season Growth
Real Estate Equity Investment
Small-Cap Value
Small Company Growth
Value
The Munder Framlington Funds
Framlington Emerging Markets
Framlington Global Financial Services
Framlington Healthcare
Framlington International Growth
As with all mutual funds, the
Securities and Exchange Commission
has not approved or disapproved these
securities nor passed upon the accuracy
or adequacy of this prospectus. It is a
criminal offense to state otherwise
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
<S> <C>
2 Risk/Return Summary
9 Summary Of Principal Risks
14 Who May Want To Invest
24 Fees And Expenses
28 More About The Funds
28 Glossary
28 Special Risks And Other Considerations
31 Additional Description Of Investments And Investment Strategies
36 Your Investment
36 How To Reach The Funds
37 Purchasing Shares
37 Exchanging Shares
37 Redeeming Shares
38 Additional Policies For Purchases, Exchanges And Redemptions
39 Shareholder Privileges
40 Distribution Arrangements
40 Share Class Selection
40 Applicable Sales Charge
42 CDSC
43 12B-1 Fees
43 Other Information
44 Pricing Of Fund Shares
45 Distributions
46 Federal Tax Considerations
46 Taxes On Distributions
46 Taxes On Sales Or Exchanges
47 Other Considerations
48 Management
48 Investment Advisors And Sub-advisor
49 Portfolio Managers
51 Financial Highlights
Back Cover For Additional Information
</TABLE>
<PAGE>
Risk/Return Summary
- --------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goals and principal investment
strategies of the Funds and the principal risks of investing in the Funds. For
further information on these and the Funds' other investment strategies and
risks, please read the section entitled More About The Funds.
The Risk/Return Summary includes a table for each Fund showing its average
annual returns and a bar chart showing its annual returns. The table and bar
chart provide an indication of the historical risk of an investment in each Fund
by showing:
. how the Fund's average annual returns for 1, 5, and 10 years (or over the
life of the Fund if the Fund is less than 10 years old) compare to those of
a broad based securities market index; and;
. changes in the Fund's performance from year to year over 10 years (or over
the life of the Fund if the Fund is less than 10 years old).
When you consider this information, please remember that a Fund's performance in
past years is not necessarily an indication of how the Fund will perform in the
future.
An investment in the Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
Certain terms used in this prospectus are defined in the Glossary.
2
<PAGE>
- ---------------------------------------------------------
Equity Funds
- ---------------------------------------------------------
Balanced Fund
Goal
The Fund's goal is to provide an attractive investment return through a
combination of growth of capital and current income.
Principal Investment Strategies
The Fund pursues its goal by allocating its assets among three asset groups:
equity securities, fixed income securities and cash equivalents.
The Fund normally will invest at least 25% of its assets in fixed income
securities and no more than 75% of its assets in equity securities. The Fund
will notify shareholders at least 30 days before changing this policy.
The advisor will allocate the Fund's assets to the three asset groups based on
its view of the following factors, among others:
. general market and economic conditions and trends;
. interest rates and inflation rates;
. fiscal and monetary developments; and o long-term corporate earnings
growth.
The advisor will try to take advantage of changing economic conditions by
adjusting the ratio of equity securities to fixed income securities or cash
equivalents. For example, if the advisor believes that rapid economic growth
will lead to better corporate earnings in the future, then it might increase the
Fund's equity securities holdings and reduce its fixed income securities and
cash equivalents holdings.
The Fund's fixed income securities include:
. U.S. Government securities;
. obligations of foreign governments;
. corporate obligations;
. zero coupon bonds;
. variable and floating rate securities;
. mortgage and other asset-backed securities; and
. stripped securities.
The Fund's cash equivalents are short-term, high-quality money market
instruments and include:
. commercial paper;
. bankers' acceptances and certificates of deposit;
. corporate obligations; and
. U.S. Government securities.
The Fund may also invest in foreign securities and enter into futures and
options on futures contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk. To the extent that the
Fund enters into futures and options on futures contracts, it may be subject to
derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year 5 Years Inception
- ------------------------- ---------- --------- -----------
Class A (4/30/93)
Class B (6/21/94)
Class C (1/24/96)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
________________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
3
<PAGE>
Equity Selection Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities.
The Fund invests in equity securities which the advisor believes are undervalued
compared to stocks of other companies in the same industry.
The Fund generally invests in companies with market capitalizations of at least
$1 billion.
The Fund diversifies its assets by industry in approximately the same weightings
as those of the S&P 500.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and medium-
size company stock risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk.
Further information about the Fund's principal investment, strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
As of the date of this prospectus, the Fund had not commenced operations and,
therefore, does not have annual returns for a full calendar year. For this
reason, a bar chart and performance table showing performance information and
information on the Fund's best and worst calendar quarters is not provided in
this prospectus.
4
<PAGE>
Growth & Income Fund
Goal
The Fund's goal is to provide capital appreciation and current income.
Principal Investment Strategies
The Fund pursues its goal by investing primarily in dividend-paying equity
securities.
Under normal circumstances, the Fund will invest at least 65% of its assets in
income-producing common stocks and convertible preferred stocks.
The Fund may also purchase fixed income securities which are convertible into or
exchangeable for common stock.
The advisor generally selects large, well-known companies that it believes have
favorable prospects for dividend growth and capital appreciation. The Fund will
seek to produce a current yield greater than the S&P 500.
The Fund focuses on dividend-paying equity securities because, over time,
dividend income has accounted for a significant portion of the total return of
the S&P 500. In addition, dividends are usually a more stable and predictable
source of return than capital appreciation. The advisor believes that stocks
which distribute a high level of current income generally have more stable
prices than those which pay below average dividends.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1995: _____%
1996: _____%
1997: _____%
1998: _____%
______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ------------------------ ---------- ------------
Class A (8/8/94)
Class B (8/9/94)
Class C (12/5/95)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
5
<PAGE>
Growth Opportunities Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in the equity
securities of companies with market capitalizations between $500 million and $10
billion.
Its style, which focuses on both growth prospects and valuation, is known as
GARP (Growth at a Reasonable Price) and seeks to produce attractive returns
during various market environments.
The advisor chooses the Fund's investments by reviewing the earnings growth of
approximately 10,000 companies over the past three years and investing in
approximately 50 to 100 companies based on:
. superior earnings growth;
. financial stability;
. relative market value; and
. price changes compared to the S&Ps MidCap 400 Index.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and
medium-size company stock risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
As of the date of this prospectus, the Fund has not completed a full calendar
year of operations. For this reason, a bar chart and performance table showing
performance information and information on the Fund's best and worst calendar
quarters is not provided in this prospectus.
6
<PAGE>
International Equity Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing primarily in foreign securities including
American Depositary Receipts.
Under normal market conditions, at least 65% of the Fund's assets are invested
in equity securities in at least three foreign countries. The Fund mostly
invests in mature markets, but may also invest in emerging markets.
The Fund emphasizes companies with a market capitalization of at least $250
million.
At least once a quarter, the advisor creates a list of foreign securities and
American Depositary Receipts which the Fund may purchase based on the country
where the company is located, its competitive advantages, its past financial
record, its future prospects for growth and the market for its securities. The
advisor updates the securities list frequently (at least quarterly), adds new
securities to the list if they are eligible and sells securities not on the
updated securities list as soon as practicable.
After the advisor creates the securities list, it divides the list into two
sections. The first section is designed to provide broad coverage of
international markets. The second section increases exposure to securities that
the advisor expects will perform better than other stocks in their industry
sectors and their markets as a whole. When the advisor believes broader market
exposure will benefit the Fund, it will allocate up to 100% of the Fund's assets
in first section securities. When the advisor identifies strong potential for
specific securities to perform well, the Fund may invest up to 50% of its assets
in second section securities.
The Fund may also enter into futures and options on futures contracts, forward
currency exchange contracts and purchase and sell options.
Principal Risks
Among the principal risks of investing in the Fund are market risk, foreign
securities risk and currency risk. To the extent that the Fund enters into
futures and options on futures contracts, and forward currency exchange
contracts, and purchases and sells options, it may be subject to derivatives
risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year 5 Years Inception
- ------------------------ ------- --------- ----------
Class A (11/30/92)
Class B (3/9/94)
Class C (9/29/95)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
7
<PAGE>
Micro-Cap Equity Fund
Goal
The Fund's goal is to provide capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of small capitalization companies. Small capitalization companies
means companies having a market capitalization within the range of the companies
included in the Wilshire Micro-Cap Index. As of the date of this prospectus,
such capitalizations do not exceed approximately $300 million, which is
considerably less than the market capitalization of S&P 500 companies.
The Fund attempts to provide investors with potentially higher returns than a
fund that invests primarily in 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 higher
returns due to inefficiencies in the marketplace.
The advisor will choose companies that:
. present the ability to grow significantly over the next several years;
. may benefit from changes in technology, regulations and industry sector
trends; and
. are still in the developmental stage and may have limited product lines.
There is no limit on the length of operating history for the companies in which
the Fund may invest. The Fund may also invest in equity securities of larger
capitalization companies. The Fund may invest without limit in initial public
offerings of small capitalization companies.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and small
company stock risk. To the extent that the Fund purchases foreign securities, it
may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ------------------------ -------- -----------
Class A (12/26/96)
Class B (2/24/97)
Class C (3/31/97)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
8
<PAGE>
Multi-season Growth Fund
Goal
The Fund's goal is to provide long-term capital appreciation. This goal is
"fundamental" and cannot be changed without shareholder approval.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities. The Fund generally invests in equity securities of companies with
market capitalizations over $1 billion. Its style, which focuses on both growth
prospects and valuation, is known as GARP (Growth at a Reasonable Price) and
seeks to produce attractive returns during various market environments.
The advisor chooses the Fund's investments by reviewing the earnings growth of
approximately 5,500 companies over the past five years and investing in
approximately 50 to 100 companies based on:
. superior earnings growth;
. financial stability;
. relative market value; and
. price changes compared to the S&P 500.
The Fund may also purchase foreign securities.
Principal Risks
Among the principal risks of investing in the Fund is market risk. To the extent
that the Fund purchases foreign securities, it may be subject to foreign
securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class B)
The annual returns in the bar chart are for the Fund's Class B Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year 5 Years Inception
- ----------------------------- -------- --------- ---------
Class A (8/4/93)
Class B (4/29/93)
Class C (9/20/93)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
_________________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
9
<PAGE>
Real Estate Equity Investment Fund
Goal
The Fund's goal is to provide both capital appreciation and current income. This
goal is "fundamental" and cannot be changed without shareholder approval.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its total assets in equity securities of U.S. companies which are
principally engaged in the real estate industry or which own significant real
estate.
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. The Fund will not own real estate directly.
The companies in which the Fund primarily invests include:
. equity real estate investment trusts ("REITS");
. brokers, home builders and real estate developers;
. companies with substantial real estate holdings (for example, paper and
lumber producers, hotels and entertainment companies);
. manufacturers and distributors of building supplies;
. Mortgage REITS; and
. financial institutions which issue or service mortgages.
In addition, the Fund may invest:
. up to 35% of its assets in companies other than real estate industry
companies;
. in fixed income securities including up to 5% of its assets in debt
securities rated below investment grade or unrated if secured by real
estate assets and if the advisor believes that the underlying collateral is
sufficient; and
. in REITS only if they are traded on a securities exchange or NASDAQ.
Principal Risks
Among the principal risks of investing in the Fund are market risk and sector
risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ---------------------- -------- -----------
Class A (9/30/94)
Class B (10/3/94)
Class C (1/5/96)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
_______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
10
<PAGE>
Small-Cap Value Fund
Goal
The Fund's goal is to provide long-term capital appreciation, with income as a
secondary objective.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its assets in equity securities of small capitalization companies. Small
capitalization companies means companies with market capitalizations within the
range of the companies in the Russell 2000 Index. As of the date of this
prospectus, such capitalizations do not exceed approximately $1.5 billion, which
is less than the market capitalization of S&P 500 companies.
The Fund attempts to provide investors with potentially higher returns than a
fund that invests primarily in larger, more established companies. Since small
companies are generally not as well known to investors and have less of an
investor following than larger companies, they may provide higher returns due to
inefficiencies in the marketplace.
The advisor will concentrate on companies that it believes are undervalued. A
company's equity securities may be undervalued because the company is
temporarily overlooked or out of favor due to general economic conditions, a
market decline, industry conditions or developments affecting the particular
company. The Fund will usually invest in equity securities of companies with
price/earnings ratios, price/cash flow ratios and price/book values that are low
relative to the general market.
In addition to valuation, the advisor considers these factors, among others, in
choosing companies:
. a stable or improving earnings record;
. sound finances;
. above-average growth prospects;
. participation in a fast growing industry;
. strategic niche position in a specialized market; and
. adequate capitalization.
The Fund may invest in equity securities of larger capitalization companies.
The Fund may also invest in foreign securities and enter into futures and
options on futures contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk and small
company stock risk. To the extent that the Fund purchases foreign securities, it
may be subject to foreign securities risk. To the extent that the Fund enters
into futures and options on futures contracts, it may be subject to derivatives
risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1998: _____%
___________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ----------------------- -------- -----------
Class A (1/10/97)
Class B (2/11/97)
Class C (1/13/97)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
________________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
11
<PAGE>
Small Company Growth Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its assets in equity securities of small capitalization companies with
market capitalizations below $1 billion, which is less than the market
capitalization of S&P 500 companies.
The Fund attempts to provide investors with potentially higher returns than a
fund that invests primarily in 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 higher
returns due to inefficiencies in the marketplace.
The advisor considers these factors, among others, in choosing companies:
. above-average growth prospects;
. participation in a fast-growing industry;
. strategic niche position in a specialized market; and
. adequate capitalization.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and small
company stock risk. To the extent that the Fund purchases foreign securities, it
may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
____________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year 5 Years Inception
- ---------------------------- -------- --------- ---------
Class A (11/23/92)
Class B (4/28/94)
Class C (9/26/95)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
________________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
12
<PAGE>
Value Fund
Goal
The Fund's primary goal is to provide long-term capital appreciation. Its
secondary goal is to provide income.
Principal Investment Strategies
The Fund pursues its goals by investing primarily in the equity securities of
well-established companies with intermediate to large capitalizations, which
typically exceed $750 million.
The Fund will invest at least 65% of its assets in equity securities.
The advisor will focus on companies that it believes are undervalued. A
company's equity securities may be undervalued because the company is
temporarily overlooked or out of favor due to general economic conditions, a
market decline, industry conditions or developments affecting the particular
company. The Fund will usually invest in equity securities of companies with
price/earnings ratios, price/cash flow ratios and price/book values that are low
relative to the general market.
In addition to valuation, the advisor considers these factors, among others, in
choosing companies:
. a stable or improving earnings record;
. sound finances;
. above-average growth prospects;
. participation in a fast growing industry;
. strategic niche position in a specialized market; and
. adequate capitalization.
The Fund may also invest in foreign securities and enter into futures and
options on futures contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk and medium-
size company stock risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk. To the extent that the
Fund enters into futures and options on futures contracts, it may be subject to
derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1996: _____%
1997: _____%
1998: _____%
_______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ------------------------- -------- ---------
Class A (9/14/95)
Class B (9/19/95)
Class C (2/9/96)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
13
<PAGE>
Framlington Emerging Markets Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of companies in emerging market countries, as defined by the World
Bank, the International Finance Corporation, the United Nations or the European
Bank for Reconstruction and Development.
A company will be considered to be in an emerging market country if:
. the company is organized under the laws of, or has a principal office in,
an emerging market country;
. the company's stock is traded primarily in an emerging market country;
. most of the company's assets are in an emerging market country; or
. most of the company's revenues or profits come from goods produced or sold,
investments made or services performed in an emerging market country.
The Fund may also invest in foreign securities of companies located in countries
with mature markets.
Principal Risks
Among the principal risks of investing in the Fund are market risk, foreign
securities risk, emerging markets risk, currency risk and medium-size company
stock risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- -------------------------- -------- ---------
Class A (1/14/97)
Class B (2/25/97)
Class C (3/3/97)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
________________________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
14
<PAGE>
Framlington Global Financial Services Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of U.S. and foreign companies which are principally engaged in the
financial services industry and companies providing services primarily within
the financial services industry. The Fund focuses specifically on companies
which are likely to benefit from growth or consolidation in the financial
services industry.
Examples of companies in the financial services industry are:
. commercial, industrial and investment banks;
. savings and loan associations;
. brokerage companies;
. consumer and industrial finance companies;
. real estate and leasing companies;
. insurance companies; and
. holding companies for each of the above.
A company is "principally engaged" in the financial services industry if at
least 50% of its gross income, net sales or net profits comes from activities in
the financial services industry or if the company dedicates more than 50% of its
assets to the production of revenues from the financial services industry.
The sub-advisor allocates assets among countries based on:
. its analysis of the trends in the financial services industry in particular
regions;
. the relative valuation of financial services companies in different
regions; and
. its assessment of the prospects for a particular equity market and its
currency.
Under normal market conditions, the Fund invests at least 65% of its assets in
at least three different countries, including the United States. The Fund may
invest in companies located in countries with mature markets and in those with
emerging markets.
The Fund may also enter into forward currency exchange contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk, sector risk,
foreign securities risk, currency risk and medium-size company stock risk. To
the extent that the Fund enters into forward currency exchange contracts, it may
be subject to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
As of the date of this prospectus, the Fund has not completed a full calendar
year of operations. For this reason, a bar chart and performance table showing
performance information and information on the Fund's best and worst calendar
quarters is not provided in this prospectus.
15
<PAGE>
Framlington Healthcare Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing in equity securities of companies
providing healthcare and medical services and products worldwide. Currently,
most of these companies are located in the United States.
The Fund will invest in:
. pharmaceutical producers;
. biotechnology firms;
. medical device and instrument manufacturers;
. distributors of healthcare products;
. healthcare providers and managers; and
. other healthcare service companies.
Under normal market conditions, the Fund will invest at least 65% of its assets
in healthcare companies, which are companies for which at least 50% of sales,
earnings or assets arise from or are dedicated to health services or medical
technology activities.
The Fund's investments may include foreign securities of companies located in
countries with mature markets.
Principal Risks
Among the principal risks of investing in the Fund are market risk, sector risk,
foreign securities risk, currency risk and medium-size company stock risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class C)
The annual returns in the bar chart are for the Fund's Class C Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ------------------------- -------- ---------
Class A (2/14/97)
Class B (1/31/97)
Class C (1/13/97)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
________________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
16
<PAGE>
Framlington International Growth Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of issuers located in at least three foreign countries.
The sub-advisor will choose companies that demonstrate:
. above-average profitability;
. high quality management; and
. the ability to grow significantly in their countries.
The Fund may invest in companies located in countries with mature markets and in
those with emerging markets. The Fund may also enter into forward currency
exchange contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk, foreign
securities risk, currency risk, emerging markets risk and medium-size company
stock risk. To the extent that the Fund enters into forward currency exchange
contracts, it may be subject to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class C)
The annual returns in the bar chart are for the Fund's Class C Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ---------------------- -------- ---------
Class A (2/20/97)
Class B (3/19/97)
Class C (2/13/97)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
________________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
17
<PAGE>
Summary of Principal Risks of the Funds
The share price of the Funds will change daily based on market conditions and
other factors. Therefore, you may lose money if you invest in the Funds.
The following summary briefly describes the principal risks that may affect a
Fund's portfolio as a whole. More information about the Funds' principal
investment strategies and their associated risks is contained in the section
entitled "More About the Funds."
SECTOR RISK is the risk of loss due to concentrating investments in a particular
industry sector. Adverse economic, business or political developments affecting
that industry sector could have a major effect on the value of the Fund's
investments. Real Estate Equity Investment Fund, Global Financial Services Fund
and Healthcare Fund are particularly subject to this Risk.
CREDIT (OR DEFAULT) RISK is the risk of loss because an issuer of a security may
default on its payment obligations. Also, an issuer may suffer adverse changes
in its financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security and in shares of the
Fund. A change in the quality rating of a bond can affect the bond's liquidity
and make it more difficult for the Fund to sell. Funds particularly subject to
this risk are: Balanced Fund, Growth & Income Fund, Bond Fund, Intermediate Bond
Fund, International Bond Fund, U.S. Government Income Fund, Michigan Tax-Free
Bond Fund, Tax-Free Bond Fund, Tax-Free Short-Intermediate Bond Fund, Cash
Investment Fund and Tax-Free Money Market Fund.
DERIVATIVES RISK is the risk that loss may result from a Fund's use of futures
and options on futures contracts, options, forward currency exchange contracts
and other forms of derivative instruments. The primary risk with many
derivatives is that they can amplify a gain or loss, potentially earning or
losing substantially more money than the actual cost of the derivative
instrument. Funds particularly subject to this risk are: Balanced Fund,
International Equity Fund, Value Fund, Small-Cap Value Fund, Global Financial
Services Fund and International Growth Fund.
FOREIGN SECURITIES RISK is the risk of loss because investments by a Fund in
foreign securities may experience greater and more rapid change in value than
investments in U.S. securities. Foreign securities are generally more volatile
and less liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available about
foreign companies. Issuers of foreign securities are generally not subject to
the same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards. Funds particularly subject to this risk are: Balanced Fund,
Equity Selection Fund, Growth & Income Fund, Growth Opportunities Fund,
International Equity Fund, Micro-Cap Equity Fund, Small-Cap Value Fund, Small
Company Growth Fund, Multi-Season Growth Fund, Value Fund, Emerging Markets
Fund, Global Financial Services Fund, Healthcare Fund and International Growth
Fund.
Currency Risk. Funds that invest in foreign securities denominated in
foreign currencies may also be subject to currency risk. This is the
risk of loss because a decline in the value of foreign currencies
relative to the U.S. dollar will reduce the value of a Fund's portfolio
securities denominated in those currencies. Funds particularly subject
to this risk are: International Equity Fund, Emerging Markets Fund,
Global Financial Services Fund, Healthcare Fund and International
Growth Fund.
Emerging Markets Risk. Funds that invest in foreign securities of
issuers in emerging market countries are subject to emerging markets
risk. Investing in emerging market countries heightens the risks
presented by investing in foreign securities and currencies and may
result in loss to the Fund. Numerous emerging countries have recently
experienced serious, and potentially continuing, economic and political
problems. Stock markets in many emerging countries are relatively small
and risky. Foreigners are often limited in their ability to invest in,
and withdraw assets from, these markets. Additional restrictions may be
imposed under emergency conditions. Funds particularly subject to this
risk are:
International Equity Fund, Emerging Markets Fund and International Growth
Fund.
18
<PAGE>
INTEREST RATE RISK is the risk of loss because increases in prevailing interest
rates will cause fixed-income securities held by a Fund to decline in value.
Longer term bonds are generally more sensitive to interest rate changes than
shorter term bonds. Generally, the longer the average maturity of the bonds held
by the Fund, the more the Fund's share price will fluctuate in response to
interest rate changes. Funds particularly subject to this risk are: Balanced
Fund and Growth & Income Fund.
MARKET RISK is the risk of loss because the value of the securities in which a
Fund invests may decline in response to general economic conditions. Price
changes may be temporary or last for extended periods. For example, stock prices
have historically risen and fallen in periodic cycles. In addition, the value of
Fund's investments may decline if the particular companies the Funds invest in
do not perform well. All of the Munder Equity Funds are subject to this risk.
MEDIUM-SIZE COMPANY STOCK RISK is the risk of loss because the stocks of
medium-size companies may be more susceptible to market downturns, and their
prices may be more volatile than the stocks of larger companies. Equity
Selection Fund, Growth Opportunities Fund, Value Fund, Emerging Markets Fund,
Global Financial Services Fund, International Growth Fund and Healthcare Fund
are particularly subject to this risk.
PREPAYMENT RISK is the risk that a Fund may experience losses when an issuer
exercises its right to pay principal on an obligation held by the Fund (such as
a mortgage-backed security) earlier than expected. This may happen during a
period of declining interest rates. Under these circumstances, the Fund may be
unable to recoup all of its initial investment and will suffer from having to
reinvest in lower yielding securities. The loss of higher yielding securities
and the reinvestment at lower interest rates can reduce the Fund's income, total
return and share price. The Balanced Fund is particularly subject to this risk.
SMALL COMPANY STOCK RISK is the risk of loss because the stocks of small
companies may have more risks than those of larger companies. Small companies
often have narrower markets and more limited managerial and financial resources
than larger, more established companies. As a result, they may be more sensitive
to changing economic conditions, which could increase the volatility of a Fund's
portfolio. In addition, small company stocks typically are traded in lower
volume making them more difficult to sell. Funds particularly subject to this
risk are: Micro-Cap Equity Fund, Small Cap Value Fund, Small Company Growth Fund
and Healthcare Fund.
19
<PAGE>
Who May Want to Invest
The Funds may be appropriate for investors:
. Looking to invest over the long term and willing to ride out market swings
in search of potentially higher returns.
. Looking for an investment that has more return and risk potential than
fixed income investments.
20
<PAGE>
Fees And Expenses
include fees that institutions may charge for services they provide to you.
<TABLE>
<CAPTION>
Class A Class B Class C
Shareholder Fees (fees paid directly from your investment) Shares Shares Shares
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases............ 5.5%(a) None None
Sales Charge (Load) Imposed on Reinvested Dividends......... None None None
Maximum Deferred Sales Charge (Load)........................ None(b) 5%(c) 1%(d)
Redemption Fees............................................. None None None
Exchange Fees............................................... None None None
</TABLE>
Annual Fund Operating Expenses (expenses that are paid from Fund assets) And
Examples
The examples are intended to help you compare the cost of investing in each Fund
to the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated. The examples also
assume that your investment has a 5% return each year, that the Fund's operating
expenses remain the same as shown in the table and that all dividends and
distributions are reinvested. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- ---------------------------------------------------------- ----------------------------------------------------------------
Balanced Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .65% .65% .65% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
Equity Selection Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
Management Fees .75% .75% .75% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
Growth & Income Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
Management Fees .75% .75% .75% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- ---------------------------------------------------------- ----------------------------------------------------------------
Growth Opportunities Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .75% .75% .75% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses (2) [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses (3) [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
International Equity Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
Management Fees .75% .75% .75% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
Micro-Cap Equity Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
Management Fees 1.00% 1.00% 1.00% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses(2) [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses(3) [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
Multi-Season Growth Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
Management Fees(1) [ ]% [ ]% [ ]% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses(3) [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
Real Estate Equity Investment Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
Management Fees .74% .74% .74% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
Small-Cap Value Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
Management Fees .75% .75% .75% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- ---------------------------------------------------------- --------------------------------------------------------------------
Small Company Growth Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .75% .75% .75% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
------- ------- -------
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
======= ======= =======
Value Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------- ------- -------- -------- ------- --------
Management Fees .74% .74% .74% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
------- ------- -------
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
======= ======= =======
Framlington Emerging Markets Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------- ------- ------- -------- ------- --------
Management Fees 1.25% 1.25% 1.25% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses(2) [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
------- ------- -------
Total Annual Fund
Operating Expenses(3) [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
======= ======= =======
Framlington Global Financial Services Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------ ------- ------- -------- ------- --------
Management Fees .75% .75% .75% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses(2) [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
------- ------- -------
Total Annual Fund
Operating Expenses(3) [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
======= ======= =======
Framlington Healthcare Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------- ------- -------- -------- ------- --------
Management Fees 1.00% 1.00% 1.00% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses(2) [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
------- ------- -------
Total Annual Fund
Operating Expenses(3) [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
======= ======= =======
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- ---------------------------------------------------------- ------------------------------------------------------------------
Framlington International Growth Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 1.00% 1.00% 1.00% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses(2) [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
------- ------- -------
Total Annual Fund
Operating Expenses(3) [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
======= ======= =======
</TABLE>
______________________
(a) The sales charge declines as the amount invested increases.
(b) A contingent deferred sales charge (CDSC) is a one-time fee charged at the
time of redemption. A 1% CDSC applies to redemptions of Class A shares within
one year of investment that were purchased with no initial sales charge as part
of an investment of $1,000,000 or more. (c) The CDSC payable upon redemption of
Class B shares declines over time. (d) The CDSC applies to redemptions of Class
C shares within one year of purchase.
(1) For the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of its management fees. As a result of the fee waiver, actual
management fees paid, based on the Multi-Season Growth Fund's average daily
net assets, were [ ]%.
(2) For the fiscal year ended June 30, 1999, the advisor voluntarily reimbursed
certain operating expenses. As a result of the expense reimbursement, actual
Other Expenses paid by the Funds, were:
Fund Other Operating Expenses
____ (as a % of average daily net assetts)
-----------------------------------
Growth Opportunities Fund %
Micro-Cap Equity Fund %
Framlington Emerging Markets Fund %
Framlington Financial Services Fund %
Framlington Healthcare Fund %
Framlington International Growth Fund %
(3) For the fiscal year ended June 30, 1999, as a result of the advisor's
voluntary fee waivers and expense reimbursements, the actual Total Annual
Fund Operating Expenses paid by the Funds were as shown below. The advisor
may terminate the fee waivers and/or expense reimbursements at any time.
Fund Total Annual Fund Operating Expenses
---- (as a % of average daily net assets)
------------------------------------
Multi-Season Growth Fund
Growth Opportunities Fund %
Micro-Cap Equity Fund %
Framlington Emerging Markets Fund %
Framlington Global Financial Services Fund %
Framlington Healthcare Fund %
Framlington International Growth Fund %
*Assumes you sold your shares at the end of the time period.
**Assumes you stayed in the Fund.
***Reflects conversion of Class B shares to Class A shares (which pay lower
ongoing expenses) approximately six years after the date of original purchase.
24
<PAGE>
More About The Funds
- --------------------------------------------------------------------------------
The Funds' principal investment strategies and risks are summarized above in the
section entitled Risk/Return Summary. A more complete description of each Fund's
investments and strategies and their associated risks is provided below under
"Special Risks and Other Considerations" and "Additional Descriptions of
Investments and Investment Strategies." The Funds may also invest in other
securities and are subject to further restrictions and risks which are described
in the Statement of Additional Information. The Glossary below explains certain
terms used throughout this prospectus.
Glossary
Types Of Funds
Equity Funds are the Balanced Fund, Equity Selection Fund, Growth & Income Fund,
Growth Opportunities Fund, International Equity Fund, Micro-Cap Equity Fund,
Multi-Season Growth Fund, Real Estate Equity Investment Fund, Small-Cap Value
Fund, Small Company Growth Fund, Value Fund, Framlington Emerging Markets Fund,
Framlington Global Financial Services Fund, Framlington Health Care Fund and
Framlington International Growth Fund.
Types Of Securities
Equity securities include common stocks, preferred stocks, securities
convertible into common stocks, and rights and warrants to subscribe for the
purchase of common stocks. Equity securities may be listed on a stock exchange
or NASDAQ National Market System or unlisted. Warrants are rights to purchase
securities at a specified time at a specified price.
Fixed income securities are securities that pay interest at set times at either
fixed, floating or variable rates, or which are issued at a discount to their
principal amount instead of making periodic interest payments. Fixed income
securities include corporate bonds, debentures and other similar corporate debt
instruments, zero coupon bonds and variable amount master demand notes.
Convertible securities are bonds or preferred stocks that may be converted
(exchanged) into the common stock of the issuing company within a specified time
period for a specified number of shares. Convertible securities offer the Funds
a way to participate in the capital appreciation of the common stock into which
the securities are convertible, while earning higher current income than is
available from the common stock.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include U.S.
Treasury bills, U.S. Treasury notes, U.S. Treasury bonds and obligations of the
Federal Home Loan Corporation, Federal National Mortgage Association and
Government National Mortgage Association.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit of
banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Rating Agencies And Indices
Moody's is Moody's Investor Services, Inc.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
S&P is Standard & Poor's Rating Services.
S&P 500 is S&P's 500 Composite Stock Price Index, a widely recognized unmanaged
index of stock market activity.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Internal Revenue Code is the Internal Revenue Code of 1986, as amended.
NAV is the net asset value per share of a Fund. NAV is the value of a single
share of a Fund. Each Fund calculates NAV separately for each class. NAV is
calculated by (1) taking the current value of a Fund's total assets allocated to
a particular class of shares, (2) subtracting the liabilities and expenses
charged to that class (3) dividing that amount by the total number of shares of
that class outstanding.
25
<PAGE>
A diversified investment company is an investment company that may not invest
more than 5% of its total assets in any one issuer other than the U.S.
Government, its agencies or instrumentalities. This limit applies only to 75% of
a diversified Fund's assets. In addition, a diversified Fund cannot invest more
than 25% of its assets in a single issuer. These limitations do not apply to the
non-diversified Funds.
Special Risks And Other Considerations
Derivative Risk. "Derivative" instruments are financial contracts whose value is
based on an underlying security, a currency exchange rate, an interest rate or a
market index. Many types of instruments representing a wide range of potential
risks and rewards are derivatives, including futures contracts, options on
futures contracts, options, swaps, forward currency contracts and structured
debt obligations (including collateralized mortgage obligations and other types
of asset-backed securities, "stripped" securities and various floating rate
instruments).
Investment Strategy. Derivatives can be used for hedging (attempting to
reduce risk by offsetting one investment position with another) or
speculation (taking a position in the hope of increasing return). The
Funds may, but are not required to, use derivatives for hedging
purposes or for the purpose of remaining fully invested or maintaining
liquidity. The Funds will not use derivatives for speculative purposes.
Special Risks. The use of derivative instruments exposes a Fund to
additional risks and transaction costs. Risks of derivative instruments
include: (1) the risk that interest rates, securities prices and
currency markets will not move in the direction that a portfolio
manager anticipates; (2) imperfect correlation between the price of
derivative instruments and movements in the prices of the securities,
interest rates or currencies being hedged; (3) the fact that skills
needed to use these strategies are different than those needed to
select portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument and possible exchange
imposed price fluctuation limits, either of which may make it difficult
or impossible to close out a position when desired; (5) the risk that
adverse price movements in an instrument can result in a loss
substantially greater than the Fund's initial investment in that
instrument (in some cases, the potential loss is unlimited); (6)
particularly in the case of privately-negotiated instruments, the risk
that the counterparty will not perform its obligations, which could
leave the Fund worse off than if it had not entered into the position;
and (7) the inability to close out certain hedged positions to avoid
adverse tax consequences.
Foreign Investment Risk. Foreign securities include direct investments in
non-U.S. dollar-denominated securities traded outside of the United States and
dollar-denominated securities of foreign issuers traded in the United States.
Foreign securities also include indirect investments such as American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and Global Depository
Receipts ("GDRs"). ADRs are U.S. dollar-denominated receipts representing shares
of foreign-based corporations. ADRs are issued by U.S. banks or trust companies,
and entitle the holder to all dividends and capital gains that are paid out on
the underlying foreign shares. EDRs and GDRs are receipts issued by non-U.S.
financial institutions that often trade on foreign exchanges. They represent
ownership in an underlying foreign or U.S. security and are generally
denominated in a foreign currency.
Investment Strategy. International Equity Fund, Framlington Global
Financial Services Fund, Framlington Healthcare Fund and Framlington
International Growth Fund will invest all or a substantial portion of
their total assets in foreign securities. The other Equity Funds
(except Real Estate Investment Fund), may invest up to 25% of their
total assets in foreign securities.
Special Risks. Foreign securities involve special risks and costs.
Investment in the securities of foreign governments involves the risk
that foreign governments may default on their obligations or may
otherwise not respect the integrity of their debt.
Investment in foreign securities may involve higher costs than
investment in U.S. securities, including higher transaction and custody
costs as well as the imposition of
26
<PAGE>
additional taxes by foreign governments. Foreign investments may also
involve risks associated with the level of currency exchange rates, less
complete financial information about the issuers, less market liquidity,
more market volatility and political instability. Future political and
economic developments, the possible imposition of withholding taxes on
dividend income, the possible seizure or nationalization of foreign
holdings, the possible establishment of exchange controls or freezes on
the convertibility of currency, or the adoption of other governmental
restrictions might adversely affect an investment in foreign securities.
Additionally, foreign issuers may be subject to less stringent
regulation, and to different accounting, auditing and recordkeeping
requirements.
Currency exchange rates may fluctuate significantly over short periods
of time causing a Fund's net asset value to fluctuate as well. A
decline in the value of a foreign currency relative to the U.S. dollar
will reduce the value of a foreign currency-denominated security. To
the extent that a Fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined
risk. The Funds' respective net currency positions may expose them to
risks independent of their securities positions.
Additional risks are involved when investing in countries with emerging
economies or securities markets. In general, the securities markets of
these countries are less liquid, are subject to greater price
volatility, have smaller market capitalizations and have problems with
securities registration and custody. In addition, because the
securities settlement procedures are less developed in these countries,
a Fund may be required to deliver securities before receiving payment
and may also be unable to complete transactions during market
disruptions. As a result of these and other risks, investments in these
countries generally present a greater risk of loss to the Fund.
A further risk of investing in foreign securities is the risk that a
Fund may be adversely affected by the conversion of certain European
currencies into the Euro. This conversion, which is under way, is
scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in world
markets and affect European markets in particular.
Investments in Financial Services Companies by Framlington Global Financial
Services Fund. Financial services companies are subject to extensive
governmental regulation which may limit the financial commitments they can make,
and the interest rates and fees they can charge. Insurance companies may be
subject to severe price competition. Proposed legislation that would reduce the
separation between commercial and investment banking businesses, if enacted,
could significantly impact the industry and the Fund. The Fund may be riskier
than a fund investing in a broader range of industries.
Investments in the Healthcare Industry by Framlington Healthcare Fund. The Fund
will invest most of its assets in the healthcare industry, which is particularly
affected by rapidly changing technology and extensive government regulation,
including cost containment measures. The Fund may be riskier than a fund
investing in a broader range of industries.
Investments in the Real Estate Industry by Real Estate Equity Investment Fund.
The Fund will invest primarily in the real estate industry and may invest more
than 25% of its assets in any one sector of the real estate industry. As a
result, the Fund will be particularly vulnerable to declines in real estate
prices and new construction rates. The Fund may be riskier than a fund investing
in a broader range of industries.
Investment Grade Credit Risk. A security is considered investment grade if, at
the time of purchase, it is rated:
. BBB or higher by S&P;
. Baa or higher by Moody's;
. BBB or higher by Duff & Phelps; or
. BBB or higher by Fitch.
A security will be considered investment grade if it receives one of the above
ratings, even if it receives a lower rating from other rating organizations.
Investment Strategy. Except as stated in the next section, fixed income
and
27
<PAGE>
convertible securities purchased by the Funds will generally be rated at
least investment grade. The Funds may also invest in unrated securities
if the advisor or sub-advisor believes they are comparable in quality.
Special Risks. Although securities rated "BBB" by S&P, Duff & Phelps or
Fitch, or Baa by Moody's are considered investment grade, they have
certain speculative characteristics. Therefore, they may be subject to
a higher risk of default than obligations with higher ratings.
Subsequent to its purchase by a Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. The advisor or sub-advisor will consider such
an event in determining whether the Fund should continue to hold the
security.
Non-Investment Grade Credit Risk. Non-investment grade fixed income and
convertible securities are generally rated "BB" or below by S&P, Duff & Phelps
or Fitch, or "Ba" by Moody's.
Investment Strategy. Each Fund may invest a portion of their total
assets in non-investment grade securities when the advisor or
sub-advisor determines that such securities are desirable in light of
the Funds' investment objectives and portfolio mix.
Special Risks. Non-investment grade securities (sometimes referred to
as "junk bonds") are subject to greater risk than investment grade
securities. They generally present a higher degree of credits risks
(default). In addition, the market value of these securities tends to
be more sensitive to individual corporate developments and to changes
in interest rates and other economic developments than higher-rated
securities.
Short-Term Trading. The Funds' historical portfolio turnover rates are shown in
the Financial Highlights.
Investment Strategy. Each Fund may engage in short-term trading,
including, initial public offerings.
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could
detract from a Fund's performance.
Defensive Investing. Each Fund may invest all or any portion of its assets in
short-term obligations as a temporary defensive
measure in response to adverse market or economic conditions.
Special Risks. A Fund may not achieve its investment objective when its
assets are invested in short-term obligations.
Year 2000 Risk. Like other mutual funds, financial institutions, business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the advisor and the Funds' other
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. The advisor is taking steps that it
believes are reasonably designed to address year 2000 computer-related problems
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Funds' other major service providers.
Although there can be no assurances, the advisor believes that these steps will
be sufficient to avoid any adverse impact on any of the Funds. Similarly, there
can be no assurance that year 2000 issues will not affect the companies and
other issuers in which the Funds invest or affect worldwide markets and
economies.
28
<PAGE>
Additional Description Of Investments And Investment Strategies
Asset-Backed Securities. Asset-backed securities are debt securities backed by
mortgages, installment sales contract and credit card receivables. The
securities are sponsored by entities such as government agencies, banks,
financial companies and commercial or industrial companies. In effect, these
securities "pass through" the monthly payments that individual borrowers make on
their mortgage or other assets net of any fees paid to the issuers. Examples of
these include guaranteed mortgage pass-through certificates, collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").
Investment Strategy. Framlington Global Financial Services Funds may
invest a portion of its assets in Asset-Backed
Securities.
Special Risks. In addition to credit and market risk, asset-backed
securities involve repayment risk because the underlying assets (loans)
may be prepaid at any time. The value of these securities may also
change because of actual or perceived changes in the creditworthiness
of the originator, the servicing agent, the financial institution
providing the credit support, or the counterparty. Like other fixed
income securities, when interest rates rise the value of an
asset-backed security generally will decline. However, when interest
rates decline, the value of an asset-backed security with prepayment
features may not increase as much as that of other fixed income
securities. In addition, non-mortgage asset-backed securities involve
certain risks not presented by mortgage-backed securities. Primarily,
these securities do not have the benefit of the same security interest
in the underlying collateral.
Borrowing and Reverse Repurchase Agreements. The Funds can borrow money from
banks and enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of
securities held by a Fund subject to the Fund's agreement to repurchase them at
a mutually agreed upon date and price (including interest).
Investment Strategy. Each Fund may borrow money in an amount up to 5%
of its assets for temporary emergency purposes and in an amount up to
33 1/3% of its assets to meet redemptions. This is a fundamental policy
which can be changed only by shareholders.
Special Risks. Borrowings and reverse repurchase agreements by a Fund
may involve leveraging. If the securities held by the Fund decline in
value while these transactions are outstanding, the Fund's net asset
value will decline in value by proportionately more than the decline in
value of the securities. In addition, reverse repurchase agreements
involve the risks that the interest income earned by the Fund (from the
investment of the proceeds) will be less than the interest expense of
the transaction, that the market value of the securities sold by the
Fund will decline below the price the Fund is obligated to pay to
repurchase the securities, and that the securities may not be returned
to the Fund.
Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation to exchange one currency for another on a future date at a specified
exchange rate.
Investment Strategy. Forward currency exchange contracts may be used
for hedging purposes and to help reduce the risks and volatility caused
by changes in foreign currency exchange rates. Foreign currency
exchange contracts will be used at the discretion of the advisor or
sub-advisor, and no Fund is required to hedge its foreign currency
positions.
Special Risks. Forward currency contracts are privately negotiated
transactions, and can have substantial price volatility. When used for
hedging purposes, they tend to limit any potential gain that may be
realized if the value of a Fund's foreign holdings increases because of
currency fluctuations.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When a Fund purchases an option on a futures
contract, it has the right to assume a position as a purchaser or seller of a
futures contract at a specified exercise price during
29
<PAGE>
the option period. When a Fund sells an option on a futures contract, it becomes
obligated to purchase or sell a futures contract if the option is exercised.
Investment Strategy. Each Fund may invest in futures contracts and
options on futures contracts on domestic or foreign exchanges or boards
of trade. These instruments may be used for hedging purposes, to
maintain liquidity to meet potential shareholder redemptions, to invest
cash balances or dividends, or to minimize trading costs.
A Fund will not purchase or sell a futures contract unless, after the
transaction, the sum of the aggregate amount of margin deposits on its
existing futures positions and the amount of premiums paid for related
options used for non-hedging purposes is 5% or less of the Fund's total
assets.
Special Risks. Futures contracts and related options present the
following risks: imperfect correlation between the change in market
value of a Fund's securities and the price of futures contracts and
options; the possible inability to close a futures contract when
desired; losses due to unanticipated market movements, which are
potentially unlimited; and the possible inability of the advisor or
sub-advisor to correctly predict the direction of securities prices,
interest rates, currency exchange rates and other economic factors.
Guaranteed Investment Contracts. Guaranteed investment contracts are agreements
by a Fund to make payments to an insurance company's general account in exchange
for a minimum level of interest based on an index.
Special Risks. Guaranteed investment contracts are considered illiquid
investments and are acquired subject to a Fund's limitation on illiquid
investments.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. Each Fund may invest up to 15% of its net assets in
securities that are illiquid.
Special Risks. To the extent that a Fund invests in illiquid
securities, the Fund risks not being able to sell the securities at the
time and the price that it would like. The Fund may have to lower the
price, sell substitute securities or forego an investment opportunity,
each of which may cause a loss to the Fund.
Investment Companies. To the extent consistent with their respective investment
objectives and policies, the Funds may invest in securities issued by other
investment companies.
Investment Strategy. Investments by a Fund in other investment companies
will be subject to the limitations of the 1940 Act.
Special Risks. As a shareholder of another investment company, a Fund
would be subject to the same risks as any other investor in that
company. In addition, it would bear a proportionate share of any fees
and expenses paid by that company. These would be in addition to the
advisory and other fees paid directly by the Fund.
Municipal Obligations. Municipal obligations may include: (i) general obligation
bonds issued for various public purposes and supported by the municipal issuer's
credit and taxing power; and (ii) revenue bonds whose principal and interest is
payable only from the revenues of a particular project or facility.
Special Risks. Industrial revenue bonds depend on the credit standing of
a private issuer and may be subject to the federal alternative minimum
tax (AMT).
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. Each Fund may write (sell) covered call options,
buy put options, buy call options and write secured put options for
hedging purposes. Options may relate to particular securities, foreign
or domestic securities indices, financial instruments or foreign
currencies.
Special Risks. The value of options can be highly volatile, and their
use can result in
30
<PAGE>
loss if the advisor or sub-advisor is incorrect in
its expectation of price fluctuations. The successful use of options
for hedging purposes also depends in part on the ability of the advisor
or sub-advisor to predict future price fluctuations and the degree of
correlation between the options and securities markets.
Repurchase Agreements. Repurchase agreements involve the purchase of securities
by a Fund subject to the seller's agreement to repurchase them at a mutually
agreed upon date and price.
Investment Strategy. Each Fund may enter into repurchase agreements with
banks and broker-dealers that are deemed to be creditworthy by the
advisor or sub-advisor.
Special Risks. If the seller defaults or declares bankruptcy, a Fund
may suffer if the proceeds from the sale of the underlying securities
and other collateral are less than the repurchase price or if there are
delays in selling the underlying securities or collateral.
Securities Lending. In order to generate additional income, each Fund may lend
securities on a short-term basis to qualified institutions. By reinvesting any
cash collateral it receives in these transactions, the Fund could realize
additional income gains or losses.
Investment Strategy. Securities lending may represent no more than 25% of
the value of a Fund's total assets (including the loan collateral).
Special Risks. The main risk when lending Fund securities is that if
the borrower fails to return the securities or the invested collateral
has declined in value, the Fund could lose money.
Stripped Securities. These securities are issued by the U.S. Government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include participations in trusts that hold U.S. Treasury or agency
securities.
Special Risks. Stripped securities are very sensitive to changes in
interest rates and to the rate of principal repayments. A rapid or
unexpected increase in mortgage prepayments could severely depress the
price of certain stripped mortgage-backed securities and adversely
affect a Fund's total returns.
Temporary Investments. Short-term obligations refer to U.S. Government
securities, high-quality money market instruments and repurchase agreements with
maturities of 13 months or less. Generally, these obligations are purchased to
provide stability and liquidity to a Fund.
Investment Strategy. Each Fund may invest a portion of its assets in
short-term obligations pending investment or to meet anticipated
redemption requests.
Special Risks. A Fund may not achieve its investment objective when its
asset are invested in short-term obligations.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
instruments include variable amount master demand notes.
Special Risks. Variable and floating rate instruments are subject to
the same risks as fixed income investments, particularly interest rate
risk and credit risk. Because there is no active secondary market for
certain variable and floating rate instruments, they may be more
difficult to sell if the issuer defaults on its payment obligations or
during periods when a Fund is not entitled to exercise its demand
rights. As a result, the Fund could suffer a loss with respect to these
instruments.
When - Issued Securities, Delayed Delivery Transactions and Forward Commitments.
A purchase of "when-issued" securities refers to a transaction made
conditionally because the securities, although authorized, have not yet been
issued. A delayed delivery or forward commitment transaction involves a contract
to purchase or sell securities for a fixed price at a future date beyond the
customary settlement period.
Special Risks. Purchasing or selling securities on a when-issued,
delayed delivery or forward commitment basis involves the risk that the
value of the
31
<PAGE>
securities may change by the time they are actually issued
or delivered. These transactions also involve the risk that the seller
may fail to deliver the security or cash on the settlement date.
Zero Coupon Bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity.
Special Risks. The market prices of zero coupon bonds generally are
more volatile than the market prices of interest-bearing securities and
are likely to respond to a greater degree to changes in interest rates
than interest-bearing securities having similar maturities and credit
quality. A Fund's investments in zero coupon bonds may require the Fund
to sell some of its portfolio securities to generate sufficient cash to
satisfy certain income distribution requirements.
32
<PAGE>
Your Investment
- --------------------------------------------------------------------------------
This section describes how to do business with the Funds.
How To Reach The Funds
By telephone: 1-800-438-5789
Call for shareholder services.
By mail: The Munder Funds
480 Pierce Street
Birmingham, Michigan 48009
Purchasing Shares
Purchase Price of Shares
Class A shares of a Fund are sold at the NAV next determined after a purchase
order is received in proper form plus any applicable sales charge. Please see
"Distribution Arrangements" below for information about sales charges.
Class B and Class C shares of a Fund are sold at NAV next determined after a
purchase order is received in proper form.
Broker-dealers (other than the Funds' distributor) may charge you additional
fees for shares you purchase through them.
Policies for Purchasing Shares
Investment minimums
. Initial: $250
. Subsequent: $ 50
. Automatic Investment Plan: $ 50
Purchases over $250,000 must be for Class A or Class C shares.
Timing of orders
Purchase orders must be received by the Funds' distributor or transfer agent
before the close of regular trading on the New York Stock Exchange (normally,
4:00 p.m. Eastern time).
Methods for Purchasing Shares Investors may purchase shares:
. By Broker. Any broker authorized by the Funds' distributor can sell you
shares of the Funds. Please note that brokers may charge you fees for their
services.
. By Mail. You may open an account by completing, signing and mailing the
attached account application form and a check or other negotiable bank
draft (payable to The Munder Funds) for $250 or more to: The Munder Funds,
c/o First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. Be sure to specify on your account application
form the class of shares being purchased. If the class is not specified,
your purchase will automatically be invested in Class A shares. For
additional investments, send a letter stating the Fund and share class you
wish to purchase, your name and your account number with a check for $50 or
more to the address listed above. [We do not accept third-party checks.]
. By Wire. To open a new account, you should call the Funds at (800) 438-5789
to obtain an account number and complete wire instructions prior to wiring
any funds. Within seven days of purchase, you must send a completed account
application form containing your certified taxpayer identification number
to the Funds' transfer agent at The Munder Funds, c/o First Data Investor
Services Group, P.O. Box 60428, King of Prussia, Pennsylvania 19406-0428.
Wire instructions must state the Fund name, share class, your registered
name and your account number. Your bank wire should be sent through the
Federal Reserve Bank Wire System to:
Boston Safe Deposit and Trust Company
Boston, MA
ABA# 011001234
DDA# 16-798-3
Account No.:
33
<PAGE>
You may make additional investments at any time using the wire procedures
described above. Note that banks may charge fees for transmitting wires.
. You may purchase shares through the Automatic Investment Plan.
. You may purchase shares through the Reinvestment Privilege.
Exchanging Shares
Policies for Exchanging Shares
. You may exchange your Fund for shares of the same class of other Munder
Funds based on their relative net asset values.
. [Class A shares of a Munder money market fund that were (1) acquired
through the use of the exchange privilege and (2) can be traced back to a
purchase of shares in one or more Munder Funds for which a sales charge was
paid, can be exchanged for Class A shares of a Fund.]
. Class B and Class C shares will continue to age from the date of the
original purchase and will retain the same CDSC rate as they had before the
exchange.
. You must meet the minimum purchase requirements for the Munder Fund that you
purchase by exchange.
. If you are exchanging into shares of a Munder Fund with a higher sales
charge, you must pay the difference at the time of the exchange.
. A share exchange is a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund
you wish to purchase by exchange. You can obtain a prospectus for any
Munder Fund by contacting your broker or calling the Munder Funds at (800)
438-5789.
. Brokers may charge you a fee for handling exchanges.
. We may change, suspend or terminate the exchange privilege at any time. You
will be given notice of any material modifications except where notice is
not required.
Methods for Exchanging Shares
. Exchanges By Telephone. You may give exchange instructions by telephone to
the Funds at (800) 438-5789. You may not exchange shares by telephone if
you hold share certificates. We reserve the right to reject any telephone
exchange request and to place restrictions on telephone exchanges.
. Exchanges By Mail. You may send exchange requests to your broker or you may
send them directly to the Funds' transfer agent at The Munder Funds, c/o
First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428.
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the redemption
request in proper form. We will reduce the amount you receive by the amount of
any applicable contingent deferred sales charge (CDSC).
Please see "Distribution Arrangements" below for information about CDSCs.
Policies for Redeeming Shares
. For your protection, a signature guarantee is required for the following
redemption requests: (a) redemption proceeds greater than $50,000; (b)
redemption proceeds not being made payable to the record owner of the
account; (c) redemption proceeds not being mailed to the address of record
on the account or (d) if the redemption proceeds are being transferred to
another Munder Fund account with a different registration. You can obtain a
signature guarantee from a financial institution such as a commercial bank,
trust company, savings association or from a securities firm having
membership on a recognized securities exchange.
34
<PAGE>
Methods for Redeeming Shares
You may redeem shares of the Funds in several ways:
. By Mail. You may mail your redemption request to: The Munder Funds, c/o
First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. The redemption request should state the name of
the Fund, share class, account number, amount of redemption, account name
and where to send the proceeds. All account owners must sign.
. By Telephone. You can redeem your shares by contacting your broker or
by calling the Funds at (800) 438-5789. There is no
minimum requirement for telephone redemptions.
If you are redeeming at least $1,000 of shares and you have authorized
expedited redemption on your account application form, simply call the
Funds prior to 4:00 p.m. (Eastern time), and request the redemption
proceeds be mailed to the commercial bank or registered broker-dealer you
designated on your account application form. We will send your redemption
proceeds to you on the next business day. We reserve the right at any time
to change or impose fees for this expedited redemption procedure.
During periods of unusual economic or market activity, you may experience
difficulties or delays in effecting telephone redemptions. In such cases
you should consider placing your redemption request by mail.
. You may redeem shares through the Automatic Withdrawal Plan.
Additional Policies For Purchases, Exchanges And
Redemptions
. We consider orders to be in "proper form" when all required documents are
properly completed, signed and received.
. The Funds reserves the right to reject any purchase order.
. At any time, the Funds may change any of their purchase or redemption
procedures, and may suspend the sale of their shares.
. The Funds may delay sending redemption proceeds for up to seven days,
or longer if permitted by the Securities and Exchange Commission.
. We will typically send redemption amounts to you within seven business
days after you redeem shares. We may hold redemption amounts from the
sale of shares you purchased by check until the purchase check has
cleared, which may be as long as 15 days.
. To limit the Funds' expenses, we do not currently issue share
certificates.
. A Fund may temporarily stop redeeming shares if:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists and the Fund cannot sell its assets or accurately
determine the value of its assets; or
. if the Securities and Exchange Commission orders the Fund to suspend
redemptions.
. If accepted by a Fund, investors may purchase shares of the Fund (other
than the Real Estate Equity Investment Fund) with securities which the
Fund may hold. The advisor will determine if the securities are
consistent with the Fund's objectives and policies. If accepted, the
securities will be valued the same way the Fund values portfolio
securities it already owns. Call the Funds at (800) 438-5789 for more
information.
. The Funds reserve the right to make payment for redeemed shares wholly
or in part by giving the redeeming shareholder portfolio securities.
The shareholder may pay transaction costs to dispose of these
securities.
. We record all telephone calls for your protection and take measures to
identify the caller. As long as the Funds' transfer agent takes
reasonable measures to authenticate telephone requests on an investor's
account, neither the Funds, the Funds' distributor nor the transfer
agent will be held responsible
35
<PAGE>
for any losses resulting from unauthorized transactions.
. We may redeem your account if its value falls below $250 as a result of
redemptions (but not as a result of a decline in NAV). You will be
notified in writing and allowed 60 days to increase the value of your
account to the minimum investment level.
. If you purchased shares directly from the Funds, the transfer agent
will send you confirmations of the opening of an account and of all
subsequent purchases, exchanges or redemptions in the account. If your
account has been set up by a broker or other investment professional,
account activity will be detailed in their statements to you.
. [The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. Each Fund
and its distributor reserve the right to refuse any purchase or
exchange request that could adversely affect the fund or its
operations, including those from any individual or group who, in the
Fund's view, is likely to engage in excessive trading or any order
considered market-timing activity. If a Fund refuses a purchase or
exchange request and the shareholder deems it necessary to redeem their
account, any CDSC as permitted by the prospectus will be applicable.
Additionally, in no event will any Fund permit more than six exchanges
into or out of a Fund in any one-year period per account, tax
identification number, social security number or related investment
group. The Munder Money Market Funds are exempt from this policy.]
Shareholder Privileges
Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in a Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Funds at (800) 438-5789. The minimum pre-authorized investment amount
is $50. You may discontinue the AIP at any time. We may discontinue the AIP on
30 days' written notice to you.
Reinvestment Privilege. For 60 days after you sell shares of a Fund, you may
reinvest your redemption proceeds in shares of the same class of a Fund at NAV.
Any CDSC you paid on the amount you are reinvesting will be credited to your
account. You may use this privilege once in any given twelve-month period with
respect to your shares of a Fund. You or your broker must notify the Funds'
transfer agent in writing at the time of reinvestment in order to eliminate the
sales charge on your reinvestment.
Automatic Withdrawal Plan (AWP). If you have an account value of $2,500 or more
in a Fund, you may redeem shares on a monthly, quarterly, semi-annual or annual
basis. The minimum withdrawal is $50. We usually process withdrawals on the 20th
day of the month and promptly send you your redemption amount. You may enroll in
the AWP by completing the AWP application form available through the Funds'
transfer agent. To participate in the AWP you must have your dividends
automatically reinvested and may not hold share certificates. You may change or
cancel the AWP at any time upon notice to the Funds' transfer agent. You should
not buy Class A shares (and pay a sales charge) while you participate in the AWP
and you must pay any applicable CDSC when you redeem shares.
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<PAGE>
Distribution Arrangements
- ------------------------------------------------------------------------------
Share Class Selection
Each Fund offers Class A, Class B and Class C shares. Each class has its own
cost structure, allowing you to choose the one that best meets your requirements
given the amount of your purchase and the intended length of your investment.
You should consider both ongoing annual expenses and initial sales charge or
CDSC in estimating the costs of investing in a particular class of shares.
Class A shares
. Front end sales charge. There are several ways to reduce these sale charges.
. Lower annual expenses than Class B and Class C shares.
Class B shares
. No front end sales charge. All your money goes to work for you right
away.
. Higher annual expenses than Class A shares.
. A CDSC on shares you sell within six years of purchase.
. Automatic conversion to Class A shares approximately six years after
issuance, thus reducing future annual expenses. o CDSC is waived for certain
redemptions.
Class C shares
. No front end sales charge or CDSC, except for a CDSC for redemptions made
within the first year after investing. All your money goes to work for you
right away.
. Shares do not convert to another class.
. Higher annual expenses than Class A shares.
Each Fund also issues other classes of shares, which have different sales
charges, expense levels and performance. The other classes of shares are
available to limited types of investors. Call (800) 438-5789 to obtain more
information about those classes.
Applicable Sales Charge-class A Shares
You can purchase Class A shares at NAV plus an initial sales charge. This sales
charge as a percentage of your investment decreases as your investment
increases. The current sales charge rates and commissions paid to selected
dealers as follows:
<TABLE>
<CAPTION>
Sales Charge Dealer
as a Percentage of Reallowance
------------------
as a
Percentage
Your Net of the
---- --- ------
Investment Asset Offering
---------- ----- --------
Value Price
----- -----
<S> <C> <C> <C>
Less than $25,000.. 5.50% 5.82% 5.00%
$25,000 but less
than $50,000....... 5.25% 5.54% 4.75%
$50,000 but less
than $100,000...... 4.50% 4.71% 4.00%
$100,000 but less
than $250,000...... 3.50% 3.63% 3.25%
$250,000 but less
than $500,000...... 2.50% 2.56% 2.25%
$500,000 but less
than $1,000,000.... 1.50% 1.52% 1.25%
$1,000,000 or
more............... None* None* (see below)**
- --------------------------
</TABLE>
* No initial sales charge applies on investments of $1 million or more.
However, a CDSC of 1% is imposed on certain redemptions within one year of
purchase.
** The distributor will pay a 1% commission to dealers who initiate and are
responsible for purchases of $1 million or more.
Sales Charge Waivers - General
We will waive the initial sales charge on Class A shares for the following types
of purchasers:
1. individuals with an investment account or relationship with the advisor;
2. full-time employees and retired employees of the advisor, employees of the
Funds' service providers and immediate family members of such persons;
3. registered broker-dealers that have entered into selling agreements with the
distributor, for their own accounts or for retirement plans for their employees
or sold to registered representatives for full-time employees (and their
families) that certify to the distributor at the time of purchase that such
purchase is for their own account (or for the benefit of their families);
4. certain qualified employee benefit plans as described below;
5. individuals who reinvest a distribution from a qualified retirement plan for
which the advisor serves as investment advisor;
37
<PAGE>
6. individuals who reinvest the proceeds of redemptions from Class Y Shares of
another Munder Fund, within 60 days of redemption;
7. banks and other financial institutions that have entered into agreements
with the Munder Funds to provide shareholder services for customers (including
customers of such banks and other financial institutions, and the immediate
family members of such customers);
8. fee-based financial planners or employee benefit plan consultants acting for
the accounts of their clients;
9. employer sponsored retirement plans which are administered by Universal
Pensions, Inc. (UPI Plans); and
10. employer sponsored 401(k) plans that are administered by Merrill Lynch Group
Employee Services (Merrill Lynch Plans) which meet the criteria described below
under "Sales Charge Waivers- Qualified Employer Sponsored Retirement Plans."
Sales Charge Waivers - Qualified Employer Sponsored Retirement Plans
We will waive the initial sales charge on purchases of Class A shares by
employer sponsored retirement plans that are qualified under Section 401(a) or
Section 403(b) of the Internal Revenue Code (each, a Qualified Employee Benefit
Plan) and that (1) invest $1,000,000 or more in Class A shares offered by the
Munder Funds or (2) have at least 75 eligible plan participants.
In addition, we will waive the CDSC of 1% charged on certain redemptions within
one year of purchase for Qualified Employee Benefit Plan purchases that meet the
above criteria. A 1% commission will be paid by the distributor to dealers and
other entities (as permitted by applicable Federal and state law) who initiate
and are responsible for Qualified Employee Benefit Plan purchases that meet the
above criteria. This sales charge waiver does not apply to Simplified Employee
Pension Plans (SEPs), Individual Retirement Accounts (IRAs), UPI Plans and
Merrill Lynch Plans.
UPI Plans. We also will waive (i) the initial sales charge on Class A shares
purchased by UPI Plans for employees participating in an employer-sponsored or
administered retirement program operating under Section 408A of the Internal
Revenue Code and (ii) the CDSC of 1% imposed on certain redemptions within one
year of purchase for these accounts. The distributor will pay a 1% commission to
dealers and others (as permitted by applicable Federal and state law) who
initiate and are responsible for UPI Plan purchases.
Merrill Lynch Plans. We will waive the initial sales charge for all investments
by Merrill Lynch Plans if
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch Group
Employee Services (Merrill Lynch) and, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million
or more in assets invested in broker/dealer funds not advised or managed
by Merrill Lynch Asset Management, L.P. (MLAM) that are made available
pursuant to a Services Agreement between Merrill Lynch and the Fund's
distributor and in funds advised or managed by MLAM (collectively, the
Applicable Investments); or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch, and on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in Applicable
Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the Merrill
Lynch plan conversion manager, on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement.
For further information on sales charge waivers, call (800) 438-5789.
Sales Charge Reductions
You may qualify for reduced sales charges in the following cases:
. Letter of Intent. If you intend to purchase at least [$25,000] of Class A
shares of the Funds, you may wish to complete the Letter of Intent section
of your account application form. By doing so, you agree to invest a
certain amount over a 13-month period. You would pay a sales charge on any
Class A shares you purchase during the 13 months based on the total amount
to be invested under the Letter of Intent. You can apply any investments
you made in any of
38
<PAGE>
the Munder Funds during the preceding 90-day period toward fulfillment of
the Letter of Intent (although there will be no refund of sales charges
you paid during the 90-day period). You should inform the Funds' transfer
agent that you have a Letter of Intent each time you make an investment.
You are not obligated to purchase the amount specified in the Letter of
Intent. If you purchase less than the amount specified, however, you must
pay the difference between the sales charge paid and the sales charge
applicable to the purchases actually made. The Funds' custodian will hold
such amount in escrow. The Funds' custodian will pay the escrowed funds to
your account at the end of the 13 months unless you do not complete your
intended investment.
. Quantity Discounts. You may combine purchases of Class A shares that are
made by you, your spouse, your children under age 21 and your IRA when
calculating the sales charge. You must notify your broker or the Funds'
transfer agent to qualify.
. Right of Accumulation. You may add the value of any shares of non-money
market Munder Funds you already own to the amount of your next Class A
share investment for purposes of calculating the sales charge at the time
of the current purchase. You must notify your broker or the Funds'
transfer agent to qualify.
Certain brokers may not offer these programs or may impose conditions or fees to
use these programs. You should consult with your broker prior to purchasing the
Funds' shares.
For further information on sales charge reductions, call (800) 438-5789.
Cdsc
You pay a CDSC when you redeem:
. Class A shares that were bought as part of an investment of at least $1
million within one year of buying them;
. Class B shares within six years of buying them; or
. Class C shares within one year of buying them.
These time periods include the time you held Class B or Class C shares of
another Munder Fund which you may have exchanged for Class B or Class C shares
of the Fund you are redeeming.
The CDSC schedule for Class B shares purchased after June 27, 1995 is set forth
below. Consult the Statement of Additional Information for the CDSC schedule for
Class B shares purchased on or before June 27, 1995. The CDSC is based on the
original NAV at the time of your investment or the NAV at the time of
redemption, whichever is lower.
Years Since Purchase CDSC
- -------------------- ----
First................................... 5.00%
Second.................................. 4.00%
Third................................... 3.00%
Fourth.................................. 3.00%
Fifth................................... 2.00%
Sixth................................... 1.00%
Seventh and thereafter.................. 0.00%
[At the time of purchase of Class B shares, the Funds' distributor pays sales
commissions of 4.00% of the purchase price to brokers that initiate and are
responsible for purchases of such Class B shares.]
You will not pay a CDSC to the extent that the value of the redeemed shares
represents:
. reinvestment of dividends or capital gains distributions; or
. capital appreciation of shares redeemed.
When you redeem shares, we will assume that you are redeeming first shares
representing reinvestment of dividends and capital gains distributions, then any
appreciation on shares redeemed, and then remaining shares held by you for the
longest period of time. [We will calculate the holding period of Class B shares
of a Fund acquired through an exchange of Class B shares of the Munder Money
Market Fund (which are available only by exchange of Class B shares of a Munder
Fund) from the date that the Class B shares of the initial Munder Fund were
purchased.]
Cdsc Waivers
We will waive the CDSC payable upon redemptions of shares which you purchased
after June 27, 1995 (or acquired through an exchange of shares of another Munder
Fund purchased after June 27, 1995) for:
. redemptions made within one year after the death of a shareholder or
registered joint owner;
. minimum required distributions made from an IRA or other retirement plan
account after you reach age 70 1/2;
. involuntary redemptions made by the Fund;
. redemptions limited to 10% per year of an account's net asset value. For
example, if you
39
<PAGE>
maintain an annual balance of $10,000 you can redeem up to $1,000 annually
free of charge.
We will waive the CDSC payable upon redemptions of shares which you purchased
after December 1, 1998 (or acquired through an exchange of shares of another
Munder Fund purchased after December 1, 1998) for:
. redemptions made from an IRA or other individual retirement plan account
established through Comerica Securities, Inc. after you reach age 59 1/2
and after the eighteen month anniversary of the purchase of Fund shares.
Consult the Statement of Additional Information for Class B CDSC waivers which
apply when you redeem shares purchased on or before June 27, 1995 (or acquired
through an exchange of shares of another Munder Fund purchased on or before June
27, 1995).
We will waive the CDSC for Class B shares for all redemptions by Merrill Lynch
Plans if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch; or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch; or
(iii) the Plan has less than 500 eligible employees, as determined by the
Merrill Lynch plan conversion manager, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement.
12b-1 Fees
The Funds have adopted Rule 12b-1 plans with respect to their Class A, Class B
and Class C shares that allow each Fund to pay distribution and other fees for
the sale of its shares and for services provided to shareholders. Under the
plans, the Funds may pay up to .25% of the daily net assets of Class A, Class B
and Class C shares to pay for certain shareholder services provided by
institutions that have agreements with the Funds' distributor to provide such
services. The Funds may also pay up to .75% of the daily net assets of the Class
B and Class C shares to finance activities relating to the distribution of its
shares.
Because the fees are paid out of each Fund's assets on an on-going basis, over
time these fees will increase the cost of an investment in the Funds and may
cost a shareholder more than paying other types of sales charges.
Other Information
The advisor may, from time to time, make payments to banks, broker-dealers or
other financial institutions for certain services to the Funds and/or its
shareholders, including sub-administration, sub-transfer agency and shareholder
servicing. The advisor may make such payments out of its own resources and there
are no additional costs to the Fund or its shareholders.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee from
the Funds for providing shareholder services to its customers who own shares of
the Funds.
40
<PAGE>
Pricing Of Fund Shares
- ------------------------------------------------------------------------------
Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
The Funds calculate NAV as of the close of business on the New York Stock
Exchange, normally 4:00 p.m. (Eastern time).
If the New York Stock Exchange closes early, the Funds will accelerate their
calculation of NAV and transaction deadlines to that time.
The NAV of each Fund is generally based on the market value of the securities
held in the Fund. If market values are not available, the fair value of
securities is determined in good faith by, or using procedures approved by, the
Boards of Directors/Trustees of the Funds.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. A Fund values foreign securities at the
latest closing price on the exchange on which they are traded immediately prior
to the closing of the New York Stock Exchange. Certain foreign currency exchange
rates may also be determined at the latest rate prior to the closing of the New
York Stock Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the New York Stock Exchange. If the advisor
believes that such events materially affect the value of portfolio securities,
these securities may be valued at their fair market value as determined in good
faith by, or using procedures approved by, the Funds' Boards of
Directors/Trustees.
Foreign securities may trade in their primary markets on weekends or other days
when a Fund does not price its shares. Therefore, the value of a Fund's
portfolio may change on days when shareholders will not be able to buy or sell
their shares.
Distributions
- ------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of a Fund's net income and
gains on its investments. The Funds pass substantially all of its earnings along
to its shareholders as distributions. When the Funds earn dividends from stocks
and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a capital gain distribution.
Balanced Fund, Growth & Income Fund And Small Company Growth Fund: pay
dividends, if any, quarterly.
Real Estate Equity Investment Fund: pays dividends, if any, monthly.
Growth Opportunities Fund, Equity Selection Fund, International Equity Fund,
Micro-cap Equity Fund, Multi-season Growth Fund, Small-cap Value Fund, Value
Fund, Framlington Emerging Markets Fund, Framlington Global Financial Services
Fund, Framlington Healthcare Fund, Framlington International Growth Fund: pay
dividends, if any, annually.
All Funds: distribute their net realized capital gains, if any, at least
annually.
It is possible that a Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
Each Fund will pay distributions in additional shares of that Fund. If you wish
to receive distributions in cash, either indicate this request on your account
application form or notify the Funds by calling (800) 438-5789.
41
<PAGE>
Federal Tax Considerations
- -------------------------------------------------------------------------------
Investments in a Fund may have tax consequences that you should consider. This
section briefly describes some of the more common federal tax consequences. A
more detailed discussion about the tax treatment of distributions from the Funds
and about other potential tax liabilities, including backup withholding for
certain taxpayers and about tax aspects of dispositions of shares of the Funds,
is contained in the Statement of Additional Information. You should consult your
tax adviser about your own particular tax situation.
Taxes on Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. Shareholders not
subject to tax on their income, generally will not be required to pay any tax on
distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held the
portfolio securities it sold. It does not depend on how long you held your Fund
shares.
Distributions are generally taxable to you in the tax year in which they are
paid, with one exception: distributions declared in October, November or
December, but not paid until January of the following year, are taxed as though
they were paid on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Funds will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Taxes on Sales or Exchanges
If you sell shares of a Fund or exchange them for shares of another Munder Fund,
you generally will be subject to tax on any taxable gain. Your taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale will result in a taxable gain.
Other Considerations
If you buy shares of a Fund just before the Fund makes any distribution, you
will pay the full price for the shares and then receive back a portion of the
money you have just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information, by law, the
Funds must withhold a portion of your distributions and redemption proceeds to
pay federal income taxes
42
<PAGE>
Management
- -------------------------------------------------------------------------------
Investment Advisors and Sub-Advisor
Munder Capital Management ("MCM"), 480 Pierce Street, Birmingham, Michigan 48009
is the investment advisor of each Fund other than the International Equity Fund.
World Asset Management, L.L.C. "World", 255 East Brown Street, Birmingham,
Michigan 48009, is the investment advisor of the International Equity Fund.
World is a wholly-owned subsidiary of MCM. As of September 30, 1999, MCM [and
its affiliates] had approximately $__ billion in assets under management, of
which $__ billion were invested in equity securities, $__ billion were invested
in money market or other short-term instruments, $__ billion were invested in
other fixed income securities, and $__ billion in non-discretionary assets. As
of September 30, 1999, World had approximately $__ in assets under management.
The advisors provide overall investment management for their respective Funds.
Except for the Framlington Funds, they also provide all research and credit
analysis and are responsible for all purchases and sales of portfolio
securities.
Framlington Overseas Investment Management Limited ("Framlington"), a subsidiary
of MCM, is the sub-advisor of the Framlington Funds.
Framlington provides research and credit analysis for each of the Framlington
Funds and is responsible for making all purchases and sales of portfolio
securities for each of the Framlington Funds other than the Framlington Global
Financial Services Fund. MCM and Framlington each manage a portion of the assets
of the Framlington Global Financial Services Fund. MCM is responsible for all
purchases and sales of domestic securities held by the Framlington Global
Financial Services Fund. Framlington is responsible for the allocation of the
Fund's assets among countries and for making all purchases and sales of foreign
securities held by the Fund.
During the fiscal year ended June 30, 1999, each Fund paid an advisory fee at an
annual rate based on the average daily net assets of the Fund (after waivers, if
any) as follows:
Balanced Fund 0.65%
Equity Selection Fund 0.75%
Growth & Income Fund 0.75%
Growth Opportunities Fund 0.75%
International Equity Fund 0.75%
Micro-Cap Equity Fund 1.00%
Multi-Season Growth Fund 0.75%
Real Estate Equity Investment Fund 0.74%
Small-Cap Value Fund 0.75%
Small Company Growth Fund 0.75%
Value Fund 0.74%
Framlington Emerging Markets Fund 1.25%
Framlington Global Financial Services
Fund 0.75%
Framlington Healthcare Fund 1.00%
Framlington International Growth Fund 1.00%
During the fiscal year ended June 30, 1999, a portion of the advisory fees for
the Multi-Season Growth Fund were waived. As a result, the payments shown above
for those Funds were less than the contractual advisory fees of 1.00% of the
first $500 million of the Multi-Season Growth Fund's average daily net assets
and .75% of that Fund's average daily net assets over $500 million.
Performance of Framlington Accounts Managed by the Sub-Advisor.
The tables below contain certain performance information provided by the sub-
advisor relating to accounts managed by the sub-advisor which have investment
objectives and policies similar to those of the corresponding Framlington Funds.
In the case of the Healthcare portfolio performance, the data relates to a unit
trust organized under the laws of the United Kingdom managed by the same
personnel of the sub-advisor with similar investment objectives and policies to
the Framlington Healthcare Fund. In the case of Emerging Markets portfolio
performance, the data relates to a Canadian-based institutional emerging markets
portfolio managed by the same personnel of the sub-advisor with similar
investment objectives and policies to the Framlington Emerging Markets Fund.
The trust account performance is provided by Standard & Poor's Micropal, an
independent research organization that is a recognized source of performance
date in the UK unit trust industry. The data is U.S. dollar adjusted on the
basis of exchange rates provided by Datastream using WM/Reuters
43
<PAGE>
closing rates. The performance figures are net of brokerage commissions, actual
investment advisory fees and initial sales charges. The data assume the
reinvestment of net income and capital gain distributions. The trust account
returns are calculated using beginning offer and ending bid prices for periods
ended December 31, 1996.
You should not rely on the following performance data of the sub-advisor's
client accounts as an indication of future performance of the Framlington Funds.
It should be noted that the management of the Funds will be affected by Revenue
Code to qualify as a regulated investment company.
Period Ended UK Health S&P Healthcare
Dec. 31,1996 Portfolio Index
- ------------ ---------
Capital Change
--------------
1 Year.............. 10.75% 18.48%
3 Years............. 96.93% 100.49%
5 Years............. 99.43% 45.60%
Inception on
April 30, 1987...... 411.08% 239.64%
Performance for the Health trust account is calculated on an offer-bid basis; US
dollar adjusted total return net of all management fees but not reflective of
U.K. tax. Source: Standard & Poor's Micropal.
S&P Healthcare Composite Index performance shows capital change in U.S. dollars
but does not reflect the deduction of fees, expenses, and taxes. Source:
Datastream.
Canadian
Emerging MSCI Emerging
Period Ended Markets Markets Free
Dec. 31, 1996 Account Total Return
- ------------- ------- ------------
1 Year............. 5.16% 6.03%
Inception on
Nov. 1, 1994....... (3.68)% 12.37)%
MSCI Emerging Markets Free Index performance shows total return in U.S. dollars
but does not reflect the deduction of fees, expenses and taxes. Source:
Datastream.
The performance of the Canadian institutional account is measured by the World
Markets Company on a total return basis and has been re-calculated net of the
management fee charged the Canadian institutional account. The inception date of
the Canadian institutional account is November 1, 1994.
Indices
The S&P Healthcare Composite Index is the composite Healthcare section of the
S&P 500 Index as defined and tracked by S&P. This index covers securities listed
in the United States only.
The MSCI Emerging Markets Free Index is maintained by Morgan Stanley Capital
International and covers 26 countries and represents the investment
opportunities in emerging markets available to foreign investors. Total return
is calculated using the prices of the companies tracked and assumes the
reinvestment of dividends.
Portfolio Managers
Balanced Fund, Equity Selection Fund, Growth Opportunities Fund, Micro-Cap
Equity Fund and Small Company Growth Fund
A committee of professional portfolio managers employed by MCM makes investment
decisions for the Funds.
Growth & Income Fund
Otto Hinzmann, Jr. has been the Fund's portfolio manager since February 1995.
Mr. Hinzmann has been a Vice President and Director of Equity Management of MCM
or of Old MCM, Inc. ("Old MCM"), the predecessor to MCM, since January 1987.
International EquitY Fund
Todd B. Johnson and Theodore Miller jointly manage the Fund. Mr. Johnson,
President and Chief Investment Officer of World, and Mr.
Miller, senior portfolio manager of the Fund, have managed the Fund since July
1992 and October 1996, respectively. Mr. Miller previously worked as the primary
analyst for the Fund (1996) and for Interacciones Global Inc. (1993-1995).
Multi-Season Growth Fund
Leonard J. Barr II has been the Fund's portfolio manager since the Fund's
inception in April 1993. Mr. Barr is the Senior Vice
President and Director of Research of MCM.
ReaL Estate Equity Investment Fund
Peter K. Hoglund and Robert E. Crosby jointly manage the Fund. Mr. Hoglund, who
has managed the Fund since October 1996, was formerly the primary analyst of the
Fund (October 1994 to October 1996). Mr. Crosby, who has managed the Fund since
March 1998, was formerly the primary analyst of the Fund (October 1996 to March
1998).
44
<PAGE>
Mr. Crosby has been employed by MCM since 1993, and also serves as portfolio
manager for separately managed institutional accounts.
Small-Cap Value Fund And Value Fund
Gerald Seizert, Edward Eberle and Brian Wall jointly manage the Funds. Mr.
Seizert, Chief Investment Officer - Equities of the advisor, has managed the
Funds since they commenced operations. Prior to joining MCM in 1995, Mr. Seizert
was a Director and Managing Partner of Loomis, Sayles & Company, L.P. (1984-
1995). Mr. Eberle, who has managed the Small-Cap Value Fund since March 1997 and
the Value Fund since October 1996, was formerly the primary analyst for the
Funds. Prior to joining MCM in 1995, he was an Executive Vice President and
Portfolio Manager for Westpointe Financial Corporation. Mr. Wall, who has
managed the Funds since [March 1997], was formerly a primary analyst for the
Funds. Prior to joining MCM in 1995, he was a Senior Equity Analyst with
Woodbridge Capital Management, Inc. (1994-1995).
Framlington Emerging Markets Fund
A committee of professional portfolio managers employed by Framlington makes
investment decisions for the Fund. William Calvert heads the committee. Mr.
Calvert has been employed by Framlington since 1997. Prior to that he was
employed by Edmond de Rothchild Securities.
Framlington Global Financial Services Fund
A committee of professional managers employed by the MCM or Framlington makes
decisions for the Fund.
Framlington Healthcare Fund
Antony Milford, head of the Specialist Desk for Framlington, has been the Fund's
primary portfolio manager since the Fund's inception. Mr. Milford has managed
funds for Framlington since 1971.
Framlington International Growth Fund
A committee of professional portfolio managers employed by Framlington makes
investment decisions for the Fund. Simon Key, Chief Investment Officer of
Framlington, heads the committee. Mr. Key has managed the Fund for Framlington
since 1989.
45
<PAGE>
Financial Highlights
- -------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand each
Fund's financial performance for the past 5 years (or, if shorter, the period of
the Fund's operations). Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in a particular class of
the Fund (assuming reinvestment of all dividends and distributions). Because
Class A, Class B and Class C Shares of Equity Selection Fund, Growth
Opportunities Fund and Framlington Global Financial Services Fund had not
commenced operations on June 30, 1999, financial highlights are not presented
for those Funds. The information has been audited by Ernst & Young LLP,
independent accountants, whose report, along with each Fund's financial
statements, are included in the annual reports of the Funds, and are
incorporated by reference into the Statement of Additional Information. You may
obtain the annual reports without charge by calling (800) 438-5789.
<TABLE>
<CAPTION>
Balanced Fund(a)
-----------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e)
Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... ------- ------- ------- ------- -------- ---------
Income from investment operations:
Net investment income................
Net realized and unrealized gain/(loss) on
investments....................................
Total from investment operations...............
Less distributions:
Dividends from net investment income...........
Distributions from net realized gains..........
Total distributions............................
Net asset value, end of period.................
Total return(b)................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...........
Ratio of operating expenses to average net
assets.........................................
Ratio of net investment income to average net
assets.........................................
Portfolio turnover rate........................
Ratio of operating expenses to average net assets
without waivers................................
</TABLE>
_______________
46
<PAGE>
<TABLE>
<CAPTION>
Balanced Fund(a)
- ----------------------------------------------------------------------------------------------------------------------
Year Year Year Year Period Period Year Year Year Period
Ended Ended Ended Ended Ended ) Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e) 6/30/99 6/30/98 6/30/97(f) 6/30/96(f)
Class B Class B Class B Class B Class B Class B Class C Class C Class C Class C
------- ------- ------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Growth & Income Fund(a)
--------------------------------------------------------------------------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(g) 6/30/96(g) 6/30/95(d) 2/28/95(g)
Class A Class A Class A Class A Class A Class A
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............
Income from investment operations:
Net investment income............................
Net realized and unrealized gain on investments..
Total from investment operations.................
Less distributions:
Dividends from net investment income.............
Distributions from net realized gains............
Total distributions..............................
Net asset value, end of period...................
Total return (b).................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).............
Ratio of operating expenses to average
net assets.......................................
Ratio of net investment income to
average net assets...............................
Portfolio turnover rate..........................
Ratio of operating expenses to average
net assets without waivers.......................
</TABLE>
________________
48
<PAGE>
<TABLE>
<CAPTION>
Growth & Income Fund (a)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Period Period Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(g) 6/30/96(g) 6/30/95(d) 2/28/95(e) 6/30/99 6/30/98 6/30/97(g) 6/30/96(g)
Class B Class B Class B Class B Class B Class B Class C Class C Class C Class C
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
International Equity Fund(a)
------------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e,f)
Class A Class A Class A Class A Class A Class A
------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.....
Income from investment operations:
Net investment income....................
Net realized and unrealized gain on
investments..............................
Total from investment operations.........
Less distributions:
Dividends from net investment income.....
Distributions from net realized gains....
Distributions from capital...............
Total distributions......................
Net asset value, end of period...........
Total return (b).........................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's).....
Ratio of operating expenses to average
net assets...............................
Ratio of net investment income to average
net assets...............................
Portfolio turnover rate..................
Ratio of operating expenses to average
net assets without waivers...............
</TABLE>
____________________
50
<PAGE>
<TABLE>
<CAPTION>
International Equity Fund (a)
- ---------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Period Period Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e,f) 6/30/99 6/30/98 6/30/97(f) 6/30/96(f)
Class B Class B Class B Class B Class B Class B Class C Class C Class C Class C
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Micro-Cap Equity Fund (a)
------------------------------------------------------------------------------
Year Year Year Period Year Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/99 6/30/97(f) 6/30/98 6/30/97(f)
Class A Class A Class B Class A Class B Class B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...............
Income from investment operations:
Net investment income/(loss).......................
Net realized and unrealized gain/(loss)
on investments.....................................
Total from investment operations...................
Less distributions:
Dividends from net investment income...............
Distributions from net realized gains..............
Total distributions................................
Net asset value, end of period.....................
Total return (b)...................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...............
Ratio of operating expenses to average net
assets.............................................
Ratio of net investment income/(loss)
to average net assets..............................
Portfolio turnover rate............................
Ratio of operating expenses to average net assets
without waivers and/or expenses reimbursed.........
</TABLE>
_________________
52
<PAGE>
<TABLE>
<CAPTION>
Micro-Cap Equity Fund (a) Multi-Season Growth Fund(a)
- --------------------------------------------------------------------------------------------------------
Year Year Period Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/97(f) 6/30/99 6/30/98(f) 6/30/97(f) 6/30/96(f) 6/30/95(d,e,h)
Class C Class C Class C Class A Class A Class A Class A Class A
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
Multi-Season Growth Fund(a)
-----------------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/97(f) 6/30/96(f) 6/30/95(d,e,h)
Class B Class B Class B Class B Class B
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.....
Income from investment operations:
Net investment income/(loss).............
Net realized and unrealized gain/(loss)
on investments...........................
Total from investment operations.........
Less distributions:
Dividends from net investment income.....
Distributions from net realized gains....
Total distributions......................
Net asset value, end of period...........
Total return (b).........................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's).....
Ratio of operating expenses to average
net assets...............................
Ratio of net investment income to average
net assets...............................
Portfolio turnover rate..................
Ratio of operating expenses to average
net assets without waivers...............
</TABLE>
___________
54
<PAGE>
<TABLE>
<CAPTION>
Multi-Season Growth (a)
- -----------------------------------------------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/97(f) 6/30/96(f) 6/30/95(d,e,h)
Class C Class C Class C Class C Class C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
Real Estate Equity Investment Fund(a)
- ------------------------------------------------------------------------------------------------------
Year Year Year Year Period Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(e) 6/30/97 6/30/96(e) 6/30/95(d) 6/30/99 6/30/98(e) 6/30/97
Class A Class A Class A Class A Class A Class B Class B Class B
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
Real Estate Equity Investment Fund (a)
--------------------------------------------------------------------------
Year Period Year Year Year Period
Ended Ended Ended Ended Ended Ended
6/30/96(e) 6/30/95(d) 6/30/99 6/30/98(e) 6/30/97 6/30/96(e)
Class B Class B Class C Class C Class C Class C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......
Income from investment operations:
Net investment income/(loss)..............
Net realized and unrealized gain on
investments...............................
Total from investment operations..........
Less distributions:
Dividends from net investment income......
Distributions in excess of net investment
income....................................
Distributions from net realized gains.....
Distributions from paid-in capital........
Total distributions.......................
Net asset value, end of period............
Total return (b)..........................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's)......
Ratio of operating expenses to average
net assets................................
Ratio of net investment income/(loss) to
average net assets........................
Portfolio turnover rate...................
Ratio of operating expenses to average net
assets without waivers....................
</TABLE>
______________
57
<PAGE>
<TABLE>
<CAPTION>
Small-Cap Value Fund (a)
- -----------------------------------------------------------------------------------------------------------------------------
Year Year Period Year Year Period Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(e) 6/30/97(e) 6/30/99 6/30/98(e) 6/30/97(e) 6/30/99 6/30/98(e) 6/30/96(e)
Class A Class A Class A Class B Class B Class B Class C Class C Class C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Small Company Growth Fund (a)
-------------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/97(f) 6/30/96(f) 6/30/95(e) 2/28/95(d)
Class A Class A Class A Class A Class A Class A
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......
Income from investment operations:
Net investment income......................
Net realized and unrealized gain/(loss)
on investments.............................
Total from investment operations...........
Less distributions: Distributions from net
realized capital gains.....................
Total distributions........................
Net asset value, end of period.............
Total return (b)...........................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's).......
Ratio of operating expenses to average net
assets.....................................
Ratio of net investment loss to
average net assets.........................
Portfolio turnover rate....................
Ratio of operating expenses to average net
assets without waivers.....................
</TABLE>
______________
59
<PAGE>
<TABLE>
<CAPTION>
Small Company Growth Fund (a)
- -----------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Period Period Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/97(f) 6/30/96(f) 6/30/95(e) 2/28/95(d) 6/30/99 6/30/98(f) 6/30/97(f) 6/30/96(f)
Class B Class B Class B Class B Class B Class B Class C Class C Class C Class C
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Value Fund (a)
----------------------------------------------------------------------------------------------
Year Year Year Period Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d) 6/30/96(d) 6/30/99 6/30/98(d) 6/30/97(d) 6/30/96(d)
Class A Class A Class A Class A Class B Class B Class B Class B
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..
Income from investment operations:
Net investment income/(loss)..........
Net realized and unrealized gain on
investments...........................
Total from investment operations......
Less distributions: Dividends from net
investment income..
Distributions from net realized gains.
Total distributions...................
Net asset value, end of period........
Total return (b)......................
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's)..
Ratio of operating expenses to average
net assets............................
Ratio of net investment income/(loss)
to average net assets.................
Portfolio turnover rate...............
Ratio of operating expenses to average
net assets without waivers............
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
Value Fund (a)
------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d) 6/30/96(d)
Class C Class C Class C Class C
------- ------- ------- -------
<S> <C> <C> <C> <C>
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
Framlington Emerging Markets Fund (a)
--------------------------------------------------------------------------------
Year Year Period Year Year Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d) 6/30/99 6/30/98(d) 6/30/97(d)
Class A Class A Class A Class B Class B Class B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....
Income from investment operations:
Net investment income...................
Net realized and unrealized gain/(loss)
on investments..........................
Total from investment operations........
Less distributions:
Dividends from net investment income..
Distributions from net realized gains...
Distributions in excess of net realized
gains...................................
Total distributions.....................
Net asset value, end of period..........
Total return (b)........................
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's)....
Ratio of operating expenses to average
net assets..............................
Ratio of net investment income/(loss)
to average net assets...................
Portfolio turnover rate.................
Ratio of operating expenses to average
net assets without expenses reimbursed..
</TABLE>
_________________________
63
<PAGE>
<TABLE>
<CAPTION>
Framlington Emerging Markets Fund (a)
--------------------------------------
Year Year Period
Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d)
Class C Class C Class C
------- ------- -------
<S> <C> <C> <C>
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
Framlington Healthcare Fund (a)
-----------------------------------------------------------------------------------------------------------------
Year Year Period Year Year Period Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97 6/30/99 6/30/98(d) 6/30/97 6/30/99 6/30/98(d) 6/30/97
Class A Class A Class A Class B Class B Class B Class C Class C Class C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
Framlington International Growth Fund (a)
-------------------------------------------------------------------------------
Year Year Period Year Year Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d) 6/30/99 6/30/98(d) 6/30/97(d)
Class A Class A Class A Class B Class B Class B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....
Income from investment operations:
Net investment income/(loss)............
Net realized and unrealized gain on
investments.............................
Total from investment operations........
Less distributions: Dividends from net
investment income.......................
Distributions from net realized gains...
Distributions in excess of net
realized gains..........................
Total distributions.....................
Net asset value, end of period..........
Total return (b)........................
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's)....
Ratio of operating expenses to average
net assets..............................
Ratio of net investment income/(loss)
to average net assets...................
Portfolio turnover rate.................
Ratio of operating expenses to average
net assets without expenses reimbursed..
</TABLE>
_____________
66
<PAGE>
<TABLE>
<CAPTION>
Framlington International Growth Fund (a)
- -------------------------------------------------
Year Period Period
Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d)
Class C Class C Class C
------- ------- -------
<S> <C> <C> <C>
</TABLE>
67
<PAGE>
For More Information
<TABLE>
<CAPTION>
To Obtain Information:
----------------------------------------------------------
<S> <C>
More information about the Funds is available
free upon request, including the following: By telephone
Call 1-800-438-5789
Annual/Semi-Annual Reports
By mail
You will receive unaudited semi-annual reports The Munder Funds
and audited annual reports on a regular basis 480 Pierce Street
from the Funds. In addition, you will also Birmingham, MI 48009
receive updated Prospectuses or Supplements
to this rospectus. In order to eliminate On the Internet
duplicate mailings, the Funds will only send one Text-only versions of fund documents can be
copy of the above communications to (1) accounts viewed online or downloaded from:
with the same primary record owner, (2) joint
tenant accounts, (3) tenant in common accounts Securities and Exchange Commission
and (4) accounts which have the same address. http://www.sec.gov
Statement Of Additional Information You can also obtain copies by visiting the
Securities and Exchange Commission's Public
Provides more details about the Funds and their Reference Room in Washington, D.C. (phone
policies. A current Securities and Exchange 1-800-SEC-0330) or by sending your request
Commission Statement of Additional Information and a duplicating fee to the Securities and
is on file with the and is incorporated by Exchange Commission's Public Reference Section,
reference (is legally considered part of this Washington, D.C. 20549-6009.
prospectus).
You may also find more information about the
Funds on the Internet at:
http://www.munderfunds.com
----------------------------------------------------------
</TABLE>
The Munder Funds, Inc.
SEC file number: 811-7346
The Munder Framlington Funds Trust
SEC file number: 811-7897
The Munder Funds Trust
SEC file number: 811-5899
<PAGE>
Class K Shares
[Munder Logo]
PROSPECTUS
October 26, 1999
THE MUNDER EQUITY FUNDS
Balanced
Equity Selection
Growth & Income
Growth Opportunities
Index 500
International Equity
Micro-Cap Equity
Multi-Season Growth
Real Estate Equity Investment
Small-Cap Value
Small Company Growth
Value
THE MUNDER FRAMLINGTON FUNDS
Framlington Emerging Markets
Framlington Global Financial Services
Framlington Healthcare
Framlington International Growth
THE MUNDER INCOME FUNDS
Bond
Intermediate Bond
International Bond
U.S. Government Income
Michigan Tax-Free Bond
Tax-Free Bond
Tax-Free Short-Intermediate Bond
THE MUNDER MONEY MARKET FUNDS
Cash Investment
Tax-Free Money Market
U.S. Treasury Money Market
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities nor passed upon the accuracy or
adequacy of this prospectus. It is a criminal offense to state otherwise.
<PAGE>
Table Of Contents
Risk/Return Summary
. Equity Funds
. Income Funds
. Tax-Free Funds
. Money Market Funds
Summary of Principal Risks
Who May Want To Invest
Fees And Expenses
More About The Funds
Glossary
Special Risks And Other Considerations
Additional Description of Investments And Investment Strategies
Your Investment
How To Reach The Funds
Purchasing Shares
Redeeming Shares
Additional Policies For Purchases And Redemptions
Shareholder Privileges
Service Agents
Pricing of Fund Shares
Distributions
Federal Tax Considerations
Taxes On Distributions
Taxes On Sales
Other Considerations
Management
Investment Advisors and Sub-advisor
Portfolio Managers
Financial Highlights
Back Cover For Additional Information
<PAGE>
Risk/Return Summary
- --------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goals and principal investment
strategies of the Funds and the principal risks of investing in the Funds. For
further information on these and the Funds' other investment strategies and
risks, please read the section entitled More About The Funds.
The Risk/Return Summary includes a table for each Fund showing its average
annual returns and a bar chart showing its annual returns. The table and bar
chart provide an indication of the historical risk of an investment in each Fund
by showing:
. how the Fund's average annual returns for 1, 5, and 10 years (or over the
life of the Fund if the Fund is less than 10 years old) compare to those of
a broad based securities market index; and;
. changes in the Fund's performance from year to year over 10 years (or over
the life of the Fund if the Fund is less than 10 years old).
When you consider this information, please remember that a Fund's performance in
past years is not necessarily an indication of how the Fund will perform in the
future.
An investment in the Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
Certain terms used in this prospectus are defined in the Glossary.
2
<PAGE>
Equity Funds
Balanced Fund
Goal
The Fund's goal is to provide an attractive investment return through a
combination of growth of capital and current income.
Principal Investment Strategies
The Fund pursues its goal by allocating its assets among three asset groups:
equity securities, fixed income securities and cash equivalents.
The Fund normally will invest at least 25% of its assets in fixed income
securities and no more than 75% of its assets in equity securities. The Fund
will notify shareholders at least 30 days before changing this policy.
The advisor will allocate the Fund's assets to the three asset groups based on
its view of the following factors, among others:
. general market and economic conditions and trends;
. interest rates and inflation rates;
. fiscal and monetary developments; and
. long-term corporate earnings growth.
The advisor will try to take advantage of changing economic conditions by
adjusting the ratio of equity securities to fixed income securities or cash
equivalents. For example, if the advisor believes that rapid economic growth
will lead to better corporate earnings in the future, then it might increase the
Fund's equity securities holdings and reduce its fixed income securities and
cash equivalents holdings.
The Fund's fixed income securities include:
. U.S. Government securities;
. obligations of foreign governments;
. corporate obligations;
. zero coupon bonds;
. variable and floating rate securities;
. mortgage and other asset-backed securities; and
. stripped securities.
The Fund's cash equivalents are short-term, high-quality money market
instruments and include:
. commercial paper;
. bankers' acceptances and certificates of deposit;
. corporate obligations; and
. U.S. Government securities.
The Fund may also invest in foreign securities and enter into futures and
options on futures contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk. To the extent that
the Fund enters into futures and options on futures contracts, it may be subject
to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
1 Year 5 Years Inception
(4/16/93)
--------- ---------- -------------
Class K
[Index]
3
<PAGE>
Equity Selection Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities.
The Fund invests in equity securities which the advisor believes are undervalued
compared to stocks of other companies in the same industry.
The Fund generally invests in companies with market capitalizations of at least
$1 billion.
The Fund diversifies its assets by industry in approximately the same weightings
as those of the S&P 500.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and medium-
size company stock risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
As of the date of this prospectus, the Fund had not commenced operations and,
therefore, does not have annual returns for a full calendar year. For this
reason, a bar chart and performance table showing performance information and
information on the Fund's best and worst calendar quarters is not provided in
this prospectus.
4
<PAGE>
Growth & Income Fund
Goal
The Fund's goal is to provide capital appreciation and current income.
Principal Investment Strategies
The Fund pursues its goal by investing primarily in dividend-paying equity
securities. Under normal circumstances, the Fund will invest at least 65% of its
assets in income-producing common stocks and convertible preferred stocks.
The Fund may also purchase fixed income securities which are convertible into or
exchangeable for common stock.
The advisor generally selects large, well-known companies that it believes have
favorable prospects for dividend growth and capital appreciation. The Fund will
seek to produce a current yield greater than the S&P 500.
The Fund focuses on dividend-paying equity securities because, over time,
dividend income has accounted for a significant portion of the total return of
the S&P 500. In addition, dividends are usually a more stable and predictable
source of return than capital appreciation. The advisor believes that stocks
which distribute a high level of current income generally have more stable
prices than those which pay below average dividends.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
Calendar Year Total Return
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_____________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
1 Year Inception
(7/5/94)
------------- ----------------
Class K
[Index]
5
<PAGE>
Growth Opportunities Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in the equity
securities of companies with market capitalizations between $500 million and $10
billion.
Its style, which focuses on both growth prospects and valuation, is known as
GARP (Growth at a Reasonable Price) and seeks to produce attractive returns
during various market environments.
The advisor chooses the Fund's investments by reviewing the earnings growth of
approximately 10,000 companies over the past three years and investing in
approximately 50 to 100 companies based on:
. superior earnings growth;
. financial stability;
. relative market value; and
. price changes compared to the S&Ps MidCap 400 Index.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and medium-
size company stock risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
As of the date of this prospectus, the Fund has not completed a full calendar
year of operations. For this reason, a bar chart and performance table showing
performance information and information on the Fund's best and worst calendar
quarters is not provided in this prospectus.
6
<PAGE>
Index 500 Fund
Goal
The Fund's goal is to provide performance and income that is comparable to the
S&P 500. The S&P 500 is an index of 500 stocks which emphasizes large
capitalization companies.
Principal Investment Strategies
The Fund pursues its goal by normally holding the securities of at least 400 of
the stocks in the S&P 500.
The Fund is managed through the use of a "quantitative" investment approach and
tries to mirror the composition and performance of the S&P 500 through
statistical procedures. As a result, the advisor does not use traditional
methods of fund investment management, i.e., it does not select stocks on the
basis of economic, financial and market analysis.
The Fund will try to achieve a correlation between the performance of its
portfolio and that of the S&P 500 of at least .95. A correlation of 1.0 would
mean that the changes in the Fund's price mirror exactly the changes in the S&P
500.
The Fund may also enter into futures contracts.
Principal Risks
Among the principal risks of investing in the Fund is market risk. To the
extent that the Fund purchases foreign securities, it may be subject to foreign
securities risk. To the extent that the Fund enters into futures contracts, it
may be subject to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (12/7/92)
----------- ------------ -----------
Class K
[Index]
7
<PAGE>
International Equity Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing primarily in foreign securities including
American Depositary Receipts.
Under normal market conditions, at least 65% of the Fund's assets are invested
in equity securities in at least three foreign countries. The Fund mostly
invests in mature markets, but may also invest in emerging markets.
The Fund emphasizes companies with a market capitalization of at least $250
million.
At least once a quarter, the advisor creates a list of foreign securities and
American Depositary Receipts which the Fund may purchase based on the country
where the company is located, its competitive advantages, its past financial
record, its future prospects for growth and the market for its securities. The
advisor updates the securities list frequently (at least quarterly), adds new
securities to the list if they are eligible and sells securities not on the
updated securities list as soon as practicable.
After the advisor creates the securities list, it divides the list into two
sections. The first section is designed to provide broad coverage of
international markets. The second section increases exposure to securities that
the advisor expects will perform better than other stocks in their industry
sectors and their markets as a whole. When the advisor believes broader market
exposure will benefit the Fund, it will allocate up to 100% of the Fund's assets
in first section securities. When the advisor identifies strong potential for
specific securities to perform well, the Fund may invest up to 50% of its assets
in second section securities.
The Fund may also enter into futures and options on futures contracts, forward
currency exchange contracts and purchase and sell options.
Principal Risks
Among the principal risks of investing in the Fund are market risk, foreign
securities risk and currency risk. To the extent that the Fund enters into
futures and options on futures contracts, and forward currency exchange
contracts, and purchases and sells options, it may be subject to derivatives
risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (11/23/92)
------------ ------------ -------------
Class K
[Index]
8
<PAGE>
Micro-Cap Equity Fund
Goal
The Fund's goal is to provide capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of small capitalization companies. Small capitalization companies
means companies having a market capitalization within the range of the companies
included in the Wilshire Micro-Cap Index. As of the date of this prospectus,
such capitalizations do not exceed approximately $300 million, which is
considerably less than the market capitalization of S&P 500 companies.
The Fund attempts to provide investors with potentially higher returns than a
fund that invests primarily in 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
higher returns due to inefficiencies in the marketplace.
The advisor will choose companies that:
. present the ability to grow significantly over the next several years;
. may benefit from changes in technology, regulations and industry sector
trends; and
. are still in the developmental stage and may have limited product lines.
There is no limit on the length of operating history for the companies in which
the Fund may invest. The Fund may also invest in equity securities of larger
capitalization companies. The Fund may invest without limit in initial public
offerings of small capitalization companies.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and small
company stock risk. To the extent that the Fund purchases foreign securities,
it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
1 Year Inception
(12/3/96)
------------- ---------------
Class K
[Index]
9
<PAGE>
Multi-Season Growth Fund
Goal
The Fund's goal is to provide long-term capital appreciation. This goal is
"fundamental" and cannot be changed without shareholder approval.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities. The Fund generally invests in equity securities of companies with
market capitalizations over $1 billion. Its style, which focuses on both growth
prospects and valuation, is known as GARP (Growth at a Reasonable Price) and
seeks to produce attractive returns during various market environments.
The advisor chooses the Fund's investments by reviewing the earnings growth of
approximately 5,500 companies over the past five years and investing in
approximately 50 to 100 companies based on:
. superior earnings growth;
. financial stability;
. relative market value; and
. price changes compared to the S&P 500.
The Fund may also purchase foreign securities.
Principal Risks
Among the principal risks of investing in the Fund is market risk. To the
extent that the Fund purchases foreign securities, it may be subject to foreign
securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (6/23/95)
------------ -------------
Class K
[Index]
10
<PAGE>
Real Estate Equity Investment Fund
Goal
The Fund's goal is to provide both capital appreciation and current income.
This goal is "fundamental" and cannot be changed without shareholder approval.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its total assets in equity securities of U.S. companies which are
principally engaged in the real estate industry or which own significant real
estate.
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. The Fund will not own real estate directly.
The companies in which the Fund primarily invests include:
. equity real estate investment trusts ("REITS");
. brokers, home builders and real estate developers;
. companies with substantial real estate holdings (for example, paper and
lumber producers, hotels and entertainment companies);
. manufacturers and distributors of building supplies;
. mortgage REITS; and
. financial institutions which issue or service mortgages.
In addition, the Fund may invest:
. up to 35% of its assets in companies other than real estate industry
companies;
. in fixed income securities including up to 5% of its assets in debt
securities rated below investment grade or unrated if secured by real
estate assets and if the advisor believes that the underlying collateral is
sufficient; and
. in REITS only if they are traded on a securities exchange or NASDAQ.
Principal Risks
Among the principal risks of investing in the Fund are market risk and sector
risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (10/3/96)
-------------- ------------------
Class K
[Index]
11
<PAGE>
Small-Cap Value Fund
Goal
The Fund's goal is to provide long-term capital appreciation, with income as a
secondary objective.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its assets in equity securities of small capitalization companies. Small
capitalization companies means companies with market capitalizations within the
range of the companies in the Russell 2000 Index. As of the date of this
prospectus, such capitalizations do not exceed approximately $1.5 billion, which
is less than the market capitalization of S&P 500 companies.
The Fund attempts to provide investors with potentially higher returns than a
fund that invests primarily in larger, more established companies. Since small
companies are generally not as well known to investors and have less of an
investor following than larger companies, they may provide higher returns due to
inefficiencies in the marketplace.
The advisor will concentrate on companies that it believes are undervalued. A
company's equity securities may be undervalued because the company is
temporarily overlooked or out of favor due to general economic conditions, a
market decline, industry conditions or developments affecting the particular
company. The Fund will usually invest in equity securities of companies with
price/earnings ratios, price/cash flow ratios and price/book values that are low
relative to the general market.
In addition to valuation, the advisor considers these factors, among others, in
choosing companies:
. a stable or improving earnings record;
. sound finances;
. above-average growth prospects;
. participation in a fast growing industry;
. strategic niche position in a specialized market; and
. adequate capitalization.
The Fund may invest in equity securities of larger capitalization companies.
The Fund may also invest in foreign securities and enter into futures and
options on futures contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk and small
company stock risk. To the extent that the Fund purchases foreign securities,
it may be subject to foreign securities risk. To the extent that the Fund
enters into futures and options on futures contracts, it may be subject to
derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (12/31/96)
------------ --------------
Class K
[Index]
12
<PAGE>
Small Company Growth Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its assets in equity securities of small capitalization companies with
market capitalizations below $1 billion, which is less than the market
capitalization of S&P 500 companies.
The Fund attempts to provide investors with potentially higher returns than a
fund that invests primarily in 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
higher returns due to inefficiencies in the marketplace.
The advisor considers these factors, among others, in choosing companies:
. above-average growth prospects;
. participation in a fast-growing industry;
. strategic niche position in a specialized market; and
. adequate capitalization.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and small
company stock risk. To the extent that the Fund purchases foreign securities,
it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (11/23/92)
------------- ------------- ------------
Class K
[Index]
13
<PAGE>
Value Fund
Goal
The Fund's primary goal is to provide long-term capital appreciation. Its
secondary goal is to provide income.
Principal Investment Strategies
The Fund pursues its goals by investing primarily in the equity securities of
well-established companies with intermediate to large capitalizations, which
typically exceed $750 million.
The Fund will invest at least 65% of its assets in equity securities.
The advisor will focus on companies that it believes are undervalued. A
company's equity securities may be undervalued because the company is
temporarily overlooked or out of favor due to general economic conditions, a
market decline, industry conditions or developments affecting the particular
company. The Fund will usually invest in equity securities of companies with
price/earnings ratios, price/cash flow ratios and price/book values that are low
relative to the general market.
In addition to valuation, the advisor considers these factors, among others, in
choosing companies:
. a stable or improving earnings record;
. sound finances;
. above-average growth prospects;
. participation in a fast growing industry;
. strategic niche position in a specialized market; and
. adequate capitalization.
The Fund may also invest in foreign securities and enter into futures and
options on futures contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk and medium-
size company stock risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk. To the extent that
the Fund enters into futures and options on futures contracts, it may be subject
to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (11/30/95)
----------- ------------
Class K
[Index]
14
<PAGE>
Framlington Emerging Markets Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of companies in emerging market countries, as defined by the World
Bank, the International Finance Corporation, the United Nations or the European
Bank for Reconstruction and Development.
A company will be considered to be in an emerging market country if:
. the company is organized under the laws of, or has a principal office in,
an emerging market country;
. the company's stock is traded primarily in an emerging market country;
. most of the company's assets are in an emerging market country; or
. most of the company's revenues or profits come from goods produced or sold,
investments made or services performed in an emerging market country.
The Fund may also invest in foreign securities of companies located in countries
with mature markets.
Principal Risks
Among the principal risks of investing in the Fund are market risk, foreign
securities risk, emerging markets risk, currency risk and medium-size company
stock risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (1/10/97)
----------- ------------
Class K
[Index]
15
<PAGE>
Framlington Global Financial Services Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of U.S. and foreign companies which are principally engaged in the
financial services industry and companies providing services primarily within
the financial services industry. The Fund focuses specifically on companies
which are likely to benefit from growth or consolidation in the financial
services industry.
Examples of companies in the financial services industry are:
. commercial, industrial and investment banks;
. savings and loan associations;
. brokerage companies;
. consumer and industrial finance companies;
. real estate and leasing companies;
. insurance companies; and
. holding companies for each of the above.
A company is "principally engaged" in the financial services industry if at
least 50% of its gross income, net sales or net profits comes from activities in
the financial services industry or if the company dedicates more than 50% of its
assets to the production of revenues from the financial services industry.
The sub-advisor allocates assets among countries based on:
. its analysis of the trends in the financial services industry in particular
regions;
. the relative valuation of financial services companies in different
regions; and
. its assessment of the prospects for a particular equity market and its
currency.
Under normal market conditions, the Fund invests at least 65% of its assets in
at least three different countries, including the United States. The Fund may
invest in companies located in countries with mature markets and in those with
emerging markets.
The Fund may also enter into forward currency exchange contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk, sector risk,
foreign securities risk, currency risk and medium-size company stock risk. To
the extent that the Fund enters into forward currency exchange contracts, it may
be subject to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
As of the date of this prospectus, the Fund has not completed a full calendar
year of operations. For this reason, a bar chart and performance table showing
performance information and information on the Fund's best and worst calendar
quarters is not provided in this prospectus.
16
<PAGE>
Framlington Healthcare Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing in equity securities of companies
providing healthcare and medical services and products worldwide. Currently,
most of these companies are located in the United States.
The Fund will invest in:
. pharmaceutical producers;
. biotechnology firms;
. medical device and instrument manufacturers;
. distributors of healthcare products;
. healthcare providers and managers; and
. other healthcare service companies.
Under normal market conditions, the Fund will invest at least 65% of its assets
in healthcare companies, which are companies for which at least 50% of sales,
earnings or assets arise from or are dedicated to health services or medical
technology activities.
The Fund's investments may include foreign securities of companies located in
countries with mature markets.
Principal Risks
Among the principal risks of investing in the Fund are market risk, sector risk,
foreign securities risk, currency risk and medium-size company stock risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
1 Year Inception
(4/1/97)
---------- -----------
Class K
[Index]
17
<PAGE>
Framlington International Growth Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of issuers located in at least three foreign countries.
The sub-advisor will choose companies that demonstrate:
. above-average profitability;
. high quality management; and
. the ability to grow significantly in their countries.
The Fund may invest in companies located in countries with mature markets and in
those with emerging markets. The Fund may also enter into forward currency
exchange contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk, foreign
securities risk, currency risk, emerging markets risk and medium-size company
stock risk. To the extent that the Fund enters into forward currency exchange
contracts, it may be subject to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (1/10/97)
------------- -------------
Class K
[Index]
18
<PAGE>
Income Funds
Bond Fund
Goal
The Fund's primary goal is to provide a high level of current income. Its
secondary goal is capital appreciation.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its total assets in a broad range of bonds and other fixed income
securities. These may include:
. U.S. Government securities and repurchase agreements collateralized by such
securities;
. obligations of state, local and foreign governments;
. obligations of domestic and foreign banks;
. obligations of domestic and foreign corporations;
. zero coupon bonds, debentures and convertible debentures;
. mortgage and other asset-backed securities; and
. stripped securities.
The Fund's strategy focuses on areas where the advisor believes value can be
added. These include credit analysis and analysis of such factors as interest
rate relationships, the relative attractiveness of bond market sectors and the
characteristics of individual issuers.
The Fund's dollar-weighted average maturity will generally range between six and
fifteen years.
The Fund will purchase only fixed income securities that are rated investment
grade or better, or if unrated, are of comparable quality.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk and
credit risk. To the extent that the Fund purchases foreign securities, it may be
subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (11/23/92)
------------- ------------ --------------
Class K
[Index]
19
<PAGE>
Intermediate Bond Fund
Goal
The Fund's goal is to provide a competitive rate of return which, over time,
exceeds the rate of inflation and the return provided by money market
instruments.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its total assets in a broad range of bonds and other fixed income
securities. These may include:
. U.S. Government securities and repurchase agreements collateralized by such
securities;
. obligations of state, local and foreign governments;
. obligations of domestic and foreign banks;
. obligations of domestic and foreign corporations;
. zero coupon bonds, debentures and convertible debentures;
. mortgage and other asset-backed securities; and
. stripped securities.
The Fund's strategy focuses on areas where the advisor believes value can be
added. These include credit analysis and analysis of such factors as interest
rate relationships, the relative attractiveness of bond market sectors and the
characteristics of individual issues.
The Fund's dollar-weighted average maturity will generally range between three
and eight years.
The Fund will purchase only fixed income securities that are rated investment
grade or better, or if unrated, are of comparable quality.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk and
credit risk. To the extent that the Fund purchases foreign securities, it may be
subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (11/20/92)
----------- ----------- --------------
Class K
[Index]
20
<PAGE>
International Bond Fund
Goal
The Fund's goal is to realize a competitive total return through a combination
of current income and capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its total assets in a broad range of bonds and other fixed income
securities of foreign issuers. These may include:
. obligations issued by foreign governments, their agencies,
instrumentalities or political subdivisions;
. obligations issued or guaranteed by supranational organizations (such as
the World Bank);
. obligations of foreign banks or bank holding companies; and
. obligations of foreign corporations.
The Fund will invest in the securities of issuers in at least three foreign
countries.
The Fund's strategy focuses on analysis of bond yield relationships and
specifically focuses on making allocation decisions based on yield relationships
between countries, pricing inefficiencies in the marketplace and yield curve
analysis.
The Fund's dollar-weighted average maturity will generally range between three
and fifteen years.
The Fund may invest a portion of its assets in domestic obligations, including
U.S. Government securities and obligations of domestic banks and corporations.
The Fund is "non-diversified" under the 1940 Act and may invest more of its
assets in fewer issuers than a "diversified" investment company.
The Fund may enter into forward currency exchange contracts.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, foreign securities risk, currency risk and non-diversified risk. To
the extent the Fund enters into forward currency contracts, it may be subject to
derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (3/25/97)
--------- --------------
Class K
[Index]
21
<PAGE>
U.S. Government Income Fund
Goal
The Fund's goal is to provide high current income.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its total assets in a broad range of U.S. Government securities and
repurchase agreements relating to such securities.
The Fund's strategy focuses on areas where the advisor believes value can be
added. These include credit analysis and an analysis of such factors as
interest rate relationships, the relative attractiveness of the government-
related sectors of the market and the characteristics of individual issues.
The Fund's dollar-weighted average maturity generally will range between six and
fifteen years.
The Fund may also invest in other fixed income securities.
Principal Risks
The principal risk of investing in the Fund is interest rate risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (7/5/94)
---------- ------------
Class K
[Index]
22
<PAGE>
Tax-Free Funds
Michigan Tax-Free Bond Fund
(Offered only in the State of Michigan.)
Goal
The Fund's goal is to provide as high a level of current interest income exempt
from regular Federal income taxes and Michigan state income tax as is consistent
with prudent investment management and preservation of capital.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
80% of the Fund's net assets in municipal obligations issued by the State of
Michigan and its political subdivisions. The interest on these obligations is
exempt from Federal income taxes and Michigan state income tax.
The Fund will invest primarily in Michigan municipal obligations that have
remaining maturities of between three and thirty years. The Fund's dollar-
weighted average maturity will generally range between ten and twenty years.
The Fund is "non-diversified" under the 1940 Act and may invest more of its
assets in fewer issuers than a "diversified" investment company.
The Fund may also invest in other fixed income securities.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk,
credit risk and non-diversified risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
[1994: _____%]
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (1/3/94)
----------- ------------ ------------
Class K
[Index]
23
<PAGE>
Tax-Free Bond Fund
Goal
The Fund's goals are to provide a high level of current interest income exempt
from Federal income taxes and to generate as competitive a long-term rate of
return as is consistent with prudent investment management and preservation of
capital.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its net assets in municipal obligations.
Under normal market conditions, at least 80% of the Fund's net assets will be
invested in municipal obligations whose interest is exempt from regular Federal
income tax. This fundamental policy may only be changed with shareholder
approval.
In selecting securities for the Fund, the advisor places a premium on value and
diversifies the Fund's portfolio holdings across maturities, industries and
geographic locations.
The Fund invests primarily in intermediate-term and long-term municipal
obligations that have remaining maturities of between three and thirty years.
The Fund's dollar-weighted average maturity will generally range between ten and
twenty years.
The Fund may also invest in other fixed income securities.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk and
credit risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (7/5/94)
------------- ------------
Class K
[Index]
24
<PAGE>
Tax-Free Short-Intermediate Bond Fund
Goal
The Fund's goals are to provide a competitive level of current interest income
exempt from regular Federal income taxes and a total return which, over time,
exceeds the rate of inflation and the return provided by tax-free money market
instruments.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its net assets in municipal obligations.
Under normal market conditions, at least 80% of the Fund's net assets will be
invested in municipal obligations whose interest is exempt from regular Federal
income tax.
The Fund generally buys obligations with remaining maturities of five years or
less. The Fund's dollar-weighted average maturity will generally range between
two and five years.
The Fund may invest more than 25% of its assets in municipal obligations issued
by the State of Michigan and its political subdivisions.
The Fund is "non-diversified" under the 1940 Act and may invest more of its
assets in fewer issuers than a "diversified" investment company.
The Fund may also invest in other fixed income securities.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk,
credit risk and non-diversified risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1989: _____%
1990: _____%
1991: _____%
1992: _____%
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
1 Year 5 Years 10 Years
-------------- ------------- ---------------
Class K
[Index]
25
<PAGE>
- --------------------------------------------------------------------------------
Money Market Funds
- --------------------------------------------------------------------------------
Cash Investment Fund
Goal
The Fund's primary goal is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
The Fund's investments may include fixed and variable rate securities.
The Fund may also invest in foreign securities.
Principal Risks
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Among the principal risks of investing in the Fund are interest rate risk and
credit risk. To the extent that the Fund purchases foreign securities, it may be
subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1989: _____%
1990: _____%
1991: _____%
1992: _____%
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
__________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
1 Year 5 Years 10 Years
-------------- -------------- ---------------
Class K
[Index]
26
<PAGE>
Tax-Free Money Market Fund
Goal
The Fund's goal is to provide as high a level of current interest income exempt
from Federal income taxes as is consistent with maintaining liquidity and
stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing substantially all of its assets in short-
term, U.S. dollar-denominated municipal obligations, the interest on which is
exempt from regular Federal income tax.
Under normal market conditions, the Fund will invest at least 80% of its net
assets in municipal obligations.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
Principal Risks
Although the Fund seeks to preserve the value of our investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Among the principal risks of investing in the Fund are interest rate risk and
credit risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
___________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
1 Year 5 Years Inception
(11/23/92)
------------- ----------- -------------
Class K
[Index]
You may call 1-800 [ ] to obtain the Fund's current 7-day yield.
27
<PAGE>
U.S. Treasury Money Market Fund
Goal
The Fund's goal is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing its assets solely in short-term bonds,
bills and notes, issued by the U.S. Treasury (including "stripped" securities)
and in repurchase agreements relating to such obligations.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
Principal Risks
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Among the principal risks of investing in the Fund is interest rate risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
__________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
1 Year 5 Years Inception
(11/25/92)
-------- --------- ---------------
Class K
[Index]
You may call 1-800 [ ] to obtain the Fund's current 7-day yield.
28
<PAGE>
Summary of Principal Risks of The Funds
The share price of the Funds will change daily based on market conditions and
other factors. Therefore, you may lose money if you invest in the Funds.
The following summary briefly describes the principal risks that may affect a
Fund's portfolio as a whole. More information about the Funds' principal
investment strategies and their associated risks is contained in the section
entitled "More About the Funds."
SECTOR RISK is the risk of loss due to concentrating investments in a particular
industry sector. Adverse economic, business or political developments affecting
that industry sector could have a major effect on the value of the Fund's
investments. Real Estate Equity Investment Fund, Global Financial Services Fund
and Healthcare Fund are particularly subject to this Risk.
CREDIT (OR DEFAULT) RISK is the risk of loss because an issuer of a security may
default on its payment obligations. Also, an issuer may suffer adverse changes
in its financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security and in shares of the
Fund. A change in the quality rating of a bond can affect the bond's liquidity
and make it more difficult for the Fund to sell. Funds particularly subject to
this risk are: Balanced Fund, Growth & Income Fund, Bond Fund, Intermediate Bond
Fund, International Bond Fund, U.S. Government Income Fund, Michigan Tax-Free
Bond Fund, Tax-Free Bond Fund, Tax-Free Short-Intermediate Bond Fund, Cash
Investment Fund and Tax-Free Money Market Fund.
DERIVATIVES RISK is the risk that loss may result from a Fund's use of futures
and options on futures contracts, options, forward currency exchange contracts
and other forms of derivative instruments. The primary risk with many
derivatives is that they can amplify a gain or loss, potentially earning or
losing substantially more money than the actual cost of the derivative
instrument. Funds particularly subject to this risk are: Balanced Fund,
International Equity Fund, Index 500 Fund, Value Fund, Small-Cap Value Fund,
Global Financial Services Fund, International Growth Fund and International Bond
Fund.
FOREIGN SECURITIES RISK is the risk of loss because investments by a Fund in
foreign securities may experience greater and more rapid change in value than
investments in U.S. securities. Foreign securities are generally more volatile
and less liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available about
foreign companies. Issuers of foreign securities are generally not subject to
the same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards. Funds particularly subject to this risk are: Balanced Fund,
Equity Selection Fund, Growth & Income Fund, Growth Opportunities Fund,
International Equity Fund, Micro-Cap Equity Fund, Value Fund, Small-Cap Value
Fund, Small Company Growth Fund, Multi-Season Growth Fund, Emerging Markets
Fund, Global Financial Services Fund, Healthcare Fund, International Growth
Fund, Bond Fund, Intermediate Bond Fund, International Bond Fund and Cash
Investment Fund.
Currency Risk. Funds that invest in foreign securities denominated in
foreign currencies may also be subject to currency risk. This is the
risk of loss because a decline in the value of foreign currencies
relative to the U.S. dollar will reduce the value of a Fund's portfolio
securities denominated in those currencies. Funds particularly subject
to this risk are: International Equity Fund, Emerging Markets Fund,
Global Financial Services Fund, Healthcare Fund, International Growth
Fund and International Bond Fund.
Emerging Markets Risk. Funds that invest in foreign securities of
issuers in emerging market countries are subject to emerging markets
risk. Investing in emerging market countries heightens the risks
presented by investing in foreign securities and currencies and may
result in loss to the Fund. Numerous emerging countries have recently
experienced serious, and potentially continuing, economic and political
problems. Stock markets in many emerging countries are relatively small
and risky. Foreigners are often limited in their ability to invest in,
and withdraw assets from, these markets. Additional restrictions may be
imposed under emergency conditions. Funds particularly subject to this
risk are: International Equity Fund, Emerging
29
<PAGE>
Markets Fund and International Growth Fund.
INTEREST RATE RISK is the risk of loss because increases in prevailing interest
rates will cause fixed-income securities held by a Fund to decline in value.
Longer term bonds are generally more sensitive to interest rate changes than
shorter term bonds. Generally, the longer the average maturity of the bonds held
by the Fund, the more the Fund's share price will fluctuate in response to
interest rate changes. Funds particularly subject to this risk are: Balanced
Fund, Growth & Income Fund, Bond Fund, Intermediate Bond Fund, International
Bond Fund, U.S. Government Income Fund, Michigan Tax-Free Bond Fund, Tax-Free
Short-Intermediate Bond Fund, Cash Investment Fund, Tax-Free Money Market Fund
and U.S. Treasury Money Market Fund.
MARKET RISK is the risk of loss because the value of the securities in which a
Fund invests may decline in response to general economic conditions. Price
changes may be temporary or last for extended periods. For example, stock prices
have historically risen and fallen in periodic cycles. In addition, the value of
Fund's investments may decline if the particular companies the Funds invest in
do not preform well. All of the Munder Equity Funds are subject to this risk.
MEDIUM-SIZE COMPANY STOCK RISK is the risk of loss because the stocks of medium-
size companies may be more susceptible to market downturns, and their prices may
be more volatile than the stocks of larger companies. Equity Selection Fund,
Growth Opportunities Fund, Value Fund, Emerging Markets Fund, Global Financial
Services Fund, International Growth Fund and Healthcare Fund are particularly
subject to this risk.
NON-DIVERSIFIED RISK is the risk of loss because a Fund that invests more of its
assets in fewer issuers than many other funds do, may be more susceptible to
adverse developments affecting any single issuer, and more susceptible to
greater losses because of these developments. For example, the Michigan Tax-Free
Bond Fund invests primarily in Michigan municipal obligations, if Michigan
issuers suffer serious financial difficulties, jeopardizing their ability to pay
their obligations, the Fund may suffer a loss. International Bond Fund, Michigan
Tax-Free Bond Fund and Tax-Free Short-Intermediate Bond Fund are subject to this
risk.
PREPAYMENT RISK is the risk that a Fund may experience losses when an issuer
exercises its right to pay principal on an obligation held by the Fund (such as
a mortgage-backed security) earlier than expected. This may happen during a
period of declining interest rates. Under these circumstances, the Fund may be
unable to recoup all of its initial investment and will suffer from having to
reinvest in lower yielding securities. The loss of higher yielding securities
and the reinvestment at lower interest rates can reduce the Fund's income, total
return and share price. Funds particularly subject to this risk are: Balanced
Fund, Bond Fund, Intermediate Bond Fund, U.S. Government Income Fund and Cash
Investment Fund.
SMALL COMPANY STOCK RISK is the risk of loss because the stocks of small
companies may have more risks than those of larger companies. Small companies
often have narrower markets and more limited managerial and financial resources
than larger, more established companies. As a result, they may be more sensitive
to changing economic conditions, which could increase the volatility of a Fund's
portfolio. In addition, small company stocks typically are traded in lower
volume making them more difficult to sell. Funds particularly subject to this
risk are: Micro-Cap Equity Fund, Small Cap Value Fund, Small Company Growth Fund
and Healthcare Fund.
30
<PAGE>
Who May Want To Invest
The Equity Funds may be appropriate for investors:
. Looking to invest over the long term and willing to ride out market swings
in search of potentially higher returns.
. Looking for an investment that has more return and risk potential than
fixed income investments.
The Income Funds may be appropriate for investors:
. Looking for potentially higher returns and willing to accept greater risk
than more conservative fixed rate investments or money market funds.
. Looking for current income.
The Tax-Free Funds may be appropriate for investors:
. Looking primarily for tax-exempt income.
. Comfortable with the risks involved with fixed income investments.
The Money Market Funds may be appropriate for investors:
. Looking for a high level of income and liquidity and stability of
principal.
31
<PAGE>
Fees And Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold Class K shares the Funds. Please note that the following information does
not include fees that institutions may charge for services they provide to you.
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases.......................... None
Sales Charge (Load) Imposed on Reinvested Dividends....................... None
Maximum Deferred Sales Charge (Load)...................................... None
Redemption Fees........................................................... None
Exchange Fees............................................................. None
Annual Fund Operating Expenses (expenses that are paid from Fund assets) And
Examples
The examples are intended to help you compare the cost of investing in each Fund
to the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated. The examples also
assume that your investment has a 5% return each year, that the Fund's operating
expenses remain the same as shown in the table and that all dividends and
distributions are reinvested. Your actual costs may be higher or lower.
Annual Fund Operating Expenses
As a % of net assets Examples
- -------------------------------------------------------- --------------------
Balanced Fund
Management Fees .65% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
----
Total Annual Fund Operating Expenses [ ]% 10 Years $
====
Equity Selection Fund
Management Fees .75% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses .[ ]% 5 Years $
----
Total Annual Fund Operating Expenses [ ] 10 Years $
====
Growth & Income Fund
Management Fees .75% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ] 5 Years $
----
Total Annual Fund Operating Expenses [ ] 10 Years $
====
Growth Opportunities Fund
Management Fees .75% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses (2) [ ] 5 Years $
----
Total Annual Fund Operating Expenses (3) [ ] 10 Years $
====
Index 500 Fund
Management Fees [ ] 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ] 5 Years $
----
Total Annual Fund Operating Expenses [ ] 10 Years $
====
32
<PAGE>
Annual Fund Operating Expenses
as a % of net assets Examples
- ----------------------------------------------------- ------------------------
International Equity Fund
Management Fees .75% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses [ ]% 10 Years $
=====
Micro-Cap Equity Fund
Management Fees 1.00% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses (2) [ ] 5 Years $
-----
Total Annual Fund Operating Expenses (3) [ ] 10 Years $
=====
Multi Season Growth Fund
Management Fees (1) [ ] 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses (3) [ ] 10 Years $
=====
Real Estate Equity Investment Fund
Management Fees .74% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses .[ ]% 5 Years $
-----
Total Annual Fund Operating Expenses [ ]% 10 Years $
=====
Small-Cap Value Fund
Management Fees .75% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses [ ]% 10 Years $
=====
Small Company Growth Fund
Management Fees .75% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses [ ]% 10 Years $
=====
Value Fund
Management Fees .74% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses [ ]% 10 Years $
=====
Framlington Emerging Markets Fund
Management Fees 1.25% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses (2) [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses (3) [ ]% 10 Years $
=====
33
<PAGE>
Annual Fund Operating Expenses
as a % of net assets Examples
- ----------------------------------------------------------- ---------------
Framlington Global Financial Services Fund
Management Fees .75% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses (2) [ ] 5 Years $
-------
Total Annual Operating Expenses (3) [ ] 10 Years $
=======
Framlington Healthcare Fund
Management Fees 1.00% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses (2) [ ] 5 Years $
-------
Total Annual Fund Operating Expenses [ ] 10 Years $
=======
Framlington International Growth Fund
Management Fees 1.00% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses (2) [ ] 5 Years $
-------
Total Annual Fund Operating Expenses (3) [ ] 10 Years $
=======
Bond Fund
Management Fees .50% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
-------
Total Annual Fund Operating Expenses [ ]% 10 Years $
=======
Intermediate Bond Fund
Management Fees .50% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
-------
Total Annual Fund Operating Expenses .[ ]% 10 Years $
=======
International Bond Fund
Management Fees .50% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses .[ ]% 5 Years $
-------
Total Annual Fund Operating Expenses [ ]% 10 Years $
=======
U.S. Government Income Fund
Management Fees .50% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
-------
Total Annual Fund Operating Expenses .[ ]% 10 Years $
=======
Michigan Tax-Free Bond Fund
Management Fees .50% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
-------
Total Annual Fund Operating Expenses [ ]% 10 Years $
=======
34
<PAGE>
Annual Fund Operating Expenses
as a % of net assets Examples
- --------------------------------------------------- ----------------------
Tax-Free Bond Fund
Management Fees .50% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
Other Expenses [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses .[ ]% 10 Years $
=====
Tax-Free Short-Intermediate Bond Fund
Management Fees .50% 1 Year $
Shareholder Servicing Fees .25% 3 Years $
-----
Other Expenses [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses [ ]% 10 Years $
=====
Cash Investment Fund
Management Fees .35% 1 Year $
Shareholder Servicing Fees .15% 3 Years $
Other Expenses [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses [ ]% 10 Years $
=====
Tax-Free Money Market Fund
Management Fees .35% 1 Year $
Shareholder Servicing Fees .15% 3 Years $
Other Expenses [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses [ ]% 10 Years $
=====
U.S. Treasury Money Market Fund
Management Fees .35% 1 Year $
Shareholder Servicing Fees .15% 3 Years $
Other Expenses [ ]% 5 Years $
-----
Total Annual Fund Operating Expenses [ ]% 10 Years $
=====
____________________
(1) For the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of its management fees. As a result of the fee waiver, actual
management fees paid by the Multi-Season Growth Fund, based on the Fund's
average daily net assets, were [ ]%.
(2) For the fiscal year ended June 30, 1999, the advisor voluntarily reimbursed
certain operating expenses. As a result of the expense reimbursement,
actual Other Expenses paid by the Funds, were:
Other Operating Expenses
Fund (as a % of average daily net assets)
- ---- ------------------------------------
Growth Opportunities Fund %
Micro-Cap Equity Fund %
Framlington Emerging Markets Fund %
Framlington Global Financial Services Fund %
Framlington Healthcare Fund %
Framlington International Growth Fund %
35
<PAGE>
(3) For the fiscal year ended June 30, 1999, as a result of the advisor's
voluntary fee waivers and expense reimbursements, the actual Total Annual
Fund Operating Expenses paid by the Funds were as shown below. The advisor
may terminate the fee waivers and/or expense reimbursements at any time.
Total Annual Fund Operating Expenses
Fund (as a % of average daily net assets)
- ---- ------------------------------------
Growth Opportunities Fund %
Multi-Season Growth Fund %
Micro-Cap Equity Fund %
Framlington Emerging Markets Fund %
Framlington Global Financial Services Fund %
Framlington Healthcare Fund %
Framlington International Growth Fund %
36
<PAGE>
More About The Funds
- --------------------------------------------------------------------------------
The Funds' principal investment strategies and risks are summarized above in the
section entitled Risk/Return Summary. A more complete description of each Fund's
investments and strategies and their associated risks is provided below under
"Special Risks and Other Considerations" and "Additional Descriptions of
Investments and Investment Strategies." The Funds may also invest in other
securities and are subject to further restrictions and risks which are described
in the Statement of Additional Information. The Glossary below explains certain
terms used throughout this prospectus.
Glossary
TYPES OF FUNDS
Equity Funds are the Balanced Fund, Equity Selection Fund, Growth & Income Fund,
Growth Opportunities Fund, Index 500 Fund, International Equity Fund, Micro-Cap
Equity Fund, Multi-Season Growth Fund, Real Estate Equity Investment Fund,
Small-Cap Value Fund, Small Company Growth Fund, Value Fund, Framlington
Emerging Markets Fund, Framlington Global Financial Services Fund, Framlington
Health Care Fund and Framlington International Growth Fund.
Income Funds are the Bond Fund, Intermediate Bond Fund, International Bond Fund
and U.S. Government Income Fund.
Tax-Free Funds are the Michigan Tax-Free Bond Fund, Tax-Free Bond Fund and Tax-
Free Short-Intermediate Bond Fund.
Money Market Funds are the Cash Investment Fund, Tax-Free Money Market Fund and
U.S. Treasury Money Market Fund.
TYPES OF SECURITIES
Equity securities include common stocks, preferred stocks, securities
convertible into common stocks, and rights and warrants to subscribe for the
purchase of common stocks. Equity securities may be listed on a stock exchange
or NASDAQ National Market System or unlisted. Warrants are rights to purchase
securities at a specified time at a specified price.
Fixed income securities are securities that pay interest at set times at either
fixed, floating or variable rates, or which are issued at a discount to their
principal amount instead of making periodic interest payments. Fixed income
securities include corporate bonds, debentures and other similar corporate debt
instruments, zero coupon bonds and variable amount master demand notes.
Convertible securities are bonds or preferred stocks that may be converted
(exchanged) into the common stock of the issuing company within a specified time
period for a specified number of shares. Convertible securities offer the Funds
a way to participate in the capital appreciation of the common stock into which
the securities are convertible, while earning higher current income than is
available from the common stock.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include U.S.
Treasury bills, U.S. Treasury notes, U.S. Treasury bonds and obligations of the
Federal Home Loan Corporation, Federal National Mortgage Association and
Government National Mortgage Association.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit of
banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Municipal obligations are obligations of states, territories and possessions of
the United States and the District of Columbia, and their political
subdivisions, agencies, instrumentalities and authorities. They may be payable
from the issuer's general revenue, the revenue of a specific project, current
revenues or a reserve fund.
37
<PAGE>
Rating Agencies and Indices
Moody's is Moody's Investor Services, Inc.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
S&P is Standard & Poor's Rating Services.
S&P 500 is S&P's 500 Composite Stock Price Index, a widely recognized unmanaged
index of U.S. stock market activity.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Internal Revenue Code is the Internal Revenue Code of 1986, as amended.
NAV is the net asset value per share of a Fund. NAV is the value of a single
share of a Fund. NAV for Class K shares is calculated by (1) taking the current
value of a Fund's total assets allocated to that class of shares, (2)
subtracting the liabilities and expenses charged to the class (3) dividing that
amount by the total number of shares of that Class outstanding.
A diversified investment company is an investment company that may not invest
more than 5% of its total assets in any one issuer other than the U.S.
Government, its agencies or instrumentalities. This limit applies only to 75% of
a diversified Fund's assets. In addition, a diversified Fund cannot invest more
than 25% of its assets in a single issuer. These limitations do not apply to the
non-diversified Funds.
Special Risks And Other Considerations
Derivative Risk. "Derivative" instruments are financial contracts whose value is
based on an underlying security, a currency exchange rate, an interest rate or a
market index. Many types of instruments representing a wide range of potential
risks and rewards are derivatives, including futures contracts, options on
futures contracts, options, swaps, forward currency contracts and structured
debt obligations (including collateralized mortgage obligations and other types
of asset-backed securities, "stripped" securities and various floating rate
instruments).
Investment Strategy. All Funds (except the Short Term Treasury Fund
and the U.S. Treasury Money Market Fund) may use derivative
instruments. Derivatives can be used for hedging (attempting to reduce
risk by offsetting one investment position with another) or
speculation (taking a position in the hope of increasing return). The
Funds may, but are not required to, use derivatives for hedging
purposes or for the purpose of remaining fully invested or maintaining
liquidity. The Funds will not use derivatives for speculative
purposes.
Special Risks. The use of derivative instruments exposes a Fund to
additional risks and transaction costs. Risks of derivative
instruments include: (1) the risk that interest rates, securities
prices and currency markets will not move in the direction that a
portfolio manager anticipates; (2) imperfect correlation between the
price of derivative instruments and movements in the prices of the
securities, interest rates or currencies being hedged; (3) the fact
that skills needed to use these strategies are different than those
needed to select portfolio securities; (4) the possible absence of a
liquid secondary market for any particular instrument and possible
exchange imposed price fluctuation limits, either of which may make it
difficult or impossible to close out a position when desired; (5) the
risk that adverse price movements in an instrument can result in a
loss substantially greater than the Fund's initial investment in that
instrument (in some cases, the potential loss is unlimited); (6)
particularly in the case of privately-negotiated instruments, the risk
that the counterparty will not perform its obligations, which could
leave the Fund worse off than if it had not entered into the position;
and (7) the inability to close out certain hedged positions to avoid
adverse tax consequences.
Foreign Investment Risk. Foreign securities include direct investments in non-
U.S. dollar-denominated securities traded outside of the United States and
dollar-denominated securities of foreign issuers traded in the United States.
Foreign securities also include indirect investments such as American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and Global Depository
Receipts
38
<PAGE>
("GDRs"). ADRs are U.S. dollar-denominated receipts representing shares of
foreign-based corporations. ADRs are issued by U.S. banks or trust companies,
and entitle the holder to all dividends and capital gains that are paid out on
the underlying foreign shares. EDRs and GDRs are receipts issued by non-U.S.
financial institutions that often trade on foreign exchanges. They represent
ownership in an underlying foreign or U.S. security and are generally
denominated in a foreign currency.
Investment Strategy. International Equity Fund, International Growth
Fund, Framlington Global Financial Services Fund, Framlington
Healthcare Fund, Framlington International Growth Fund and
International Bond Fund will invest all or a substantial portion of
their total assets in foreign securities. The other Equity Funds
(except Real Estate Investment Fund), the Income Funds, and Cash
Investment Fund may invest up to 25% of their total assets in foreign
securities. The Tax-Free Funds may invest up to 10% of their total
assets in foreign securities.
Special Risks. Foreign securities involve special risks and costs.
Investment in the securities of foreign governments involves the risk
that foreign governments may default on their obligations or may
otherwise not respect the integrity of their debt.
Investment in foreign securities may involve higher costs than
investment in U.S. securities, including higher transaction and
custody costs as well as the imposition of additional taxes by foreign
governments. Foreign investments may also involve risks associated
with the level of currency exchange rates, less complete financial
information about the issuers, less market liquidity, more market
volatility and political instability. Future political and economic
developments, the possible imposition of withholding taxes on dividend
income, the possible seizure or nationalization of foreign holdings,
the possible establishment of exchange controls or freezes on the
convertibility of currency, or the adoption of other governmental
restrictions might adversely affect an investment in foreign
securities. Additionally, foreign issuers may be subject to less
stringent regulation, and to different accounting, auditing and
recordkeeping requirements.
Currency exchange rates may fluctuate significantly over short periods
of time causing a Fund's net asset value to fluctuate as well. A
decline in the value of a foreign currency relative to the U.S. dollar
will reduce the value of a foreign currency-denominated security. To
the extent that a Fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined
risk. The Funds' respective net currency positions may expose them to
risks independent of their securities positions.
Additional risks are involved when investing in countries with
emerging economies or securities markets. In general, the securities
markets of these countries are less liquid, are subject to greater
price volatility, have smaller market capitalizations and may have
problems with securities registration and custody. In addition,
because the securities settlement procedures are less developed in
these countries, a Fund may be required to deliver securities before
receiving payment and may also be unable to complete transactions
during market disruptions. As a result of these and other risks,
investments in these countries generally present a greater risk of
loss to the Fund.
A further risk of investing in foreign securities is the risk that a
Fund may be adversely affected by the conversion of certain European
currencies into the Euro. This conversion, which is under way, is
scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in world
markets and affect European markets in particular.
Investments in Financial Services Companies by Framlington Global Financial
Services Fund. Financial services companies are subject to extensive
governmental regulation which may limit the financial commitments they can make,
and the interest rates and fees they can charge. Insurance companies may be
subject to severe price competition. Proposed legislation that would reduce the
separation between commercial and investment
39
<PAGE>
banking businesses, if enacted, could significantly impact the industry and the
Fund. The Fund may be riskier than a fund investing in a broader range of
industries.
Investments in the Healthcare Industry by Framlington Healthcare Fund. The Fund
will invest most of its assets in the healthcare industry, which is particularly
affected by rapidly changing technology and extensive government regulation,
including cost containment measures. The Fund may be riskier than a fund
investing in a broader range of industries.
Investments in the Real Estate Industry by Real Estate Equity Investment Fund.
The Fund will invest primarily in the real estate industry and may invest more
than 25% of its assets in any one sector of the real estate industry. As a
result, the Fund will be particularly vulnerable to declines in real estate
prices and new construction rates. The Fund may be riskier than a fund investing
in a broader range of industries.
Investment Grade Credit Risk. A security is considered investment grade if, at
the time of purchase, it is rated:
. BBB or higher by S&P;
. Baa or higher by Moody's;
. BBB or higher by Duff & Phelps; or
. BBB or higher by Fitch.
A security will be considered investment grade if it receives one of the above
ratings, even if it receives a lower rating from other rating organizations.
Investment Strategy. Except as stated in the next section, fixed
income and convertible securities purchased by the Funds will
generally be rated at least investment grade. The Funds may also
invest in unrated securities if the advisor or sub-advisor believes
they are comparable in quality.
Special Risks. Although securities rated "BBB" by S&P, Duff & Phelps
or Fitch, or Baa by Moody's are considered investment grade, they have
certain speculative characteristics. Therefore, they may be subject to
a higher risk of default than obligations with higher ratings.
Subsequent to its purchase by a Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. The advisor or sub-advisor will consider
such an event in determining whether the Fund should continue to hold
the security.
Non-Investment Grade Credit Risk. Non-investment grade fixed income and
convertible securities are generally rated "BB" or below by S&P, Duff & Phelps
or Fitch, or "Ba" by Moody's.
Investment Strategy. All Equity Funds may invest a portion of their
total assets in non-investment grade securities when the advisor or
sub-advisor determines that such securities are desirable in light of
the Funds' investment objectives and portfolio mix.
Special Risks. Non-investment grade securities (sometimes referred to
as "junk bonds") are subject to greater risk than investment grade
securities. They generally present a higher degree of credits risks
(default). In addition, the market value of these securities tends to
be more sensitive to individual corporate developments and to changes
in interest rates and other economic developments than higher-rated
securities.
Tracking Risk. Because the Index 500 Fund pays fees and transaction costs, while
the S&P 500 does not, the Fund's returns are likely to be lower than those of
the S&P 500. Tracking variance may also result from share purchases and
redemptions and other factors.
Short-Term Trading. The Funds' historical portfolio turnover rates are shown in
the Financial Highlights.
Investment Strategy. Some Funds may engage in short-term trading,
including, in the case of the Equity Funds, initial public offerings.
40
<PAGE>
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could
detract from a Fund's performance.
Defensive Investing. Each Fund (except the Index 500 Fund) may invest all or
any portion of its assets in short-term obligations as a temporary defensive
measure in response to adverse market or economic conditions.
Special Risks. A Fund may not achieve its investment objective when
its assets are invested in short-term obligations The Index 500 Fund
cannot take steps to reduce market exposure or to lessen the effects of
a declining market.
Year 2000 Risk. Like other mutual funds, financial institutions, business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the advisor and the Funds' other
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. The advisor is taking steps that it
believes are reasonably designed to address year 2000 computer-related problems
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Funds' other major service providers.
Although there can be no assurances, the advisor believes that these steps will
be sufficient to avoid any adverse impact on any of the Funds. Similarly, there
can be no assurance that year 2000 issues will not affect the companies and
other issuers in which the Funds invest or affect worldwide markets and
economies.
Additional Description Of Investments And Investment Strategies
Asset-Backed Securities. Asset-backed securities are debt securities backed by
mortgages, installment sales contract and credit card receivables. The
securities are sponsored by entities such as government agencies, banks,
financial companies and commercial or industrial companies. In effect, these
securities "pass through" the monthly payments that individual borrowers make on
their mortgage or other assets net of any fees paid to the issuers. Examples of
these include guaranteed mortgage pass-through certificates, collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").
Investment Strategy. All Income Funds, Balanced Fund, Framlington
Global Financial Services Funds and Cash Investment Fund may invest a
portion of its assets in Asset-Backed Securities.
Special Risks. In addition to credit and market risk, asset-backed
securities involve repayment risk because the underlying assets (loans)
may be prepaid at any time. The value of these securities may also
change because of actual or perceived changes in the creditworthiness
of the originator, the servicing agent, the financial institution
providing the credit support, or the counterparty. Like other fixed
income securities, when interest rates rise the value of an asset-
backed security generally will decline. However, when interest rates
decline, the value of an asset-backed security with prepayment features
may not increase as much as that of other fixed income securities. In
addition, non-mortgage asset-backed securities involve certain risks
not presented by mortgage-backed securities. Primarily, these
securities do not have the benefit of the same security interest in the
underlying collateral.
Borrowing and Reverse Repurchase Agreements. The Funds can borrow money from
banks and enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of
securities held by a Fund subject to the Fund's agreement to repurchase them at
a mutually agreed upon date and price (including interest).
Investment Strategy. Each Fund may borrow money in an amount up to 5%
of its assets for temporary emergency purposes and in an amount up to
33 1/3% of its assets to meet redemptions. This is a fundamental policy
which can be changed only by shareholders.
Special Risks. Borrowings and reverse repurchase agreements by a Fund
may involve leveraging. If the securities held by the Fund decline in
value while these transactions are outstanding, the Fund's net asset
value will decline in value by proportionately more than the decline in
value of the securities. In addition, reverse repurchase agreements
involve the risks that
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the interest income earned by the Fund (from the investment of the
proceeds) will be less than the interest expense of the transaction,
that the market value of the securities sold by the Fund will decline
below the price the Fund is obligated to pay to repurchase the
securities, and that the securities may not be returned to the Fund.
Credit Quality of the Tax-Free Funds. The Tax-Free Funds will invest in
long-term instruments only if they are rated "A" or better by Moody's or S&P or,
if unrated, are of comparable quality. These Funds will invest in short-term
instruments only if they (i) have short-term debt ratings in the top two
categories by at least one nationally recognized statistical rating
organization, (ii) are issued by an issuer with such ratings or (iii) if
unrated, are of comparable quality.
Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation to exchange one currency for another on a future date at a specified
exchange rate.
Investment Strategy. Forward currency exchange contracts may be used
for hedging purposes and to help reduce the risks and volatility caused
by changes in foreign currency exchange rates. Foreign currency
exchange contracts will be used at the discretion of the advisor or
sub-advisor, and no Fund is required to hedge its foreign currency
positions.
Special Risks. Forward currency contracts are privately negotiated
transactions, and can have substantial price volatility. When used for
hedging purposes, they tend to limit any potential gain that may be
realized if the value of a Fund's foreign holdings increases because of
currency fluctuations.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When a Fund purchases an option on a futures
contract, it has the right to assume a position as a purchaser or seller of a
futures contract at a specified exercise price during the option period. When a
Fund sells an option on a futures contract, it becomes obligated to purchase or
sell a futures contract if the option is exercised.
Investment Strategy. The Equity Funds, the Income Funds and the Tax-
Free Funds may invest in futures contracts and options on futures
contracts on domestic or foreign exchanges or boards of trade. These
instruments may be used for hedging purposes, to maintain liquidity to
meet potential shareholder redemptions, to invest cash balances or
dividends, or to minimize trading costs.
A Fund will not purchase or sell a futures contract unless, after the
transaction, the sum of the aggregate amount of margin deposits on its
existing futures positions and the amount of premiums paid for related
options used for non-hedging purposes is 5% or less of the Fund's total
assets.
Special Risks. Futures contracts and related options present the
following risks: imperfect correlation between the change in market
value of a Fund's securities and the price of futures contracts and
options; the possible inability to close a futures contract when
desired; losses due to unanticipated market movements, which are
potentially unlimited; and the possible inability of the advisor or
sub-advisor to correctly predict the direction of securities prices,
interest rates, currency exchange rates and other economic factors.
Guaranteed Investment Contracts. Guaranteed investment contracts are agreements
by a Fund to make payments to an insurance company's general account in exchange
for a minimum level of interest based on an index.
Investment Strategy. The Income Funds, Cash Investment Fund and Money
Market Fund may invest in guaranteed investment contracts.
Special Risks. Guaranteed investment contracts are considered illiquid
investments and are acquired subject to a Fund's limitation on illiquid
investments.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. Each Fund may invest up to 15% (10% in the case
of a Money Market Fund) of its net assets in securities that are
illiquid.
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Special Risks. To the extent that a Fund invests in illiquid
securities, the Fund risks not being able to sell the securities at the
time and the price that it would like. The Fund may have to lower the
price, sell substitute securities or forego an investment opportunity,
each of which may cause a loss to the Fund.
Investment Companies. To the extent consistent with their respective investment
objectives and policies, the Funds (other than U.S. Treasury Money Market Fund)
may invest in securities issued by other investment companies.
Investment Strategy. Investments by a Fund in other investment
companies will be subject to the limitations of the 1940 Act.
Special Risks. As a shareholder of another investment company, a Fund
would be subject to the same risks as any other investor in that
company. In addition, it would bear a proportionate share of any fees
and expenses paid by that company. These would be in addition to the
advisory and other fees paid directly by the Fund.
Municipal Obligations. Municipal obligations may include: (i) general
obligation bonds issued for various public purposes and supported by the
municipal issuer's credit and taxing power; and (ii) revenue bonds whose
principal and interest is payable only from the revenues of a particular project
or facility.
Investment Strategy. The Tax-Free Funds and Tax-Free Money Market Fund
will normally invest at least 80% of their net assets in municipal
obligations.
Special Risks. Industrial revenue bonds depend on the credit standing
of a private issuer and may be subject to the federal alternative
minimum tax (AMT). Although Tax-Free Money Market Fund may invest more
than 25% of its net assets in municipal revenue obligations, it does
not intend to do so on a regular basis. If it does, it will be riskier
than a fund which does not concentrate to such an extent on similar
projects.
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. The Equity Funds, the Income Funds, Tax-Free Bond
Fund and Michigan Tax-Free Bond Fund may write (sell) covered call
options, buy put options, buy call options and write secured put
options for hedging purposes. Options may relate to particular
securities, foreign or domestic securities indices, financial
instruments or foreign currencies.
Special Risks. The value of options can be highly volatile, and their
use can result in loss if the advisor or sub-advisor is incorrect in
its expectation of price fluctuations. The successful use of options
for hedging purposes also depends in part on the ability of the advisor
or sub-advisor to predict future price fluctuations and the degree of
correlation between the options and securities markets.
Repurchase Agreements. Repurchase agreements involve the purchase of securities
by a Fund subject to the seller's agreement to repurchase them at a mutually
agreed upon date and price.
Investment Strategy. Each Fund may enter into repurchase agreements
with banks and broker-dealers that are deemed to be creditworthy by the
advisor or sub-advisor.
Special Risks. If the seller defaults or declares bankruptcy, a Fund
may suffer if the proceeds from the sale of the underlying securities
and other collateral are less than the repurchase price or if there are
delays in selling the underlying securities or collateral.
Securities Lending. In order to generate additional income, each Fund may lend
securities on a short-term basis to qualified institutions. By reinvesting any
cash collateral it receives in these transactions, the Fund could realize
additional income gains or losses.
Investment Strategy. Securities lending may represent no more than 25%
of the value of a Fund's total assets (including the loan collateral).
Special Risks. The main risk when lending Fund securities is that if
the borrower fails
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to return the securities or the invested collateral has declined in
value, the Fund could lose money.
Stripped Securities. These securities are issued by the U.S. Government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include participations in trusts that hold U.S. Treasury or agency
securities.
Special Risks. Stripped securities are very sensitive to changes in
interest rates and to the rate of principal repayments. A rapid or
unexpected increase in mortgage prepayments could severely depress the
price of certain stripped mortgage-backed securities and adversely
affect a Fund's total returns.
Temporary Investments. Short-term obligations refer to U.S. Government
securities, high-quality money market instruments and repurchase agreements with
maturities of 13 months or less. Generally, these obligations are purchased to
provide stability and liquidity to a Fund.
Investment Strategy. Each Fund may invest a portion of its assets in
short-term obligations pending investment or to meet anticipated
redemption requests. The Tax-Free Funds and Tax-Free Money Market Fund
may hold uninvested cash if, in the advisor's opinion, suitable tax-
exempt securities are not available. Each Tax-Free Fund may also invest
a portion of its assets in short-term money market instruments, the
income from which is subject to Federal income tax.
Special Risks. A Fund may not achieve its investment objective when
its asset are invested in short-term obligations.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
instruments include variable amount master demand notes.
Special Risks. Variable and floating rate instruments are subject to
the same risks as fixed income investments, particularly interest rate
risk and credit risk. Because there is no active secondary market for
certain variable and floating rate instruments, they may be more
difficult to sell if the issuer defaults on its payment obligations or
during periods when a Fund is not entitled to exercise its demand
rights. As a result, the Fund could suffer a loss with respect to these
instruments.
When - Issued Securities, Delayed Delivery Transactions and Forward Commitments.
A purchase of "when-issued" securities refers to a transaction made
conditionally because the securities, although authorized, have not yet been
issued. A delayed delivery or forward commitment transaction involves a contract
to purchase or sell securities for a fixed price at a future date beyond the
customary settlement period.
Special Risks. Purchasing or selling securities on a when-issued,
delayed delivery or forward commitment basis involves the risk that the
value of the securities may change by the time they are actually issued
or delivered. These transactions also involve the risk that the seller
may fail to deliver the security or cash on the settlement date.
Zero Coupon Bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity.
Special Risks. The market prices of zero coupon bonds generally are
more volatile than the market prices of interest-bearing securities and
are likely to respond to a greater degree to changes in interest rates
than interest-bearing securities having similar maturities and credit
quality. A Fund's investments in zero coupon bonds may require the Fund
to sell some of its portfolio securities to generate sufficient cash to
satisfy certain income distribution requirements.
Disclaimers
The Index 500 Fund is not sponsored, endorsed, sold or promoted by S&P, nor does
S&P guarantee the accuracy and/or completeness of the S&P 500(R) Index or any
data included therein. S&P makes no warranty, express or implied, as to the
results to be obtained by the Fund, owners of the Fund, any
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person or any entity from the use of the S&P 500(R) Index or any data included
therein. S&P makes no express or implied warranties and expressly disclaims all
such warranties of merchantability or fitness for a particular purpose for use
with respect to the S&P Index or any data included therein.
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Your Investment
- --------------------------------------------------------------------------------
This section describes how to do business with the Funds.
How To Reach The Funds
By telephone: 1-800-438-5789
Call for account information
By mail: The Munder Funds
480 Pierce Street
Birmingham, MI 48009
Purchasing Shares
Who May Purchase Shares
Customers (and their immediate family members) of banks and other institutions
that have entered into agreements with us to provide shareholder services for
customers may purchase Class K Shares. Customers may include individuals,
trusts, partnerships and corporations. Each Fund also issues other classes of
shares, which have different sales charges, expense levels and performance. Call
(800) 438-5789 to obtain more information concerning the Funds' other classes of
shares.
Purchase Price of Shares
Class K shares of the Funds are sold at the NAV next determined after a purchase
order is received in proper form.
Method for Purchasing Shares
You may purchase shares through selected banks or other institutions.
Policies for Purchasing Shares
. All share purchases are effected through a customer's account at an
institution and confirmations of share purchases will be sent to the
institution involved.
. Institutions (or their nominees) will normally be the holders of record of
Fund shares acting on behalf of their customers, and will reflect their
customers' beneficial ownership of shares in the account statements
provided by them to their customers.
. Purchase orders must be received by the Fund's distributor or the transfer
agent before the close of regular trading on the New York Stock Exchange
(normally, 4:00 p.m. Eastern time).
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the redemption
request in proper form.
Methods for Redeeming Shares
. You may redeem shares of all Funds through your bank or other financial
institution.
. You may redeem a portion of your shares of the Income Funds (other than the
International Bond Fund), Tax-Free Funds and Money Market Funds through the
free checkwriting privilege.
Policies for Redeeming Shares
. Shares held by an institution on behalf of its customers must be redeemed
in accordance with instructions and limitations pertaining to the account
at that institution.
. If we receive a redemption order for a Fund (other than a Money Market
Fund) before 4:00 p.m. (Eastern time), we will normally wire payment to the
redeeming institution on the next business day. If we receive a redemption
order for a Money Market Fund before 12:00 noon (Eastern time), we will
normally wire payment to the redeeming institution on the same business
day. If an order for a Money Market Fund is received between 12:00 noon and
4:00 p.m. (Eastern time), payment is normally wired the next business day.
Additional Policies For Purchases And Redemptions
. We consider requests to be in "proper form" when all required
documents are properly completed, signed and received.
. If your purchase order payment for a Money Market Fund is received in
proper form before 2:45 p.m. (Eastern time), you will receive
dividends for that day. If your redemption order is received in proper
form before 2:45 p.m. (Eastern time), you will not receive dividends
for that day.
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. The Funds reserve the right to reject any purchase order.
. At any time, the Funds may change any of their purchase or redemption
procedures, and may suspend the sale of their shares.
. The Funds may delay sending redemption proceeds for up to seven days,
or longer if permitted by the Securities and Exchange Commission.
. To limit the Funds' expenses, we do not currently issue share
certificates.
. If you are redeeming recently purchased shares, your redemption
request may not be honored until your check or [electronic
transaction] has cleared. This may delay your transaction for up to 15
days.
. A Fund may temporarily stop redeeming shares if:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists and the Fund cannot sell its assets or
accurately determine the value of its assets;
. the Securities and Exchange Commission orders the Fund to suspend
redemptions.
. If accepted by a Fund, investors may purchase shares of the Fund
(other than the Real Estate Equity Investment Fund) with securities
that the Fund may hold. The advisor will determine if the securities
are consistent with the Fund's objectives and policies. If accepted,
the securities will be valued the same way the Fund values portfolio
securities it already owns. Call the Funds at (800) 438-5789 for more
information.
. The Funds reserve the right to make payment for redeemed shares wholly
or in part by giving the redeeming shareholder portfolio securities.
The shareholder may pay transaction costs to dispose of these
securities.
. We record all telephone calls for your protection and take measures to
identify the caller. As long as the Funds' transfer agent takes
reasonable measures to authenticate telephone requests on an
investor's account, neither the Funds, the Funds' distributor nor the
transfer agent will be held responsible for any losses resulting from
unauthorized transactions.
. Financial institutions are responsible for transmitting orders and
payments for their customers on a timely basis.
Shareholder Privileges
Free Checkwriting. Free checkwriting is available to holders of Class K shares
of the Income Funds (other than the International Bond Fund), Tax-Free Funds and
Money Market Funds who complete the signature card section of the account
application form. You may write checks in the amount of $500 or more but you may
not close a Fund account by writing a check. We may change or terminate this
program on 30 days' notice to you.
Service Agents
Class K shares of the Funds are sold through institutions that have entered into
shareholder servicing agreements with the Funds. These agreements are permitted
under the Funds' Shareholder Servicing Plan. Under the agreements, the
institutions provide shareholder services to their customers who are record or
beneficial owners of Class K shares. In return for providing these services, the
institutions are entitled to receive a fee from each Fund at an annual rate of
up to 0.25% of the average daily net asset value of the Class K shares owned by
their customers. Class K shares bear all fees paid to institutions under the
Shareholder Servicing Plan. Payments are not tied exclusively to the shareholder
expenses actually incurred by the institutions and may exceed service expenses
actually incurred.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee from
the Funds for providing shareholder services to its customers who own shares of
the Funds.
In addition, the advisor may, from time to time, make payments to banks, broker-
dealers or other financial institutions for certain services to the Funds and/or
their shareholders, including sub-administration, sub-transfer agency and
shareholder servicing. The advisor may make such payments out of its own
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resources and there are no additional costs to the Funds or their shareholders.
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Pricing Of Fund Shares
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Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
The Funds (other than the Money Market Funds) calculate NAV as of the close of
business on the New York Stock Exchange, normally 4:00 p.m. (Eastern time). [The
Money Market Funds calculate NAV as of 2:45 p.m. (Eastern time) and as of the
close of business on the New York Stock Exchange, normally 4:00 p.m. (Eastern
time).]
If the New York Stock Exchange closes early, the Funds will accelerate their
calculation of NAV and transaction deadlines to that time.
The NAV of each Fund (other than the Money Market Funds) is generally based on
the market value of the securities held in the Fund. If market values are not
available, the fair value of securities is determined in good faith by, or using
procedures approved by, the Boards of Directors/Trustees of the Funds.
In determining each Money Market Fund's NAV, securities are valued at amortized
cost, which is approximately equal to market value.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. A Fund values foreign securities at the
latest closing price on the exchange on which they are traded immediately prior
to the closing of the New York Stock Exchange. Certain foreign currency exchange
rates may also be determined at the latest rate prior to the closing of the New
York Stock Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the New York Stock Exchange. If the advisor
believes that such events materially affect the value of portfolio securities,
these securities may be valued at their fair market value as determined in good
faith by, or using procedures approved by, the Funds' Boards of
Directors/Trustees.
Foreign securities may trade in their primary markets on weekends or other days
when a Fund does not price its shares. Therefore, the value of a Fund's
portfolio may change on days when shareholders will not be able to buy or sell
their shares.
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Distributions
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As a shareholder you are entitled to your share of a Fund's net income and gains
on its investments. The Funds pass substantially all of its earnings along to
its shareholders as distributions. When the Funds earns dividends from stocks
and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a capital gain distribution.
Balanced Fund, Growth & Income Fund, Small Company Growth Fund, Index 500 Fund
and International Bond Fund: pay dividends, if any, quarterly.
Equity Selection Fund, Growth Opportunities Fund, Framlington Emerging Markets
Fund, Framlington Global Financial Services Fund, Framlington Healthcare Fund,
Framlington International Growth Fund, International Equity Fund, Micro-Cap
Equity Fund, Multi-Season Growth Fund, Small-Cap Value Fund and Value Fund: pay
dividends, if any, at least annually.
Bond Fund, Intermediate Bond Fund, U.S. Government Income Fund, Michigan Tax-
Free Bond Fund, Tax-Free Bond Fund, Tax-Free Short-Intermediate Bond Fund and
Real Estate Equity Investment Fund: pay dividends, if any, monthly.
Cash Investment Fund, Tax-Free Money Market Fund and U.S. Treasury Money Market
Fund: dividends are declared daily and paid monthly.
All Funds: distribute their net realized capital gains, if any, at least
annually.
It is possible that a Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
Each Fund will pay distributions in additional shares of that Fund. If you wish
to receive distributions in cash, either indicate this request on your account
application form or notify the Funds by calling (800) 438-5789.
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Federal Tax Considerations
- --------------------------------------------------------------------------------
Investments in a Fund may have tax consequences that you should consider. This
section briefly describes some of the more common federal tax consequences. A
more detailed discussion about the tax treatment of distributions from the Funds
and about other potential tax liabilities, including backup withholding for
certain taxpayers and about tax aspects of dispositions of shares of the Funds,
is contained in the Statement of Additional Information. You should consult your
tax adviser about your own particular tax situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. The Tax-Free Funds
and Tax-Free Money Market Fund expect that a portion of their dividend
distributions will be exempt from federal income tax. Shareholders not subject
to tax on their income, generally will not be required to pay any tax on
distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held the
portfolio securities it sold. It does not depend on how long you held your Fund
shares.
Distributions are generally taxable to you in the tax year in which they are
paid, with one exception: distributions declared in October, November or
December, but not paid until January of the following year, are taxed as though
they were paid on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Funds will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Dividends and certain interest income earned from foreign securities by a Fund
may be subject to foreign withholding or other taxes. A Fund may be permitted to
pass on to its shareholders the right to a credit or deduction for income or
other tax credits earned from foreign investments and will do so if possible.
These deductions or credits may be subject to tax law limitations.
Taxes On Sales
If you sell shares of a Fund, you generally will be subject to tax on any
taxable gain. Your taxable gain is computed by subtracting your tax basis in the
shares from the redemption proceeds. Because your tax basis depends on the
original purchase price and on the price at which any dividends may have been
reinvested, you should be sure to keep account statements so that you or your
tax preparer will be able to determine whether a sale will result in a taxable
gain.
Other Considerations
If you buy shares of a Fund just before the Fund makes any distribution, you
will pay the full price for the shares and then receive back a portion of the
money you have just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law, the
Funds must withhold a portion of your distributions and redemption proceeds to
pay federal income taxes.
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MANAGEMENT
Investment Advisors And Sub-Advisor
Munder Capital Management "MCM", 480 Pierce Street, Birmingham, Michigan 48009
is the investment advisor of each Fund other than Index 500 Fund and
International Equity Fund. World Asset Management, L.L.C. "World", 255 East
Brown Street, Birmingham, Michigan 48009, is the investment advisor of the Index
500 Fund and the International Equity Fund. World is a wholly-owned subsidiary
of MCM. As of September 30, 1999, MCM [and its affiliates] had approximately $__
billion in assets under management, of which $__ billion were invested in equity
securities, $__ billion were invested in money market or other short-term
instruments, $__ billion were invested in other fixed income securities, and $__
billion in non-discretionary assets. As of September 30, 1999, World had
approximately $__ in assets under management.
The advisors provide overall investment management for their respective Funds.
Except for the Framlington Funds, they also provide all research and credit
analysis and are responsible for all purchases and sales of portfolio
securities.
Framlington Overseas Investment Management Limited "Framlington", a subsidiary
of MCM, is the sub-advisor of the Framlington Funds.
Framlington provides research and credit analysis for each of the Framlington
Funds and is responsible for making all purchases and sales of portfolio
securities for each of the Framlington Funds other than the Framlington Global
Financial Services Fund. MCM and Framlington each manage a portion of the assets
of the Framlington Global Financial Services Fund. MCM is responsible for all
purchases and sales of domestic securities held by the Framlington Global
Financial Services Fund. Framlington is responsible for the allocation of the
Fund's assets among countries and for making all purchases and sales of foreign
securities held by the Fund.
During the fiscal year ended June 30, 1999, each Fund paid an advisory fee at an
annual rate based on the average daily net assets of the Fund (after waivers, if
any) as follows:
Balanced Fund 0.65%
Equity Selection Fund 0.75%
Growth & Income Fund 0.75%
Growth Opportunities Fund 0.75%
Index 500 Fund [ ]%
International Equity Fund 0.75%
Micro-Cap Equity Fund 1.00%
Multi-Season Growth Fund 0.75%
Real Estate Equity Investment Fund 0.74%
Small-Cap Value Fund 0.75%
Small Company Growth Fund 0.75%
Value Fund 0.74%
Framlington Emerging Markets Fund 1.25%
Framlington Global Financial Services Fund 0.75%
Framlington Healthcare Fund 1.00%
Framlington International Growth Fund 1.00%
Bond Fund 0.50%
Intermediate Bond Fund 0.50%
International Bond Fund 0.50%
U.S. Government Income Fund 0.50%
Michigan Tax-Free Bond Fund 0.50%
Tax-Free Bond Fund 0.50%
Tax-Free Short-Intermediate Bond Fund 0.50%
Cash Investment Fund 0.40%
Tax-Free Money Market Fund 0.35%
U.S. Treasury Money Market Fund 0.35%
During the fiscal year ended June 30, 1999, a portion of the advisory fees for
the Index 500 Fund and the Multi-Season Growth Fund were waived. As a result,
the payments shown above for those Funds were less than the contractual advisory
fees of [[%] of the Index 500 Fund's average daily net assets] and 1.00% of the
first $500 million of the Multi-Season Growth Fund's average daily net assets
and .75% of that Fund's average daily net assets over $500 million.
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Performance Information. The tables below contain performance information for
certain Funds created through the conversion of a common or collective trust
fund which had investment objectives and policies materially similar to those of
the corresponding Funds.
Immediately before and after the conversion, the same person managed both the
common or collective trust fund and the corresponding Fund.
The table for each Fund:
. includes the average annual total returns of the common or collective
trust fund and the average annual total returns of the corresponding
Fund linked together;
. assumes that net investment income and dividends have been reinvested;
. assumes that the common or collective trust fund paid the same levels
of fees and expenses as the corresponding Fund currently pays;
. does not reflect any potential negative impact on the common and
collective trust funds' performance if they had been subjected to the
same regulatory restrictions (the 1940 Act and the Internal Revenue
Code) as the corresponding Fund; and
. indicates past performance only and does not predict future results.
Munder Small
Company Russell
Period Ended Growth Fund 2000
June 30, 1999 (Class K )* Index**
- ------------- ---------- -------
1 Year....................... % %
3 Years...................... % %
5 Years...................... % %
10 Years..................... % %
Inception on December
31, 1982..................... % %
___________________________________
* Converted from collective trust fund to mutual fund on November 23, 1992.
** Russell 2000 Index performance shows total return in U.S. dollars but does
not reflect the deduction of fees, expenses and taxes. Source: Lipper Analytical
Services, Inc.
Munder FT/S&P
International Actuaries
Period Ended Equity Fund World Index
June 30, 1999 (Class K )* ex. U.S.**
------------- ---------- ----------
1 Year.......................... % %
3 Years......................... % %
5 Years......................... % %
Inception on September
30, 1990........................ % %
___________________________________
* Converted from collective trust fund to mutual fund on November 23, 1992.
** FT/S&P Actuaries World Index ex. U.S. performance shows total return in U.S.
dollars but does not reflect the deduction of fees, expenses and taxes. Source:
Ibbotson Associates, Inc.
Munder
Index 500 S&P
Period Ended Fund 500
June 30, 1999 (Class K )* Index**
------------- ---------- -------
1 Year.......................... % %
3 Years......................... % %
5 Years......................... % %
10 Years........................ % %
Inception on
January 27, 1988................ % %
__________________________________
* Converted from collective trust fund to mutual fund on December 7, 1992.
** S&P 500 Index performance shows total return in U.S. dollars but does not
reflect the deduction of fees, expenses and taxes. Source: Lipper Analytical
Services, Inc.
Lehman
Munder Bond Brothers
Period Ended Fund Gov't/Corp.
June 30, 1999 (Class K)* Bond Index**
------------- --------- ------------
1 Year.............................. % %
3 Years............................. % %
5 Years............................. % %
10 Years............................ % %
__________________________________
* Converted from collective trust fund to mutual fund on November 23, 1992.
** Lehman Brothers Government/Corporate Bond Index performance shows total
return in U.S. dollars but does not reflect the deduction of fees, expenses and
taxes. Source: Lipper Analytical Services, Inc.
53
<PAGE>
Munder U.S.
Government Lehman
Income Brothers
Period Ended Fund Gov't/Corp.
June 30, 1999 (Class K)* Bond Index**
1 Year.............................. % %
3 Years............................. % %
5 Years............................. % %
10 Years............................ % %
_________________________________
* Converted from collective trust fund to mutual fund on July 5, 1994.
** Lehman Brothers Government/Corporate Bond Index performance shows total
return in U.S. dollars but does not reflect the deduction of fees, expenses and
taxes. Source: Lipper Analytical Services, Inc.
Lehman
Munder Brothers
Intermediate Intermediate
Period Ended Bond Fund Gov't/Bond
June 30, 1999 (Class K)* Index**
------------- --------- -------
1 Year............................... % %
3 Years.............................. % %
5 Years.............................. % %
10 Years............................. % %
Inception on March 31,
1982................................. % %
_________________________________
* Converted from collective trust fund to mutual fund on November 20, 1992.
** Lehman Brothers Intermediate Government/Corporate Bond Index performance
shows total return in U.S. dollars but does not reflect the deduction of fees,
expenses and taxes. Source: Lipper Analytical Services, Inc.
Lehman
Munder 20-Year
Tax-Free Muni
Period Ended Bond Fund Bond
June 30, 1999 (Class K)* Index**
------------- --------- -------
1 Year............................... % %
3 Years.............................. % %
5 Years.............................. % %
10 Years............................. % %
_____________________________
* Converted from common trust fund to mutual fund on July 5, 1994.
** Lehman 20-Year Municipal Bond Index performance shows total return in U.S.
dollars but does not reflect the deduction of fees, expenses and taxes. Source:
Lipper Analytical Services, Inc.
Indices
The S&P 500 is a widely recognized unmanaged index of U.S. Stock Market
activity.
The Russell 2000 Index is a capitalization weighted total return index which is
comprised of 2,000 of the smallest capitalized U.S. domiciled companies whose
stock is traded in the United States on the New York Stock Exchange, American
Stock Exchange and the NASDAQ.
The FT/S&P Actuaries World Index ex. U.S. is an unmanaged index used to portray
the global equity market excluding the U.S. The Index is weighted based on the
market capitalization of those stocks selected to represent each country and
includes gross reinvestment of dividends.
The Lehman Brothers Government/Corporate Bond Index is a weighted composite of
(i) Lehman Brothers Government Bond Index, which is comprised of all publicly
issued, non-convertible debt of the U.S. Government or any agency thereof,
quasi-Federal corporations, and corporate debt guaranteed by the U.S. Government
and (ii) Lehman Brothers Corporate Bond Index, which is comprised of all public
fixed-rate, non-convertible investment-grade domestic corporate debt, excluding
collateralized mortgage obligations.
The Lehman Brothers Intermediate Government/Corporate Bond Index is a weighted
composite of (i) Lehman Brothers Intermediate Government Bond Index, which is
comprised of all publicly issued, non-convertible debt of the U.S. Government or
any agency thereof, quasi-Federal corporations and corporate debt guaranteed by
the U.S. Government with a maturity of between one and ten years and (ii) Lehman
Brothers Corporate Bond Index.
The Lehman Brothers 20-Year Municipal Bond Index is a performance benchmark for
the long-term investment-grade tax-exempt bond market.
Performance of Framlington Accounts Managed by the Sub-Advisor. The tables below
contain certain performance information provided by the sub-advisor relating to
accounts managed by the sub-advisor which have investment objectives and
policies similar to those of the corresponding Framlington Funds. In the case
of the Healthcare portfolio performance, the data relates to a unit trust
organized under the laws of the United Kingdom managed by the same personnel of
the sub-advisor with similar investment objectives and policies to the
Framlington Healthcare Fund. In the case of Emerging Markets portfolio
performance, the data relates to a Canadian-based institutional emerging markets
portfolio managed by the same personnel of the sub-advisor with similar
investment objectives and policies to the Framlington Emerging Markets Fund.
54
<PAGE>
The trust account performance is provided by Standard & Poor's Micropal, an
independent research organization that is a recognized source of performance
data in the UK unit trust industry. The data is U.S. dollar adjusted on the
basis of exchange rates provided by Datastream using WM/Reuters closing rates.
The performance figures are net of brokerage commissions, actual investment
advisory fees and initial sales charges. The data assume the reinvestment of net
income and capital gain distributions. The trust account returns are calculated
using beginning offer and ending bid prices for periods ended December 31, 1996.
You should not rely on the following performance data of the sub-advisor's
client accounts as an indication of future performance of the Framlington Funds.
It should be noted that the management of the Funds will be affected by
regulatory requirements under the 1940 Act and requirements of the Internal
Revenue Code to qualify as a regulated investment company.
S&P
Healthcare
U.K. Composite
Period Ended Health Index Capital
December 31, 1996 Portfolio Change
----------------- --------- ------
1 Year................................. 10.75% 18.48%
3 Years................................ 96.93% 100.49%
5 Years................................ 99.43% 45.60%
Inception on April
30, 1987............................... 411.08% 239.64%
Performance for the Health trust account is calculated on an offer-bid basis;
U.S. dollar adjusted total return net of all management fees but not reflective
of U.K. tax. Source: Standard & Poor's Micropal.
S&P Healthcare Composite Index performance shows capital change in U.S. dollars
but does not reflect the deduction of fees, expenses and taxes. Source:
Datastream.
MSCI
Canadian Emerging
Emerging Markets Free
Period Ended Markets Total
December 31, 1996 Account Return
----------------- ------- ------
1 Year..................................... 5.16 % 6.03 %
Inception on November
1, 1994.................................... (3.68)% (12.37)%
MSCI Emerging Markets Free Index performance shows total return in U.S. Dollars
but does not reflect the deduction of fees, expenses and taxes. Source:
Datastream.
The performance of the Canadian institutional account is measured by the World
Markets Company on a total return basis and has been re-calculated net of the
management fee charged the Canadian institutional account. The inception date of
the Canadian institutional account is November 1, 1994.
Indices
The S&P Healthcare Composite Index is the composite Healthcare section of the
S&P 500 Index as defined and tracked by S&P. This index covers securities listed
in the United States only.
The MSCI Emerging Markets Free Index is maintained by Morgan Stanley Capital
International, and covers 26 countries and represents the investment
opportunities in emerging markets available to foreign investors. Total return
is calculated using the prices of the companies tracked and assumes the
reinvestment of dividends.
Portfolio Managers [to be revised]
Balanced Fund, Equity Selection Fund, Growth Opportunities Fund, Micro-Cap
Equity Fund And Small Company Growth Fund
A committee of professional portfolio managers employed by MCM makes investment
decisions for the Funds.
Growth & Income Fund
Otto Hinzmann, Jr. has been the Fund's portfolio manager since February 1995.
Mr. Hinzmann has been a Vice President and Director of Equity Management of MCM
or of Old MCM, Inc. ("Old MCM"), the predecessor to MCM, since January 1987.
International Equity Fund
Todd B. Johnson and Theodore Miller jointly manage the Fund. Mr. Johnson,
President and Chief Investment Officer of World, and Mr. Miller, senior
portfolio manager of the Fund, have managed the Fund since July 1992 and October
1996, respectively. Mr. Miller previously worked as the primary analyst for the
Fund (1996) and for Interacciones Global Inc. (1993-1995).
Multi-Season Growth Fund
Leonard J. Barr II has been the Fund's portfolio manager since the Fund's
inception in April 1993. Mr. Barr is the Senior Vice President and Director of
Research of MCM.
Real Estate Equity Investment Fund
55
<PAGE>
Peter K. Hoglund and Robert E. Crosby jointly manage the Fund. Mr. Hoglund, who
has managed the Fund since October 1996, was formerly the primary analyst of the
Fund (October 1994 to October 1996). Mr. Crosby, who has managed the Fund since
March 1998, was formerly the primary analyst of the Fund (October 1996 to March
1998). Mr. Crosby has been employed by MCM since 1993, and also serves as
portfolio manager for separately managed institutional accounts.
Small-Cap Value Fund And Value Fund
Gerald Seizert, Edward Eberle and Brian Wall jointly manage the Funds. Mr.
Seizert, Chief Investment Officer -Equities of the advisor, has managed the
Funds since they commenced operations. Prior to joining MCM in 1995, Mr. Seizert
was a Director and Managing Partner of Loomis, Sayles & Company, L.P. (1984-
1995). Mr. Eberle, who has managed the Small-Cap Value Fund since March 1997 and
the Value Fund since October 1996, was formerly the primary analyst for the
Funds. Prior to joining MCM in 1995, he was an Executive Vice President and
Portfolio Manager for Westpointe Financial Corporation. Mr. Wall, who has
managed the Funds since [March 1997], was formerly a primary analyst for the
Funds. Prior to joining MCM in 1995, he was a Senior Equity Analyst with
Woodbridge Capital Management, Inc. (1994-1995).
Framlington Emerging Markets Fund
A committee of professional portfolio managers employed by Framlington makes
investment decisions for the Fund. William Calvert heads the committee.
Framlington Global Financial Services Fund
A committee of professional managers employed by the MCM or Framlington makes
decisions for the Fund.
Framlington Healthcare Fund
Antony Milford, head of the Specialist Desk for Framlington, has been the Fund's
primary portfolio manager since the Fund's inception. Mr. Milford has managed
funds for Framlington since 1971.
Framlington International Growth Fund
A committee of professional portfolio managers employed by Framlington makes
investment decisions for the Fund. Simon Key, Chief Investment Officer of
Framlington, heads the committee.
Bond Fund
James C. Robinson and Gregory A. Prost jointly manage the Fund. Mr. Robinson and
Mr. Prost have managed the Fund since March 1995 and May 1995, respectively. Mr.
Robinson has been a Vice President and Chief Investment Officer of MCM or Old
MCM since 1987. Mr. Prost has been a Senior Fixed Income Portfolio of MCM or Old
MCM since 1995. Prior to joining MCM, he was a Vice President and Senior Fund
Manager for First of America Investment Corp.
Intermediate Bond Fund
Anne K. Kennedy and James C. Robinson jointly manage the Fund. Ms. Kennedy, Vice
President and Director of Corporate Bond Trading of MCM or Old MCM since 1991,
has managed the Fund since March 1995. Mr. Robinson, Vice President and Chief
Investment Officer of MCM or Old MCM since 1987, has managed the Fund since
March 1995.
International Bond Fund
Gregory A. Prost and Sharon E. Fayolle jointly manage the Fund. Mr. Prost,
Senior Fixed Income Portfolio Manager of MCM or Old MCM, has managed the 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. Ms. Fayolle, Vice
President and Director of Money Market Trading for MCM or Old MCM, has managed
the Fund since 1996. Prior to that she managed an international portfolio for
Ford Motor Company.
U.S. Government Income Fund
James C. Robinson and Peter G. Root jointly manage the Fund. Mr. Robinson, Vice
President and Chief Investment Officer of MCM or Old MCM since 1987, and Mr.
Root, Vice President and Director of Government Securities Trading of MCM since
March 1995, have managed the Fund since March 1995. Mr. Root joined MCM in 1991.
56
<PAGE>
Michigan Tax-Free Bond Fund, Tax-Free Bond Fund And Tax-Free Short-Intermediate
Bond Fund
Talmadge D. Gunn, Vice President and Director of Tax-Exempt Trading of MCM since
1993, manages the Tax-Free Funds.
Index 500 Fund
Todd B. Johnson and Kenneth A. Schluchter III jointly manage the Fund. Mr.
Johnson, a Chief Investment Officer of MCM, has been the portfolio manager of
the Fund since July 1992. Mr. Schluchter, who has managed the Fund since June
1997, was previously a Systems Developer and Data Analyst for Compuware
Incorporated (1993-1995).
57
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand each
Fund's financial performance for the past 5 years (or, if shorter, the period of
the Fund's operations). Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). Because the Class K shares of
Equity Selection Fund, Growth Opportunities Fund and Framlington Global
Financial Services Fund had not yet commenced operations on June 30, 1999,
financial highlights are not presented for those Funds. The information has been
audited by Ernst & Young LLP, independent accountants, whose report, along with
each Fund's financial statements, are included in the annual reports of the
Funds, and are incorporated by reference into the Statement of Additional
Information. You may obtain the annual reports without charge by calling (800)
438-5789.
<TABLE>
<CAPTION>
Balanced Fund (a)
-----------------------------------------------------------------------
Year Year Year Period Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e)
--------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......................
Income from investment operations:
Net investment income
Net realized and unrealized gain/(loss) on investments.....
Total from investment operations...........................
Less distributions:
Dividends from net investment income.......................
Distributions from net realized gains......................
Total distributions........................................
Net asset value, end of period.............................
Total return (b)...........................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).......................
Ratio of operating expenses to average net assets..........
Ratio of net investment income to average net assets.......
Portfolio turnover rate....................................
Ratio of operating expenses to average net assets without
waivers....................................................
</TABLE>
_______________________
58
<PAGE>
<TABLE>
<CAPTION>
Growth & Income Fund (a)
-----------------------------------------------------------------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e)
--------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......................
Income from investment operations:
Net investment income......................................
Net realized and unrealized gain on investments............
Total from investment operations...........................
Less distributions:
Dividends from net investment income.......................
Distributions from net realized gains......................
Total distributions........................................
Net asset value, end of period.............................
Total return (b)...........................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).......................
Ratio of operating expenses to average net assets..........
Ratio of net investment income to average net
assets.....................................................
Portfolio turnover rate....................................
Ratio of operating expenses to average net assets
without waivers............................................
</TABLE>
_________________________________
59
<PAGE>
<TABLE>
<CAPTION>
Index 500 Fund (a)
----------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96(d) 6/30/95(e) 2/28/95(d,f)
--------- --------- --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......................
Income from investment operations:
Net investment income......................................
Net realized and unrealized gain on investments............
Total from investment operations...........................
Less distributions:
Dividends from net investment income.......................
Distributions from net realized gains......................
Total distributions........................................
Net asset value, end of period.............................
Total return (b)...........................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).......................
Ratio of operating expenses to average net assets..........
Ratio of net investment income to average net assets.......
Portfolio turnover rate....................................
Ratio of operating expenses to average net assets..........
without waivers............................................
</TABLE>
________________________
60
<PAGE>
<TABLE>
<CAPTION>
International Equity Fund (a)
-------------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(d) 6/30/96(d) 6/30/95(e) 2/28/95(d,f)
--------- --------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................
Income from investment operations:
Net investment income.................................
Net realized and unrealized gain/(loss)on
investments...........................................
Total from investment operations......................
Less distributions:
Dividends from net investment income..................
Distributions from net realized gains.................
Distributions from capital............................
Total distributions...................................
Net asset value, end of period........................
Total return (b)......................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)..................
Ratio of operating expenses to average net assets.....
Ratio of net investment income to average net assets
Portfolio turnover rate...............................
Ratio of operating expenses to average net assets
without waivers.......................................
</TABLE>
_____________________________
61
<PAGE>
<TABLE>
<CAPTION>
Micro-Cap Equity Fund (a)
-------------------------------------
Year Year Period
Ended Ended Ended
6/30/99 6/30/98(e) 6/30/97(e)
-------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period................................
Income from investment operation:
Net investment income/(loss)........................................
Net realized and unrealized gain/(loss) on investments..............
Total from investment operations....................................
Less distributions:
Dividends from net investment income................................
Distributions from net realized gains...............................
Total distributions.................................................
Net asset value, end of period......................................
Total return (b)....................................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................................
Ratio of operating expenses to average net assets...................
Ratio of net investment income/(loss) to average net assets.........
Portfolio turnover rate.............................................
Ratio of operating expenses to average net assets without
waivers and/or expenses reimbursed..................................
</TABLE>
________________________
62
<PAGE>
<TABLE>
<CAPTION>
Multi-Season Growth Fund (a)
---------------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
6/30/99 6/30/98(e) 6/30/97(e) 6/30/96(e) 6/30/95(d,f)
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..........................
Income from investment operation:
Net investment income/(loss)..................................
Net realized and unrealized gain/(loss) on investments........
Total from investment operations..............................
Less distributions:
Dividends from net investment income..........................
Distributions from net realized gains.........................
Total distributions...........................................
Net asset value, end of period................................
Total return (b)..............................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)..........................
Ratio of operating expenses to average net assets.............
Ratio of net investment income/(loss) to average net assets...
Portfolio turnover rate.......................................
Ratio of operating expenses to average net assets without
waivers and/or expenses reimbursed............................
</TABLE>
______________________
63
<PAGE>
<TABLE>
<CAPTION>
Real Estate Equity Investment Fund (a) Small-Cap Value Fund (a)
-------------------------------------------------------------------------
Year Year Period Year Year Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97 6/30/99 6/30/98(d) 6/30/97(d)
--------- ------------ --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................
Income from investment operations:
Net investment income...............................
Net realized and unrealized gain on investments.....
Total from investment operations....................
Less distributions:
Dividends from net investment income................
Distributions in excess of net investment income....
Distributions from net realized gains...............
Distributions from paid-in capital..................
Total distributions.................................
Net asset value, end of period......................
Total return (b)....................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................
Ratio of operating expenses to average net
assets..............................................
Ratio of net investment income to average net
assets..............................................
Portfolio turnover rate.............................
Ratio of operating expenses to average net assets
without waivers and/or expenses reimbursed..........
</TABLE>
_______________________
64
<PAGE>
<TABLE>
<CAPTION>
Small Company Growth Fund (a)
--------------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e)
--------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.....................
Income from investment operations:
Net investment loss
Net realized and unrealized gain/(loss) on investments...
Total from investment operations.........................
Less distributions:
Distributions from net realized gains....................
Total distributions......................................
Net asset value, end of period...........................
Total return (b).........................................
Ratio to average net assets/supplemental data:
Net assets, end of period (000's)........................
Ratio of operating expenses to average net assets........
Ratio of net investment loss to average net assets.......
Portfolio turnover rate..................................
Ratio of operating expenses to average net assets........
without waivers..........................................
</TABLE>
_________________________
65
<PAGE>
<TABLE>
<CAPTION>
Value Fund (a)
--------------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d) 6/30/96(d)
--------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................
Income from investment operations:
Net investment income...........................................
Net realized and unrealized gain on investments.................
Total from investment operations................................
Less distributions:
Dividends from net investment income............................
Distributions from net realized gains...........................
Total distributions.............................................
Net asset value, end of period..................................
Total return (b)................................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)............................
Ratio of operating expenses to average net assets...............
Ratio of net investment income to average net assets............
Portfolio turnover rate.........................................
Ratio of operating expenses to average net assets
without waivers and/or expenses reimbursed......................
___________________________________________________
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
Framlington Emerging Markets
Fund (a) Framlington Healthcare Fund (a)
-----------------------------------------------------------------------
Year Year Period Year Year Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d) 6/30/99 6/30/98(d) 6/30/97
---------- ----------- ------------ --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................
Income from investment operations:
Net investment income/(loss)............................
Net realized and unrealized gain on
investments.............................................
Total from investment operations........................
Less distributions:
Dividends from net investment income....................
Distributions from net realized gains...................
Distributions in excess of net realized gains...........
Total distributions.....................................
Net asset value, end of period..........................
Total return (b)........................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)....................
Ratio of operating expenses to average
net assets..............................................
Ratio of net investment income/(loss) to average
net assets..............................................
Portfolio turnover rate.................................
Ratio of operating expenses to average net assets
without expenses reimbursed.............................
- ---------------------------------
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
Framlington International Growth
Fund (a)
------------------------------------
Year Year Period
Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d)
--------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period...................................
Income from investment operations:
Net investment income/(loss)...........................................
Net realized and unrealized gain on investments........................
Total from investment operations.......................................
Less distributions:
Dividends from net investment income...................................
Distributions from net realized gains..................................
Distributions in excess of net realized gains..........................
Total distributions....................................................
Net asset value, end of period.........................................
Total return (b).......................................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...................................
Ratio of operating expenses to average net assets......................
Ratio of net investment income/(loss) to average
net assets.............................................................
Portfolio turnover rate................................................
Ratio of operating expenses to average net assets
without expenses reimbursed............................................
</TABLE>
_______________________________
68
<PAGE>
<TABLE>
<CAPTION>
Bond Fund (a)
------------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97 6/30/96 6/30/95(e) 2/28/95(d,f)
--------- ----------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...............
Income from investment operations:
Net investment income..............................
Net realized and unrealized gain/(loss) on
investments........................................
Total from investment operations...................
Less distributions:
Dividends from net investment income...............
Distributions from net realized gains..............
Total distributions................................
Net asset value, end of period.....................
Total return (b)...................................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's)...............
Ratio of operating expenses to average net
assets.............................................
Ratio of net investment income to average
net assets.........................................
Portfolio turnover rate............................
Ratio of operating expenses to average net
assets without waivers.............................
</TABLE>
__________________________________________
69
<PAGE>
<TABLE>
<CAPTION>
Intermediate Bond Fund (a)
--------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96 6/30/95(d) 2/28/95(e)
---------- ---------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...............
Income from investment operations:
Net investment income..............................
Net realized and unrealized gain/(loss) on
investments........................................
Total from investment operations...................
Less distributions:
Dividends from net investment income...............
Distributions from net realized gains..............
Total distributions................................
Net asset value, end of period.....................
Total return (b)...................................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's)...............
Ratio of operating expenses to average net
assets.............................................
Ratio of net investment income to average
net asseets........................................
Portfolio turnover rate............................
Ratio of operating expenses to average net
assets without waivers ...........................
</TABLE>
_______________________________
70
<PAGE>
<TABLE>
<CAPTION>
International Bond Fund (a)
-----------------------------------
Year Year Period
Ended Ended Ended
6/30/99 6/30/98 6/30/97
---------- ---------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period...........
Income from investment operations:
Net investment income/(loss)...................
Net realized and unrealized gain/(loss) on
investments....................................
Total from investment operations...............
Less distributions:
Dividends from net investment income...........
Distributions from net realized gains..........
Total distributions............................
Net asset value, end of period.................
Total return (b)...............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...........
Ratio of operating expenses to average net
assets.........................................
Ratio of net investment income/(loss) to
average net assets.............................
Portfolio turnover rate........................
Ratio of operating expenses to average net
assets without waivers.........................
</TABLE>
_______________
71
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Income Fund (a)
-------------------------------------------------------------------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96(f) 6/30/95(d) 2/28/95(e)
--------- --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...........
Income from investment operations:
Net investment income/(loss)...................
Net realized and unrealized gain/(loss) on
investments....................................
Total from investment operations...............
Less distributions:
Dividends from net investment income...........
Distributions from net realized gains..........
Total distributions............................
Net asset value, end of period.................
Total return (b)...............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...........
Ratio of operating expenses to average net
assets.........................................
Ratio of net investment income/(loss) to
average net assets.............................
Portfolio turnover rate........................
Ratio of operating expenses to average net
assets without waivers.........................
</TABLE>
_________________
72
<PAGE>
<TABLE>
<CAPTION>
Michigan Tax-Free Bond Fund(a)
-------------------------------------------------------------------------------------
Year Year Year Year Period Period Year
Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(d) 6/30/96(f) 6/30/95(d) 2/28/95(d,e) 8/95(d,f)
--------- --------- ------------ ------------ --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...........
Income from investment operations:
Net investment income..........................
Net realized and unrealized gain/(loss) on
investments....................................
Total from investment operations...............
Less distributions:
Dividends from net investment income...........
Distributions from net realized gains..........
Total distributions............................
Net asset value, end of period.................
Total return (b)...............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...........
Ratio of operating expenses to average net
assets.........................................
Ratio of net investment income to average net
assets.........................................
Portfolio turnover rate........................
Ratio of operating expenses to average net
assets without waivers.........................
</TABLE>
_________________
73
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Bond Fund (a)
---------------------------------------------------------------------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96(f) 6/30/95(d,f) 2/28/95(e)
--------- --------- --------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...........
Income from investment operations:
Net investment income).........................
Net realized and unrealized gain on
investments....................................
Total from investment operations...............
Less distributions:
Dividends from net investment income...........
Distributions from net realized gains..........
Total distributions............................
Net asset value, end of period.................
Total return (b)...............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...........
Ratio of operating expenses to average net
assets.........................................
Ratio of net investment income to average net
assets.........................................
Portfolio turnover rate........................
Ratio of operating expenses to average net
assets without waivers.........................
</TABLE>
_________________
74
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Short-Intermediate Fund (a)
-----------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e)
--------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................
Income from investment operations:
Net investment income.................................
Net realized and unrealized gain/(loss) on
investments...........................................
Total from investment operations......................
Less distributions:
Dividends from net investment income..................
Distributions from net realized gains.................
Total distributions...................................
Net asset value, end of period........................
Total return (b)......................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)
Ratio of operating expenses to average net
assets................................................
Ratio of net investment income to average net
assets................................................
Portfolio turnover rate...............................
Ratio of operating expenses to average net assets
without waivers.......................................
</TABLE>
______________________
75
<PAGE>
<TABLE>
<CAPTION>
Cash Investment Fund (a)
------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95(d) 2/28/95(e)
---------- --------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................
Income from investment operations:
Net investment income.................................
Total from investment operations......................
Less distributions:
Dividends from net investment income..................
Total distributions...................................
Net asset value, end of period........................
Total return (b)......................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)..................
Ratio of operating expenses to average net assets.....
Ratio of net investment income to average net assets..
Ratio of operating expenses to average net assets
without waivers.......................................
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Money Market Fund (a)
-----------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95(d) 2/28/95(e)
--------- --------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.....................
Income from investment operations:
Net investment income....................................
Total from investment operations.........................
Less distributions:
Dividends from net investment income.....................
Total distributions......................................
Net asset value, end of period...........................
Total return (b).........................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).....................
Ratio of operating expenses to average net
assets...................................................
Ratio of net investment income to average net
assets...................................................
Ratio of operating expenses to average net assets
without waivers..........................................
</TABLE>
_____________
77
<PAGE>
<TABLE>
<CAPTION>
U.S. Treasury Money Market Fund (a)
-----------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95(d) 2/28/95(e)
--------- --------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.....................
Income from investment operations:
Net investment income....................................
Total from investment operations.........................
Less distributions:
Dividends from net investment income.....................
Total distributions......................................
Net asset value, end of period...........................
Total return (b).........................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).....................
Ratio of operating expenses to average net
assets...................................................
Ratio of net investment income to average net
assets...................................................
Ratio of operating expenses to average net assets
without waivers..........................................
</TABLE>
78
<PAGE>
For More Information
<TABLE>
<S> <C>
To Obtain Information:
-------------------------------------------------------
More information about the Funds is available free upon request,
including the following: By telephone
Call 1-800-438-5789
Annual/Semi-Annual Reports
By mail
You will receive unaudited semi-annual reports and audited annual The Munder Funds
reports on a regular basis from the Funds. In addition, you will 480 Pierce Street
also receive updated Prospectuses or Supplements to this Birmingham, MI 48009
Prospectus. In order to eliminate duplicate mailings, the Funds
will only send one copy of the above communications to (1) accounts On the Internet
with the same primary record owner, (2) joint tenant accounts, (3)
tenant in common accounts and (4) accounts which have the same Text-only versions of fund
address. documents can be viewed online or downloaded
from:
Securities and Exchange Commission
Statement Of Additional Information http://www.sec.gov
Provides more details about the Funds and their policies. A You can also obtain copies by visiting the
current Statement of Additional Information is on file with the Securities and Exchange Commissions Public
Securities and Exchange Commission and is incorporated by reference Reference Room in Washington, D.C. (phone
(is legally considered part of this prospectus). 1-800-SEC-0330) or by sending your request and
a duplicating fee to the Securities and
Exchange Commissions Public Reference Section,
Washington, D.C. 20549-6009.
You may also find more information about the
Funds on the Internet at:
http://www.munderfunds.com
--------------------------------------------------------
</TABLE>
The Munder Funds, Inc.
SEC file number: 811-7346
The Munder Funds Trust
SEC file number: 811-5899
The Munder Framlington Funds Trust
SEC file number: 811-7897
<PAGE>
Class Y Shares
[Munder Logo]
Prospectus
October 26, 1999
The Munder Equity Funds
Balanced
Equity Selection
Growth & Income
Growth Opportunities
International Equity
Micro-Cap Equity
Multi-Season Growth
NetNet
Real Estate Equity Investment
Small-Cap Value
Small Company Growth
Value
The Munder Framlington Funds
Framlington Emerging Markets
Framlington Global Financial Services
Framlington Healthcare
Framlington International Growth
The Munder Income Funds
Bond
Intermediate Bond
International Bond
U.S. Government Income
Michigan Tax-Free Bond
Tax-Free Bond
Tax-Free Short-Intermediate Bond
Short Term Treasury
The Munder Money Market Funds
Cash Investment
Money Market
Tax-Free Money Market
U.S. Treasury Money Market
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved these securities nor passed upon the
accuracy or adequacy of this prospectus. It is a
criminal offense to state otherwise.
<PAGE>
Table Of Contents
Risk/Return Summary
. Equity Funds
. Income Funds
. Tax-Free Funds
. Money Market Funds
Summary of Principal Risks
Who May Want To Invest
Fees And Expenses
More About The Funds
Glossary
Special Risks And Other Considerations
Additional Description of Investments And Common Investment Techniques
Your Investment
How To Reach The Fund
Purchasing Shares
Exchanging Shares
Redeeming Shares
Additional Policies For Purchases, Exchanges And Redemptions
Shareholder Privileges
Pricing of Fund Shares
Distributions
Federal Tax Considerations
Taxes On Distributions
Taxes On Sales Or Exchanges
Other Considerations
Management
Investment Advisors And Sub-Advisor
Portfolio Managers
Financial Highlights
Back Cover For Additional Information
2
<PAGE>
Risk/Return Summary
- --------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goals and principal investment
strategies of the Funds and the principal risks of investing in the Funds. For
further information on these and the Funds' other investment strategies and
risks, please read the section entitled More About The Funds.
The Risk/Return Summary includes a table for each Fund showing its average
annual returns and a bar chart showing its annual returns. The table and bar
chart provide an indication of the historical risk of an investment in each Fund
by showing:
. how the Fund's average annual returns for 1, 5, and 10 years (or over the
life of the Fund if the Fund is less than 10 years old) compare to those of a
broad based securities market index; and;
. changes in the Fund's performance from year to year over 10 years (or over
the life of the Fund if the Fund is less than 10 years old).
When you consider this information, please remember that a Fund's performance in
past years is not necessarily an indication of how the Fund will perform in the
future.
An investment in the Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
Certain terms used in this prospectus are defined in the Glossary.
- --------------------------------------------------------------------------------
Equity Funds
- --------------------------------------------------------------------------------
Balanced Fund
Goal
The Fund's goal is to provide an attractive investment return through a
combination of growth of capital and current income.
Principal Investment Strategies
The Fund pursues its goal by allocating its assets among three asset groups:
equity securities, fixed income securities and cash equivalents.
The Fund normally will invest at least 25% of its assets in fixed income
securities and no more than 75% of its assets in equity securities. The Fund
will notify shareholders at least 30 days before changing this policy.
The advisor will allocate the Fund's assets to the three asset groups based on
its view of the following factors, among others:
. general market and economic conditions and trends;
. interest rates and inflation rates;
. fiscal and monetary developments; and
. long-term corporate earnings growth.
The advisor will try to take advantage of changing economic conditions by
adjusting the ratio of equity securities to fixed income securities or cash
equivalents. For example, if the advisor believes that rapid economic growth
will lead to better corporate earnings in the future, then it might increase the
Fund's equity securities holdings and reduce its fixed income securities and
cash equivalents holdings.
The Fund's fixed income securities include:
. U.S. Government securities;
. obligations of foreign governments;
. corporate obligations;
. zero coupon bonds;
. variable and floating rate securities;
. mortgage and other asset-backed securities; and
. stripped securities.
The Fund's cash equivalents are short-term, high-quality money market
instruments and include:
. commercial paper;
. bankers' acceptances and certificates of deposit;
. corporate obligations; and
. U.S. Government securities.
The Fund may also invest in foreign securities and enter into futures and
options on futures contracts.
3
<PAGE>
Principal Risks
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk. To the extent that
the Fund enters into futures and options on futures contracts, it may be subject
to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year 5 Years (4/13/93)
---------- ----------- -------------------------
Class Y
[Index]
4
<PAGE>
Equity Selection Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities.
The Fund invests in equity securities which the advisor believes are undervalued
compared to stocks of other companies in the same industry.
The Fund generally invests in companies with market capitalizations of at least
$1 billion.
The Fund diversifies its assets by industry in approximately the same weightings
as those of the S&P 500.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and medium-
size company stock risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
As of the date of this prospectus, the Fund had not commenced operations and,
therefore, does not have annual returns for a full calendar year. For this
reason, a bar chart and performance table showing performance information and
information on the Fund's best and worst calendar quarters is not provided in
this prospectus.
5
<PAGE>
Growth & Income Fund
Goal
The Fund's goal is to provide capital appreciation and current income.
Principal Investment Strategies
The Fund pursues its goal by investing primarily in dividend-paying equity
securities. Under normal circumstances, the Fund will invest at least 65% of its
assets in income-producing common stocks and convertible preferred stocks.
The Fund may also purchase fixed income securities which are convertible into or
exchangeable for common stock.
The advisor generally selects large, well-known companies that it believes have
favorable prospects for dividend growth and capital appreciation. The Fund will
seek to produce a current yield greater than the S&P 500.
The Fund focuses on dividend-paying equity securities because, over time,
dividend income has accounted for a significant portion of the total return of
the S&P 500. In addition, dividends are usually a more stable and predictable
source of return than capital appreciation. The advisor believes that stocks
which distribute a high level of current income generally have more stable
prices than those which pay below average dividends.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (7/5/94)
-------------- ---------------------------
Class Y
[Index]
6
<PAGE>
Growth Opportunities Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in the equity
securities of companies with market capitalizations between $500 million and $10
billion.
Its style, which focuses on both growth prospects and valuation, is known as
GARP (Growth at a Reasonable Price) and seeks to produce attractive returns
during various market environments.
The advisor chooses the Fund's investments by reviewing the earnings growth of
approximately 10,000 companies over the past three years and investing in
approximately 50 to 100 companies based on:
. superior earnings growth;
. financial stability;
. relative market value; and
. price changes compared to the S&Ps MidCap 400 Index.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and medium-
size company stock risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
As of the date of this prospectus, the Fund has not completed a full calendar
year of operations. For this reason, a bar chart and performance table showing
performance information and information on the Fund's best and worst calendar
quarters is not provided in this prospectus.
7
<PAGE>
International Equity Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing primarily in foreign securities including
American Depositary Receipts.
Under normal market conditions, at least 65% of the Fund's assets are invested
in equity securities in at least three foreign countries. The Fund mostly
invests in mature markets, but may also invest in emerging markets.
The Fund emphasizes companies with a market capitalization of at least $250
million.
At least once a quarter, the advisor creates a list of foreign securities and
American Depositary Receipts which the Fund may purchase based on the country
where the company is located, its competitive advantages, its past financial
record, its future prospects for growth and the market for its securities. The
advisor updates the securities list frequently (at least quarterly), adds new
securities to the list if they are eligible and sells securities not on the
updated securities list as soon as practicable.
After the advisor creates the securities list, it divides the list into two
sections. The first section is designed to provide broad coverage of
international markets. The second section increases exposure to securities that
the advisor expects will perform better than other stocks in their industry
sectors and their markets as a whole. When the advisor believes broader market
exposure will benefit the Fund, it will allocate up to 100% of the Fund's assets
in first section securities. When the advisor identifies strong potential for
specific securities to perform well, the Fund may invest up to 50% of its assets
in second section securities.
The Fund may also enter into futures and options on futures contracts and
forward currency exchange contracts, and purchase and sell options.
Principal Risks
Among the principal risks of investing in the Fund are market risk, foreign
securities risk and currency risk. To the extent that the Fund enters into
futures and options on futures contracts, enters into forward currency exchange
contracts, and purchases and sells options, it may be subject to derivatives
risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1992 _____%
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (12/1/91)
-------------- ------------- ------------
Class Y
[Index]
8
<PAGE>
Micro-Cap Equity Fund
Goal
The Fund's goal is to provide capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of small capitalization companies. Small capitalization companies
means companies having market capitalizations within the range of the companies
in the Wilshire Micro-Cap Index. As of the date of this prospectus, such
capitalizations do not exceed approximately $300 million, which is considerably
less than the market capitalization of S&P 500 companies.
The Fund attempts to provide investors with potentially higher returns than a
fund that invests primarily in 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
higher returns due to inefficiencies in the marketplace.
The advisor will choose companies that:
. present the ability to grow significantly over the next several years;
. may benefit from changes in technology, regulations and industry sector
trends; and
. are still in the developmental stage and may have limited product lines.
There is no limit on the length of operating history for the companies in which
the Fund may invest. The Fund may also invest in equity securities of larger
capitalization companies. The Fund may invest without limit in initial public
offerings of small capitalization companies.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and small
company stock risk. To the extent that the Fund purchases foreign securities,
it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (12/26/96)
-------------- -----------------------------
Class Y
[Index]
9
<PAGE>
Multi-Season Growth Fund
Goal
The Fund's goal is to provide long-term capital appreciation. This goal is
"fundamental" and cannot be changed without shareholder approval.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities. The Fund generally invests in equity securities of companies with
market capitalizations over $1 billion. Its style, which focuses on both growth
prospects and valuation, is known as GARP (Growth at a Reasonable Price) and
seeks to produce attractive returns during various market environments.
The advisor chooses the Fund's investments by reviewing the earnings growth of
approximately 5,500 companies over the past five years and investing in
approximately 50 to 100 companies based on:
. superior earnings growth;
. financial stability;
. relative market value; and
. price changes compared to the S&P 500.
The Fund may also purchase foreign securities.
Principal Risks
Among the principal risks of investing in the Fund is market risk. To the
extent that the Fund purchases foreign securities, it may be subject to foreign
securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
Calendar Year Total Return
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (8/16/93)
---------------- --------------- --------------
Class Y
[Index]
10
<PAGE>
NetNet Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its assets in equity securities.
The Fund invests in companies which are engaged in research, design, development
or manufacturing activities related to the Internet or Intranet. Investments
will also be made in companies involved to a significant extent in the business
of distributing products, processes or services for or through the Internet or
Intranet.
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 Fund may also invest in foreign securities and purchase and sell options.
Principal Risks
Among the principal risks of investing in the Fund are market risk, sector risk,
medium-size company risk and small company risk. To the extent that
the Fund purchases foreign securities, it may be subject to foreign securities
risk. To the extent that it purchases and sells options, it may be subject to
derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (8/__/96)
------------- ----------------------------
Class Y
[Index]
11
<PAGE>
Real Estate Equity Investment Fund
Goal
The Fund's goal is to provide both capital appreciation and current income.
This goal is "fundamental" and cannot be changed without shareholder approval.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its total assets in equity securities of U.S. companies which are
principally engaged in the real estate industry or which own significant real
estate.
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. The Fund will not own real estate directly.
The companies in which the Fund primarily invests include:
. equity real estate investment trusts ("REITS");
. brokers, home builders and real estate developers;
. companies with substantial real estate holdings (for example, paper and
lumber producers, hotels and entertainment companies);
. manufacturers and distributors of building supplies;
. mortgage REITS; and
. financial institutions which issue or service mortgages.
In addition, the Fund may invest:
. up to 35% of its assets in companies other than real estate industry
companies;
. in fixed income securities including up to 5% of its assets in debt
securities rated below investment grade or unrated if secured by real estate
assets and if the advisor believes that the underlying collateral is
sufficient; and
. in REITS only if they are traded on a securities exchange or NASDAQ.
Principal Risks
Among the principal risks of investing in the Fund are market risk and sector
risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1995: _____%
1996: _____%
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (10/3/94)
----------------- ------------------
Class Y
[Index]
12
<PAGE>
Small-Cap Value Fund
Goal
The Fund's goal is to provide long-term capital appreciation, with income as a
secondary objective.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its assets in equity securities of small capitalization companies. Small
capitalization companies means companies with market capitalizations within the
range of the companies in the Russell 2000 Index. As of the date of this
prospectus, such capitalizations do not exceed approximately $1.5 billion, which
is less than the market capitalization of S&P 500 companies.
The Fund attempts to provide investors with potentially higher returns than a
fund that invests primarily in larger, more established companies. Since small
companies are generally not as well known to investors and have less of an
investor following than larger companies, they may provide higher returns due to
inefficiencies in the marketplace.
The advisor will concentrate on companies that it believes are undervalued. A
company's equity securities may be undervalued because the company is
temporarily overlooked or out of favor due to general economic conditions, a
market decline, industry conditions or developments affecting the particular
company. The Fund will usually invest in equity securities of companies with
price/earnings ratios, price/cash flow ratios and price/book values that are low
relative to the general market.
In addition to valuation, the advisor considers these factors, among others, in
choosing companies:
. a stable or improving earnings record;
. sound finances;
. above-average growth prospects;
. participation in a fast growing industry;
. strategic niche position in a specialized market; and
. adequate capitalization.
The Fund may invest in equity securities of larger capitalization companies.
The Fund may also invest in foreign securities and enter into futures and
options on futures contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk and small
company stock risk. To the extent that the Fund purchases foreign securities,
it may be subject to foreign securities risk. To the extent that the Fund
enters into futures and options on futures contracts, it may be subject to
derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1997: _____%
1998: _____%
______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (12/26/96)
------------- ------------------------
Class Y
[Index]
13
<PAGE>
Small Company Growth Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its assets in equity securities of small capitalization companies with
market capitalizations below $1 billion, which is less than the market
capitalization of S&P 500 companies.
The Fund attempts to provide investors with potentially higher returns than a
fund that invests primarily in 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
higher returns due to inefficiencies in the marketplace.
The advisor considers these factors, among others, in choosing companies:
. above-average growth prospects;
. participation in a fast-growing industry;
. strategic niche position in a specialized market; and
. adequate capitalization.
The Fund may also invest in foreign securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk and small
company stock risk. To the extent that the Fund purchases foreign securities,
it may be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1992: _____%
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year 5 Years (12/1/91)
------------- ------------- ---------------------
Class Y
[Index]
14
<PAGE>
Value Fund
Goal
The Fund's primary goal is to provide long-term capital appreciation. Its
secondary goal is to provide income.
Principal Investment Strategies
The Fund pursues its goals by investing primarily in the equity securities of
well-established companies with intermediate to large capitalizations, which
typically exceed $750 million.
The Fund will invest at least 65% of its assets in equity securities.
The advisor will focus on companies that it believes are undervalued. A
company's equity securities may be undervalued because the company is
temporarily overlooked or out of favor due to general economic conditions, a
market decline, industry conditions or developments affecting the particular
company. The Fund will usually invest in equity securities of companies with
price/earnings ratios, price/cash flow ratios and price/book values that are low
relative to the general market.
In addition to valuation, the advisor considers these factors, among others, in
choosing companies:
. a stable or improving earnings record;
. sound finances;
. above-average growth prospects;
. participation in a fast growing industry;
. strategic niche position in a specialized market; and
. adequate capitalization.
The Fund may also invest in foreign securities and enter into futures and
options on futures contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk and medium-
size company stock risk. To the extent that the Fund purchases foreign
securities, it may be subject to foreign securities risk. To the extent that
the Fund enters into futures and options on futures contracts, it may be subject
to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (8/18/95)
----------------- -------------------
Class Y
[Index]
15
<PAGE>
Framlington Emerging Markets Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of companies in emerging market countries, as defined by the World
Bank, the International Finance Corporation, the United Nations or the European
Bank for Reconstruction and Development.
A company will be considered to be in an emerging market country if:
. the company is organized under the laws of, or has a principal office in,
an emerging market country;
. the company's stock is traded primarily in an emerging market country;
. most of the company's assets are in an emerging market country; or
. most of the company's revenues or profits come from goods produced or sold,
investments made or services performed in an emerging market country.
The Fund may also invest in foreign securities of companies located in countries
with mature markets.
Principal Risks
Among the principal risks of investing in the Fund are market risk, foreign
securities risk, emerging markets risk, currency risk and medium-size company
stock risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (12/31/96)
------------ ----------------------
Class Y
[Index]
16
<PAGE>
Framlington Global Financial Services Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of U.S. and foreign companies which are principally engaged in the
financial services industry and companies providing services primarily within
the financial services industry. The Fund focuses specifically on companies
which are likely to benefit from growth or consolidation in the financial
services industry.
Examples of companies in the financial services industry are:
. commercial, industrial and investment banks;
. savings and loan associations;
. brokerage companies;
. consumer and industrial finance companies;
. real estate and leasing companies;
. insurance companies; and
. holding companies for each of the above.
A company is "principally engaged" in the financial services industry if at
least 50% of its gross income, net sales or net profits comes from activities in
the financial services industry or if the company dedicates more than 50% of its
assets to the production of revenues from the financial services industry.
The sub-advisor allocates assets among countries based on:
. its analysis of the trends in the financial services industry in particular
regions;
. the relative valuation of financial services companies in different
regions; and
. its assessment of the prospects for a particular equity market and its
currency.
Under normal market conditions, the Fund invests at least 65% of its assets in
at least three different countries, including the United States. The Fund may
invest in companies located in countries with mature markets and in those with
emerging markets.
The Fund may also enter into forward currency exchange contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk, sector risk,
foreign securities risk, currency risk and medium-size company stock risk. To
the extent that the Fund enters into forward currency exchange contracts, it may
be subject to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
As of the date of this prospectus, the Fund has not completed a full calendar
year of operations. For this reason, a bar chart and performance table showing
performance information and information on the Fund's best and worst calendar
quarters is not provided in this prospectus.
17
<PAGE>
Framlington Healthcare Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing in equity securities of companies
providing healthcare and medical services and products worldwide. Currently,
most of these companies are located in the United States.
The Fund will invest in:
. pharmaceutical producers;
. biotechnology firms;
. medical device and instrument manufacturers;
. distributors of healthcare products;
. healthcare providers and managers; and
. other healthcare service companies.
Under normal market conditions, the Fund will invest at least 65% of its assets
in healthcare companies, which are companies for which at least 50% of sales,
earnings or assets arise from or are dedicated to health services or medical
technology activities.
The Fund's investments may include foreign securities of companies located in
countries with mature markets.
Principal Risks
Among the principal risks of investing in the Fund are market risk, sector risk,
foreign securities risk, currency risk and medium-size company stock risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1997: _____%
1998: _____%
_______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (12/31/96)
---------- -----------------------
Class Y
[Index]
18
<PAGE>
Framlington International Growth Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing at least 65% of its assets in equity
securities of issuers located in at least three foreign countries.
The sub-advisor will choose companies that demonstrate:
. above-average profitability;
. high quality management; and
. the ability to grow significantly in their countries.
The Fund may invest in companies located in countries with mature markets and in
those with emerging markets. The Fund may also enter into forward currency
exchange contracts.
Principal Risks
Among the principal risks of investing in the Fund are market risk, foreign
securities risk, currency risk, emerging markets risk and medium-size company
stock risk. To the extent that the Fund enters into forward currency exchange
contracts, it may be subject to derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
Calendar Year Total Return
1997: _____%
1998: _____%
_______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (12/31/96)
------------- ---------------------
Class Y
[Index]
19
<PAGE>
Income Funds
Bond Fund
Goal
The Fund's primary goal is to provide a high level of current income. Its
secondary goal is capital appreciation.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its total assets in a broad range of bonds and other fixed income
securities. These may include:
. U.S. Government securities and repurchase agreements collateralized by such
securities;
. obligations of state, local and foreign governments;
. obligations of domestic and foreign banks;
. obligations of domestic and foreign corporations;
. zero coupon bonds, debentures and convertible debentures;
. mortgage and other asset-backed securities; and
. stripped securities.
The Fund's strategy focuses on areas where the advisor believes value can be
added. These include credit analysis and analysis of such factors as interest
rate relationships, the relative attractiveness of bond market sectors and the
characteristics of individual issuers.
The Fund's dollar-weighted average maturity will generally range between six and
fifteen years.
The Fund will purchase only fixed income securities that are rated investment
grade or better, or if unrated, are of comparable quality.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk and
credit risk. To the extent that the Fund purchases foreign securities, it may be
subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1992: _____%
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
____________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (12/1/91)
------------- ----------- -------------
Class Y
[Index]
20
<PAGE>
Intermediate Bond Fund
Goal
The Fund's goal is to provide a competitive rate of return which, over time,
exceeds the rate of inflation and the return provided by money market
instruments.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its total assets in a broad range of bonds and other fixed income
securities. These may include:
. U.S. Government securities and repurchase agreements collateralized by such
securities;
. obligations of state, local and foreign governments;
. obligations of domestic and foreign banks;
. obligations of domestic and foreign corporations;
. zero coupon bonds, debentures and convertible debentures;
. mortgage and other asset-backed securities; and
. stripped securities.
The Fund's strategy focuses on areas where the advisor believes value can be
added. These include credit analysis and analysis of such factors as interest
rate relationships, the relative attractiveness of bond market sectors and the
characteristics of individual issues.
The Fund's dollar-weighted average maturity will generally range between three
and eight years.
The Fund will purchase only fixed income securities that are rated investment
grade or better, or if unrated, are of comparable quality.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk and
credit risk. To the extent that the Fund purchases foreign securities, it may be
subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1992: ______%
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
1 5 Inception
Year Years (12/1/91)
-------- --------- -----------
Class Y
[Index]
21
<PAGE>
International Bond Fund
Goal
The Fund's goal is to realize a competitive total return through a combination
of current income and capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its total assets in a broad range of bonds and other fixed income
securities of foreign issuers. These may include:
. obligations issued by foreign governments, their agencies, instrumentalities
or political subdivisions;
. obligations issued or guaranteed by supranational organizations (such as the
World Bank);
. obligations of foreign banks or bank holding companies; and
. obligations of foreign corporations.
The Fund will invest in the securities of issuers in at least three foreign
countries.
The Fund's strategy focuses on analysis of bond yield relationships and
specifically focuses on making allocation decisions based on yield relationships
between countries, pricing inefficiencies in the marketplace and yield curve
analysis.
The Fund's dollar-weighted average maturity will generally range between three
and fifteen years.
The Fund may invest a portion of its assets in domestic obligations, including
U.S. Government securities and obligations of domestic banks and corporations.
The Fund is "non-diversified" under the 1940 Act and may invest more of its
assets in fewer issuers than a "diversified" investment company.
The Fund may enter into forward currency exchange contracts.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, foreign securities risk, currency risk and non-diversified risk. To
the extent the Fund enters into forward currency contracts, it may be subject to
derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (10/2/96)
--------- ------------------------
Class Y
[Index]
22
<PAGE>
U.S. Government Income Fund
Goal
The Fund's goal is to provide high current income.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its total assets in a broad range of U.S. Government securities and
repurchase agreements relating to such securities.
The Fund's strategy focuses on areas where the advisor believes value can be
added. These include credit analysis and an analysis of such factors as
interest rate relationships, the relative attractiveness of the government-
related sectors of the market and the characteristics of individual issues.
The Fund's dollar-weighted average maturity generally will range between six and
fifteen years.
The Fund may also invest in other fixed income securities.
Principal Risks
The principal risk of investing in the Fund is interest rate risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" on "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1995: _____%
1996: _____%
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (7/5/94)
---------- ---------------
Class Y
[Index]
23
<PAGE>
Short Term Treasury Fund
Goal
The Fund's goal is to provide investors with an enhanced money market return
consistent with capital preservation.
Principal Investment Strategies
The Fund pursues its goal by investing all of its assets in U.S. Treasury
securities and in repurchase agreements fully collateralized by U.S. Treasury
securities.
The Fund's dollar-weighted average portfolio maturity usually will not exceed
two years.
The Fund seeks to generate a total return which exceeds the return of money
market instruments while minimizing the fluctuation of its net asset value. The
Fund, however, is not a money market fund and its net asset value may fluctuate.
Principal Risks
The principal risk of investing in the Fund is interest rate risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1998: _____%
____________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (1/29/97)
------------ ------------------
Class Y
[Index]
24
<PAGE>
- --------------------------------
Tax-Free Funds
- --------------------------------
Michigan Tax-Free Bond Fund
(Offered only in the State of Michigan)
Goal
The Fund's goal is to provide as high a level of current interest income exempt
from regular Federal income taxes and Michigan state income tax as is consistent
with prudent investment management and preservation of capital.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
80% of the Fund's net assets in municipal obligations issued by the State of
Michigan and its political subdivisions. The interest on these obligations is
exempt from Federal income taxes and Michigan state income tax.
The Fund will invest primarily in Michigan municipal obligations that have
remaining maturities of between three and thirty years. The Fund's dollar-
weighted average maturity will generally range between ten and twenty years.
The Fund is "non-diversified" under the 1940 Act and may invest more of its
assets in fewer issuers than a "diversified" investment company.
The Fund may also invest in other fixed income securities.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, and non-diversified risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
[1994: _____%]
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (1/3/94)
------------ ------------- ----------------
Class Y
[Index]
25
<PAGE>
Tax-Free Bond Fund
Goal
The Fund's goals are to provide a high level of current interest income exempt
from Federal income taxes and to generate as competitive a long-term rate of
return as is consistent with prudent investment management and preservation of
capital.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its net assets in municipal obligations.
Under normal market conditions, at least 80% of the Fund's net assets will be
invested in municipal obligations whose interest is exempt from regular Federal
income tax. This fundamental policy may only be changed with shareholder
approval.
In selecting securities for the Fund, the advisor places a premium on value and
diversifies the Fund's portfolio holdings across maturities, industries and
geographic locations.
The Fund invests primarily in intermediate-term and long-term municipal
obligations that have remaining maturities of between three and thirty years.
The Fund's dollar-weighted average maturity will generally range between ten and
twenty years.
The Fund may also invest in other fixed income securities.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk and
credit risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1995: _____%
1996: _____%
1997: _____%
1998: _____%
__________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since Inception
1 Year (7/21/94)
------------- -------------------
Class Y
[Index]
26
<PAGE>
Tax-Free Short-Intermediate Bond Fund
Goal
The Fund's goals are to provide a competitive level of current interest income
exempt from regular Federal income taxes and a total return which, over time,
exceeds the rate of inflation and the return provided by tax-free money market
instruments.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its net assets in municipal obligations.
Under normal market conditions, at least 80% of the Fund's net assets will be
invested in municipal obligations whose interest is exempt from regular Federal
income tax.
The Fund generally buys obligations with remaining maturities of five years or
less. The Fund's dollar-weighted average maturity will generally range between
two and five years.
The Fund may invest more than 25% of its assets in municipal obligations issued
by the State of Michigan and its political subdivisions.
The Fund is "non-diversified" under the 1940 Act and may invest more of its
assets in fewer issuers than a "diversified" investment company.
The Fund may also invest in other fixed income securities.
Principal Risks
Among the principal risks of investing in the Fund are market risk, interest
rate risk, credit risk and non-diversified risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
Calendar Year Total Return
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
__________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (12/17/92)
-------------- ------------- ---------------
Class Y
[Index]
27
<PAGE>
- -----------------------------
Money Market Funds
- -----------------------------
Cash Investment Fund
Goal
The Fund's primary goal is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
The Fund's investments may include fixed and variable rate securities.
The Fund may also invest in foreign securities.
Principal Risks
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Among the principal risks of investing in the Fund are interest rate risk and
credit risk. To the extent that the Fund purchases foreign securities, it may
be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1991: _____%
1992: _____%
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
__________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (3/14/90)
-------------- ------------- ---------------
Class Y
[Index]
You may call 1-800 [ ] to obtain the Fund's current 7-day yield.
28
<PAGE>
Money Market Fund
Goal
The Fund's primary goal is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
The Fund's investments may include fixed and variable rate securities.
The Fund may also invest in foreign securities..
Principal Risks
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Among the principal risks of investing in the Fund are interest rate risk and
credit risk. To the extent that the Fund purchases foreign securities, it may
be subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
Calendar Year Total Return
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
__________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (8/18/93)
-------------- ------------- ---------------
Class Y
[Index]
You may call 1-800 [ ] to obtain the Fund's current 7-day yield.
29
<PAGE>
Tax-Free Money Market fund
Goal
The Fund's goal is to provide as high a level of current interest income exempt
from Federal income taxes as is consistent with maintaining liquidity and
stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing substantially all of its assets in short-
term, U.S. dollar-denominated municipal obligations, the interest on which is
exempt from regular Federal income tax.
Under normal market conditions, the Fund will invest at least 80% of its net
assets in municipal obligations.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
Principal Risks
Although the Fund seeks to preserve the value of our investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Among the principal risks of investing in the Fund are interest rate risk and
credit risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return
1991: _____%
1992: _____%
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
__________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (3/14/90)
-------------- ------------- ---------------
Class Y
[Index]
You may call 1-800 [ ] to obtain the Fund's current 7-day yield.
30
<PAGE>
U.S. Treasury Money Market Fund
Goal
The Fund's goal is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing its assets solely in short-term bonds,
bills and notes, issued by the U.S. Treasury (including "stripped" securities)
and in repurchase agreements relating to such obligations.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
Principal Risks
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Among the principal risks of investing in the Fund is interest rate risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
Calendar Year Total Return
1991: _____%
1992: _____%
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year 5 Years (3/14/90)
-------------- ------------- ---------------
Class Y
[Index]
[You may call 1-800 [ ] to obtain the Fund's current 7-day yield.
31
<PAGE>
Summary of Principal Risks of The Funds
The share price of the Funds will change daily based on market conditions and
other factors. Therefore, you may lose money if you invest in the Funds.
The following summary briefly describes the principal risks that may affect a
Fund's portfolio as a whole. More information about the Funds' principal
investment strategies and their associated risks is contained in the section
entitled "More About the Funds."
SECTOR RISK is the risk of loss due to concentrating investments in a particular
industry sector. Adverse economic, business or political developments affecting
that industry sector could have a major effect on the value of the Fund's
investments. Real Estate Equity Investment Fund, Global Financial Services
Fund, Healthcare Fund and NetNet Fund are particularly subject to this Risk.
CREDIT (OR DEFAULT) RISK is the risk of loss because an issuer of a security may
default on its payment obligations. Also, an issuer may suffer adverse changes
in its financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security and in shares of the
Fund. A change in the quality rating of a bond can affect the bond's liquidity
and make it more difficult for the Fund to sell. Funds particularly subject to
this risk are: Balanced Fund, Growth & Income Fund, Bond Fund, Intermediate
Bond Fund, International Bond Fund, U.S. Government Income Fund, Michigan Tax-
Free Bond Fund, Tax-Free Bond Fund, Tax-Free Short-Intermediate Bond Fund, Cash
Investment Fund, Money Market Fund and Tax-Free Money Market Fund.
DERIVATIVES RISK is the risk that loss may result from a Fund's use of futures
and options on futures contracts, options, forward currency exchange contracts
and other forms of derivative instruments. The primary risk with many
derivatives is that they can amplify a gain or loss, potentially earning or
losing substantially more money than the actual cost of the derivative
instrument. Funds particularly subject to this risk are: Balanced Fund,
International Equity Fund, Value Fund, Small-Cap Value Fund, NetNet Fund, Global
Financial Services Fund, International Growth Fund and International Bond Fund.
FOREIGN SECURITIES RISK is the risk of loss because investments by a Fund in
foreign securities may experience greater and more rapid change in value than
investments in U.S. securities. Foreign securities are generally more volatile
and less liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available about
foreign companies. Issuers of foreign securities are generally not subject to
the same degree of regulation as are U.S. issuers. The reporting, accounting
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards. Funds particularly subject to this risk
are: Balanced Fund, Equity Selection Fund, Growth & Income Fund, Growth
Opportunities Fund, International Equity Fund, Micro-Cap Equity Fund, NetNet
Fund, Value Fund, Small-Cap Value Fund, Small Company Growth Fund, Multi-Season
Growth Fund, Emerging Markets Fund, Global Financial Services Fund, Healthcare
Fund, International Growth Fund, Bond Fund, Intermediate Bond Fund,
International Bond Fund, Cash Investment Fund and Money Market Fund.
Currency Risk. Funds that invest in foreign securities denominated in
foreign currencies may also be subject to currency risk. This is the risk
of loss because a decline in the value of foreign currencies relative to
the U.S. dollar will reduce the value of a Fund's portfolio securities
denominated in those currencies. Funds particularly subject to this risk
are: International Equity Fund, Emerging Markets Fund, Global Financial
Services Fund, Healthcare Fund, International Growth Fund and International
Bond Fund.
Emerging Markets Risk. Funds that invest in foreign securities of issuers
in emerging market countries are subject to emerging markets risk.
Investing in emerging market countries heightens the risks presented by
investing in foreign securities and currencies and may result in loss to
the Fund. Numerous emerging countries have recently experienced serious,
and potentially continuing, economic and political problems. Stock markets
in many emerging countries are relatively small and risky. Foreigners are
often limited in their ability to invest in, and withdraw assets from,
these markets. Additional restrictions may be
32
<PAGE>
imposed under emergency conditions. Funds particularly subject to this risk
are: International Equity Fund, Emerging Markets Fund and International
Growth Fund.
INTEREST RATE RISK is the risk of loss because increases in prevailing interest
rates will cause fixed-income securities held by a Fund to decline in value.
Longer term bonds are generally more sensitive to interest rate changes than
shorter term bonds. Generally, the longer the average maturity of the bonds
held by the Fund, the more the Fund's share price will fluctuate in response to
interest rate changes. Funds particularly subject to this risk are: Balanced
Fund, Growth & Income Fund, Bond Fund, Intermediate Bond Fund, International
Bond Fund, Short-Term Treasury Fund, U.S. Government Income Fund, Michigan Tax-
Free Bond Fund, Tax-Free Short-Intermediate Bond Fund, Cash Investment Fund,
Money Market Fund, Tax-Free Money Market Fund and U.S. Treasury Money Market
Fund.
MARKET RISK is the risk of loss because the value of the securities in which a
Fund invests decline in response to general economic conditions. Price changes
may be temporary or last for extended periods. For example, stock prices have
historically risen and fallen in periodic cycles. In addition, the value of a
Fund's investments may decline if the particular Companies the Fund invests in
do not perform well. All of the Munder Equity Funds are subject to this risk.
MEDIUM-SIZE COMPANY STOCK RISK is the risk of loss because the stocks of medium-
size companies may be more susceptible to market downturns, and their prices may
be more volatile than the stocks of larger companies. Equity Selection Fund,
Growth Opportunities Fund, NetNet Fund, Value Fund, Emerging Markets Fund,
Global Financial Services Fund, International Growth Fund and Healthcare Fund
are particularly subject to this risk.
NON-DIVERSIFIED RISK is the risk of loss because a Fund that invests more of its
assets in fewer issuers than many other funds do, may be more susceptible to
adverse developments affecting any single issuer, and more susceptible to
greater losses because of these developments. For example, the Michigan Tax-
Free Bond Fund invests primarily in Michigan municipal obligations, if Michigan
issuers suffer serious financial difficulties, jeopardizing their ability to pay
their obligations, the Fund may suffer a loss. International Bond Fund,
Michigan Tax-Free Bond Fund and Tax-Free Short-Intermediate Bond Fund are
subject to this risk.
PREPAYMENT RISK is the risk that a Fund may experience losses when an issuer
exercises its right to pay principal on an obligation held by the Fund (such as
a mortgage-backed security) earlier than expected. This may happen during a
period of declining interest rates. Under these circumstances, the Fund may be
unable to recoup all of its initial investment and will suffer from having to
reinvest in lower yielding securities. The loss of higher yielding securities
and the reinvestment at lower interest rates can reduce the Fund's income, total
return and share price. Funds particularly subject to this risk are: Balanced
Fund, Bond Fund, Intermediate Bond Fund, U.S. Government Income Fund, Cash
Investment Fund and Money Market Fund.
SMALL COMPANY STOCK RISK is the risk of loss because the stocks of small
companies may have more risks than those of larger companies. Small companies
often have narrower markets and more limited managerial and financial resources
than larger, more established companies. As a result, they may be more
sensitive to changing economic conditions, which could increase the volatility
of a Fund's portfolio. In addition, small company stocks typically are traded
in lower volume making them more difficult to sell. Funds particularly subject
to this risk are: Micro-Cap Equity Fund, Small Cap Value Fund, Small Company
Growth Fund, NetNet Fund and Healthcare Fund.
33
<PAGE>
Who May Want To Invest
The Equity Funds may be appropriate for investors:
. Looking to invest over the long term and willing to ride out market swings
in search of potentially higher returns.
. Looking for an investment that has more return and risk potential than
fixed income investments.
The Income Funds may be appropriate for investors:
. Looking for potentially higher returns and willing to accept greater risk
than more conservative fixed rate investments or money market funds.
. Looking for current income.
The Tax-Free Funds may be appropriate for investors:
. Looking primarily for tax-exempt income.
. Comfortable with the risks involved with fixed income investments.
The Money Market Funds may be appropriate for investors:
. Looking for a high level of income and liquidity and stability of
principal.
34
<PAGE>
Fees And Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold Class Y shares the Funds. Please note that the following information does
not include fees that institutions may charge for services they provide to you.
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases......................... None
Sales Charge (Load) Imposed on Reinvested Dividends...................... None
Maximum Deferred Sales Charge (Load)..................................... None
Redemption Fees.......................................................... None
Exchange Fees............................................................ None
Annual Fund Operating Expenses (expenses that are paid from Fund assets) And
Examples
The examples are intended to help you compare the cost of investing in each Fund
to the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated. The examples also
assume that your investment has a 5% return each year, that the Funds operating
expenses remain the same as shown in the table and that all dividends and
distributions are reinvested. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- --------------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
Balanced Fund
Management Fees .65% 1 Year $
Other Expenses [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses .[ ]% 10 Years $
=====
Equity Selection Fund
Management Fees .75% 1 Year $
Other Expenses [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
=====
Growth & Income Fund
Management Fees .75% 1 Year $
Other Expenses [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses .[ ]% 10 Years $
=====
Growth Opportunities Fund
Management Fees .75% 1 Year $
Other Expenses(2) [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses(3) [ ]% 10 Years $
=====
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- --------------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
International Equity Fund
Management Fees .75% 1 Year $
Other Expenses .25% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses 1.00% 10 Years $
=====
Micro-Cap Equity Fund
Management Fees 1.00% 1 Year $
Other Expenses(2) [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses(3) [ ]% 10 Years $
=====
Multi-Season Growth Fund
Management Fees(1) [ ]% 1 Year $
Other Expenses [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
=====
NetNet Fund
Management Fees 1.00% 1 Year $
Other Expenses(2) [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses(3) [ ]% 10 Years $
=====
Real Estate Equity Investment Fund
Management Fees .74% 1 Year $
Other Expenses [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
=====
Small-Cap Value Fund
Management Fees .75% 1 Year $
Other Expenses [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
=====
Small Company Growth Fund
Management Fees .75% 1 Year $
Other Expenses [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses .[ ]% 10 Years $
=====
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- --------------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
Value Fund
Management Fees .74% 1 Year $
Other Expenses [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
=====
Framlington Emerging Markets Fund
Management Fees 1.25% 1 Year $
Other Expenses(2) [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses(3) [ ]% 10 Years $
=====
Framlington Global Financial Services Fund
Management Fees .75% 1 Year $
Other Expenses(2) [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses(3) [ ]% 10 Years $
=====
Framlington Healthcare Fund
Management Fees 1.00% 1 Year $
Other Expenses(2) [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses(3) [ ]% 10 Years $
=====
Framlington International Growth Fund
Management Fees 1.00% 1 Year $
Other Expenses(2) [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses(3) [ ]% 10 Years $
=====
Bond Fund
Management Fees .50% 1 Year $
Other Expenses [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
=====
Intermediate Bond Fund
Management Fees .50% 1 Year $
Other Expenses [ ]% 3 Years $
-----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
=====
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- --------------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
International Bond Fund
Management Fees .50% 1 Year $
Other Expenses [ ]% 3 Years $
----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
====
U.S. Government Income Fund
Management Fees .50% 1 Year $
Other Expenses [ ]% 3 Years $
----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
====
Short Term Treasury Fund
Management Fees .25% 1 Year $
Other Expenses(2) [ ]% 3 Years $
----
Total Annual Fund Operating 5 Years $
Expenses(3) [ ]% 10 Years $
====
Michigan Tax-Free Bond Fund
Management Fees .50% 1 Year $
Other Expenses [ ]% 3 Years $
----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
====
Tax-Free Bond Fund
Management Fees .50% 1 Year $
Other Expenses [ ]% 3 Years $
----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
====
Tax-Free Short-Intermediate Bond Fund
Management Fees .50% 1 Year $
Other Expenses [ ]% 3 Years $
----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
====
Cash Investment Fund
Management Fees .35% 1 Year $
Other Expenses [ ]% 3 Years $
----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
====
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- --------------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
Money Market Fund
Management Fees .40% 1 Year $
Other Expenses [ ]% 3 Years $
----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
====
Tax-Free Money Market Fund
Management Fees .35% 1 Year $
Other Expenses [ ]% 3 Years $
----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
====
U.S. Treasury Money Market Fund
Management Fees .35% 1 Year $
Other Expenses [ ]% 3 Years $
----
Total Annual Fund Operating 5 Years $
Expenses [ ]% 10 Years $
====
</TABLE>
_______________________________________________________
(1) For the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of its management fees. As a result of the fee waiver, actual
management fees paid by the Multi-Season Growth Fund were [ ]% of its
average daily net assets.
(2) For the fiscal year ended June 30, 1999, the advisor voluntarily reimbursed
certain operating expenses. As a result of the expense reimbursement,
actual Other Expenses paid by the Funds, were:
<TABLE>
<CAPTION>
Fund Other Operating Expenses
----
(as a % of average daily net assets)
------------------------------------
<S> <C>
Growth Opportunities Fund %
Micro-Cap Equity Fund %
NetNet Fund %
Framlington Emerging Markets Fund %
Framlington Global Financial Services Fund %
Framlington Healthcare Fund %
Framlington International Growth Fund %
Short Term Treasury Fund %
</TABLE>
(3) For the fiscal year ended June 30, 1999, as a result of the advisor's
voluntary fee waivers and expense reimbursements, the actual Total Annual
Fund Operating Expenses paid by the Funds were as shown below. The advisor
may terminate the fee waivers and/or expense reimbursements at any time.
<TABLE>
<CAPTION>
Fund Total Annual Fund Operating Expenses
----
(as a % of average daily net assets)
-----------------------------------
<S> <C>
Growth Opportunities Fund %
Multi-Season Growth Fund %
Micro-Cap Equity Fund %
NetNet Fund %
Framlington Emerging Markets Fund %
Framlington Global Financial Services Fund %
Framlington Healthcare Fund %
Framlington International Growth Fund %
Short Term Treasury Fund %
</TABLE>
39
<PAGE>
More About The Funds
- -------------------------------------------------------------------------------
The Funds' principal investment strategies and risks are summarized above in the
section entitled Risk/Return Summary. A more complete description of each Funds
investments and strategies and their associated risks is provided below under
"Special Risks and Other Considerations" and "Additional Descriptions of
Investments and Investment Strategies." The Funds may also invest in other
securities and are subject to further restrictions and risks which are described
in the Statement of Additional Information. The Glossary below explains certain
terms used throughout this prospectus.
Glossary
Types Of Funds
Equity Funds are the Balanced Fund, Equity Selection Fund, Growth & Income Fund,
Growth Opportunities Fund, International Equity Fund, Micro-Cap Equity Fund,
Multi-Season Growth Fund, NetNet Fund, Real Estate Equity Investment Fund,
Small-Cap Value Fund, Small Company Growth Fund, Value Fund, Framlington
Emerging Markets Fund, Framlington Global Financial Services Fund, Framlington
Health Care Fund and Framlington International Growth Fund.
Income Funds are the Bond Fund, Intermediate Bond Fund, International Bond Fund,
U.S. Government Income Fund and Short Term Treasury Fund.
Tax-Free Funds are the Michigan Tax-Free Bond Fund, Tax-Free Bond Fund and Tax-
Free Short-Intermediate Bond Fund.
Money Market Funds are the Cash Investment Fund, Money Market, Tax-Free Money
Market Fund and U.S. Treasury Money Market Fund.
Types Of Securities
Equity securities include common stocks, preferred stocks, securities
convertible into common stocks, and rights and warrants to subscribe for the
purchase of common stocks. Equity securities may be listed on a stock exchange
or NASDAQ National Market System or unlisted. Warrants are rights to purchase
securities at a specified time at a specified price.
Fixed income securities are securities that pay interest at set times at either
fixed, floating or variable rates, or which are issued at a discount to their
principal amount instead of making periodic interest payments. Fixed income
securities include corporate bonds, debentures and other similar corporate debt
instruments, zero coupon bonds and variable amount master demand notes.
Convertible securities are bonds or preferred stocks that may be converted
(exchanged) into the common stock of the issuing company within a specified time
period for a specified number of shares. Convertible securities offer the Funds
a way to participate in the capital appreciation of the common stock into which
the securities are convertible, while earning higher current income than is
available from the common stock.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include U.S.
Treasury bills, U.S. Treasury notes, U.S. Treasury bonds and obligations of the
Federal Home Loan Corporation, Federal National Mortgage Association and
Government National Mortgage Association.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit of
banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Municipal obligations are obligations of states, territories and possessions of
the United States and the District of Columbia, and their political
subdivisions, agencies, instrumentalities and authorities. They may be payable
from the issuer's general revenue, the revenue of a specific project, current
revenues or a reserve fund.
Rating Agencies and Indices
Moody's is Moody's Investor Services, Inc.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
S&P is Standard & Poor's Rating Services.
40
<PAGE>
S&P 500 is S&P's 500 Composite Stock Price Index, a widely recognized unmanaged
index U.S. stock market activity.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Internal Revenue Code is the Internal Revenue Code of 1986, as amended.
NAV is the net asset value per share of a Fund.
A diversified investment company is an investment company that may not invest
more than 5% of its total assets in any one issuer other than the U.S.
Government, its agencies or instrumentalities. This limit applies only to 75% of
a diversified Fund's assets. In addition, a diversified Fund cannot invest more
than 25% of its assets in a single issuer. These limitations do not apply to the
non-diversified Funds.
Special Risks And Other Considerations
Derivative Risk. "Derivative" instruments are financial contracts whose value is
based on an underlying security, a currency exchange rate, an interest rate or a
market index. Many types of instruments representing a wide range of potential
risks and rewards are derivatives, including futures contracts, options on
futures contracts, options, swaps, forward currency contracts and structured
debt obligations (including collateralized mortgage obligations and other types
of asset-backed securities, "stripped" securities and various floating rate
instruments).
Investment Strategy. All Funds (except the Short Term Treasury Fund and the
U.S. Treasury Money Market Fund) may use derivative instruments.
Derivatives can be used for hedging (attempting to reduce risk by
offsetting one investment position with another) or speculation (taking a
position in the hope of increasing return). The Funds may, but are not
required to, use derivatives for hedging purposes or for the purpose of
remaining fully invested or maintaining liquidity. The Funds will not use
derivatives for speculative purposes.
Special Risks. The use of derivative instruments exposes a Fund to
additional risks and transaction costs. Risks of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the direction that a portfolio manager
anticipates; (2) imperfect correlation between the price of derivative
instruments and movements in the prices of the securities, interest rates
or currencies being hedged; (3) the fact that skills needed to use these
strategies are different than those needed to select portfolio securities;
(4) the possible absence of a liquid secondary market for any particular
instrument and possible exchange imposed price fluctuation limits, either
of which may make it difficult or impossible to close out a position when
desired; (5) the risk that adverse price movements in an instrument can
result in a loss substantially greater than the Fund's initial investment
in that instrument (in some cases, the potential loss is unlimited); (6)
particularly in the case of privately-
41
<PAGE>
negotiated instruments, the risk that the counterparty will not perform its
obligations, which could leave the Fund worse off than if it had not
entered into the position; and (7) the inability to close out certain
hedged positions to avoid adverse tax consequences.
Foreign Investment Risk. Foreign securities include direct investments in non-
U.S. dollar-denominated securities traded outside of the United States and
dollar-denominated securities of foreign issuers traded in the United States.
Foreign securities also include indirect investments such as American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and Global Depository
Receipts ("GDRs"). ADRs are U.S. dollar-denominated receipts representing shares
of foreign-based corporations. ADRs are issued by U.S. banks or trust companies,
and entitle the holder to all dividends and capital gains that are paid out on
the underlying foreign shares. EDRs and GDRs are receipts issued by non-U.S.
financial institutions that often trade on foreign exchanges. They represent
ownership in an underlying foreign or U.S. security and are generally
denominated in a foreign currency.
Investment Strategy. International Equity Fund, International Growth Fund,
Framlington Global Financial Services Fund, Framlington Healthcare Fund
Framlington International Growth Fund and International Bond Fund will
invest all or a substantial portion of their total assets in foreign
securities. The other Equity Funds (except Real Estate Investment Fund),
the Income Funds (except Short-Term Treasury Fund), Cash Investment Fund
and Money Market Fund may invest up to 25% of their total assets in foreign
securities. The Tax - Free Funds may invest up to 10% of their total assets
in foreign securities.
Special Risks. Foreign securities involve special risks and costs.
Investment in the securities of foreign governments involves the risk that
foreign governments may default on their obligations or may otherwise not
respect the integrity of their debt.
Investment in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of additional taxes by foreign governments. Foreign
investments may also involve risks associated with the level of currency
exchange rates, less complete financial information about the issuers, less
market liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls or
freezes on the convertibility of currency, or the adoption of other
governmental restrictions might adversely affect an investment in foreign
securities. Additionally, foreign issuers may be subject to less stringent
regulation, and to different accounting, auditing and recordkeeping
requirements.
Currency exchange rates may fluctuate significantly over short periods of
time causing a Fund's net asset value to fluctuate as well. A decline in
the value of a foreign currency relative to the U.S. dollar will reduce the
value of a foreign currency-denominated security. To the extent that a Fund
is invested in foreign securities while also maintaining currency
positions, it may be exposed to greater combined risk. The Funds'
respective net currency positions may expose them to risks independent of
their securities positions.
Additional risks are involved when investing in countries with emerging
economies or securities markets. In general, the securities markets of
these countries are less liquid, are subject to greater price volatility,
have smaller market capitalizations and may have problems with securities
registration and custody. In addition, because the securities settlement
procedures are less developed in these countries, a Fund may be required to
deliver securities before receiving payment and may also be unable to
complete transactions during market disruptions. As a result of these and
other risks, investments in these countries generally present a greater
risk of loss to the Fund.
A further risk of investing in foreign securities is the risk that a Fund
may be adversely affected by the conversion of
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certain European currencies into the Euro. This conversion, which is under
way, is scheduled to be completed in the year 2002. However, problems with
the conversion process and delays could increase volatility in world
markets and affect European markets in particular.
Investments in Financial Services Companies by Framlington Global Financial
Services Fund. Financial services companies are subject to extensive
governmental regulation which may limit the financial commitments they can make,
and the interest rates and fees they can charge. Insurance companies may be
subject to severe price competition. Proposed legislation that would reduce the
separation between commercial and investment banking businesses, if enacted,
could significantly impact the industry and the Fund. The Fund may be riskier
than a fund investing in a broader range of industries.
Investments in the Healthcare Industry by Framlington Healthcare Fund. The Fund
will invest most of its assets in the healthcare industry, which is particularly
affected by rapidly changing technology and extensive government regulation,
including cost containment measures. The Fund may be riskier than a fund
investing in a broader range of industries.
Investments in the Real Estate Industry by Real Estate Equity Investment Fund.
The Fund will invest primarily in the real estate industry and may invest more
than 25% of its assets in any one sector of the real estate industry. As a
result, the Fund will be particularly vulnerable to declines in real estate
prices and new construction rates. The Fund may be riskier than a fund investing
in a broader range of industries.
Investments in Internet Related Companies by the NetNet Fund. The Fund will
invest primarily in companies engaged in Internet and Intranet related
activities. The value of such companies is particularly vulnerable to rapidly
changing technology, (extensive government regulation) and relatively high risks
of obsolescence caused by scientific and technological advances. The value of
the Fund's shares may fluctuate more than shares of a fund investing in a
broader range of industries.
Investment Grade Credit Risk. A security is considered investment grade if, at
the time of purchase, it is rated:
. BBB or higher by S&P;
. Baa or higher by Moody's;
. BBB or higher by Duff & Phelps; or
. BBB or higher by Fitch.
A security will be considered investment grade if it receives one of the above
ratings, even if it receives a lower rating from other rating organizations.
Investment Strategy. Except as stated in the next section, fixed income and
convertible securities purchased by the Funds will generally be rated at
least investment grade. The Funds may also invest in unrated securities if
the advisor or sub-advisor believes they are comparable in quality.
Special Risks. Although securities rated "BBB" by S&P, Duff & Phelps or
Fitch, or Baa by Moody's are considered investment grade, they have certain
speculative characteristics. Therefore, they may be subject to a higher
risk of default than obligations with higher ratings. Subsequent to its
purchase by a Fund, a rated security may cease to be rated or its rating
may be reduced below the minimum rating required for purchase by the Fund.
The advisor or sub-advisor will consider such an event in determining
whether the Fund should continue to hold the security.
Non-Investment Grade Credit Risk. Non-investment grade fixed income and
convertible securities are generally rated "BB" or below by S&P, Duff & Phelps
or Fitch, or "Ba" by Moody's.
Investment Strategy. All Equity Funds may invest a portion of their total
assets in non-investment grade securities when the advisor or sub-advisor
determines that such securities are desirable in light of the Funds'
investment objectives and portfolio mix.
Special Risks. Non-investment grade securities (sometimes referred to as
"junk bonds") are subject to greater risk than investment grade securities.
They generally present a higher degree of credits risks (default). In
addition, the market value of these securities tends to be more sensitive
to individual corporate developments and to changes in interest rates and
other economic developments than higher-rated securities
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Short-Term Trading. The Funds' historical portfolio turnover rates are shown in
the Financial Highlights.
Investment Strategy. Some Funds may engage in short-term trading,
including, in the case of the Equity Funds, initial public offerings.
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could detract
from a Fund's performance.
Defensive Investing. Each Fund may invest all or any portion of its assets in
short-term obligations as a temporary defensive measure in response to adverse
market or economic conditions.
Special Risks. A Fund may not achieve its investment objective when its
assets are invested in short-term obligations.
Year 2000 Risk. Like other mutual funds, financial institutions, business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the advisor and the Funds' other
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. The advisor is taking steps that it
believes are reasonably designed to address year 2000 computer-related problems
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Funds' other major service providers.
Although there can be no assurances, the advisor believes that these steps will
be sufficient to avoid any adverse impact on any of the Funds. Similarly, there
can be no assurance that year 2000 issues will not affect the companies and
other issuers in which the Funds invest or affect worldwide markets and
economies.
Additional Description of Investments And Investment Strategies
Asset-Backed Securities. Asset-backed securities are debt securities backed by
mortgages, installment sales contract and credit card receivables. The
securities are sponsored by entities such as government agencies, banks,
financial companies and commercial or industrial companies. In effect, these
securities "pass through" the monthly payments that individual borrowers make on
their mortgage or other assets net of any fees paid to the issuers. Examples of
these include guaranteed mortgage pass-through certificates, collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").
Investment Strategy. All Income Funds (except Short Term Treasury Fund),
Balanced Fund, Framlington Global Financial Services Funds, Money Market
Fund and Cash Investment Fund may invest a portion of its assets in Asset-
Backed Securities.
Special Risks. In addition to credit and market risk, asset-backed
securities involve repayment risk because the underlying assets (loans) may
be prepaid at any time. The value of these securities may also change
because of actual or perceived changes in the creditworthiness of the
originator, the servicing agent, the financial institution providing the
credit support, or the counterparty. Like other fixed income securities,
when interest rates rise the value of an asset-backed security generally
will decline. However, when interest rates decline, the value of an asset-
backed security with prepayment features may not increase as much as that
of other fixed income securities. In addition, non-mortgage asset-backed
securities involve certain risks not presented by mortgage-backed
securities. Primarily, these securities do not have the benefit of the same
security interest in the underlying collateral.
Borrowing and Reverse Repurchase Agreements. The Funds can borrow money from
banks and enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of
securities held by a Fund subject to the Fund's agreement to repurchase them at
a mutually agreed upon date and price (including interest).
Investment Strategy. Each Fund may borrow money in an amount up to 5% of
its assets for temporary emergency purposes and in an amount up to 33 1/3%
of its assets to meet redemptions. This is a fundamental policy which can
be changed only by shareholders.
Special Risks. Borrowings and reverse repurchase agreements by a Fund may
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involve leveraging. If the securities held by the Fund decline in value
while these transactions are outstanding, the Fund's net asset value will
decline in value by proportionately more than the decline in value of the
securities. In addition, reverse repurchase agreements involve the risks
that the interest income earned by the Fund (from the investment of the
proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by the Fund will decline below the
price the Fund is obligated to pay to repurchase the securities, and that
the securities may not be returned to the Fund.
Credit Quality of the Tax-Free Funds. The Tax-Free Funds will invest in long-
term instruments only if they are rated "A" or better by Moody's or S&P or, if
unrated, are of comparable quality. These Funds will invest in short-term
instruments only if they (i) have short-term debt ratings in the top two
categories by at least one nationally recognized statistical rating
organization, (ii) are issued by an issuer with such ratings or (iii) if
unrated, are of comparable quality.
Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation to exchange one currency for another on a future date at a specified
exchange rate.
Investment Strategy. Forward currency exchange contracts may be used for
hedging purposes and to help reduce the risks and volatility caused by
changes in foreign currency exchange rates. Foreign currency exchange
contracts will be used at the discretion of the advisor or sub-advisor, and
no Fund is required to hedge its foreign currency positions.
Special Risks. Forward currency contracts are privately negotiated
transactions, and can have substantial price volatility. When used for
hedging purposes, they tend to limit any potential gain that may be
realized if the value of a Fund's foreign holdings increases because of
currency fluctuations.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When a Fund purchases an option on a futures
contract, it has the right to assume a position as a purchaser or seller of a
futures contract at a specified exercise price during the option period. When a
Fund sells an option on a futures contract, it becomes obligated to purchase or
sell a futures contract if the option is exercised.
Investment Strategy. The Equity Funds the Income Funds (except Short Term
Treasury Fund) and the Tax-Free Funds may invest in futures contracts and
options on futures contracts on domestic or foreign exchanges or boards of
trade. These instruments may be used for hedging purposes, to maintain
liquidity to meet potential shareholder redemptions, to invest cash
balances or dividends, or to minimize trading costs.
A Fund will not purchase or sell a futures contract unless, after the
transaction, the sum of the aggregate amount of margin deposits on its
existing futures positions and the amount of premiums paid for related
options used for non-hedging purposes is 5% or less of the Fund's total
assets.
Special Risks. Futures contracts and related options present the following
risks: imperfect correlation between the change in market value of a Fund's
securities and the price of futures contracts and options; the possible
inability to close a futures contract when desired; losses due to
unanticipated market movements, which are potentially unlimited; and the
possible inability of the advisor or sub-advisor to correctly predict the
direction of securities prices, interest rates, currency exchange rates and
other economic factors.
Guaranteed Investment Contracts. Guaranteed investment contracts are agreements
by a Fund to make payments to an insurance company's general account in exchange
for a minimum level of interest based on an index.
Investment Strategy. The Income Funds (except Short Term Treasury Fund),
Cash Investment Fund and Money Market Fund may invest in guaranteed
investment contracts.
Special Risks. Guaranteed investment contracts are considered illiquid
investments and are acquired subject to a Fund's limitation on illiquid
investments.
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Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. Each Fund may invest up to 15% (10% in the case of a
Money Market Fund) of its net assets in securities that are illiquid.
Special Risks. To the extent that a Fund invests in illiquid securities,
the Fund risks not being able to sell the securities at the time and the
price that it would like. The Fund may have to lower the price, sell
substitute securities or forego an investment opportunity, each of which
may cause a loss to the Fund.
Investment Companies. To the extent consistent with their respective investment
objectives and policies, the Funds (other than Short-Term Treasury Fund and U.S.
Treasury Money Market Fund) may invest in securities issued by other investment
companies.
Investment Strategy. Investments by a Fund in other investment companies
will be subject to the limitations of the 1940 Act.
Special Risks. As a shareholder of another investment company, a Fund would
be subject to the same risks as any other investor in that company. In
addition, it would bear a proportionate share of any fees and expenses paid
by that company. These would be in addition to the advisory and other fees
paid directly by the Fund.
Municipal Obligations. Municipal obligations may include: (i) general obligation
bonds issued for various public purposes and supported by the municipal issuer's
credit and taxing power; and (ii) revenue bonds whose principal and interest is
payable only from the revenues of a particular project or facility.
Investment Strategy. The Tax-Free Funds and Tax-Free Money Market Fund will
normally invest at least 80% of their net assets in municipal obligations.
Special Risks. Industrial revenue bonds depend on the credit standing of a
private issuer and may be subject to the federal alternative minimum tax
(AMT). Although Tax-Free Money Market Fund may invest more than 25% of its
net assets in municipal revenue obligations, it does not intend to do so on
a regular basis. If it does, it will be riskier than a fund which does not
concentrate to such an extent on similar projects.
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. The Equity Funds, Income Funds (except Short Term
Treasury Fund), Tax-Free Free Bond Fund and Michigan Tax-Free Bond Fund may
write (sell) covered call options, buy put options, buy call options and
write secured put options for hedging purposes. Options may relate to
particular securities, foreign or domestic securities indices, financial
instruments or foreign currencies.
Special Risks. The value of options can be highly volatile, and their use
can result in loss if the advisor or sub-advisor is incorrect in its
expectation of price fluctuations. The successful use of options for
hedging purposes also depends in part on the ability of the advisor or sub-
advisor to predict future price fluctuations and the degree of correlation
between the options and securities markets.
Repurchase Agreements. Repurchase agreements involve the purchase of securities
by a Fund subject to the seller's agreement to repurchase them at a mutually
agreed upon date and price.
Investment Strategy. Each Fund may enter into repurchase agreements with
banks and broker-dealers that are deemed to be creditworthy by the advisor
or sub-advisor.
Special Risks. If the seller defaults or declares bankruptcy, a Fund may
suffer if the proceeds from the sale of the underlying securities and other
collateral are less than the repurchase price or if there are delays in
selling the underlying securities or collateral.
Securities Lending. In order to generate additional income, each Fund may lend
securities on a short-
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term basis to qualified institutions. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional income gains
or losses.
Investment Strategy. Securities lending may represent no more than 25% of
the value of a Fund's total assets (including the loan collateral).
Special Risks. The main risk when lending Fund securities is that if the
borrower fails to return the securities or the invested collateral has
declined in value, the Fund could lose money.
Stripped Securities. These securities are issued by the U.S. Government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include participations in trusts that hold U.S. Treasury or agency
securities.
Special Risks. Stripped securities are very sensitive to changes in
interest rates and to the rate of principal repayments. A rapid or
unexpected increase in mortgage prepayments could severely depress the
price of certain stripped mortgage-backed securities and adversely affect a
Fund's total returns.
Temporary Investments. Short-term obligations refer to U.S. Government
securities, high-quality money market instruments and repurchase agreements with
maturities of 13 months or less. Generally, these obligations are purchased to
provide stability and liquidity to a Fund.
Investment Strategy. Each Fund may invest a portion of its assets in short-
term obligations pending investment or to meet anticipated redemption
requests. The Tax-Free Funds and Tax-Free Money Market Fund may hold
uninvested cash if, in the advisor's opinion, suitable tax-exempt
securities are not available. Each Tax-Free Fund may also invest a portion
of its assets in short-term money market instruments, the income from which
is subject to Federal income tax.
Special Risks. A Fund may not achieve its investment objective when its
asset are invested in short-term obligations.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
instruments include variable amount master demand notes.
Special Risks. Variable and floating rate instruments are subject to the
same risks as fixed income investments, particularly interest rate risk and
credit risk. Because there is no active secondary market for certain
variable and floating rate instruments, they may be more difficult to sell
if the issuer defaults on its payment obligations or during periods when a
Fund is not entitled to exercise its demand rights. As a result, the Fund
could suffer a loss with respect to these instruments.
When - Issued Securities, Delayed Delivery Transactions and Forward
Commitments. A purchase of "when-issued" securities refers to a transaction
made conditionally because the securities, although authorized, have not
yet been issued. A delayed delivery or forward commitment transaction
involves a contract to purchase or sell securities for a fixed price at a
future date beyond the customary settlement period.
Special Risks. Purchasing or selling securities on a when-issued, delayed
delivery or forward commitment basis involves the risk that the value of
the securities may change by the time they are actually issued or
delivered. These transactions also involve the risk that the seller may
fail to deliver the security or cash on the settlement date.
Zero Coupon Bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity.
Special Risks. The market prices of zero coupon bonds generally are more
volatile than the market prices of interest-bearing securities and are
likely to respond to a greater degree to changes in interest rates than
interest-bearing securities having
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similar maturities and credit quality. A Fund's investments in zero coupon
bonds may require the Fund to sell some of its portfolio securities to
generate sufficient cash to satisfy certain income distribution
requirements.
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Your Investment
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This section describes how to do business with the Funds.
How To Reach The Funds
By telephone: 1-800-438-5789
Call for account information.
By mail: The Munder Funds
480 Pierce Street
Birmingham, MI 48009
Purchasing Shares
Who May Purchase Shares
The following persons may purchase shares of the Funds:
. fiduciary and discretionary accounts of institutions;
. institutional investors (including: banks; savings institutions; credit
unions and other financial institutions; pension, profit sharing and
employee benefit plans and trusts; insurance companies; investment
companies; investment advisers and broker-dealers acting for their own
accounts or for the accounts of their clients);
. directors, trustees, officers and employees of the Munder Funds, the
advisor and the Funds' distributor;
. the advisor's investment advisory clients; and
. family members of employees of the advisor.
Each Fund also issues other classes of shares, which have different sales
charges, expense levels and performance. Call (800) 438-5789 to obtain more
information about the Funds' other classes of shares.
Purchase Price of Shares
Class Y shares of the Funds are sold at the NAV next determined after a purchase
order is received in proper form.
Broker-dealers (other than the Funds' distributor) may charge you a fee for
shares you purchase through them.
Policies for Purchasing Shares
Minimum initial investment
The minimum initial investment by fiduciary and discretionary accounts of
institutions and by institutional investors is $500,000 ($250,000 for the Real
Estate Equity Investment Fund). Other investors are not subject to any minimum.
There is no minimum for subsequent investments.
Timing of orders
Purchase orders must be received by the Funds' distributor or transfer agent
before the close of regular trading on the New York Stock Exchange (normally,
4:00 p.m. Eastern time).
Methods for Purchasing Shares
You can purchase Class Y shares through the Fund's transfer agent or through the
Fund's distributor through arrangements with a broker-dealer or financial
institution.
. Through a Financial Institution. You may purchase shares through a
financial institution through procedures established with that institution.
Confirmations of share purchases will be sent to the institution.
. By Mail. You may open an account directly through the Fund's transfer agent
by completing, signing and mailing an account application form and a check
or other negotiable bank draft (payable to The Munder Funds) to: The Munder
Funds, c/o First Data Investor Services Group, P.O. Box 60428, King of
Prussia, Pennsylvania 19406-0428. You can obtain an account application
form by calling (800) 438-5789. For additional investments, send a letter
stating the Fund and share class you wish to purchase, your name and your
account number with a check for $50 or more to the address listed above.
[We do not generally accept third-party checks.]
. By Wire. You may make additional investments in the Funds by wire. Wire
instructions must state the Fund name, share class, your registered name
and your account number. Your bank wire should be sent through the Federal
Reserve Bank Wire System to:
Boston Safe Deposit and Trust Company
Boston, MA
ABA# 011001234
DDA# 16-798-3
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Account No.:
Note that banks may charge fees for transmitting wires.
. You may purchase shares through the Automatic Investment Plan.
Exchanging Shares
Policies for Exchanging Shares
. You may exchange your Fund shares for Class Y shares of other Munder Funds
based on their relative net asset values.
. You must meet the minimum purchase requirements for the Munder Fund that
you purchase by exchange.
. A share exchange may be a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund
you wish to purchase by exchange. You can obtain a prospectus for any
Munder Fund by contacting your broker or the Munder Funds at (800) 438-
5789.
. Brokers may charge you a fee for handling exchanges.
. We may modify or terminate the exchange privilege at any time. You will be
given notice of any material modifications except where notice is not
required.
[Methods for Exchanging Shares]
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the redemption
request in proper form.
Methods for Redeeming Shares
. [You may redeem shares of all Funds through your [broker-dealer] or
financial institution.]
. [Others Methods]
. You can redeem a portion of your shares of the Income Funds (other than the
International Bond Fund [and the Short Term Treasury Fund]), the Tax-Free
Funds and the Money Market Funds through the free checkwriting privilege.
Policies for Redeeming Shares
. Shares held by an institution on behalf of its customers must be redeemed
in accordance with instructions and limitations pertaining to the account
at that institution.
. If we receive a redemption order for a Fund (other than a Money Market
Fund) before 4:00 p.m. (Eastern time), we will normally wire payment to the
redeeming institution on the next business day. If we receive a redemption
order for a Money Market Fund before 12:00 noon (Eastern time), we will
normally wire payment to the redeeming institution on the same business
day. If an order for a Money Market Fund is received between 12:00 noon and
4:00 p.m. (Eastern time), we will normally wire redemption proceeds the
next business day.
Additional Policies For Purchases, Exchanges And Redemptions
. We consider requests to be in "proper form" when all required documents are
properly completed, signed and received.
. If your purchase order and payment for a Money Market Fund is received in
proper form before 2:45 p.m. (Eastern time), you will receive dividends for
that day. If your redemption order is received before 2:45 p.m. (Eastern
time), you will not receive dividends for that day.
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. The Funds reserve the right to reject any purchase order.
. At any time, the Funds may change any of their purchase, redemption or
exchange practices, and may suspend the sale of their shares.
. The Funds may delay sending redemption proceeds for up to seven days, or
longer if permitted by the Securities and Exchange Commission.
. To limit the Funds' expenses, we do not currently issue share certificates.
. If you are redeeming recently purchased shares, your redemption request may
not be honored until your check or [electronic transaction] has cleared.
This may delay your transaction for up to 15 days.
. A Fund may temporarily stop redeeming shares if:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists and the Fund cannot sell its assets or accurately
determine the value of its assets; or
. the Securities and Exchange Commission orders the Fund to suspend
redemptions.
. If accepted by a Fund, investors may purchase shares of the Fund (other
than the Real Estate Equity Investment Fund) with securities which the Fund
may hold. The advisor will determine if the securities are consistent with
the Funds objectives and policies. If accepted, the securities will be
valued the same way the Fund values portfolio securities it already owns.
Call the Funds at (800) 438-5789 for more information.
. The Funds reserve the right to make payment for redeemed shares wholly or
in part by giving the redeeming shareholder portfolio securities. The
shareholder may pay transaction costs to dispose of these securities.
. We record all telephone calls for your protection and take measures to
identify the caller. As long as the Fund's transfer agent takes reasonable
measures to authenticate telephone requests on an investor's account,
neither the Funds, the Fund's distributor nor the transfer agent will be
held responsible for any losses resulting from unauthorized transactions.
. We may redeem your account if its value falls below $250 as a result of
redemptions (but not as a result of a decline in net asset value). You will
be notified in writing and allowed 60 days to increase the value of your
account to the minimum investment level.
. If you purchased shares directly through the Funds' transfer agent, the
transfer agent will send you confirmations of the opening of an account and
of all subsequent purchases, exchanges or redemptions in the account.
Confirmations of transactions effected through an institution will be sent
to the institution.
. Financial institutions are responsible for transmitting orders and payments
for their customers on a timely basis.
Shareholder Privileges
Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in a Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Funds at (800) 438-5789. The minimum pre-authorized investment amount
is $50. You may discontinue the AIP at any time. We may discontinue the AIP on
30 days' written notice to you.
Free Checkwriting. Free checkwriting is available to holders of Class Y shares
of the Income Funds (other than the International Bond Fund [and the Short Term
Treasury Fund]), Tax-Free Funds and Money Market Funds who complete the
signature card section of the account application form. You may write checks in
the amount of $500 or more but you may not close a Fund account by writing a
check. We may change or terminate this program on 30 days' notice to you.
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Pricing Of Fund Shares
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Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV is the value of a single share of a Fund. NAV for Class K shares is
calculated by (1) taking the current value of a Funds total assets allocated to
that class of shares, (2) subtracting the liabilities and expenses charged to
that class (3) dividing that amount by the total number of shares of that class
outstanding.
The Funds (other than the Money Market Funds) calculate NAV as of the close of
business on the New York Stock Exchange, normally 4:00 p.m. (Eastern time). [The
Money Market Funds calculate NAV as of 2:45 p.m. (Eastern time) and as of the
close of business on the New York Stock Exchange, normally 4:00 p.m. (Eastern
time).]
If the New York Stock Exchange closes early, the Funds will accelerate their
calculation of NAV and transaction deadlines to that time.
The NAV of each Fund (other than the Money Market Funds) is generally based on
the market value of the securities held in the Fund. If market values are not
available, the fair value of securities is determined in good faith by, or using
procedures approved by, the Boards of Directors/Trustees of the Funds.
In determining each Money Market Fund's NAV, securities are valued at amortized
cost, which is approximately equal to market value.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. A Fund values foreign securities at the
latest closing price on the exchange on which they are traded immediately prior
to the closing of the New York Stock Exchange. Certain foreign currency exchange
rates may also be determined at the latest rate prior to the closing of the New
York Stock Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the New York Stock Exchange. If the advisor
believes that such events materially affect the value of portfolio securities,
these securities may be valued at their fair market value as determined in good
faith by, or using procedures approved by, the Funds' Boards of
Directors/Trustees.
Foreign securities may trade in their primary markets on weekends or other days
when a Fund does not price its shares. Therefore, the value of a Fund's
portfolio may change on days when shareholders will not be able to buy or sell
their shares.
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Distributions
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As a shareholder you are entitled to your share of a Fund's net income and gains
on its investments. The Funds pass substantially all of its earnings along to
its shareholders as distributions. When the Funds earns dividends from stocks
and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a capital gain distribution.
Balanced Fund, Growth & Income Fund, Small Company Growth Fund and International
Bond Fund: pay dividends, if any, quarterly.
Equity Selection Fund, Growth Opportunities Fund, NetNet Fund, Framlington
Emerging Markets Fund, Framlington Global Financial Services Fund, Framlington
Healthcare Fund, Framlington International Growth Fund, International Equity
Fund, Micro-Cap Equity Fund, Multi-Season Growth Fund, Small-Cap Value Fund and
Value Fund: pay dividends, if any, at least annually.
Bond Fund, Intermediate Bond Fund, U.S. Government Income Fund, Michigan Tax-
Free Bond Fund, Tax-Free Bond Fund, Tax-Free Short-Intermediate Bond Fund and
Real Estate Equity Investment Fund: pay dividends, if any, monthly.
Short Term Treasury Fund, Cash Investment Fund, Tax-Free Money Market Fund,
Money Market Fund and U.S. Treasury Money Market Fund: dividends are declared
daily and paid monthly.
All Funds: distribute their net realized capital gains, if any, at least
annually.
It is possible that a Fund may make a distribution in excess of the Funds
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
Each Fund will pay distributions in additional shares of that Fund. If you wish
to receive distributions in cash, either indicate this request on your account
application form or notify the Funds by calling (800) 438-5789.
54
<PAGE>
Federal Tax Considerations
- -------------------------------------------------------------------------------
Investments in a Fund may have tax consequences that you should consider. This
section briefly describes some of the more common federal tax consequences. A
more detailed discussion about the tax treatment of distributions from the Funds
and about other potential tax liabilities, including backup withholding for
certain taxpayers and about tax aspects of dispositions of shares of the Funds,
is contained in the Statement of Additional Information. You should consult your
tax adviser about your own particular tax situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. The Tax-Free Funds
and the Tax-Free Money Market Fund expect that a portion of their dividend
distributions will be exempt from federal income tax. Shareholders not subject
to tax on their income, generally will not be required to pay any tax on
distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held the
portfolio securities it sold. It does not depend on how long you held your Fund
shares.
Distributions are generally taxable to you in the tax year in which they are
paid, with one exception: distributions declared in October, November or
December, but not paid until January of the following year, are taxed as though
they were paid on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Funds will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Dividends and certain interest income earned from foreign securities by a Fund
may be subject to foreign withholding or other taxes. A Fund may be permitted to
pass on to its shareholders the right to a credit or deduction for income or
other tax credits earned from foreign investments and will do so if possible.
These deductions or credits may be subject to tax law limitations.
Taxes On Sales
If you sell shares of a Fund or exchange them for shares of another Fund, you
generally will be subject to tax on any taxable gain. Your taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale or an exchange will result in a taxable
gain.
Other Considerations
If you buy shares of a Fund just before the Fund makes any distribution, you
will pay the full price for the shares and then receive back a portion of the
money you have just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law, the
Funds must withhold a portion of your distributions and redemption proceeds to
pay federal income taxes.
55
<PAGE>
Management
- -------------------------------------------------------------------------------
Investment Advisors And Sub-Advisor
Munder Capital Management "MCM", 480 Pierce Street, Birmingham, Michigan 48009
is the investment advisor of each Fund other than International Equity Fund.
World Asset Management, L.L.C. "World", 255 East Brown Street, Birmingham,
Michigan 48009, is the investment advisor of the International Equity Fund.
World is a wholly-owned subsidiary of MCM. As of September 30, 1999, MCM [and
its affiliates] had approximately $__ billion in assets under management, of
which $__ billion were invested in equity securities, $__ billion were invested
in money market or other short-term instruments, $__ billion were invested in
other fixed income securities, and $__ billion in non-discretionary assets. As
of September 30, 1999, World had approximately $__ in assets under management.
The advisors provide overall investment management for their respective Funds.
Except for the Framlington Funds, the advisors provide all research and credit
analysis and are responsible for all purchases and sales of portfolio
securities.
Framlington Overseas Investment Management Limited "Framlington", a subsidiary
of MCM, is the sub-advisor of the Framlington Funds.
Framlington provides research and credit analysis for each of the Framlington
Funds and is responsible for making all purchases and sales of portfolio
securities for each of the Framlington Funds other than the Framlington Global
Financial Services Fund. MCM and Framlington each manage a portion of the assets
of the Framlington Global Financial Services Fund. MCM is responsible for all
purchases and sales of domestic securities held by the Framlington Global
Financial Services Fund. Framlington is responsible for the allocation of the
Funds assets among countries and for making all purchases and sales of foreign
securities held by the Fund.
During the fiscal year ended June 30, 1999, each Fund paid an advisory fee at an
annual rate based on the average daily net assets of the Fund (after waivers, if
any) as follows:
Balanced Fund 0.65%
Growth & Income Fund 0.75%
Growth Opportunities Fund 0.75%
International Equity Fund 0.75%
Micro-Cap Equity Fund 1.00%
Multi-Season Growth Fund 0.75%
NetNet Fund 1.00%
Real Estate Equity Investment Fund 0.74%
Small-Cap Value Fund 0.75%
Small Company Growth Fund 0.75%
Value Fund 0.74%
Framlington Emerging Markets Fund 1.25%
Framlington Global Financial Services
Fund 0.75%
Framlington Healthcare Fund 1.00%
Framlington International Growth Fund 1.00%
Bond Fund 0.50%
Intermediate Bond Fund 0.50%
International Bond Fund 0.50%
U.S. Government Income Fund 0.50%
Michigan Tax-Free Bond Fund 0.50%
Tax-Free Bond Fund 0.50%
Tax-Free Short-Intermediate Bond Fund 0.50%
Short Term Treasury Fund 0.25%
Cash Investment Fund 0.35%
Money Market Fund 0.40%
Tax-Free Money Market Fund 0.35%
U.S. Treasury Money Market Fund 0.35%
Because MCM voluntarily agreed to waive a portion of its fees for the Multi-
Season Growth Fund, the payment shown above for that Fund is less than the
contractual advisory fee of 1.00% of the Multi-Season Growth Funds average daily
net assets.
MCM may, from time to time, make payments to banks, broker-dealers or other
financial institutions for certain services to the Funds and/or their
shareholders, including sub-administration, sub-transfer agency and shareholder
servicing. MCM may make such payments out of its own resources and there are no
additional costs to the Funds or their shareholders.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee from
the Funds for providing shareholder services to its customers who own shares of
the Funds.
56
<PAGE>
Performance Information. The tables below contain performance information for
certain Funds created through the conversion of a common or collective trust
fund which had investment objectives and policies materially similar to those of
the corresponding Funds. Immediately before and after the conversion, the same
person managed both the common or collective trust fund and the corresponding
Fund.
The table for each Fund:
. includes the average annual total returns of the common or collective
trust fund and the average annual total returns of the corresponding
Fund linked together;
. assumes that net investment income and dividends have been reinvested;
. assumes that the common or collective trust fund paid the same levels
of fees and expenses as the corresponding Fund currently pays;
. does not reflect any potential negative impact on the common and
collective trust funds performance if they had been subjected to the
same regulatory restrictions (the 1940 Act and the Internal Revenue
Code) as the corresponding Fund; and
. indicates past performance only and does not predict future results.
Munder Small Russell
Period Ended Company Growth 2000
June 30, 1999 Fund (Class Y)* Index**
------------- --------------- -------
1 Year................. % %
3 Years................ % %
5 Years................ % %
10 Years............... % %
Inception on December
31, 1982............... % %
_______________________________________
* Converted from collective trust fund to mutual fund on December 1, 1991.
** Russell 2000 Index performance shows total return in U.S. dollars but does
not reflect the deduction of fees, expenses and taxes. Source: Lipper Analytical
Services, Inc.
Munder FT/S&P
International Actuaries
Period Ended Equity Fund World Index
June 30, 1999 (Class Y )* ex. U.S.**
------------- ------------- -----------
1 Year................... % %
3 Years.................. % %
5 Years.................. % %
Inception on September
30, 1990................. % %
_______________________________________
* Converted from collective trust fund to mutual fund on December 1, 1991.
** FT/S&P Actuaries World Index ex. U.S. performance shows total return in U.S.
dollars but does not reflect the deduction of fees, expenses and taxes. Source:
Ibbotson Associates, Inc.
Lehman
Brothers
Period Ended Munder Bond Fund Gov't/Corp.
June 30, 1999 (Class Y )* Bond Index**
------------- ---------------- ------------
1 Year................. % %
3 Years................ % %
5 Years................ % %
10 Years............... % %
_______________________________________
* Converted from collective trust fund to mutual fund on December 1, 1991.
** Lehman Brothers Government/Corporate Bond Index performance shows total
return in U.S. dollars but does not reflect the deduction of fees, expenses and
taxes. Source: Lipper Analytical Services, Inc.
Munder U.S.
Government Lehman
Income Brothers
Period Ended Fund Gov't/Corp.
June 30, 1999 (Class Y)* Bond Index**
------------- ----------- ------------
1 Year................. % %
3 Years................ % %
5 Years................ % %
10 Years............... % %
______________________________________
* Converted from collective trust fund to mutual fund on July 5, 1994.
** Lehman Brothers Government/Corporate Bond Index performance shows total
return in U.S. dollars but does not reflect the deduction of fees, expenses and
taxes. Source: Lipper Analytical Services, Inc.
57
<PAGE>
Lehman
Munder Brothers
Intermediate Intermediate
Period Ended Bond Fund Gov't/Bond
June 30, 1999 (Class Y)* Index**
------------- ------------ ------------
1 Year................... % %
3 Years.................. % %
5 Years.................. % %
10 Years................. % %
Inception on March 31,
1982..................... % %
______________________________________
* Converted from collective trust fund to mutual fund on December 1, 1991.
** Lehman Brothers Intermediate Government/Corporate Bond Index performance
shows total return in U.S. dollars but does not reflect the deduction of fees,
expenses and taxes. Source: Lipper Analytical Services, Inc.
Munder
Tax-Free Lehman
Period Ended Bond Fund 20-Year Muni
June 30, 1999 (Class Y)* Bond Index**
------------- ---------- ------------
1 Year................. % %
3 Years................ % %
5 Years................ % %
10 Years............... % %
_____________________________________
* Converted from common trust fund to mutual fund on July 21, 1994.
** Lehman 20-Year Municipal Bond Index performance shows total return in U.S.
dollars but does not reflect the deduction of fees, expenses and taxes. Source:
Lipper Analytical Services, Inc.
Indices
The Russell 2000 Index is a capitalization weighted total return index which is
comprised of 2,000 of the smallest capitalized U.S. domiciled companies whose
stock is traded in the United States on the New York Stock Exchange, American
Stock Exchange and the NASDAQ.
The FT/S&P Actuaries World Index ex. U.S. is an unmanaged index used to portray
the global equity market excluding the U.S. The Index is weighted based on the
market capitalization of those stocks selected to represent each country and
includes gross reinvestment of dividends.
The Lehman Brothers Government/Corporate Bond Index is a weighted composite of
(i) Lehman Brothers Government Bond Index, which is comprised of all publicly
issued, non-convertible debt of the U.S. Government or any agency thereof,
quasi-Federal corporations, and corporate debt guaranteed by the U.S. Government
and (ii) Lehman Brothers Corporate Bond Index, which is comprised of all public
fixed-rate, non-convertible investment-grade domestic corporate debt, excluding
collateralized mortgage obligations.
The Lehman Brothers Intermediate Government/Corporate Bond Index is a weighted
composite of (i) Lehman Brothers Intermediate Government Bond Index, which is
comprised of all publicly issued, non-convertible debt of the U.S. Government or
any agency thereof, quasi-Federal corporations and corporate debt guaranteed by
the U.S. Government with a maturity of between one and ten years and (ii) Lehman
Brothers Corporate Bond Index.
The Lehman Brothers 20-Year Municipal Bond Index is a performance benchmark for
the long-term investment-grade tax-exempt bond market.
Performance of Framlington Accounts Managed by the Sub-Advisor
The tables below contain certain performance information provided by the sub-
advisor relating to accounts managed by the sub-advisor which have investment
objectives and policies similar to those of the corresponding Framlington
Funds. In the case of the Healthcare portfolio performance, the data relates to
a unit trust organized under the laws of the United Kingdom managed by the same
personnel of the sub-advisor with similar investment objectives and policies to
the Framlington Healthcare Fund. In the case of Emerging Markets portfolio
performance, the data relates to a Canadian-based institutional emerging markets
portfolio managed by the same personnel of the sub-advisor with similar
investment objectives and policies to the Framlington Emerging Markets Fund.
The trust account performance is provided by Standard & Poor's Micropal, an
independent research organization that is a recognized source of performance
data in the UK unit trust industry. The data is U.S. dollar adjusted on the
basis of exchange rates provided by Datastream using WM/Reuters closing rates.
The performance figures are net of brokerage commissions, actual investment
advisory fees and initial sales charges. The data assume the reinvestment of net
income and capital gain distributions. The trust account returns are calculated
using beginning offer and ending bid prices for periods ended December 31, 1996.
You should not rely on the following performance data of the sub-advisor's
client accounts as an indication of future performance of the Framlington Funds.
It should be noted that the management of the
58
<PAGE>
Funds will be affected by regulatory requirements under the 1940 Act and
requirements of the Internal Revenue Code to qualify as a regulated investment
company.
S&P Healthcare
U.K. Composite
Period Ended Health Index Capital
December 31, 1996 Portfolio Change
- ----------------- --------- ------
1 Year............... 10.75% 18.48%
3 Years.............. 96.93% 100.49%
5 Years.............. 99.43% 45.60%
Inception on April
30, 1987............. 411.08% 239.64%
Performance for the Health trust account is calculated on an offer-bid basis;
U.S. dollar adjusted total return net of all management fees but not reflective
of U.K. tax. Source: Standard & Poors Micropal.
S&P Healthcare Composite Index performance shows capital change in U.S. dollars
but does not reflect the deduction of fees, expenses and taxes. Source:
Datastream.
MSCI Emerging
Canadian Markets Free
Period Ended Emerging Total
December 31, 1996 Markets Account Return
- ----------------- --------------- ------
1 Year................ 5.16% 6.03%
Inception on November
1, 1994............... (3.68)% (12.37)%
MSCI Emerging Markets Free Index performance shows total return in U.S. Dollars
but does not reflect the deduction of fees, expenses and taxes. Source:
Datastream.
The performance of the Canadian institutional account is measured by the World
Markets Company on a total return basis and has been re-calculated net of the
management fee charged the Canadian institutional account. The inception date of
the Canadian institutional account is November 1, 1994.
Indices
The S&P Healthcare Composite Index is the composite Healthcare section of the
S&P 500 Index as defined and tracked by S&P. This index covers securities listed
in the United States only.
The MSCI Emerging Markets Free Index is maintained by Morgan Stanley Capital
International, and covers 26 countries and represents the investment
opportunities in emerging markets available to foreign investors. Total return
is calculated using the prices of the companies tracked and assumes the
reinvestment of dividends.
Portfolio Managers [to be revised]
Balanced Fund, Equity Selection Fund, Growth Opportunities Fund, NetNet Fund,
Micro-Cap Equity Fund And Small Company Growth Fund.
A committee of professional portfolio managers employed by MCM makes investment
decisions for the Funds.
Growth & Income Fund
Otto Hinzmann, Jr. has been the Funds portfolio manager since February 1995. Mr.
Hinzmann has been a Vice President and Director of Equity Management of MCM or
of Old MCM, Inc. (Old MCM), the predecessor to MCM, since January 1987.
International Equity Fund
Todd B. Johnson and Theodore Miller jointly manage the Fund. Mr. Johnson,
President and Chief Investment Officer of World, and Mr. Miller, senior
portfolio manager of the Fund, have managed the Fund since July 1992 and October
1996, respectively. Mr. Miller previously worked as the primary analyst for the
Fund (1996) and for Interacciones Global Inc. (1993-1995).
Multi-Season Growth Fund
Leonard J. Barr II has been the Funds portfolio manager since the Funds
inception in April 1993. Mr. Barr is the Senior Vice President and Director of
Research of MCM.
Real Estate Equity Investment Fund
Peter K. Hoglund and Robert E. Crosby jointly manage the Fund. Mr. Hoglund, who
has managed the Fund since October 1996, was formerly the primary analyst of the
Fund (October 1994 to October 1996). Mr. Crosby, who has managed the Fund since
March 1998, was formerly the primary analyst of the Fund (October 1996 to March
1998). Mr. Crosby has been employed by MCM since 1993, and also serves as
portfolio manager for separately managed institutional accounts.
Small-Cap Value Fund And Value Fund
Gerald Seizert, Edward Eberle and Brian Wall jointly manage the Funds. Mr.
Seizert, a Chief Investment Officer - Equities of MCM, has managed the Funds
since they commenced operations. Prior to joining the advisor in 1995, Mr.
Seizert was a Director and Managing Partner of Loomis, Sayles & Company,
59
<PAGE>
L.P. (1984-1995). Mr. Eberle, who has managed the Small-Cap Value Fund since
March 1997 and the Value Fund since October 1996, was formerly the primary
analyst for the Funds. Prior to joining MCM in 1995, he was an Executive Vice
President and Portfolio Manager for Westpointe Financial Corporation. Mr. Wall,
who has managed the Funds since January 1998, was formerly a primary analyst for
the Funds. Prior to joining the MCM in 1995, he was a Senior Equity Analyst with
Woodbridge Capital Management, Inc. (1994-1995).
Framlington Emerging Markets Fund
A committee of professional portfolio managers employed by Framlington makes
investment decisions for the Fund. William Calvert heads the committee. Mr.
Calvert has been employed by Framlington since 1997. Prior to that he was
employed by Edmund de Rothschild Securities.
Framlington Global Financial Services Fund
A committee of professional managers employed by MCM or Framlington makes
decisions for the Fund.
Framlington Healthcare Fund
Antony Milford, head of the Specialist Desk for Framlington, has been the Funds
primary portfolio manager since the Funds inception. Mr. Milford has managed
funds for Framlington since 1971.
Framlington International Growth Fund
A committee of professional portfolio managers employed by Framlington makes
investment decisions for the Fund. Simon Key, Chief Investment Officer of
Framlington, heads the committee. Mr. Key has managed funds for Framlington
since 1989.
Bond Fund
James C. Robinson and Gregory A. Prost jointly manage the Fund. Mr. Robinson and
Mr. Prost have managed the Fund since March 1995 and May 1995, respectively. Mr.
Robinson has been a Vice President and Chief Investment Officer of MCM or Old
MCM since 1987. Mr. Prost has been a Senior Fixed Income Portfolio of MCM or Old
MCM since 1995. Prior to joining MCM, he was a Vice President and Senior Fund
Manager for First of America Investment Corp.
Intermediate Bond Fund
Anne K. Kennedy and James C. Robinson jointly manage the Fund. Ms. Kennedy, Vice
President and Director of Corporate Bond Trading of MCM or Old MCM since 1991,
has managed the Fund since March 1995. Mr. Robinson, Vice President and Chief
Investment Officer of MCM or Old MCM since 1987, has managed the Fund since
March 1995.
International Bond Fund
Gregory A. Prost and Sharon E. Fayolle jointly manage the Fund. Mr. Prost,
Senior Fixed Income Portfolio Manager of MCM or Old MCM, has managed the 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. Ms. Fayolle, Vice
President and Director of Money Market Trading for MCM or Old MCM, has managed
the Fund since 1996. Prior to that she managed an international portfolio for
Ford Motor Company.
U.S. Government Income Fund
James C. Robinson and Peter G. Root jointly manage the Fund. Mr. Robinson, Vice
President and Chief Investment Officer of MCM or Old MCM since 1987, and Mr.
Root, Vice President and Director of Government Securities Trading of MCM since
March 1995, have managed the Fund since March 1995. Mr. Root joined Old MCM in
1991.
Michigan Tax-Free Bond Fund, Tax-Free Bond Fund And Tax-Free Short-Intermediate
Bond Fund Talmadge D. Gunn, Vice President and Director of Tax-Exempt Trading of
MCM since 1993, manages the Tax-Free Funds.
Short Term Treasury Fund
Sharon E. Fayolle, Vice President and Director of Money Market Trading for MCM
or Old MCM, has managed the Fund since 1996. Prior to that, she managed an
international portfolio for Ford Motor Company.
60
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand each
Funds financial performance for the past 5 years (or, if shorter, the period of
the Funds operations). Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). Because the Class Y shares of
the Equity Selection Fund had not commenced operations on June 30, 1999,
financial highlights are not presented for that Fund. The information has been
audited by Ernst & Young LLP, independent accountants, whose report along with
each Funds financial statements, are included in the annual reports of the
Funds, and are incorporated by reference into the Statement of Additional
Information. You may obtain the annual reports without charge by calling (800)
438-5789.
<TABLE>
<CAPTION>
Balanced Fund(a)
---------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e)
------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..........
Income from investment operations:
Net investment income.........................
Net realized and unrealized gain/(loss) on
investments...................................
Total from investment operations..............
Less distributions:
Dividends from net investment income..........
Distributions from net realized gains.........
Total distributions...........................
Net asset value, end of period................
Total return (b)..............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)...........
Ratio of operating expenses to average
net assets...................................
Ratio of net investment income to average
net assets....................................
Portfolio turnover rate.......................
Ratio of operating expenses to average
net assets without waivers....................
</TABLE>
________________
61
<PAGE>
<TABLE>
<CAPTION>
Growth
Opportunities
Growth & Income Fund (a) Fund (a)
-------------------------------------------------------------- ------------------
Year Year Year Year Period Period Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(g) 6/30/98 6/30/96(g) 6/30/95(d) 2/28/95(e) 6/30/99
------- ------- ---------- ------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.........
Income from investment operations:
Net investment income........................
Net realized and/or unrealized gain on
investments..................................
Total from investment operations.............
Less distributions:
Dividends from net investment income.........
Distributions from net realized gains........
Total distributions..........................
Net asset value, end of period...............
Total return (b).............................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000s)..........
Ratio of operating expenses to average
net assets..................................
Ratio of net investment income to average
net assets...................................
Portfolio turnover rate......................
Ratio of operating expenses to average
net assets without waivers and/ or
expenses reimbursed..........................
</TABLE>
____________
62
<PAGE>
<TABLE>
<CAPTION>
International Equity Fund (a)
---------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e,f)
------- ------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......
Income from investment operations:
Net investment income......................
Net realized and unrealized
gain/(loss) on investments.................
Total from investment operations...........
Less distributions:
Dividends from net investment income.......
Distributions from net realized
gains......................................
Distributions from capital.................
Total distributions........................
Net asset value, end of period.............
Total return (b)...........................
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000s)........
Ratio of operating expenses to
average net assets.........................
Ratio of net investment income to
average net assets........................
Portfolio turnover rate....................
Ratio of operating expenses to average
net assets without waivers.................
</TABLE>
__________________
63
<PAGE>
<TABLE>
<CAPTION>
Micro-Cap Equity Fund (a)
--------------------------------------------
Year Year Period
Ended Ended Ended
6/30/99) 6/30/98(d) 6/30/97(d)
-------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period..........
Income from investment operations:
Net investment income/(loss)..................
Net realized and unrealized gain on
investments...................................
Total from investment operations..............
Less distributions:
Dividends from net investment income..........
Distributions from net realized gains.........
Total distributions...........................
Net asset value, end of period................
Total return (b)..............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)...........
Ratio of operating expenses to
average net assets............................
Ratio of net investment income to
average net assets...........................
Portfolio turnover rate.......................
Ratio of operating expenses to average net
assets without waivers and/or expenses
reimbursed....................................
</TABLE>
_________________________
64
<PAGE>
<TABLE>
<CAPTION>
Multi-Season Growth Fund (a) NetNet Fund (a)
-------------------------------------------------------- ------------------
Year Year Year Year Period Year Period
Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/96(f) 6/30/98(f) 6/30/97(f) 6/30/95(d,e,h) 6/30/99 6/30/98
------- ---------- ---------- ---------- -------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..........
Income from investment operations:
Net investment income/(loss)..................
Net realized and unrealized gain/(loss)
on investments...............................
Total from investment operations..............
Less distributions:
Dividends from net investment income..........
Distributions from net realized gains.........
Total distributions...........................
Net asset value at end of period..............
Total return (b)..............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)...........
Ratio of operating expenses to average
net assets...................................
Ratio of net investment income/(loss) to
average net assets............................
Portfolio turnover rate.......................
Ratio of operating expenses to average net
assets without waivers and/or expenses
reimbursed....................................
</TABLE>
_____________________
65
<PAGE>
<TABLE>
<CAPTION>
Real Estate Equity Investment Fund (a)
-----------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
6/30/99 6/30/98(e) 6/30/97 6/30/96(e) 6/30/95(d)
------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..........
Income from investment operations:
Net investment income/(loss)..................
Net realized and unrealized gain on
investments..................................
Total from investment operations..............
Less distributions:
Dividends from net investment income..........
Distributions in excess of net investment
income........................................
Distributions from net realized gains.........
Distributions from paid-in capital............
Total distributions...........................
Net asset value, end of period................
Total return (b)..............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)...........
Ratio of operating expenses to average net
assets.......................................
Ratio of net investment income/(loss) to
average net assets...........................
Portfolio turnover rate.......................
Ratio of operating expenses to average net
assets without waivers........................
</TABLE>
_________________
66
<PAGE>
<TABLE>
<CAPTION>
Small-Cap Value Fund (a)
------------------------------
Year Year Year
Ended Ended Ended
6/30/99 6/30/98(e) 6/30/97
------- ---------- -------
<S> <C> <C> <C>
Net asset value, beginning of period..........
Income from investment operations:
Net investment income/(loss)..................
Net realized and unrealized gain on
investments..................................
Total from investment operations..............
Less distributions:
Dividends from net investment income..........
Distributions in excess of net investment
income.......................................
Distributions from net realized gains.........
Distributions from paid-in capital............
Total distributions...........................
Net asset value, end of period................
Total return (b)..............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)...........
Ratio of operating expenses to average net
assets.......................................
Ratio of net investment income/(loss) to
average net assets...........................
Portfolio turnover rate.......................
Ratio of operating expenses to average net
assets without waivers........................
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
Small Company Growth Fund (a)
---------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/97(f) 6/30/96(f) 6/30/95(e) 2/28/95(d)
------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..........
Income from investment operations:
Net investment loss...........................
Net realized and unrealized gain/(loss)
on investments................................
Total from investment operations..............
Less distributions:
Distributions from net realized gains.........
Total distributions...........................
Net asset value, end of period................
Total return (b)..............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)...........
Ratio of operating expenses to average
net assets....................................
Ratio of net investment loss to average
net assets....................................
Portfolio turnover rate.......................
Ratio of operating expenses to average
net assets without waivers....................
</TABLE>
________________________
68
<PAGE>
<TABLE>
<CAPTION>
Value Fund (a)
------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d) 6/30/96(d)
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.........................
Income from investment operations:
Net investment income........................................
Net realized and unrealized gain/(loss) on investments.......
Total from investment operations.............................
Less distributions:
Dividends from net investment income.........................
Distributions from net realized gains........................
Total distributions..........................................
Net asset value, end of period...............................
Total return (b).............................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)..........................
Ratio of operating expenses to average net assets............
Ratio of net investment income to average net assets.........
Portfolio turnover rate......................................
Ratio of operating expenses to average net assets
without waivers..............................................
</TABLE>
____________________
69
<PAGE>
<TABLE>
<CAPTION>
Framlington Global
Framlington Emerging Markets Fund (a) Financial Services Fund (a)
---------------------------------------------------------------------
Year Year Period Year Period
Ended Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97(d) 6/30/99 6/30/98
------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............
Income from investment operations:
Net investment income/(loss)....................
Net realized and unrealized gain/(loss)
on investments..................................
Total from investment operations................
Less distributions:
Dividends from net investment income............
Distributions from net realized gains...........
Distributions in excess of net realized
gains...........................................
Total distributions.............................
Net asset value, end of period..................
Total return (b)................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s).............
Ratio of operating expenses to average net
assets..........................................
Ratio of net investment income/(loss)
to average net assets..........................
Portfolio turnover rate.........................
Ratio of operating expenses to average net
assets without expenses reimbursed..............
</TABLE>
___________________
70
<PAGE>
<TABLE>
<CAPTION>
Framlington International Growth
Framlington Healthcare Fund (a) Fund (a)
---------------------------------------------------------------------------
Year Year Period Year Year Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(d) 6/30/97 6/30/99 6/30/98(d) 6/30/97(d)
------- ---------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............
Income from investment operations:
Net investment income/(loss).....................
Net realized and unrealized gain/(loss) on
investments......................................
Total from investment operations.................
Less distributions:
Dividends from net investment income.............
Distributions from net realized gains............
Distributions in excess of net realized gains....
Total distributions..............................
Net asset value, end of period...................
Total return (b).................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)..............
Ratio of operating expenses to average net
assets...........................................
Ratio of net investment income/(loss)
to average net assets...........................
Portfolio turnover rate..........................
Ratio of operating expenses to average net
assets without expenses reimbursed...............
</TABLE>
___________________
71
<PAGE>
<TABLE>
<CAPTION>
Bond Fund (a)
------------------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(e) 6/30/97 6/30/96 6/30/95(d) 2/28/95(e,f)
------- ---------- ------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..........
Income from investment operations:
Net investment income.........................
Net realized and unrealized gain/(loss) on
investments...................................
Total from investment operations..............
Less distributions:
Dividends from net investment income..........
Distributions from net realized gains.........
Total distributions...........................
Net asset value, end of period................
Total return (b)..............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)...........
Ratio of operating expenses to average net
assets........................................
Ratio of net investment income to average net
assets........................................
Portfolio turnover rate.......................
Ratio of operating expenses to average net
assets without waivers........................
</TABLE>
___________________
72
<PAGE>
<TABLE>
<CAPTION>
Intermediate Bond Fund (a)
-----------------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/97(f) 6/30/96 6/30/95(d) 2/28/95(e)
------- ---------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...........
Income from investment operations:
Net investment income..........................
Net realized and unrealized gain/(loss) on
investments....................................
Total from investment operations...............
Less distributions:
Dividends from net investment income...........
Distributions from net realized gains..........
Total distributions Net asset value, end of
period.........................................
Total return (b)...............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)............
Ratio of operating expenses to average net
assets.........................................
Ratio of net investment income to average net
assets.........................................
Portfolio turnover rate........................
Ratio of operating expenses to average net
assets without waivers.........................
</TABLE>
___________________
73
<PAGE>
<TABLE>
<CAPTION>
International Bond Fund (a) U.S. Government Income Fund (a)
----------------------------------------------------------------------------------------
Year Year Period Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/99 6/30/98 6/30/97 6/30/96(f) 6/30/95(d) 2/28/95(e)
-------- ------- ------- ------- ------- ------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......
Income from investment operations:
Net investment income.....................
Net realized and unrealized gain/(loss)
on investments............................
Total from investment operations..........
Less distributions:
Dividends from net investment income......
Distributions from net realized gains.....
Total distributions.......................
Net asset value, end of period............
Total return (b)..........................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000s).......
Ratio of operating expenses to average net
assets....................................
Ratio of net investment income to average
net assets................................
Portfolio turnover rate...................
Ratio of operating expenses to average net
assets without waivers....................
</TABLE>
___________________
74
<PAGE>
<TABLE>
<CAPTION>
Michigan Tax-Free Bond Fund (a)
-----------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(e) 6/30/96(e) 6/30/95(d) 2/28/95(e,f)
------- ------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............
Income from investment operations:
Net investment income............................
Net realized and unrealized gain/(loss) on
investments......................................
Total from investment operations.................
Less distributions:
Dividends from net investment income..............
Distributions from net realized gains.............
Total distributions...............................
Net asset value, end of period....................
Total return (b)..................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)...............
Ratio of operating expenses to average net
assets............................................
Ratio of net investment income to average
net assets........................................
Portfolio turnover rate...........................
Ratio of operating expenses to average net assets
without waivers...................................
</TABLE>
___________________
75
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Bond Fund (a)
----------------------------------------------------------------------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(e) 6/30/96(e) 6/30/95(d,e) 2/28/95(f)
------- ------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............
Income from investment operations:
Net investment income...........................
Net realized and unrealized gain/(loss) on
investments.....................................
Total from investment operations................
Less distributions:
Dividends from net investment income............
Distributions from net realized gains...........
Total distributions.............................
Net asset value, end of period..................
Total return (b)................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s).............
Ratio of operating expenses to average net
assets..........................................
Ratio of net investment income to average net
assets..........................................
Portfolio turnover rate.........................
Ratio of operating expenses to average net
assets without waivers..........................
</TABLE>
___________________
76
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Short-Intermediate Bond Fund (a)
------------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d) 2/28/95(e)
-------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..........
Income from investment operations:
Net investment income.........................
Net realized and unrealized gain/(loss)
on investments................................
Total from investment operations..............
Less distributions:
Dividends from net investment income..........
Distributions from net realized gains.........
Total distributions...........................
Net asset value, end of period................
Total return (b)..............................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000s)...........
Ratio of operating expenses to average net
assets........................................
Ratio of net investment income to average net
assets........................................
Portfolio turnover rate ......................
Ratio of operating expenses to average net
assets without waivers........................
</TABLE>
_________________________
77
<PAGE>
<TABLE>
<CAPTION>
Short Term Treasury Fund (a)
------------------------------------------
Year Year Period
Ended Ended Ended
6/30/99 6/30/98 6/30/97(d)
--------- --------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period...............................
Income from investment operations:
Net investment income..............................................
Net realized and/or unrealized gain on investments
Total from investment operations...................................
Less distributions:
Dividends from net investment income...............................
Total distributions................................................
Net asset value, end of period.............................. ......
Total return (b)...................................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)................................
Ratio of operating expenses to average net assets..................
Ratio of net investment income to average net assets...............
Portfolio turnover rate............................................
Ratio of operating expenses to average net assets without expenses
reimbursed.........................................................
</TABLE>
__________________
78
<PAGE>
<TABLE>
<CAPTION>
Cash Investment Fund (a)
--------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95(d) 2/28/95(e)
------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ..................................
Income from investment
operations:
Net investment income.......................
Total from investment
operations..................................
Less distributions:
Dividends from net
investment income...........................
Total Distributions.........................
Net asset value, end of
period......................................
Total return (b)............................
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000s).......................................
Ratio of operating expenses
to average net assets.......................
Ratio of net investment
income to average net
assets......................................
Ratio of operating expenses to
average net assets without
waivers.....................................
</TABLE>
______________________
79
<PAGE>
<TABLE>
<CAPTION>
Money Market Fund (a)
------------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95(d,e)
------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...............
Income from investment operations:
Net investment income..............................
Total from investment operations...................
Less distributions:
Dividends from net investment income...............
Total distributions................................
Net asset value, end of period.....................
Total return (b)...................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000s)................
Ratio of operating expenses to average
net assets.........................................
Ratio of net investment income to
average net assets.................................
Ratio of operating expenses to average.............
net assets without waivers.........................
</TABLE>
____________________
80
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Money Market Fund (a)
--------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95(d) 2/28/95(e)
------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........
Income from investment
operations:
Net investment income.......................
Total from investment operations............
Less distributions:
Dividends from net investment
income......................................
Total distributions.........................
Net asset value end of period...............
Total return (b)............................
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000s).........
Ratio of operating expenses to
average net assets..........................
Ratio of net investment income to
average net assets..........................
Ratio of operating expenses to
average net assets without waivers..........
</TABLE>
___________________
81
<PAGE>
<TABLE>
<CAPTION>
U.S. Treasury Money Market Fund (a)
-----------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95(d) 2/28/95(e)
------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................................
Income from investment
operations:
Net investment income.......................
Total from investment
operations..................................
Less distributions:
Dividends from net investment
income......................................
Total distributions.........................
Net asset value, end of period..............
Total return (b)............................
Ratios to average net
assets/supplemental data:
Net assets, end of period
(in 000s)...................................
Ratio of operating expenses to
average net assets..........................
Ratio of net investment income to
average net assets..........................
Ratio of operating expenses to
average net assets without
waivers.....................................
</TABLE>
____________________
82
<PAGE>
For More Information
<TABLE>
To Obtain Information:
<S> <C>
More information about the Funds is available free upon request,
including the following:
-----------------------------------------------
Annual/Semi-Annual Reports By telephone
Call 1-800-438-5789
You will receive unaudited semi-annual reports and audited annual
reports on a regular basis from the Funds. In addition, you will By mail
also receive updated prospectuses or supplements to this The Munder Funds
prospectus. In order to eliminate duplicate mailings, each Fund 480 Pierce Street
will only send one copy of the above communications to (1) accounts Birmingham, MI 48009
with the same primary record owner, (2) joint tenant accounts, (3)
tenant in common accounts and (4) accounts which have the same On the Internet
address.
Text-only versions of fund documents can be
viewed online or downloaded from:
Statement Of Additional Information
Securities and Exchange Commission
Provides more details about the Funds and their policies. A http://www.sec.gov
current Statement of Additional Information is on file with the
Securities and Exchange Commission and is incorporated by reference You can also obtain copies by visiting the
(is legally considered part of this prospectus). Securities and Exchange Commissions Public
Reference Room in Washington, D.C. (phone
1-800-SEC-0330) or by sending your request and
a duplicating fee to the Securities and
Exchange Commissions Public Reference Section,
Washington, D.C. 20549-6009.
You may also find more information about the
Funds on the Internet at:
http://www.munderfunds.com
-----------------------------------------------
</TABLE>
The Munder Funds, Inc.
SEC file number: 811-7346
The Munder Funds Trust
SEC file number: 811-5899
The Munder Framlington Funds Trust
SEC file number: 811-7897
<PAGE>
Class A, B & C Shares
[Munder Logo]
Prospectus
October 26, 1999
The Munder Income Funds
Bond
Intermediate Bond
International Bond
U.S. Government Income
Michigan Tax-Free Bond
Tax-Free Bond
Tax-Free Short-Intermediate Bond
As with all mutual funds, the
Securities and Exchange
Commission has not approved or
disapproved these securities nor
passed upon the accuracy or
adequacy of this prospectus. It
is a criminal offense to state
otherwise.
<PAGE>
Table of Contents
2 Risk/Return Summary
. Income Funds
. Tax-Free Funds
10 Summary Of Principal Risks
11 Who May Want To Invest
12 Fees And Expenses
14 More About The Funds
14 Glossary
15 Special Risks And Other Considerations
17 Additional Description Of Investments And Investment Strategies
21 Your Investment
21 How To Reach The Funds
21 Purchasing Shares
22 Exchanging Shares
22 Redeeming Shares
23 Additional Policies For Purchases, Exchanges And Redemptions
24 Shareholder Privileges
25 Distribution Arrangements
25 Share Class Selection
25 Applicable Sales Charge
27 CDSC
28 12B-1 Fees
28 Other Information
29 Pricing Of Fund Shares
29 Distributions
30 Federal Tax COnsiderations
30 Taxes On Distributions
30 Taxes On Sales Or Exchanges
30 Other Considerations
31 Management
31 Investment Advisor
31 Portfolio Management
32 Financial Highlights
Back Cover For Additional Information
<PAGE>
Risk/Return Summary
- -----------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goals and principal investment
strategies of the Funds and the principal risks of investing in the Funds. For
further information on these and the Funds' other investment strategies and
risks, please read the section entitled More About The Funds.
Certain terms used in this prospectus are defined in the Glossary.
An investment in the Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
The Risk/Return Summary includes a table for each Fund showing its average
annual returns and a bar chart showing its annual returns. The table and bar
chart provide an indication of the historical risk of an investment in each Fund
by showing:
. how the Fund's average annual returns for 1, 5, and 10 years (or over the
life of the Fund if the Fund is less than 10 years old) compare to those of
a broad based securities market index; and;
. changes in the Fund's performance from year to year over 10 years (or over
the life of the Fund if the Fund is less than 10 old).
When you consider this information, please remember that a Fund's performance in
past years is not necessarily an indication of how the Fund will perform in the
future.
2
<PAGE>
Income Funds
Bond Fund
Goal
The Fund's primary goal is to provide a high level of current income. Its
secondary goal is capital appreciation.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its total assets in a broad range of bonds and other fixed income
securities. These may include:
. U.S. Government securities and repurchase agreements collateralized by such
securities;
. obligations of state, local and foreign governments;
. obligations of domestic and foreign banks;
. obligations of domestic and foreign corporations;
. zero coupon bonds, debentures and convertible debentures;
. mortgage and other asset-backed securities; and
. stripped securities.
The Fund's strategy focuses on areas where the advisor believes value can be
added. These include credit analysis and analysis of such factors as interest
rate relationships, the relative attractiveness of bond market sectors and the
characteristics of individual issuers.
The Fund's dollar-weighted average maturity will generally range between six and
fifteen years.
The Fund will purchase only fixed income securities that are rated investment
grade or better, or if unrated, are of comparable quality.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk and
credit risk. To the extent that the Fund purchases foreign securities, it may be
subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
____________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year 5 Years Inception
- ----------------------- ------- -------- ---------
Class A (12/9/92)
Class B (3/13/96)
Class C (3/25/96)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
3
<PAGE>
Intermediate Bond Fund
Goal
The Fund's goal is to provide a competitive rate of return which, over time,
exceeds the rate of inflation and the return provided by money market
instruments.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its total assets in a broad range of bonds and other fixed income
securities. These may include:
. U.S. Government securities and repurchase agreements collateralized by such
securities;
. obligations of state, local and foreign governments;
. obligations of domestic and foreign banks;
. obligations of domestic and foreign corporations;
. zero coupon bonds, debentures and convertible debentures;
. mortgage and other asset-backed securities; and
. stripped securities.
The Fund's strategy focuses on areas where the advisor believes value can be
added. These include credit analysis and analysis of such factors as interest
rate relationships, the relative attractiveness of bond market sectors and the
characteristics of individual issues.
The Fund's dollar-weighted average maturity will generally range between three
and eight years.
The Fund will purchase only fixed income securities that are rated investment
grade or better, or if unrated, are of comparable quality.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk and
credit risk. To the extent that the Fund purchases foreign securities, it may be
subject to foreign securities risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
_________________
Year-to-date through September 30, 1999: ______%
Best Quarter: Q____199__ ___%
Worst Quarter: Q____199__ ___%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year 5 Years Inception
- --------------------- ------ ------- ---------
Class A (11/24/92)
Class B (10/25/94)
Class C (4/19/96)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
__________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
4
<PAGE>
International Bond Fund
Goal
The Fund's goal is to realize a competitive total return through a combination
of current income and capital appreciation.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its total assets in a broad range of bonds and other fixed income
securities of foreign issuers. These may include:
. obligations issued by foreign governments, their agencies,
instrumentalities or political subdivisions;
. obligations issued or guaranteed by supranational organizations (such as
the World Bank);
. obligations of foreign banks or bank holding companies; and
. obligations of foreign corporations.
The Fund will invest in the securities of issuers in at least three foreign
countries.
The Fund's strategy focuses on analysis of bond yield relationships and
specifically focuses on making allocation decisions based on yield relationships
between countries, pricing inefficiencies in the marketplace and yield curve
analysis.
The Fund's dollar-weighted average maturity will generally range between three
and fifteen years.
The Fund may invest a portion of its assets in domestic obligations, including
U.S. Government securities and obligations of domestic banks and corporations.
The Fund is "non-diversified" under the 1940 Act and may invest more of its
assets in fewer issuers than a "diversified" investment company.
The Fund may enter into forward currency exchange contracts.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, foreign securities risk, currency risk and non-diversified risk. To
the extent the Fund enters into forward currency contracts, it may be subject to
derivatives risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1997: _____%
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- --------------------- ------ ---------
Class A (10/17/96)
Class B (6/9/97)
Class C (6/4/98)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
5
<PAGE>
U.S. Government Income Fund
Goal
The Fund's goal is to provide high current income.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its total assets in a broad range of U.S. Government securities and
repurchase agreements relating to such securities.
The Fund's strategy focuses on areas where the advisor believes value can be
added. These include credit analysis and an analysis of such factors as interest
rate relationships, the relative attractiveness of the government-related
sectors of the market and the characteristics of individual issues.
The Fund's dollar-weighted average maturity generally will range between six and
fifteen years.
The Fund may also invest in other fixed income securities.
Principal Risks
The principal risk of investing in the Fund is interest rate risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1995: _____%
1996: _____%
1997: _____%
1998: _____%
______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- --------------------- ------ ---------
Class A (7/28/94)
Class B (9/6/95)
Class C (8/12/96)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
6
<PAGE>
- --------------------------------------------------------------------------------
Tax-Free Funds
- --------------------------------------------------------------------------------
Michigan Tax-Free Bond Fund
(Offered only in the State of Michigan.)
Goal
The Fund's goal is to provide as high a level of current interest income exempt
from regular Federal income taxes and Michigan state income tax as is consistent
with prudent investment management and preservation of capital.
Principal Investment Strategies
The Fund pursues its goal by investing, under normal market conditions, at least
80% of the Fund's net assets in municipal obligations issued by the State of
Michigan and its political subdivisions. The interest on these obligations is
exempt from Federal income taxes and Michigan state income tax.
The Fund will invest primarily in Michigan municipal obligations that have
remaining maturities of between three and thirty years. The Fund's dollar-
weighted average maturity will generally range between ten and twenty years.
The Fund is "non-diversified" under the 1940 Act and may invest more of its
assets in fewer issuers than a "diversified" investment company.
The Fund may also invest in other fixed income securities.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk,
credit risk and non-diversified risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1995: _____%
1996: _____%
1997: _____%
1998: _____%
______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ------------------------------ ------------ ---------------
Class A (2/15/94)
Class B (7/5/94)
Class C (10/4/96)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
7
<PAGE>
Tax-Free Bond Fund
Goal
The Fund's goals are to provide a high level of current interest income exempt
from Federal income taxes and to generate as competitive a long-term rate of
return as is consistent with prudent investment management and preservation of
capital.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its net assets in municipal obligations.
Under normal market conditions, at least 80% of the Fund's net assets will be
invested in municipal obligations whose interest is exempt from regular Federal
income tax. This fundamental policy may only be changed with shareholder
approval.
In selecting securities for the Fund, the advisor places a premium on value and
diversifies the Fund's portfolio holdings across maturities, industries and
geographic locations.
The Fund invests primarily in intermediate-term and long-term municipal
obligations that have remaining maturities of between three and thirty years.
The Fund's dollar-weighted average maturity will generally range between ten and
twenty years.
The Fund may also invest in other fixed income securities.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk and
credit risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class B)
The annual returns in the bar chart are for the Fund's Class B Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1996: _____%
1997: _____%
1998: _____%
______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ------------------------------ ------------ ---------------
Class A (10/9/95)
Class B (12/6/94)
Class C (7/7/97)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
8
<PAGE>
Tax-Free Short-Intermediate Bond Fund
Goal
The Fund's goals are to provide a competitive level of current interest income
exempt from regular Federal income taxes and a total return which, over time,
exceeds the rate of inflation and the return provided by tax-free money market
instruments.
Principal Investment Strategies
The Fund pursues its goals by investing, under normal market conditions, at
least 65% of its net assets in municipal obligations.
Under normal market conditions, at least 80% of the Fund's net assets will be
invested in municipal obligations whose interest is exempt from regular Federal
income tax.
The Fund generally buys obligations with remaining maturities of five years or
less. The Fund's dollar-weighted average maturity will generally range between
two and five years.
The Fund may invest more than 25% of its assets in municipal obligations issued
by the State of Michigan and its political subdivisions.
The Fund is "non-diversified" under the 1940 Act and may invest more of its
assets in fewer issuers than a "diversified" investment company.
The Fund may also invest in other fixed income securities.
Principal Risks
Among the principal risks of investing in the Fund are interest rate risk,
credit risk and non-diversified risk.
Further information about the Fund's principal investment strategies and risks
is provided below under "Summary of Principal Risks" and "More About the Funds."
Performance
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year 5 Years Inception
- --------------------------- -------- --------- -------------
Class A (11/30/92)
Class B (5/16/96)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
9
<PAGE>
Summary of Principal Risks of the Funds
The share price of the Funds will change daily based on market conditions and
other factors. Therefore, you may lose money if you invest in the Funds.
The following summary briefly describes the principal risks that may affect a
Fund's portfolio as a whole. More information about the Funds' principal
investment strategies and their associated risks is contained in the section
entitled "More About the Funds."
Credit (or Default) Risk is the risk of loss because an issuer of a security may
default on its payment obligations. Also, an issuer may suffer adverse changes
in its financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security and in shares of the
Fund. A change in the quality rating of a bond can affect the bond's liquidity
and make it more difficult for the Fund to sell. Funds particularly subject to
this risk are: Bond Fund, Intermediate Bond Fund, International Bond Fund, U.S.
Government Income Fund, Michigan Tax-Free Bond Fund, Tax-Free Bond Fund and Tax-
Free Short-Intermediate Bond Fund.
Derivatives Risk is the risk that loss may result from a Fund's use of futures
and options on futures contracts, options, forward currency exchange contracts
and other forms of derivative instruments. The primary risk with many
derivatives is that they can amplify a gain or loss, potentially earning or
losing substantially more money than the actual cost of the derivative
instrument. International Bond Fund is particularly subject to this risk.
Foreign Securities Risk is the risk of loss because investments by a Fund in
foreign securities may experience greater and more rapid change in value than
investments in U.S. securities. Foreign securities are generally more volatile
and less liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available about
foreign companies. Issuers of foreign securities are generally not subject to
the same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards. Funds particularly subject to this risk are: Bond Fund,
Intermediate Bond Fund and International Bond Fund.
Currency Risk. Funds that invest in foreign securities denominated in
foreign currencies may also be subject to currency risk. This is the
risk of loss because a decline in the value of foreign currencies
relative to the U.S. dollar will reduce the value of a Fund's portfolio
securities denominated in those currencies. International Bond Fund is
particularly subject to this risk.
Interest Rate Risk is the risk of loss because increases in prevailing interest
rates will cause fixed-income securities held by a Fund to decline in value.
Longer term bonds are generally more sensitive to interest rate changes than
shorter term bonds. Generally, the longer the average maturity of the bonds held
by the Fund, the more the Fund's share price will fluctuate in response to
interest rate changes. Funds particularly subject to this risk are Bond Fund,
Intermediate Bond Fund, International Bond Fund, U.S. Government Income Fund,
Michigan Tax-Free Bond Fund and Tax-Free Short-Intermediate Bond Fund.
Market Risk is the risk of loss because the value of the securities in which a
Fund invests may decline in response to general economic conditions. Price
changes may be temporary or last for extended periods. For example, stock prices
have historically risen and fallen in periodic cycles. In addition, the value of
a Fund's investments may decline if the particular companies the Funds invest in
do not perform well. All of the Munder Funds are subject to this risk.
Non-Diversified Risk is the risk of loss because a Fund that invests more of its
assets in fewer issuers than many other funds do, may be more susceptible to
adverse developments affecting any single issuer, and more susceptible to
greater losses because of these developments. For example, the Michigan Tax-Free
Bond Fund invests primarily in Michigan municipal obligations, if Michigan
issuers suffer serious financial difficulties, jeopardizing their ability to pay
their obligations, the Fund may suffer a loss. International Bond Fund, Michigan
Tax-Free Bond Fund and Tax-Free Short-Intermediate Bond Fund are subject to this
risk.
10
<PAGE>
Prepayment Risk is the risk that a Fund may experience losses when an issuer
exercises its right to pay principal on an obligation held by the Fund (such as
a mortgage-backed security) earlier than expected. This may happen during a
period of declining interest rates. Under these circumstances, the Fund may be
unable to recoup all of its initial investment and will suffer from having to
reinvest in lower yielding securities. The loss of higher yielding securities
and the reinvestment at lower interest rates can reduce the Fund's income, total
return and share price. Funds particularly subject to this risk are: Bond Fund,
Intermediate Bond Fund and U.S. Government Income Fund.
Who May Want to Invest
The Income Funds may be appropriate for investors:
. Looking for potentially higher returns and willing to accept greater risk
than more conservative fixed rate investments or money market funds.
. Looking for current income.
The Tax-Free Funds may be appropriate for investors:
. Looking primarily for tax-exempt income and comfortable with the risks
involved with income funds.
11
<PAGE>
Fees and Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Funds. Please note that the following information does not
include fees that institutions may charge for services they provide to you.
<TABLE>
<CAPTION>
Class A Class B Class C
Shareholder Fees (fees paid directly from your investment) Shares Shares Shares
------ ------ ------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases........................... 4%(a) None None
Sales Charge (Load) Imposed on Reinvested Dividends........................ None None None
Maximum Deferred Sales Charge (Load)....................................... None(b) 5%(c) 1%(d)
Redemption Fees............................................................ None None None
Exchange Fees.............................................................. None None None
</TABLE>
Annual Fund Operating Expenses (expenses that are paid from Fund assets) And
Examples
The examples are intended to help you compare the cost of investing in each Fund
to the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the Fund for the time periods indicated. The examples also
assume that your investment has a 5% return each year, that the Fund's operating
expenses remain the same as shown in the table and that all dividends and
distributions are reinvested. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- ---------------------------------------------------------- ---------------------------------------------------------------
Bond Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50% .50% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
Intermediate Bond Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
Management Fees .50% .50% .50% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
International Bond Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------ ------ ------ ------
Management Fees .50% .50% .50% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
---- ---- ----
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
==== ==== ====
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- --------------------------------------------------------- -----------------------------------------------------------------
U.S. Government Income Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50% .50% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
------- ------- -------
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
======= ======= =======
Michigan Tax-Free Bond Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------- ------- ------- -------- ------- --------
Management Fees .50% .50% .50% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
------- ------- ------
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
======= ======= ======
Tax-Free Bond Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------- ------- ------- -------- ------- --------
Management Fees .50% .50% .50% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
------- ------- ------
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
======= ======= ======
Tax-Free Short-Intermediate Bond Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------- ------- ------- -------- ------- --------
Management Fees .50% .50% .50% 1 Year $ $ $ $ $
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years $ $ $ $ $
Other Expenses [ ]% [ ]% [ ]% 5 Years $ $ $ $ $
-------- ------- -------
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years*** $ $ $ $ $
======== ======= =======
</TABLE>
_________________________
(a) The sales charge declines as the amount invested increases.
(b) A contingent deferred sales charge (CDSC) is a one-time fee charged at the
time of redemption. A 1% CDSC applies to redemptions of Class A shares within
one year of investment that were purchased with no initial sales charge as part
of an investment of $1,000,000 or more.
(c) The CDSC payable upon redemption of Class B shares declines over time.
(d) The CDSC applies to redemptions of Class C shares within one year of
purchase.
* Assumes you sold your shares at the end of the time period.
** Assumes you stayed in the Fund.
*** Reflects conversion of Class B shares to Class A shares (which pay lower
ongoing expenses) approximately six years after date of original purchase.
13
<PAGE>
More About The Funds
- ------------------------------------------------------------------------------
The Funds' principal investment strategies and risks are summarized above in the
section entitled Risk/Return Summary. A more complete description of each Fund's
investments and strategies and their associated risks is provided below under
"Special Risks and Other Considerations" and "Additional Descriptions of
Investments and Investment Strategies." The Funds may also invest in other
securities and are subject to further restrictions and risks which are described
in the Statement of Additional Information. The Glossary below explains certain
terms used throughout this prospectus.
Glossary
Types Of Funds
Income Funds are the Bond Fund, Intermediate Bond Fund, International Bond Fund
and U.S. Government Income Fund. Tax-Free Funds are the Michigan Tax-Free Bond
Fund, Tax-Free Bond Fund and Tax-Free Short-Intermediate Bond Fund.
Types Of Securities
Fixed income securities are securities that pay interest at set times at either
fixed, floating or variable rates, or which are issued at a discount to their
principal amount instead of making periodic interest payments. Fixed income
securities include corporate bonds, debentures and other similar corporate debt
instruments, zero coupon bonds and variable amount master demand notes.
Convertible securities are bonds or preferred stocks that may be converted
(exchanged) into the common stock of the issuing company within a specified time
period for a specified number of shares. Convertible securities offer the Funds
a way to participate in the capital appreciation of the common stock into which
the securities are convertible, while earning higher current income than is
available from the common stock.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include U.S.
Treasury bills, U.S. Treasury notes, U.S. Treasury bonds and obligations of the
Federal Home Loan Corporation, Federal National Mortgage Association and
Government National Mortgage Association.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit of
banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Municipal obligations are obligations of states, territories and possessions of
the United States and the District of Columbia, and their political
subdivisions, agencies, instrumentalities and authorities. They may be payable
from the issuer's general revenue, the revenue of a specific project, current
revenues or a reserve fund.
Rating Agencies And Indices
Moody's is Moody's Investor Services, Inc.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
S&P is Standard & Poor's Rating Services.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Internal Revenue Code is the Internal Revenue Code of 1986, as amended.
NAV is the net asset value per share of a Fund. NAV is the value of a single
share of a Fund. Each Fund calculates NAV separately for each class. NAV is
calculated by (1) taking the current value of a Fund's total assets allocated to
a particular class of shares, (2) subtracting the liabilities and expenses
charged to that class (3) dividing that amount by the total number of shares of
that class outstanding.
14
<PAGE>
A diversified investment company is an investment company that may not invest
more than 5% of its total assets in any one issuer other than the U.S.
Government, its agencies or instrumentalities. This limit applies only to 75% of
a diversified Fund's assets. In addition, a diversified Fund cannot invest more
than 25% of its assets in a single issuer. These limitations do not apply to the
non-diversified Funds.
Special Risks And Other Considerations
Derivative Risk. "Derivative" instruments are financial contracts whose value is
based on an underlying security, a currency exchange rate, an interest rate or a
market index. Many types of instruments representing a wide range of potential
risks and rewards are derivatives, including futures contracts, options on
futures contracts, options, swaps, forward currency contracts and structured
debt obligations (including collateralized mortgage obligations and other types
of asset-backed securities, "stripped" securities and various floating rate
instruments).
Investment Strategy. The Funds may use derivative instruments.
Derivatives can be used for hedging (attempting to reduce risk by
offsetting one investment position with another) or speculation (taking
a position in the hope of increasing return). The Funds may, but are
not required to, use derivatives for hedging purposes or for the
purpose of remaining fully invested or maintaining liquidity. The Funds
will not use derivatives for speculative purposes.
Special Risks. The use of derivative instruments exposes a Fund to
additional risks and transaction costs. Risks of derivative instruments
include: (1) the risk that interest rates, securities prices and
currency markets will not move in the direction that a portfolio
manager anticipates; (2) imperfect correlation between the price of
derivative instruments and movements in the prices of the securities,
interest rates or currencies being hedged; (3) the fact that skills
needed to use these strategies are different than those needed to
select portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument and possible exchange
imposed price fluctuation limits, either of which may make it difficult
or impossible to close out a position when desired; (5) the risk that
adverse price movements in an instrument can result in a loss
substantially greater than the Fund's initial investment in that
instrument (in some cases, the potential loss is unlimited); (6)
particularly in the case of privately-negotiated instruments, the risk
that the counterparty will not perform its obligations, which could
leave the Fund worse off than if it had not entered into the position;
and (7) the inability to close out certain hedged positions to avoid
adverse tax consequences.
Foreign Investment Risk. Foreign securities include direct investments in non-
U.S. dollar-denominated securities traded outside of the United States and
dollar-denominated securities of foreign issuers traded in the United States.
Investment Strategy. International Bond Fund will invest all or a
substantial portion of its total assets in foreign securities. The
other Income Funds may invest up to 25% of their total assets in
foreign securities. The Tax-Free Funds may invest up to 10% of their
total assets in foreign securities.
Special Risks. Foreign securities involve special risks and costs.
Investment in the securities of foreign governments involves the risk
that foreign governments may default on their obligations or may
otherwise not respect the integrity of their debt.
Investment in foreign securities may involve higher costs than
investment in U.S. securities, including higher transaction and custody
costs as well as the imposition of additional taxes by foreign
governments. Foreign investments may also involve risks associated with
the level of currency exchange rates, less complete financial
information about the issuers, less market liquidity, more market
volatility and political instability. Future political and economic
developments, the possible imposition of withholding taxes on dividend
income, the possible seizure or nationalization of foreign holdings,
the possible establishment of exchange controls or freezes on the
convertibility of currency, or the adoption of other governmental
restrictions might adversely affect an
15
<PAGE>
investment in foreign securities. Additionally, foreign issuers may be
subject to less stringent regulation, and to different accounting,
auditing and recordkeeping requirements.
Currency exchange rates may fluctuate significantly over short periods
of time causing a Fund's net asset value to fluctuate as well. A
decline in the value of a foreign currency relative to the U.S. dollar
will reduce the value of a foreign currency-denominated security. To
the extent that a Fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined
risk. The Funds' respective net currency positions may expose them to
risks independent of their securities positions.
Additional risks are involved when investing in countries with emerging
economies or securities markets. In general, the securities markets of
these countries are less liquid, are subject to greater price
volatility, have smaller market capitalizations and may have problems
with securities registration and custody. In addition, because the
securities settlement procedures are less developed in these countries,
a Fund may be required to deliver securities before receiving payment
and may also be unable to complete transactions during market
disruptions. As a result of these and other risks, investments in these
countries generally present a greater risk of loss to the Fund.
A further risk of investing in foreign securities is the risk that a
Fund may be adversely affected by the conversion of certain European
currencies into the Euro. This conversion, which is under way, is
scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in world
markets and affect European markets in particular.
Investment Grade Credit Risk. A security is considered investment grade if, at
the time of purchase, it is rated:
. BBB or higher by S&P;
. Baa or higher by Moody's;
. BBB or higher by Duff & Phelps; or
. BBB or higher by Fitch.
A security will be considered investment grade if it receives one of the above
ratings, even if it receives a lower rating from other rating organizations.
Investment Strategy. Except as stated in the next section, fixed income
and convertible securities purchased by the Funds will generally be
rated at least investment grade. The Funds may also invest in unrated
securities if the advisor or believes they are comparable in quality.
Special Risks. Although securities rated "BBB" by S&P, Duff & Phelps or
Fitch, or Baa by Moody's are considered investment grade, they have
certain speculative characteristics. Therefore, they may be subject to
a higher risk of default than obligations with higher ratings.
Subsequent to its purchase by a Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. The advisor will consider such an event in
determining whether the Fund should continue to hold the security.
Short-Term Trading. The Funds' historical portfolio turnover rates are shown in
the Financial Highlights.
Investment Strategy. The Funds may engage in short-term trading.
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could
detract from the Fund's performance.
Defensive Investing. Each Fund may invest all or any portion of its assets in
short-term obligations as a temporary defensive measure in response to adverse
market or economic conditions.
Special Risks. A Fund may not achieve its investment objective when its
assets are invested in short-term obligations.
Year 2000 Risk. Like other mutual funds, financial institutions, business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the advisor and the Funds' other
service providers do not
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properly process and calculate date-related information and data from and after
January 1, 2000. The advisor is taking steps that it believes are reasonably
designed to address year 2000 computer-related problems with respect to the
computer systems that it uses and to obtain assurances that comparable steps are
being taken by the Funds' other major service providers. Although there can be
no assurances, the advisor believes that these steps will be sufficient to avoid
any adverse impact on any of the Funds. Similarly, there can be no assurance
that year 2000 issues will not affect the companies and other issuers in which
the Funds invest or affect worldwide markets and economies.
Additional Description Of Investments And Investment Strategies
Asset-Backed Securities. Asset-backed securities are debt securities backed by
mortgages, installment sales contract and credit card receivables. The
securities are sponsored by entities such as government agencies, banks,
financial companies and commercial or industrial companies. In effect, these
securities "pass through" the monthly payments that individual borrowers make on
their mortgage or other assets net of any fees paid to the issuers. Examples of
these include guaranteed mortgage pass-through certificates, collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").
Investment Strategy. All Income Funds may invest a portion of its
assets in Asset-Backed Securities.
Special Risks. In addition to credit and market risk, asset-backed
securities involve repayment risk because the underlying assets (loans)
may be prepaid at any time. The value of these securities may also
change because of actual or perceived changes in the creditworthiness
of the originator, the servicing agent, the financial institution
providing the credit support, or the counterparty. Like other fixed
income securities, when interest rates rise the value of an
asset-backed security generally will decline. However, when interest
rates decline, the value of an asset-backed security with prepayment
features may not increase as much as that of other fixed income
securities. In addition, non-mortgage asset-backed securities involve
certain risks not presented by mortgage-backed securities. Primarily,
these securities do not have the benefit of the same security interest
in the underlying collateral.
Borrowing and Reverse Repurchase Agreements. The Funds can borrow money from
banks and enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of
securities held by a Fund subject to the Fund's agreement to repurchase them at
a mutually agreed upon date and price (including interest).
Investment Strategy. Each Fund may borrow money in an amount up to 5%
of its assets for temporary emergency purposes and in an amount up to
33 1/3% of its assets to meet redemptions. This is a fundamental policy
which can be changed only by shareholders.
Special Risks. Borrowings and reverse repurchase agreements by a Fund
may involve leveraging. If the securities held by the Fund decline in
value while these transactions are outstanding, the Fund's net asset
value will decline in value by proportionately more than the decline in
value of the securities. In addition, reverse repurchase agreements
involve the risks that the interest income earned by the Fund (from the
investment of the proceeds) will be less than the interest expense of
the transaction, that the market value of the securities sold by the
Fund will decline below the price the Fund is obligated to pay to
repurchase the securities, and that the securities may not be returned
to the Fund.
Credit Quality of the Tax-Free Funds. The Tax-Free Funds will invest in
long-term instruments only if they are rated "A" or better by Moody's or S&P or,
if unrated, are of comparable quality. These Funds will invest in short-term
instruments only if they (i) have short-term debt ratings in the top two
categories by at least one nationally recognized statistical rating
organization, (ii) are issued by an issuer with such ratings or (iii) if
unrated, are of comparable quality.
Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation to exchange one currency for another on a future date at a specified
exchange rate.
Investment Strategy. Forward currency exchange contracts may be used
for hedging
17
<PAGE>
purposes and to help reduce the risks and volatility caused
by changes in foreign currency exchange rates. Foreign currency
exchange contracts will be used at the discretion of the advisor, and
no Fund is required to hedge its foreign currency positions.
Special Risks. Forward currency contracts are privately negotiated
transactions, and can have substantial price volatility. When used for
hedging purposes, they tend to limit any potential gain that may be
realized if the value of a Fund's foreign holdings increases because of
currency fluctuations.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When a Fund purchases an option on a futures
contract, it has the right to assume a position as a purchaser or seller of a
futures contract at a specified exercise price during the option period. When a
Fund sells an option on a futures contract, it becomes obligated to purchase or
sell a futures contract if the option is exercised.
Investment Strategy. Futures contracts and options on futures contracts
are traded on domestic or foreign exchanges or boards of trade. These
instruments may be used for hedging purposes, to maintain liquidity to
meet potential shareholder redemptions, to invest cash balances or
dividends, or to minimize trading costs.
A Fund will not purchase or sell a futures contract unless, after the
transaction, the sum of the aggregate amount of margin deposits on its
existing futures positions and the amount of premiums paid for related
options used for non-hedging purposes is 5% or less of the Fund's total
assets.
Special Risks. Futures contracts and related options present the
following risks: imperfect correlation between the change in market
value of a Fund's securities and the price of futures contracts and
options; the possible inability to close a futures contract when
desired; losses due to unanticipated market movements, which are
potentially unlimited; and the possible inability of the advisor to
correctly predict the direction of securities prices, interest rates,
currency exchange rates and other economic factors.
Guaranteed Investment Contracts. Guaranteed investment contracts are agreements
by a Fund to make payments to an insurance company's general account in exchange
for a minimum level of interest based on an index.
Investment Strategy. The Income Funds may invest in guaranteed
investment contracts.
Special Risks. Guaranteed investment contracts are considered illiquid
investments and are acquired subject to a Fund's limitation on illiquid
investments.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. Each Fund may invest up to 15% of its net assets
in securities that are illiquid.
Special Risks. To the extent that a Fund invests in illiquid
securities, the Fund risks not being able to sell the securities at the
time and the price that it would like. The Fund may have to lower the
price, sell substitute securities or forego an investment opportunity,
each of which may cause a loss to the Fund.
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<PAGE>
Investment Companies. To the extent consistent with their respective investment
objectives and policies, the Funds may invest in securities issued by other
investment companies.
Investment Strategy. Investments by a Fund in other investment
companies will be subject to the limitations of the 1940 Act.
Special Risks. As a shareholder of another investment company, a Fund
would be subject to the same risks as any other investor in that
company. In addition, it would bear a proportionate share of any fees
and expenses paid by that company. These would be in addition to the
advisory and other fees paid directly by the Fund.
Municipal Obligations. Municipal obligations may include: (i) general obligation
bonds issued for various public purposes and supported by the municipal issuer's
credit and taxing power; and (ii) revenue bonds whose principal and interest is
payable only from the revenues of a particular project or facility.
Investment Strategy. The Tax-Free Funds will normally invest at least
80% of their net assets in municipal obligations.
Special Risks. Industrial revenue bonds depend on the credit standing
of a private issuer and may be subject to the federal alternative
minimum tax (AMT).
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. The Income Funds, Michigan Tax-Free Bond Fund and
Tax-Free Bond Fund may write (sell) covered call options, buy put
options, buy call options and write secured put options for hedging
purposes. Options may relate to particular securities, foreign or
domestic securities indices, financial instruments or foreign
currencies.
Special Risks. The value of options can be highly volatile, and their
use can result in loss if the advisor is incorrect in its expectation
of price fluctuations. The successful use of options for hedging
purposes also depends in part on the ability of the advisor to predict
future price fluctuations and the degree of correlation between the
options and securities markets.
Repurchase Agreements. Repurchase agreements involve the purchase of securities
by a Fund subject to the seller's agreement to repurchase them at a mutually
agreed upon date and price.
Investment Strategy. Each Fund may enter into repurchase agreements
with banks and broker-dealers that are deemed to be creditworthy by the
advisor.
Special Risks. If the seller defaults or declares bankruptcy, a Fund
may suffer if the proceeds from the sale of the underlying securities
and other collateral are less than the repurchase price or if there are
delays in selling the underlying securities or collateral.
Securities Lending. In order to generate additional income, each Fund may lend
securities on a short-term basis to qualified institutions. By reinvesting any
cash collateral it receives in these transactions, the Fund could realize
additional income gains or losses.
Investment Strategy. Securities lending may represent no more than 25%
of the value of a Fund's total assets (including the loan collateral).
Special Risks. The main risk when lending Fund securities is that if
the borrower fails to return the securities or the invested collateral
has declined in value, the Fund could lose money.
Stripped Securities. These securities are issued by the U.S. Government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include participations in trusts that hold U.S. Treasury or agency
securities.
Special Risks. Stripped securities are very sensitive to changes in
interest rates and to the rate of principal repayments. A rapid or
unexpected increase in mortgage
19
<PAGE>
prepayments could severely depress the price of certain stripped
mortgage-backed securities and adversely affect a Fund's total returns.
Temporary Investments. Short-term obligations refer to U.S. Government
securities, high-quality money market instruments and repurchase agreements with
maturities of 13 months or less. Generally, these obligations are purchased to
provide stability and liquidity to a Fund.
Investment Strategy. Each Fund may invest a portion of its assets in
short-term obligations pending investment or to meet anticipated
redemption requests. The Tax-Free Funds may hold uninvested cash if, in
the advisor's opinion, suitable tax-exempt securities are not
available. Each Tax-Free Fund may also invest a portion of its assets
in short-term money market instruments, the income from which is
subject to Federal income tax.
Special Risks. A Fund may not achieve its investment objective when its
asset are invested in short-term obligations.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
instruments include variable amount master demand notes.
Special Risks. Variable and floating rate instruments are subject to
the same risks as fixed income investments, particularly interest rate
risk and credit risk. Because there is no active secondary market for
certain variable and floating rate instruments, they may be more
difficult to sell if the issuer defaults on its payment obligations or
during periods when a Fund is not entitled to exercise its demand
rights. As a result, the Fund could suffer a loss with respect to these
instruments.
When - Issued Securities, Delayed Delivery Transactions and Forward Commitments.
A purchase of "when-issued" securities refers to a transaction made
conditionally because the securities, although authorized, have not yet been
issued. A delayed delivery or forward commitment transaction involves a contract
to purchase or sell securities for a fixed price at a future date beyond the
customary settlement period.
Special Risks. Purchasing or selling securities on a when-issued,
delayed delivery or forward commitment basis involves the risk that the
value of the securities may change by the time they are actually issued
or delivered. These transactions also involve the risk that the seller
may fail to deliver the security or cash on the settlement date.
Zero Coupon Bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity.
Special Risks. The market prices of zero coupon bonds generally are
more volatile than the market prices of interest-bearing securities and
are likely to respond to a greater degree to changes in interest rates
than interest-bearing securities having similar maturities and credit
quality. A Fund's investments in zero coupon bonds may require the Fund
to sell some of its portfolio securities to generate sufficient cash to
satisfy certain income distribution requirements.
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Your Investment
- -------------------------------------------------------------------------------
This section describes how to do business with the Funds.
How To Reach The Funds
By telephone: 1-800-438-5789
Call for shareholder services.
By mail: The Munder Funds
480 Pierce Street
Birmingham, MI 48009
Purchasing Shares
Purchase Price of Shares
Class A shares of a Fund are sold at the NAV next determined after a purchase
order is received in proper form plus any applicable sales charge. Please see
"Distribution Arrangements" below for information about sales charges.
Class B and Class C shares of a Fund are sold at NAV next determined after a
purchase order is received in proper form.
Broker-dealers (other than the Funds' distributor) may charge you additional
fees for shares you purchase through them.
Policies for Purchasing Shares
Investment minimums
. Initial: $250
. Subsequent: $ 50
. Automatic Investment Plan: $ 50
Purchases over $250,000 must be for Class A or Class C shares.
Timing of orders
Purchase orders must be received by the Funds' distributor or transfer agent
before the close of regular trading on the New York Stock Exchange (normally,
4:00 p.m. Eastern time).
Methods for Purchasing Shares
Investors may purchase shares:
. By Broker. Any broker authorized by the Funds' distributor can sell you
shares of the Funds. Please note that brokers may charge you fees for their
services.
. By Mail. You may open an account by completing, signing and mailing the
attached account application form and a check or other negotiable bank
draft (payable to The Munder Funds) for $250 or more to: The Munder Funds,
c/o First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. Be sure to specify on your account application
form the class of shares being purchased. If the class is not specified,
your purchase will automatically be invested in Class A shares. For
additional investments, send a letter stating the Fund and share class you
wish to purchase, your name and your account number with a check for $50 or
more to the address listed above. [We do not accept third party checks.]
. By Wire. To open a new account, you should call the Funds at (800) 438-5789
to obtain an account number and complete wire instructions prior to wiring
any funds. Within seven days of purchase, you must send a completed account
application form containing your certified taxpayer identification number
to the Funds' transfer agent at The Munder Funds, c/o First Data Investor
Services Group, P.O. Box 60428, King of Prussia, Pennsylvania 19406-0428.
Wire instructions must state the Fund name, share class, your registered
name and your account number. Your bank wire should be sent through the
Federal Reserve Bank Wire System to:
Boston Safe Deposit and Trust Company
Boston, MA
ABA# 011001234
DDA# 16-798-3
Account No.:
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You may make additional investments at any time using the wire procedures
described above. Note that banks may charge fees for transmitting wires.
. You may purchase shares through the Automatic Investment Plan.
. You may purchase shares through the Reinvestment Privilege.
Exchanging Shares
Policies for Exchanging Shares
. You may exchange Fund shares for shares of the same class of other Munder
Funds based on their relative net asset values.
. [Class A shares of a Munder money market fund that were (1) acquired
through the use of the exchange privilege and (2) can be traced back to a
purchase of shares in one or more Munder Funds for which a sales charge was
paid, can be exchanged for Class A shares of a Fund.]
. Class B and Class C shares will continue to age from the date of the
original purchase and will retain the same CDSC rate as they had before the
exchange.
. You must meet the minimum purchase requirements for the Munder Fund of that
you purchase by exchange.
. If you are exchanging into shares of a Munder Fund with a higher sales
charge, you must pay the difference at the time of the exchange.
. A share exchange is a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund
you wish to purchase by exchange. You can obtain a prospectus for any
Munder Fund by contacting your broker or calling the Munder Funds at (800)
438-5789.
. Brokers may charge you a fee for handling exchanges.
. We may change, suspend or terminate the exchange privilege at any time. You
will be given notice of any material modifications except where notice is
not required.
Methods for Exchanging Shares
. Exchanges By Telephone. You may give exchange instructions by telephone to
the Funds at (800) 438-5789. You may not exchange shares by telephone if
you hold share certificates. We reserve the right to reject any telephone
exchange request and to place restrictions on telephone exchanges.
. Exchanges By Mail. You may send exchange orders to your broker or you may
send them directly to the Funds' transfer agent at The Munder Funds, c/o
First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428.
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the redemption
request in proper form. We will reduce the amount you receive by the amount of
any applicable contingent deferred sales charge (CDSC).
Please see "Distribution Arrangements" below for information about CDSCs.
Policies for Redeeming Shares
. For your protection, a signature guarantee is required for the following
redemption requests: (a) redemption proceeds greater than $50,000; (b)
redemption proceeds not being made payable to the recordowner of the
account; (c) redemption proceeds not being mailed to the address of record
on the account or (d) if the redemption proceeds are being transferred to
another Munder Fund account with a different registration. You can obtain a
signature guarantee from a financial institution such as a commercial bank,
trust company, savings association or from a securities firm having
membership on a recognized securities exchange.
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Methods for Redeeming Shares
You may redeem shares of the Funds in several ways:
. By Mail. You may mail your redemption request to: The Munder Funds, c/o
First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. The redemption request should state the name of
the Fund, share class, account number, amount of redemption, account name
and where to send the proceeds. All account owners must sign.
. By Telephone. You can redeem your shares by contacting your broker or
calling the Funds at (800) 438-5789. There is no minimum requirement for
telephone redemptions.
If you are redeeming at least $1,000 of shares and you have authorized
expedited redemption on your account application form, simply call the
Funds prior to 4:00 p.m. (Eastern time), and request the redemption
proceeds be mailed to the commercial bank or registered broker-dealer you
designated on your account application form. We will send your redemption
proceeds to you on the next business day. We reserve the right at any time
to change or impose fees for this expedited redemption procedure.
During periods of unusual economic or market activity, you may experience
difficulties or delays in effecting telephone redemptions. In such cases
you should consider placing your redemption request by mail.
. You may redeem shares through the Automatic Withdrawal Plan.
. You can redeem a portion of your Class A shares of the Funds (except the
International Bond Fund) through the Free Checkwriting Privilege.
Additional Policies For Purchases, Exchanges And Redemptions
. We consider orders to be in "proper form" when all required documents
are properly completed, signed and received.
. The Funds reserve the right to reject any purchase order.
. At any time, the Funds may change any of their purchase or redemption
procedures, and may suspend the sale of their shares.
. The Funds may delay sending redemption proceeds for up to seven days,
or longer if permitted by the Securities and Exchange Commission.
. We will typically send redemption amounts to you within seven business
days after you redeem shares. We may hold redemption amounts from the
sale of shares you purchased by check until the purchase check has
cleared, which may be as long as 15 days.
. To limit the Funds' expenses, we do not currently issue share
certificates.
. A Fund may temporarily stop redeeming shares if:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists and the Fund cannot sell its assets or
accurately determine the value of its assets; or
. the Securities and Exchange Commission orders the Funds to suspend
redemptions.
. If accepted by a Fund, investors may purchase shares of the Fund with
securities that the Fund may hold. The advisor will determine if the
securities are consistent with the Funds' objectives and policies. If
accepted, the securities will be valued the same way the Fund values
portfolio securities it already owns. Call the Funds at (800) 438-5789
for more information.
. The Funds reserve the right to make payment for redeemed shares wholly
or in part by giving the redeeming shareholder portfolio securities.
The shareholder may pay transaction costs to dispose of these
securities.
. We record all telephone calls for your protection and take measures to
identify the caller. As long as the Funds' transfer agent takes
reasonable measures to authenticate telephone requests on an investor's
account,
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<PAGE>
neither the Funds, the Funds' distributor nor the transfer agent will
be held responsible for any losses resulting from unauthorized
transactions.
. We may redeem your account if its value falls below $250 as a result of
redemptions (but not as a result of a decline in NAV). You will be
notified in writing and allowed 60 days to increase the value of your
account to the minimum investment level.
. If you purchased shares directly from the Funds, the Funds' transfer
agent will send you confirmations of the opening of an account and of
all subsequent purchases, exchanges or redemptions in the account. If
your account has been set up by a broker or other investment
professional, account activity will be detailed in their statements to
you.
. [The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. Each Fund
and its distributor reserve the right to refuse any purchase or
exchange request that could adversely affect the fund or its
operations, including those from any individual or group who, in the
Fund's view, is likely to engage in excessive trading or any order
considered market-timing activity. If a Fund refuses a purchase or
exchange request and the shareholder deems it necessary to redeem their
account, any CDSC as permitted by the prospectus will be applicable.
Additionally, in no event will any Fund permit more than six exchanges
into or out of a Fund in any one-year period per account, tax
identification number, social security number or related investment
group. The Munder Money Market Funds are exempt from this policy.]
Shareholder Privileges
Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in a Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Funds at (800) 438-5789. The minimum pre-authorized investment amount
is $50. You may discontinue the AIP at any time. We may discontinue the AIP on
30 days' written notice to you.
Reinvestment Privilege. For 60 days after you sell shares of a Fund, you may
reinvest your redemption proceeds in shares of the same class of a Fund at NAV.
Any CDSC you paid on the amount you are reinvesting will be credited to your
account. You may use this privilege once in any given twelve-month period with
respect to your shares of a Fund. You or your broker must notify the Funds'
transfer agent in writing at the time of reinvestment in order to eliminate the
sales charge on your reinvestment.
Automatic Withdrawal Plan (AWP). If you have an account value of $2,500 or more
in a Fund, you may redeem shares on a monthly, quarterly, semi-annual or annual
basis. The minimum withdrawal is $50. We usually process withdrawals on the 20th
day of the month and promptly send you your redemption amount. You may enroll in
the AWP by completing the AWP application form available through the Funds'
transfer agent. To participate in the AWP you must have your dividends
automatically reinvested and may not hold share certificates. You may change or
cancel the AWP at any time upon notice to the Funds' transfer agent. You should
not buy Class A shares (and pay a sales charge) while you participate in the AWP
and you must pay any applicable CDSC when you redeem shares.
Free Checkwriting. Free checkwriting is available to holders of Class A shares
of the Funds (other than the International Bond Fund) who complete the signature
card section of the account application form. You may write checks in the amount
of $500 or more but you may not close a Fund account by writing a check. We may
change or terminate this program on 30 days' notice to you.
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Distribution Arrangements
- -------------------------------------------------------------------------------
Share Class Selection
Each Fund offers Class A, Class B and Class C shares. Each class has its own
cost structure, allowing you to choose the one that best meets your requirements
given the amount of your purchase and the intended length of your investment.
You should consider both ongoing annual expenses and initial sales charge or
CDSC in estimating the costs of investing in a particular class of shares.
Class A shares
. Front end sales charge. There are several ways to reduce these sale charges.
. Lower annual expenses than Class B and Class C shares.
Class B shares
. No front end sales charge. All your money goes to work for you right away.
. Higher annual expenses than Class A shares.
. A CDSC on shares you sell within six years of purchase.
. Automatic conversion to Class A shares approximately six years after
issuance, thus reducing future annual expenses. o CDSC is waived for certain
redemptions.
Class C shares
. No front end sales charge or CDSC, except for a CDSC for redemptions made
within the first year after investing. All your money goes to work for you
right away.
. Shares do not convert to another class.
. Higher annual expenses than Class A shares.
Each Fund also issues other classes of shares, which have different sales
charges, expense levels and performance. The other classes of shares are
available to limited types of investors. Call (800) 438-5789 to obtain more
information about the Funds' other classes.
Applicable Sales Charge- Class A Shares
You can purchase Class A shares at NAV plus an initial sales charge. The sales
change as a percentage of your investment decreases as the amount you invest
increases. The current sales charge rates and commissions paid to selected
dealers as follows:
Discount to
Selected
Sales Charge as a Dealers as a
Percentage of Percentage
-------------
Your Net Asset of
Investment Value Investment
---------- ----- ----------
Less than 4.00% 4.17% 3.75%
$100,000............
$100,000 but less
than $250,000....... 3.00% 3.09% 2.75%
$250,000 but less
than $500,000....... 2.00% 2.04% 1.75%
$500,000 but less
than $1,000,000..... 1.25% 1.27% 1.00%
$1,000,000 or
more................ None* None* (see below)**
- --------------------
* No initial sales charge applies on investments of $1 million or more. However,
a CDSC of 1% is imposed on certain redemptions within one year of purchase.
**The Distributor will pay 1% commission to dealers who initiate and are
responsible for purchases of $1 million or more.
Sales Charge Waivers - General
We will waive the initial sales charge on Class A shares for the following types
of purchasers:
1. individuals with an investment account or relationship with the advisor;
2. full-time employees and retired employees of the advisor, employees of the
Funds' service providers and immediate family members of such persons;
3. registered broker-dealers that have entered into selling agreements with the
Fund's distributor, for their own accounts or for retirement plans for their
employees or sold to registered representatives for full-time employees (and
their families) that certify to the distributor at the time of purchase that
such purchase is for their own account (or for the benefit of their families);
4. certain qualified employee benefit plans as described below;
5. individuals who reinvest a distribution from a qualified retirement plan for
which the advisor serves as investment advisor;
6. individuals who reinvest the proceeds of redemptions from Class Y Shares of
another Munder Fund, within 60 days of redemption;
7. banks and other financial institutions that have entered into agreements with
the Munder Funds to
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provide shareholder services for customers (including customers of such banks
and other financial institutions, and the immediate family members of such
customers);
8. fee-based financial planners or employee benefit plan consultants acting for
the accounts of their clients;
9. employer sponsored retirement plans which are administered by Universal
Pensions, Inc. (UPI Plans); and
10. employer sponsored 401(k) plans that are administered by Merrill Lynch Group
Employee Services (Merrill Lynch Plans) which meet the criteria described below
under "Sales Charge Waivers- Qualified Employer Sponsored Retirement Plans."
Sales Charge Waivers - Qualified Employer Sponsored Retirement Plans
We will waive the initial sales charge on purchases of Class A shares by
employer sponsored retirement plans that are qualified under Section 401(a) or
Section 403(b) of the Internal Revenue Code (each, a Qualified Employee Benefit
Plan) and that (1) invest $1,000,000 or more in Class A shares offered by The
Munder Funds or (2) have at least 75 eligible plan participants.
In addition, we will waive the CDSC of 1% charged on certain redemptions within
one year of purchase for Qualified Employee Benefit Plan purchases that meet the
above criteria. A 1% commission will be paid by the distributor to dealers and
other entities (as permitted by applicable Federal and state law) who initiate
and are responsible for Qualified Employee Benefit Plan purchases that meet the
above criteria. This sales charge waiver does not apply to Simplified Employee
Pension Plans (SEPs), Individual Retirement Accounts (IRAs), UPI Plans and
Merrill Lynch Plans.
UPI Plans. We also will waive (i) the initial sales charge on Class A shares
purchased by UPI Plans for employees participating in an employer-sponsored or
administered retirement program operating under Section 408A of the Internal
Revenue Code and (ii) the CDSC of 1% imposed on certain redemptions within one
year of purchase for these accounts. The distributor will pay a 1% commission to
dealers and others (as permitted by applicable Federal and state law) who
initiate and are responsible for UPI Plan purchases.
Merrill Lynch Plans. We will waive the initial sales charge for all
investments by Merrill Lynch Plans if
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch Group
Employee Services (Merrill Lynch) and, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3
million or more in assets invested in broker/dealer funds not advised or
managed by Merrill Lynch Asset Management, L.P. (MLAM) that are made
available pursuant to a Services Agreement between Merrill Lynch and the
Fund's distributor and in funds advised or managed by MLAM (collectively,
the Applicable Investments); or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch, and on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3
million or more in assets, excluding money market funds, invested in
Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the Merrill
Lynch plan conversion manager, on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement.
For further information on sales charge waivers, call (800) 438-5789.
Sales Charge Reductions
You may qualify for reduced sales charges in the following cases:
. Letter of Intent. If you intend to purchase at least $100,000 of Class A
shares of the Funds you may wish to complete the Letter of Intent section
of your account application form. By doing so, you agree to invest a
certain amount over a 13-month period. You would pay a sales charge on any
Class A shares you purchase during the 13 months based on the total amount
to be invested under the Letter of Intent. You can apply any investments
you made in any of the Munder Funds during the preceding 90-day period
toward fulfillment of the Letter of Intent (although there will be no
refund of sales charges you paid during the 90-day period). You should
inform the Funds' transfer agent that
26
<PAGE>
you have a Letter of Intent each time you make an investment.
You are not obligated to purchase the amount specified in the Letter of
Intent. If you purchase less than the amount specified, however, you must
pay the difference between the sales charge paid and the sales charge
applicable to the purchases actually made. The Funds' custodian will hold
such amount in escrow. The custodian will pay the escrowed funds to your
account at the end of the 13 months unless you do not complete your
intended investment.
. Quantity Discounts. You may combine purchases of Class A shares that are
made by you, your spouse, your children under age 21 and your IRA when
calculating the sales charge. You must notify your broker or the Funds'
transfer agent to qualify.
. Right of Accumulation. You may add the value of any shares of non-money
market Munder Funds you already own to the amount of your next Class A
share investment for purposes of calculating the sales charge at the time
of the current purchase. You must notify your broker or the Funds' transfer
agent to qualify.
Certain brokers may not offer these programs or may impose conditions or fees to
use these programs. You should consult with your broker prior to purchasing the
Funds' shares.
For further information on sales charge reductions, call (800) 438-5789.
Cdsc
You pay a CDSC when you redeem:
. Class A shares that were bought as part of an investment of at least $1
million within one year of buying them;
. Class B shares within six years of buying them;
. Class C shares within one year of buying them.
These time periods include the time you held Class B or Class C shares of
another Munder Fund which you may have exchanged for Class B or Class C shares
of the Fund you are redeeming.
The CDSC schedule for Class B shares purchased after June 27, 1995 is set forth
below. Consult the Statement of Additional Information for the CDSC schedule for
Class B shares purchased on or before June 27, 1995. The CDSC is based on the
original NAV at the time of your investment or the NAV at the time of
redemption, whichever is lower.
Years Since Purchase CDSC
- -------------------- ----
First................................... 5.00%
Second.................................. 4.00%
Third................................... 3.00%
Fourth.................................. 3.00%
Fifth................................... 2.00%
Sixth................................... 1.00%
Seventh and thereafter.................. 0.00%
[At the time of purchase of Class B shares, the Funds' distributor pays sales
commissions of 4.00% of the purchase price to brokers that initiate and are
responsible for purchases of such Class B shares.]
You will not pay a CDSC to the extent that the value of the redeemed shares
represents:
. reinvestment of dividends or capital gains distributions; or
. capital appreciation of shares redeemed.
When you redeem shares, we will assume that you are redeeming first shares
representing reinvestment of dividends and capital gains distributions, then any
appreciation on shares redeemed, and then remaining shares held by you for the
longest period of time. [We will calculate the holding period of Class B shares
of a Fund acquired through an exchange of Class B shares of the Munder Money
Market Fund (which are available only by exchange of Class B shares of a Munder
Fund) from the date that the Class B shares of the initial Munder Fund were
purchased.]
CDSC Waivers
We will waive the CDSC payable upon redemptions of shares which you purchased
after June 27, 1995 (or acquired through an exchange of shares of another Munder
Fund purchased after June 27, 1995) for:
. redemptions made within one year after the death of a shareholder or
registered joint owner;
. minimum required distributions made from an IRA or other retirement plan
account after you reach age 70 1/2;
. involuntary redemptions made by the Fund;
. redemptions limited to 10% per year of an account's net asset value. For
example, if you maintain an annual balance of $10,000 you can redeem up to
$1,000 annually free of charge.
We will waive the CDSC payable upon redemptions of shares which you purchased
after December 1, 1998 (or acquired through an exchange of shares of
27
<PAGE>
another Munder Fund purchased after December 1, 1998) for:
. redemptions made from an IRA or other individual retirement plan account
established through Comerica Securities, Inc. after you reach age 59 1/2
and after the eighteen month anniversary of the purchase of Fund shares.
Consult the Statement of Additional Information for Class B CDSC waivers which
apply when you redeem shares purchased on or before June 27, 1995 (or acquired
through an exchange of shares of another Munder Fund purchased on or before June
27, 1995).
We will waive the CDSC for Class B shares for all redemptions by Merrill Lynch
Plans if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch; or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch; or
(iii) the Plan has less than 500 eligible employees, as determined by the
Merrill Lynch plan conversion manager, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement.
12b-1 Fees
The Funds have adopted Rule 12b-1 plans with respect to their Class A, Class B
and Class C shares that allow the Funds to pay distribution and other fees for
the sale of its shares and for services provided to shareholders. Under the
plans, the Funds may pay up to .25% of the daily net assets of Class A, Class B
and Class C shares to pay for certain shareholder services provided by
institutions that have agreements with the Funds' distributor to provide such
services. The Funds may also pay up to .75% of the daily net assets of the Class
B and Class C shares to finance activities relating to the distribution of its
shares.
Because the fees are paid out of each Fund's assets on an on-going basis, over
time these fees will increase the cost of an investment in a Fund and may cost a
shareholder more than paying other types of sales charges.
Other Information
The advisor may, from time to time, make payments to banks, broker-dealers or
other financial institutions for certain services to the Funds and/or their
shareholders, including sub-administration, sub-transfer agency and shareholder
servicing. The advisor may make such payments out of its own resources and there
are no additional costs to the Funds or their shareholders.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee from
the Funds for providing shareholder services to its customers who own shares of
the Funds.
28
<PAGE>
Pricing Of Fund Shares
- -------------------------------------------------------------------------------
Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV is the value of a single share of a Fund. Each Fund calculates NAV
separately for each class. NAV is calculated by (1) taking the current value of
a Fund's total assets allocated to a particular class of shares, (2) subtracting
the liabilities and expenses charged to that class (3) dividing that amount by
the total number of shares of that class outstanding.
The Funds calculate NAV as of the close of business on the New York Stock
Exchange, normally 4:00 p.m. (Eastern time). If the New York Stock Exchange
closes early, the Funds will accelerate calculation of NAV and transaction
deadlines to that time.
The NAV of each Fund is generally based on the market value of the securities
held by in the Fund. If market values are not available, the fair value of
securities is determined in good faith by, or using procedures approved by, the
Boards of Directors/Trustees of the Funds.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. A Fund values foreign securities at the
latest closing price on the exchange on which they are traded immediately prior
to the closing of the New York Stock Exchange. Certain foreign currency exchange
rates may also be determined at the latest rate prior to the closing of the New
York Stock Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the New York Stock Exchange. If the advisor
believes that such events materially affect the value of portfolio securities,
these securities may be valued at their fair market value as determined in good
faith by, or using procedures approved by, the Funds' Boards of
Directors/Trustees.
Foreign securities may trade in their primary markets on weekends or other days
when a Fund does not price its shares. Therefore, the value of a Fund's
portfolio may change on days when shareholders will not be able to buy or sell
their shares.
Distributions
- -------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of a Fund's net income and
gains on its investments. Each Fund passes substantially all of its earnings
along to its shareholders as distributions. When a Fund earns dividends from
stocks and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a capital gain distribution.
Bond Fund, Intermediate Bond Fund, U.s. Government Income Fund, Michigan Tax-
Free Bond Fund, Tax-free Bond Fund And Tax-free Short-intermediate Bond Fund
These Funds pay dividends, if any, monthly.
International Bond Fund
This Fund pays dividends, if any, quarterly.
All Funds
Each Fund distributes its net realized capital gains, if any, at least annually.
It is possible that a Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as a gain
from a sale or exchange of the shares.
Each Fund normally will pay distributions in additional shares of that Fund. If
you wish to receive distributions in cash, either, indicate this request on your
account application form or notify the Funds by calling (800) 438-5789.
29
<PAGE>
Federal Tax Considerations
- ------------------------------------------------------------------------------
Investments in a Fund may have tax consequences that you should consider. This
section briefly describes some of the more common federal tax consequences. A
more detailed discussion about the tax treatment of distributions from the Funds
and about other potential tax liabilities, including backup withholding for
certain taxpayers and about tax aspects of dispositions of shares of the Funds,
is contained in the Statement of Additional Information. You should consult your
tax adviser about your own particular tax situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. The Tax-Free Funds
expect that a portion of their dividend distributions will be exempt from
federal income tax. Shareholders not subject to tax on their income generally
will not be required to pay any tax on distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held the
portfolio securities it sold. It does not depend on how long you held your Fund
shares.
Distributions are generally taxable to you in the year in which they are paid,
with one exception: distributions declared in October, November or December, but
not paid until January of the following year, are taxed as though they were paid
on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Funds will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
If a Fund invests in certain "passive foreign investment companies" ("PFICs"),
it will be subject to Federal income tax (and possibly additional interest
charges) on a portion of any "excess distribution" or gain from the disposition
of such shares, even if it distributes such income to its shareholders. If a
Fund elects to treat PFIC as a "qualified electing fund" ("QEF") and the PFIC
furnishes certain financial information in the required form to such Fund, the
Fund will instead be required to include in income each year its allocable share
of the ordinary earnings and net capital gains of the QEF, regardless of whether
received, and such amounts will be subject to the various distribution
requirements described above. The Funds may also elect to mitigate the tax
effects of owning PFIC stock by making an annual mark-to-market election with
respect to PFIC shares.
Taxes On Sales Or Exchanges
If you sell shares of a Fund or exchange them for shares of another Munder Fund,
you generally will be subject to tax on any taxable gain. Taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale or an exchange will result in a taxable
gain.
Other Considerations
If you buy shares of a Fund just before the Fund makes any distribution, you
will pay the full price for the shares and then receive back a portion of the
money you just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law the Funds
must withhold a portion of your distributions and redemption proceeds to pay
federal income taxes.
30
<PAGE>
Management
- --------------------------------------------------------------------------------
Investment Advisor
The Funds' investment advisor is Munder Capital Management ("MCM"), 480 Pierce
Street, Birmingham, Michigan 48009. As of September 30, 1999, the advisor and
its affiliates had approximately $__ billion in assets under management, of
which $__ billion were invested in equity securities, $__ billion were invested
in money market or other short-term instruments, $__ billion were invested in
other fixed income securities, and $__ billion in non-discretionary assets.
The advisor provides overall investment management for the Funds, provides
research and credit analysis and is responsible for all purchases and sales of
portfolio securities.
During the fiscal year ended June 30, 1999, the advisor was paid an advisory fee
at an annual rate of 0.50% of the average daily net assets of each Fund.
Portfolio Management
Bond Fund
James C. Robinson and Gregory A. Prost jointly manage the Fund. Mr. Robinson and
Mr. Prost have managed the Fund since March 1995 and May 1995, respectively. Mr.
Robinson has been a Vice President and Chief Investment Officer of MCM or Old
MCM since 1987. Mr. Prost has been a Senior Fixed Income Portfolio of MCM or Old
MCM since 1995. Prior to joining MCM, he was a Vice President and Senior Fund
Manager for First of America Investment Corp.
Intermediate Bond Fund
Anne K. Kennedy and James C. Robinson jointly manage the Fund. Ms. Kennedy, Vice
President and Director of Corporate Bond Trading of MCM or Old MCM since 1991,
has managed the Fund since March 1995. Mr. Robinson, Vice President and Chief
Investment Officer of MCM or Old MCM since 1987, has managed the Fund since
March 1995.
International Bond Fund
Gregory A. Prost and Sharon E. Fayolle jointly manage the Fund. Mr. Prost,
Senior Fixed Income Portfolio Manager of MCM or Old MCM, has managed the 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. Ms. Fayolle, Vice
President and Director of Money Market Trading for MCM or Old MCM, has managed
the Fund since 1996. Prior to that she managed an international portfolio for
Ford Motor Company.
U.S. Government Income Fund
James C. Robinson and Peter G. Root jointly manage the Fund. Mr. Robinson, Vice
President and Chief Investment Officer of MCM or Old MCM since 1987, and Mr.
Root, Vice President and Director of Government Securities Trading of MCM since
March 1995, have managed the Fund since March 1995. Mr. Root joined MCM in 1991.
Michigan Tax-free Bond Fund, Tax-free Bond Fund And Tax-free Short-intermediate
Bond Fund
Talmadge D. Gunn, Vice President and Director of Tax-Exempt Trading of MCM since
1993, manages the Tax-Free Funds.
31
<PAGE>
Financial Highlights
- -------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand each
Fund's financial performance for the past 5 years (or, if shorter, the period of
the Fund's operations). Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in a Fund (assuming
reinvestment of all dividends and distributions). The information has been
audited by Ernst & Young LLP, independent accountants, whose report, along with
each Fund's financial statements, are included in the annual reports of the
Funds, and are incorporated by reference into the Statement of Additional
Information. You may obtain the annual reports without charge by calling
(800) 438-5789.
<TABLE>
<CAPTION>
Bond Fund (a)
-----------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
6/30/99 6/30/98(e) 6/30/97 6/30/96 6/30/95(d)
Class A Class A Class A Class A Class A
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............................
Income from investment operations:
Net investment income...........................................
Net realized and unrealized gain/(loss) on
investments.....................................................
Total from investment operations................................
Less distributions:
Dividends from net investment income............................
Distributions from net realized gains...........................
Total distributions.............................................
Net asset value, end of period..................................
Total return (b)................................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)............................
Ratio of operating expenses to average net assets...............
Ratio of net investment income to average net assets............
Portfolio turnover rate.........................................
Ratio of operating expenses to average net assets without
waivers.........................................................
</TABLE>
_____________________
32
<PAGE>
<TABLE>
<CAPTION>
Bond Fund (a)
- ---------------------------------------------------------------------------------------------------------------
Year Year Year Year Period Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended
2/28/95(e,f) 6/30/99 6/30/98(e) 6/30/97 6/30/96 6/30/99 6/30/98(e) 6/30/97 6/30/96
Class A Class B Class B Class B Class B Class C Class C Class C Class C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Intermediate Bond Fund (a)
-------------------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/97(f) 6/30/96 6/30/95(d) 2/28/95(e)
Class A Class A Class A Class A Class A Class A
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......
Income from investment operations:
Net investment income......................
Net realized and unrealized gain/(loss) on
investments................................
Total from investment operations...........
Less distributions:
Dividends from net investment income.......
Distributions from net realized gains......
Total distributions........................
Net asset value, end of period.............
Total return (b)...........................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).......
Ratio of operating expenses to average net
assets.....................................
Ratio of net investment income to
average net assets.........................
Portfolio turnover rate....................
Ratio of operating expenses to
average net assets without waivers.........
</TABLE>
_____________
34
<PAGE>
<TABLE>
<CAPTION>
Intermediate Bond Fund (a)
- ----------------------------------------------------------------------------------------------------------------------
Year Year Year Year Period Period Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98(f) 6/30/97(f) 6/30/96 6/30/95(d) 2/28/95(e) 6/30/99 6/30/98(f) 6/30/97(f) 6/30/96
Class B Class B Class B Class B Class B Class B Class C Class C Class C Class C
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
International Bond Fund (a)
--------------------------------------------------------------------------
Year Year Period Year Year Period Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/99 6/30/98 6/30/97 6/30/99 6/30/98
Class A Class A Class A Class B Class B Class B Class C Class C
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...............
Income from investment operations:
Net investment income..............................
Net realized and unrealized gain/(loss) on
investments........................................
Total from investment operations...................
Less distributions:
Dividends from net investment income...............
Distributions from net realized gains..............
Total distributions................................
Net asset value, end of period.....................
Total return (b)...................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...............
Ratio of operating expenses to average net assets..
Ratio of net investment income to average net assets
Portfolio turnover rate............................
Ratio of operating expenses to average net
assets without waivers.............................
</TABLE>
_______________
36
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Income Fund(a)
- -------------------------------------------------------------------------------------------------------------------------------
Year Period Year Year Period Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96(f) 6/30/95(d) 2/28/95(e) 6/30/99 6/30/98 6/30/97 6/30/96(f)
Class A Class A Class A Class A Class A Class A Class B Class B Class B Class B
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Income Fund (a) Michigan Tax-Free Bond Fund (a)
----------------------------------- -----------------------------------------
Year Period Period Year Year Period Year
Ended Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/99 6/30/98 6/30/97(e) 6/30/96(e)
Class C Class C Class C Class A Class A Class A Class A
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................
Income from investment operations:
Net investment income...............................
Net realized and unrealized gain/(loss) on
investments.........................................
Total from investment operations....................
Less distributions:
Dividends from net investment income................
Distributions from net realized gains...............
Total distributions.................................
Net asset value, end of period......................
Total return (b)....................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................
Ratio of operating expenses to average net assets...
Ratio of net investment income to average net assets
Portfolio turnover rate.............................
Ratio of operating expenses to average net
assets without waivers..............................
</TABLE>
_________
38
<PAGE>
<TABLE>
<CAPTION>
Michigan Tax-Free Bond Fund (a)
- -----------------------------------------------------------------------------------------------------------------------------------
Period Year Year Year Year Year Period Period Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
6/30/95(d,e) 2/28/95(e,f) 6/30/99 6/30/98 6/30/97(e) 6/30/96(e) 6/30/95(d,e) 2/28/95(e,f) 6/30/99 6/30/98 6/30/97(e)
Class A Class A Class B Class B Class B Class B Class B Class B Class C Class C Class C
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Bond Fund (a)
----------------------------------------------------------------------
Year Year Year Period Year Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(e) 6/30/96(e) 6/30/99 6/30/98
Class A Class A Class A Class A Class B Class B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................
Income from investment operations:
Net investment income.......................................
Net realized and unrealized gain/(loss) on investments.....
Total from investment operations............................
Less distributions:
Dividends from net investment income........................
Distributions from net realized gains.......................
Total distributions.........................................
Net asset value, end of period..............................
Total return (b)............................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)........................
Ratio of operating expenses to average net assets...........
Ratio of net investment income to average net assets........
Portfolio turnover rate.....................................
Ratio of operating expenses to average net
assets without waivers....................................
</TABLE>
40
<PAGE>
Tax-Free Bond Fund (a)
- -------------------------------------------------------------------------------
Year Year Period Period Year Period
Ended Ended Ended Ended Ended Ended
6/30/97(e) 6/30/96(e) 6/30/95(d,e) 2/28/95(f) 6/30/99 6/30/98
Class B Class B Class B Class B Class C Class C
------- ------- ------- ------- ------- -------
41
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Short-Intermediate Bond Fund (a)
---------------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/95(d)
Class A Class A Class A Class A Class A
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................
Income from investment operations:
Net investment income.......................................
Net realized and unrealized gain/(loss) on investments.....
Total from investment operations............................
Less distributions:
Dividends from net investment income........................
Distributions from net realized gains.......................
Total distributions.........................................
Net asset value, end of period..............................
Total return (b)............................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)........................
Ratio of operating expenses to average net assets...........
Ratio of net investment income to average net assets........
Portfolio turnover rate.....................................
Ratio of operating expenses to average net
assets without waivers....................................
</TABLE>
42
<PAGE>
Tax-Free Short-Intermediate Bond Fund (a)
- --------------------------------------------------------------------------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
2/28/95(e) 6/30/99 6/30/98 6/30/97(f) 6/30/96(f) 6/30/99
Class A Class A Class B Class B Class B Class C
------- ------- ------- ------- ------- -------
____________________
43
<PAGE>
For More Information
<TABLE>
<CAPTION>
To Obtain Information:
------------------------------------------------
<S> <C>
More information about the Funds is available free upon request,
including the following: By telephone
Call 1-800-438-5789
Annual/Semi-Annual Reports
By mail
You will receive unaudited semi-annual reports and audited annual reports on a The Munder Funds
regular basis from the Funds. In addition, you will By mail also receive updated 480 Pierce Street
prospectuses or supplements to this The Munder Funds prospectus. In order to Birmingham, MI 48009
eliminate duplicate mailings, the Funds 480 Pierce Street will only send one
copy of the above communications to (1) accounts Birmingham, MI 48009 with the On the Internet
same primary record owner, (2) joint tenant accounts, (3) Text-only versions of fund documents can be
tenant in common accounts and (4) accounts which have the same viewed online or downloaded from:
address.
Securities and Exchange Commission
Statement of Additional Information http://www.sec.gov
Provides more details about the Funds and their policies. A current You can also obtain copies by visiting the
Statement of Additional Information is on file with the Securities Securities and Exchange Commission's Public
and Exchange Commission and is incorporated by reference (is legally Reference Room in Washington, D.C. (phone
considered part of this prospectus). 1-800-SEC-0330) or by sending your request and
a duplicating fee to the Securities and
Exchange Commission's Public Reference Section,
Washington, D.C. 20549-6009.
You may also find more information about the
Funds on the Internet at:
http://www.munderfunds.com
------------------------------------------------
</TABLE>
The Munder Funds, Inc.
SEC file number: 811-7346
The Munder Funds Trust
SEC file number: 811-5899
<PAGE>
Class A, B & C Shares
[Munder Logo]
Prospectus
October 26, 1999
The Munder Money Market Funds
Cash Investment
Money Market
Tax-Free Money Market
U.S. Treasury Money Market
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved these securities nor passed upon
the accuracy or adequacy of this prospectus.
It is a criminal offense to state otherwise.
<PAGE>
Table Of Contents
2 Risk/Return Summary
Cash Investment Fund
2 Goal
2 Principal Investment Strategies
2 Principal Risks
Money Market Fund And Tax-Free Money Market Fund
3 Goal
3 Principal Investment Strategies
3 Principal Risks
U.S. Treasury Money Market Fund
4 Goal
4 Principal Investment Strategies
4 Principal Risks
4 Who May Want To Invest
5 Performance
8 Fees And Expenses
10 More About The Funds
13 Your Investment
13 How To Reach The Funds
13 Purchasing Shares
14 Exchanging Shares
14 Redeeming Shares
15 Additional Policies For Purchases, Exchanges And Redemptions
16 Shareholder Privileges
17 Distribution Arrangements
17 CDSC
18 12B-1 Fees
18 Other Information
19 Pricing Of Fund Shares
19 Distributions
20 Federal Tax Considerations
20 Taxes On Distributions
20 Taxes On Sales Or Exchanges
20 Other Considerations
21 Management
21 Investment Advisor
21 Portfolio Managers
22 Financial Highlights
Back Cover For Additional Information
<PAGE>
Risk/Return Summary
- --------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goals and principal investment
strategies of the Funds and the principal risks of investing in the Funds. For
further information on the Funds' principal investment strategies and risks,
please read the section entitled More About The Funds. Each Fund may also use
other investment techniques to achieve its goal. For information on these
techniques and their related risks, please read the Statement of Additional
Information.
An investment the Funds is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other governmental agency.
Cash Investment Fund
Goal
The Fund's primary goal is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
The Fund's investments may include fixed and variable rate securities.
The Fund may also invest in foreign securities, guaranteed investment contracts,
stripped securities, asset-backed securities, enter into repurchase agreements
and lend its portfolio securities.
Principal Risks
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
The principal risks of investing in the Fund are:
Credit (or Default) Risk is the risk of loss because an issuer of a security may
default on its payment obligations. Also, an issuer may suffer adverse changes
in its financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security and in shares of the
Fund. A change in the quality rating of a bond can affect the bond's liquidity
and make it more difficult for the Fund to sell.
Interest Rate Risk is the risk that increases in prevailing interest rates will
cause fixed-income securities held by the Fund to decline in value. Longer term
bonds are generally more sensitive to interest rate changes than shorter term
bonds. Generally, the longer the average maturity of the bonds held by the
Fund, the more the Fund's share price will fluctuate in response to interest
rate changes.
Foreign Securities Risk is the risk of loss because investments by the Fund in
foreign securities may experience greater and more rapid change in value than
investments in U.S. securities. Foreign securities are generally more volatile
and less liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available about
foreign companies. Issuers of foreign securities are generally not subject to
the same degree of regulation as are U.S. issuers. The reporting, accounting
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards.
Prepayment Risk is the risk that the Fund may experience losses when an issuer
exercises its right to pay principal on an obligation held by the Fund (such as
a mortgage-backed security) earlier than expected. This may happen during a
period of declining interest rates. Under these circumstances, the Fund may be
unable to recoup all of its initial investment and will suffer from having to
reinvest in lower yielding securities. The loss of higher yielding securities
and the reinvestment at lower interest rates can reduce the Fund's income, total
return and share price.
Further information about the Fund's principal investment strategies and risks
is provided below under "More About the Funds."
2
<PAGE>
Money Market Fund
Goal
The Fund's primary goal is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
The Fund's investments may include fixed and variable rate securities.
The Fund may also invest in foreign securities, guaranteed investment contracts,
stripped securities, asset-backed securities, enter into repurchase agreements
and lend its portfolio securities.
Principal Risks
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
The principal risks of investing in the Fund are:
Credit (or Default) Risk is the risk of loss because an issuer of a security may
default on its payment obligations. Also, an issuer may suffer adverse changes
in its financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security and in shares of the
Fund. A change in the quality rating of a bond can affect the bond's liquidity
and make it more difficult for the Fund to sell.
Interest Rate Risk is the risk that increases in prevailing interest rates will
cause fixed-income securities held by the Fund to decline in value. Longer term
bonds are generally more sensitive to interest rate changes than shorter term
bonds. Generally, the longer the average maturity of the bonds held by the
Fund, the more the Fund's share price will fluctuate in response to interest
rate changes.
Further information about the Fund's principal investment strategies and risks
is provided below under "More About the Funds."
Tax-Free Money Market Fund
Goal
The Fund's goal is to provide as high a level of current interest income exempt
from Federal income taxes as is consistent with maintaining liquidity and
stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing substantially all of its assets in short-
term, U.S. dollar-denominated municipal obligations, the interest on which is
exempt from regular Federal income tax.
Under normal market conditions, the Fund will invest at least 80% of its net
assets in municipal obligations.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
The Fund's investments may include fixed and variable rate and zero coupon
securities. The Fund may also invest in other investment companies and lend its
portfolio securities.
Principal Risks
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
The principal risks of investing in the Fund are:
Credit (or Default) Risk is the risk of loss because an issuer of a security may
default on its payment obligations. Also, an issuer may suffer adverse changes
in its financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security and in shares of the
Fund. A change in the quality rating of a bond can affect the bond's liquidity
and make it more difficult for the Fund to sell.
Interest Rate Risk is the risk that increases in prevailing interest rates will
cause fixed-income securities held by the Fund to decline in value. Longer term
bonds are generally more sensitive to interest rate changes than shorter term
bonds.
3
<PAGE>
Generally, the longer the average maturity of the bonds held by the
Fund, the more the Fund's share price will fluctuate in response to interest
rate changes.
Further information about the Fund's principal investment strategies and risks
is provided below under "More About the Funds."
U.S. Treasury Money Market Fund
Goal
The Fund's goal is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal.
Principal Investment Strategies
The Fund pursues its goal by investing its assets solely in short-term bonds,
bills and notes, issued by the U.S. Treasury (including "stripped" securities)
and in repurchase agreements relating to such obligations.
The Fund invests solely in U.S. dollar-denominated debt securities with
remaining maturities of 13 months or less and maintains an average dollar-
weighted portfolio maturity of 90 days or less.
The Fund may also lend its portfolio securities.
Principal Risks
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
The principal risk of investing in the Fund is:
Interest Rate Risk is the risk that increases in prevailing interest rates will
cause fixed-income securities held by the Fund to decline in value. Longer term
bonds are generally more sensitive to interest rate changes than shorter term
bonds. Generally, the longer the average maturity of the bonds held by the
Fund, the more the Fund's share price will fluctuate in response to interest
rate changes.
Further information about the Fund's principal investment strategies and risks
is provided below under "More About the Funds."
Who May Want To Invest
. The Funds may be appropriate for investors who desire a high level of income
and liquidity and stability of principal.
. The Money Market Fund is also designed to be acquired by the exchange of
shares of other Munder Funds for investors who own other Munder Funds, wish
to be out of the market temporarily and do not desire to incur redemption
fees or sales charges.
The Funds alone cannot provide a balanced investment program.
4
<PAGE>
Performance
The bar charts and tables below give some indication of: (a) the variability of
the Funds' returns by showing changes in each Fund's performance from year to
year over the life of the Fund; and (b) the risk of an investment in a Fund by
showing how each Fund's average annual total returns over different calendar
periods compare to those of a broad based securities market index.
When you consider this information, please remember a Fund's performance in past
years is not necessarily an indication of how a Fund will perform in the future.
Cash Investment Fund
[BAR CHART]
Calendar Year Total Return (Class A)
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
- ---------------------
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year 5 Years Inception
- ---------------------- ------------ ------------ -----------
Class A (12/1/92)
[Index] *
Since inception of Class ___**
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
You may call 1-800-[ ] to obtain the Fund's current 7-day yield.
Money Market Fund
[BAR CHART]
Calendar Year Total Return (Class B)
The annual returns in the bar chart are for the Fund's Class B Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
5
<PAGE>
1995: _____%
1996: _____%
1997: _____%
1998: _____%
- ----------------
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ---------------------- ------------ -----------
Class A (7/3/95)
Class B (2/16/94)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
- ------------------
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum contingent
deferred sales charge and conversion of Class B shares to Class A shares after
the applicable period.
You may call 1-800 [ ] to obtain the Fund's current 7-day yield.
Tax-Free Money Market Fund
[BAR CHART]
Calendar Year Total Return (Class A)
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
- -------------------
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year 5 Years Inception
- ---------------------- ------------ ------------ -----------
Class A (11/29/92)
[Index] *
Since inception of Class ___**
- -------------------
*Index return from __/__/9__
6
<PAGE>
**Index return from month-end of applicable class inception date.
You may call 1-800 [ ] to obtain the Fund's current 7-day yield.
U.S. Treasury Money Market Fund
[BAR CHART]
Calendar Year Total Return (Class A)
1993: _____%
1994: _____%
1995: _____%
1996: _____%
1997: _____%
1998: _____%
- -------------------
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year 5 Years Inception
- ---------------------- ------------ ------------ -----------
Class A (11/24/92)
[Index] *
Since inception of Class ___**
- --------------
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
You may call 1-800 [ ] to obtain the Fund's current 7-day yield.
7
<PAGE>
Fees And Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Funds. Please note that the following information does not
include fees that institutions may charge for services they provide to you.
<TABLE>
<CAPTION>
Cash Investment Fund
Tax-Free Money Market Fund
U.S. Treasury Money Market Fund Money Market Fund
------------------------------- -----------------
<S> <C> <C> <C> <C>
Shareholder Fees
(fees paid directly from your Class A Class A Class B Class C
investment) Shares Shares Shares Shares
- ----------------------------- ------- ------- ------- -------
Maximum Sales Charge (Load)
Imposed on Purchases............. None None None None
Sales Charge (Load) Imposed on
Reinvested Dividends............. None None None None
Maximum Deferred Sales Charge
(Load)........................... None None(a) 5%(b) 1%(c)
Redemption Fees.................. None None None None
Exchange Fees.................... None None None None
</TABLE>
Annual Fund Operating Expenses (expenses that are paid from Fund assets) And
Examples
The examples are intended to help you compare the cost of investing in each Fund
to the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in each Fund for the time periods indicated. The examples also
assume that your investment has a 5% return each year, that each Fund's
operating expenses remain the same as shown in the table and that all dividends
and distributions are reinvested. Your actual costs and the return on your
investment may be higher or lower.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- ----------------------------------------------------------- ----------------------------------------------------------------
Money Market Fund
Class A Class B Class C Class A Class B Class B Class C Class C
Shares Shares Shares Shares Shares* Shares** Shares* Shares**
------- ------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .40% .40% .40% 1 Year
Distribution and/or
Service (12b-1) Fees .25% 1.00% 1.00% 3 Years
Other Expenses [ ]% [ ]% [ ]% 5 Years
----- ----- -----
Total Annual Fund
Operating Expenses [ ]% [ ]% [ ]% 10 Years***
----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
Cash Investment Fund
Class A Class A
Shares Shares
------- -------
<S> <C> <C>
Management Fees .35% 1 Year
Distribution and/or
Service (12b-1) Fees .25% 3 Years
Other Expenses [ ]% 5 Years
-----
Total Annual Fund
Operating Expenses [ ]% 10 Years
-----
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a % of net assets Examples
- ------------------------------------------------------------------------------ ---------------------------------------------------
Tax-Free Money Market Fund
Class A Class A
Shares Shares
------- -------
<S> <C> <C>
Management Fees .35% 1 Year
Distribution and/or Service .25%
(12b-1) Fees 3 Years
Other Expenses [ ]% 5 Years
-----
Total Annual Fund
Operating Expenses [ ]% 10 Years
-----
</TABLE>
U.S. Treasury Money Market Fund
<TABLE>
<CAPTION>
Class A Class A
Shares Shares
------- -------
<S> <C> <C> <C>
Management Fees .35% 1 Year
Distribution and/or Service .25%
(12b-1) Fees 3 Years
Other Expenses [ ]% 5 Years
-----
Total Annual Fund
Operating Expenses [ ]% 10 Years
-----
</TABLE>
- -------------------
(a) A contingent deferred sales charge(CDSC) is a one-time fee charged at the
time of redemption. A 1% CDSC applies to redemptions of shares acquired
through the exchange of Class A shares of other funds purchased on or after
June 27, 1995 as part of an investment of $1,000,000 or more.
(b) The CDSC payable on redemption of Class B shares declines over time.
(c) The CDSC applies to redemptions within one year after the initial
investment in Class C shares.
* Assumes you sold your shares at the end of the time period.
** Assumes you stayed in the Fund.
*** Reflects conversion of Class B shares to Class A shares (which pay lower
ongoing expenses) approximately six years after date of original purchase.
9
<PAGE>
More About The Funds
- --------------------------------------------------------------------------------
The Funds' principal investments, strategies and risks are summarized above in
the section entitled Risk/Return Summary. Below is further information about
the Funds' principal investment strategies and their associated risks. The
Funds may also use techniques and invest in securities described in the
Statement of Additional Information.
Fixed income securities are securities that pay interest at set times at either
fixed, floating or variable rates, or which are issued at a discount to their
principal amount instead of making periodic interest payments. Fixed income
securities include corporate bonds, debentures and other similar corporate debt
instruments, zero coupon bonds and variable amount master demand notes.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include U.S.
Treasury bills, U.S. Treasury notes, U.S. Treasury bonds and obligations of the
Federal Home Loan Corporation, Federal National Mortgage Association and
Government National Mortgage Association.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit of
banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Municipal Obligations are obligations of states, territories and possessions of
the United States and the District of Columbia, and their political
subdivisions, agencies, instrumentalities and authorities. They may be payable
from the issuer's general revenue, the revenue of a specific project, current
revenues or a reserve fund.
Foreign Securities. The Cash Investment Fund and the Money Market Fund may
invest up to 25% of total assets in U.S. dollar denominated money market
securities of foreign issuers, which include securities issued by foreign
companies and foreign governments and their agencies, instrumentalities or
political subdivisions and supranational organizations. Investments by the
Funds in foreign securities involve risks in addition to those of U.S.
securities, in part because of higher political and economic risks and because
there is less public information available about foreign companies.
Repurchase Agreements. The Funds may buy securities with the understanding that
the seller will buy them back with interest at a later date. If the seller is
unable to honor its commitment to repurchase the securities, the Fund could lose
money.
Guaranteed Investment Contracts. The Cash Investment Fund and the Money Market
may invest in guaranteed investment contracts. Guaranteed investment contracts
are agreements of the Fund to make payments, generally to an insurance company's
general account, in exchange for a minimum level of interest based on an index.
Guaranteed investment contracts are considered illiquid investments and are
acquired subject to the Fund's limitation on illiquid investments.
Asset-Backed Securities. Subject to applicable maturity and credit criteria,
the Cash Investment Fund and the Money Market Fund may purchase securities
backed by mortgages, installment sales contracts, credit card receivables or
other assets. Mortgage-backed securities carry additional risks. The price and
yield of these securities typically assume that the securities will be redeemed
at a given time before maturity. When interest rates fall substantially, these
securities are generally redeemed early because the underlying mortgages are
often prepaid. In that case the Fund would have to reinvest the money at a
lower rate. In addition, the price or yield of mortgage-backed securities may
fall if they are redeemed later than expected.
Variable and Floating Rate Securities. Variable and floating rate securities
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
securities exhibit greater price variations than fixed-rate securities.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market. Each Fund may invest up to 10%
of its net assets in securities that are illiquid. To the extent that a Fund
invests in illiquid securities, the Fund risks not being able to sell the
securities at the time and the price that it would like. The Fund may have to
lower the price, sell substitute securities or forego an investment opportunity,
each of which may cause a loss to the Fund.
10
<PAGE>
When - Issued Securities, Delayed Delivery Transactions and Forward Commitments.
A purchase of "when-issued" securities refers to a transaction made
conditionally because the securities, although authorized, have not yet been
issued. A delayed delivery or forward commitment transaction involves a
contract to purchase or sell securities for a fixed price at a future date
beyond the customary settlement period. Purchasing or selling securities on a
when-issued, delayed delivery or forward commitment basis involves the risk that
the value of the securities may change by the time they ar3e actually issued or
delivered. These transactions also involve the risk that the seller may fail to
deliver the security or cash on the settlement date.
Zero Coupon Bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity. The
market prices of zero coupon bonds generally are more volatile than the market
prices of interest-bearing securities and are likely to respond to a greater
degree to changes in interest rates than interest-bearing securities having
similar maturities and credit quality. A Fund's investments in zero coupon
bonds may require the Fund to sell some of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements.
Stripped Securities. These securities are issued by the U.S. Government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include participations in trusts that hold U.S. Treasury or agency
securities. Stripped securities are very sensitive to changes in interest rates
and to the rate of principal repayments. A rapid or unexpected increase in
mortgage prepayments could severely depress the price of certain stripped
mortgage-backed securities and adversely affect a Fund's total returns.
Securities Lending. Each Fund may seek additional income by lending portfolio
securities to qualified institutions. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains or
losses. If the borrower fails to return the securities and the invested
collateral has declined in value, the Fund could lose money.
Borrowing and Reverse Repurchase Agreements. The Funds can borrow money from
banks and enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of
securities held by a Fund subject to the Fund's agreement to repurchase them at
a mutually agreed upon date and price (including interest). Each Fund may borrow
money in an amount up to 5% of its assets for temporary emergency purposes and
in an amount up to 33 1/3% of its assets to meet redemptions. This is a
fundamental policy which can be changed only by shareholders. Borrowings and
reverse repurchase agreements by a Fund may involve leveraging. If the
securities held by the Fund decline in value while these transactions are
outstanding, the Fund's net asset value will decline in value by proportionately
more than the decline in value of the securities. In addition, reverse
repurchase agreements involve the risks that the interest income earned by the
Fund (from the investment of the proceeds) will be less than the interest
expense of the transaction, that the market value of the securities sold by the
Fund will decline below the price the Fund is obligated to pay to repurchase the
securities, and that the securities may not be returned to the Fund.
Short-Term Trading. Each Fund may engage in short-term trading. A high rate of
portfolio turnover (100% or more) could produce higher trading costs and taxable
distributions, which could detract from a Fund's performance.
11
<PAGE>
Year 2000 Risk. Like other mutual funds, financial institutions, business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the advisor and the Fund's other
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. The advisor is taking steps that it
believes are reasonably designed to address year 2000 computer-related problems
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Fund's other major service providers.
Although there can be no assurances, the advisor believes that these steps will
be sufficient to avoid any adverse impact on the Fund. Similarly, there can be
no assurance that year 2000 issues will not affect the companies and other
issuers in which the Fund invests or affect worldwide markets and economies.
12
<PAGE>
Your Investment
- --------------------------------------------------------------------------------
This section describes how to do business with the Funds.
How To Reach The Funds
By telephone: 1-800-438-5789
Call for shareholder services.
By mail: The Munder Funds
480 Pierce Street
Birmingham, Michigan 48009
Purchasing Shares
Purchase Price of Shares
Class A shares of a Fund are sold at the net asset value (NAV) next determined
without a sales charge after a purchase order is received in proper form.
Brokers-dealers (other than the Fund's distributor) may charge you additional
fees for shares you purchase through them.
Policies for Purchasing Shares
Investment Minimums
The minimum initial investment for Class A shares of the Cash Investment Fund,
the Tax-Free Money Market Fund and U.S. Treasury Money Market Fund is $250.
Subsequent investments must be at least $50.
Timing of orders
Purchase orders must be received by the Fund's distributor or the transfer agent
before the close of regular trading on the New York Stock Exchange (normally,
4:00 p.m. Eastern time).
Methods for Purchasing Shares
Class A, B and C shares of the Money Market Fund may be acquired only through an
exchange of shares of the corresponding class of another Munder Fund.
Investors may purchase Class A shares of the Cash Investment Fund, the Tax-Free
Money Market Fund and U.S. Treasury Money Market Fund:
. By Broker. Any broker authorized by the distributor can sell you Class A
shares of the Funds. Please note that brokers may charge you fees for their
services.
. By Mail. You may open an account by completing, signing and mailing the
attached account application form and a check or other negotiable bank draft
(payable to The Munder Funds) for $250 or more to: The Munder Funds, c/o
First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. For additional investments, send a letter stating
the Fund and share class you wish to purchase, your name and your account
number with a check for $50 or more to the address listed above. [We do not
generally accept third-party checks.]
. By Wire. To open a new account, you should call the Funds at (800) 438-5789
to obtain an account number and complete wire instructions prior to wiring
any funds. Within seven days of purchase, you must send a completed account
application form containing your certified taxpayer identification number to
the transfer agent at The Munder Funds, c/o First Data Investor Services
Group, P.O. Box 60428, King of Prussia, Pennsylvania 19406-0428. Wire
instructions must state the Fund name, share class, your registered name and
your account number. Your bank wire should be sent through the Federal
Reserve Bank Wire System to:
Boston Safe Deposit and Trust Company
Boston, MA
ABA# 011001234
DDA# 16-798-3
Account No.:
You may make additional investments at any time using the wire procedures
described above. Note that banks may charge fees for transmitting wires.
. You may purchase shares through the Automatic Investment Plan.
13
<PAGE>
Exchanging Shares
Policies for Exchanging Shares
. You may exchange Class A shares of your Fund for Class A shares of other
Munder Funds based on their relative net asset values.
. You may exchange Class B and Class C shares of the Money Market Fund for the
corresponding class of shares of other Munder Funds.
. [You may exchange Class A shares of the Cash Investment Fund, the U.S.
Treasury Money Market Fund and the Tax-Free Money Market Fund for Class A,
Class B or Class C shares of other Munder Funds, subject to any applicable
sales charge differential.]
. [Class A shares of the Funds that were (1) acquired through the use of the
exchange privilege and (2) can be traced back to a purchase of shares in one
or more Munder Funds for which a sales charge was paid, can be exchanged for
Class A shares of another Munder Fund.]
. Class B and Class C shares of the Money Market Fund will continue to age from
the date of the original purchase and will retain the same CDSC rate as they
had before the exchange.
. You must meet the minimum purchase requirements for the Munder Fund that you
purchase by exchange.
. If you are exchanging into shares of a Munder Fund with a higher sales
charge, you must pay the difference at the time of the exchange.
. A share exchange is a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund you
wish to purchase by exchange. You can obtain a prospectus for any Munder Fund
by contacting your broker or calling the Munder Funds at (800) 438-5789.
. Brokers may charge a fee for handling exchanges.
. We may change, suspend or terminate the exchange privilege at any time. You
will be given notice of any material modifications except where notice is not
required.
Methods for Exchanging Shares
. Exchanges By Telephone. You may give exchange instructions by telephone to
the Funds at (800) 438-5789. You may not exchange shares by telephone if you
hold share certificates. We reserve the right to reject any telephone
exchange request and to place restrictions on telephone exchanges.
. Exchanges By Mail. You may send exchange orders to your broker or you may
send them directly to the Funds' transfer agent at The Munder Funds, c/o
First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428.
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the redemption
request in proper form. We will reduce the amount you receive by the amount of
any applicable contingent deferred sales charge (CDSC).
Please see "Distribution Arrangements" below for information about CDSCs.
Policies for Redeeming Shares
. For your protection, a signature guarantee is required for the following
redemption requests: (a) redemption proceeds greater than $50,000; (b)
redemption proceeds not being made payable to the recordowner of the account;
(c) redemption proceeds not being mailed to the address of record on the
account or (d) if the redemption proceeds are being transferred to another
Munder Fund account with a different registration. You can obtain a signature
guarantee from a financial institution such as a commercial bank, trust
company, savings association or from a securities firm having membership on a
recognized securities exchange.
Methods for Redeeming Shares
You may redeem shares of the Funds in several ways:
14
<PAGE>
. By Mail. You may mail your redemption request to: The Munder Funds, c/o First
Data Investor Services Group, P.O. Box 60428, King of Prussia, Pennsylvania
19406-0428. The redemption request should state the name of the Fund, share
class, account number, amount of redemption, account name and where to send
the proceeds. All account owners must sign.
. By Telephone. You can redeem your shares by calling your broker or by
calling the Funds at (800) 438-5789. There is no minimum requirement for
telephone redemptions.
If you are redeeming at least $1,000 of shares and you have authorized
expedited redemption on your account application form, simply call the Funds
prior to 4:00 p.m. (Eastern time), and request the funds be mailed to the
commercial bank or registered broker-dealer you designated on your account
application form. We will send your redemption amount to you on the next
business day. We reserve the right at any time to change or impose fees for
this expedited redemption procedure.
During periods of unusual economic or market activity, you may experience
difficulties or delays in effecting telephone redemptions. In such cases you
should consider placing your redemption request by mail.
. You may redeem shares through the Automatic Withdrawal Plan.
. Free Checkwriting is available to holders of Class A shares of the Funds.
Additional Policies For Purchases, Exchanges And Redemptions
. We consider orders to be in "proper form" when all required documents
are properly completed, signed and received.
. The Funds reserve the right to reject any purchase order.
. At any time, the Funds may change any of their purchase or redemption
procedures, and may suspend the sale of their shares.
. The Funds may delay sending redemption proceeds for up to seven days, or
longer if permitted by the Securities and Exchange Commission.
. We will typically send redemption amounts to you within seven business
days after you redeem shares. We may hold redemption amounts from the
sale of shares you purchased by check until the purchase check has
cleared, which may be as long as 15 days.
. To limit the Funds' expenses, we do not currently issue share
certificates.
. A Fund may temporarily stop redeeming shares if:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists and the Fund cannot sell its assets or accurately
determine the value of its assets; or
. if the Securities and Exchange Commission orders the Fund to suspend
redemptions.
. If accepted by a Fund, investors may purchase shares of the Fund with
securities which the Fund may hold. The advisor will determine if the
securities are consistent with the Funds' objectives and policies. If
accepted, the securities will be valued the same way the Fund values
portfolio securities it already owns. Call the Funds at (800) 438-5789
for more information.
. The Funds reserve the right to make payment for redeemed shares wholly
or in part by giving the redeeming shareholder portfolio securities. The
shareholder may pay transaction costs to dispose of these securities.
. We record all telephone calls for your protection and take measures to
identify the caller. As long as the Funds' transfer agent takes
reasonable measures to authenticate telephone requests on an investor's
account, neither the Funds, the Funds' distributor nor the transfer
agent will be held responsible for any losses resulting from
unauthorized transactions.
15
<PAGE>
. We may redeem your account if its value falls below $250 as a result of
redemptions (but not as a result of a decline in NAV). You will be
notified in writing and allowed 60 days to increase the value of your
account to the minimum investment level.
. If you purchased shares directly from the Funds, the transfer agent will
send you confirmations of the opening of an account and of all
subsequent purchases, exchanges or redemptions in the account. If your
account has been set up by a broker or other investment professional,
account activity will be detailed in their statements to you.
Shareholder Privileges
. Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in a Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Funds at (800) 438-5789. The minimum pre-authorized investment
amount is $50. You may discontinue the AIP at any time. We may discontinue
the AIP on 30 days' written notice to you.
. Automatic Withdrawal Plan (AWP). If you have an account value of $2,500 or
more in a Fund, you may redeem shares on a monthly, quarterly, semi-annual or
annual basis. The minimum withdrawal is $50. We usually process withdrawals
on the 20th day of the month and promptly send you your redemption amount.
You may enroll in the AWP by completing the AWP application form available
through the transfer agent. To participate in the AWP you must have your
dividends automatically reinvested and may not hold share certificates. You
may change or cancel the AWP at any time upon notice to the Funds' transfer
agent. You should not buy Class A shares (and pay a sales charge) while you
participate in the AWP and you must pay any applicable CDSC when you redeem
shares.
. Free Checkwriting. Free checkwriting is available to holders of Class A
shares of the Funds who complete the signature card section of the account
application form. You may write checks in the amount of $500 or more but you
may not close a Fund account by writing a check. We may change or terminate
this program on 30 days' notice to you.
16
<PAGE>
Distribution Arrangements
- --------------------------------------------------------------------------------
Cdsc
You pay a CDSC when you redeem:
. Class A shares of the Money Market Fund within one year of buying them;
. Class A shares of the Money Market Fund acquired through the exchange of
Class A Shares of another Munder Fund purchased before Jun e 27, 1995 as part
of an investment of $500,000 or more;
. Class B shares of the Money Market Fund within six years of buying them;
. Class C shares of the Money Market Fund within one year of buying them.
These time periods include the time you held the shares you
exchanged to acquire Money Market Fund shares.
You pay a 1% CDSC when you redeem Class A shares of the Money Market Fund:
. that you acquired through the exchange of initial Class A shares of another
Munder Fund;
. if you acquired the initial Class A shares after June 27, 1995; and
. if the initial shares were purchased without a sales charge in connection
with an investment of $1,000,000 or more.
You pay a CDSC of 1% when you redeem Class C shares of the Money Market Fund
within one year of the date you purchased the initial Class C shares that you
exchanged to acquire Money Market Fund shares.
The CDSC schedule for Class B shares of the Money Market Fund purchased after
June 27, 1995 is set forth below. Consult the Statement of Additional
Information for the CDSC schedule for Class B shares purchased on or before June
27, 1995. The CDSC is based on the original NAV at the time of your investment
or the NAV at the time of redemption, whichever is lower.
<TABLE>
<CAPTION>
Money Market Fund
Class B Shares
Years Since Purchase CDSC
- -------------------- ----
<S> <C>
First....................................... 5.00%
Second...................................... 4.00%
Third....................................... 3.00%
Fourth...................................... 3.00%
Fifth....................................... 2.00%
Sixth....................................... 1.00%
Seventh and thereafter...................... 0.00%
</TABLE>
You will not pay a CDSC to the extent that the value of the redeemed shares
represents:
. reinvestment of dividends or capital gains distributions; or
. capital appreciation of shares redeemed.
When you redeem shares, we will assume that you are redeeming first shares
representing reinvestment of dividends and capital gains distributions, then
any appreciation on shares redeemed, and then remaining shares held by you for
the longest period of time.
CDSC Waivers
We will waive the CDSC payable upon redemption of Class B shares of the Money
Market Fund which you purchased after June 27, 1995 for:
. redemptions made within one year after the death of a shareholder or
registered joint owner;
. minimum required distributions made from an IRA or other retirement plan
account after you reach age 70 1/2;
. involuntary redemptions made by the Fund;
. redemptions limited to 10% per year of an account's NAV. For example, if you
maintain an annual balance of $10,000 you can redeem up to $1,000 annually
free of charge.
We will waive the CDSC payable upon redemptions of shares which you purchased
after December 1, 1998 (or acquired through an exchange of shares of another
Munder Fund purchased after December 1, 1998) for:
. redemptions made from an IRA or other individual retirement plan account
established through Comerica Securities, Inc. after you reach age 59 1/2 and
after the eighteen month anniversary of the purchase of Fund shares.
Consult the Statement of Additional Information for Class A and Class B CDSC
waivers which apply
17
<PAGE>
when you redeem shares of the Money Market Fund purchased on or before June 27,
1995.
Rule 12b-1 Fees
The Funds have adopted Rule 12b-1 plans with respect to their Class A shares and
the Money Market Fund has adopted Rule 12b-1 plans for Class B and Class C
shares that allow the Funds to pay distribution and other fees for the sale of
its shares and for services provided to shareholders. Under the plans, the Funds
may pay up to .25% of the daily net assets of Class A , Class B and Class C
shares to pay for certain shareholder services provided by institutions that
have agreements with the Funds' distributor to provide such services. The Money
Market Fund may also pay up to .75% of the daily net assets of the Class B and
Class C shares to finance activities relating to the distribution of its shares.
Because the fees are paid out of a Fund's assets on an on-going basis, over time
these fees will increase the cost of an investment in a Fund and may cost a
shareholder more than paying other types of sales charges.
Other Information
The advisor may, from time to time, make payments to banks, broker-dealers or
other financial institutions for certain services to the Funds and/or their
shareholders, including sub-administration, sub-transfer agency and shareholder
servicing. The advisor may make such payments out of its own resources and there
are no additional costs to the Funds or their shareholders.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee from
the Funds for providing Shareholder services to its customers who own shares of
the Funds.
18
<PAGE>
Pricing of Fund Shares
- -----------------------------------------------------------------------------
Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV is the value of a single share of a Fund. Each Fund calculates NAV
separately for each class. NAV is calculated by (1) taking the current value of
a Fund's total assets allocated to a particular class of shares, (2)
subtracting the liabilities and expenses charged to that class (3) dividing that
amount by the total number of shares of that class outstanding.
The Funds calculate NAV as of 2:45 p.m. (Eastern time) and as of the close of
business on the New York Stock Exchange, normally 4:00 p.m. (Eastern time).
If the New York Stock Exchange closes early, the Funds will accelerate its
calculation of NAV and transaction deadlines to that time.
In determining each Money Market Fund's NAV, securities are valued at amortized
cost, which is approximately equal to market value.
Distributions
- -----------------------------------------------------------------------------
As a shareholder, you are entitled to your share of a Fund's net income and
gains on its investments. Each Fund passes substantially all of its earnings
along to its shareholders as distributions. When a Fund earns dividends from
stocks and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a capital gain distribution.
The Funds declare dividends daily and pay them monthly.
Each Fund distributes its net realized capital gains, if any, at least annually.
If a purchase order is accepted by 2:45 p.m. (Eastern time), the investor will
receive dividends for that day. Otherwise the investor will begin to earn
dividends on the first business day following the day of purchase. If a
redemption order is received by 2:45 p.m. (Eastern time), the redeeming
shareholder will not receive dividends for that day.
It is possible that a Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
Each Fund normally will pay distributions in additional shares of that Fund. If
you wish to receive distributions in cash, either indicate this request on your
account application form or notify the Fund by calling (800) 438-5789.
19
<PAGE>
Federal Tax Considerations
- ---------------------------------------------------------------------------
Investments in a Fund may have tax consequences that you should consider. This
section briefly describes some of the more common federal tax consequences. A
more detailed discussion about the tax treatment of distributions from the Funds
and about other potential tax liabilities, including backup withholding for
certain taxpayers and about tax aspects of dispositions of shares of the Funds,
is contained in the Statement of Additional Information. You should consult your
tax adviser about your own particular tax situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. The Tax-Free Money
Market Fund expects that a portion of its dividend distributions will be exempt
from federal income tax. Shareholders not subject to tax on their income,
generally will not be required to pay any tax on distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held
the portfolio securities it sold. It does not depend on how long you held your
Fund shares.
Distributions are generally taxable to you in the tax year in which they are
paid, with one exception: distributions declared in October, November or
December, but not paid until January of the following year, are taxed as though
they were paid on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Funds will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Taxes On Sales Or Exchanges
If you sell shares of a Fund or exchange them for shares of another Munder Fund,
you generally will be subject to tax on any taxable gain. Taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale will result in a taxable gain.
Other Considerations
If you buy shares of a Fund just before the Fund makes any distribution, you
will pay the full price for the shares and then receive back a portion of the
money you have just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law the Funds
must withhold a portion of your distributions and redemption proceeds to pay
federal income taxes.
20
<PAGE>
Management
- --------------------------------------------------------------------------------
Investment Advisor
The Funds' investment advisor is Munder Capital Management, 480 Pierce Street,
Birmingham, Michigan 48009. As of September 30, 1999, the advisor and its
affiliates had approximately $___ billion in assets under management, of which
$___ billion were invested in equity securities, $___ billion were invested in
money market or other short-term instruments, $___ billion were invested in
other fixed income securities, and $___ billion in non-discretionary assets.
The advisor provides overall investment management for the Funds, provides
research and credit analysis and is responsible for all purchases and sales of
portfolio securities.
During the fiscal year ended June 30, 1999, each Fund paid an advisory fee at an
annual rate based on the average daily net assets of the Fund (after waivers, if
any) as follows:
Cash Investment Fund.................... .35%
Tax-Free Money Market Fund.............. .35%
U.S. Treasury Money Market Fund......... .35%
Money Market Fund....................... .40%
21
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand the
financial performance of each class of shares of each Fund for the past 5 years
(or, if shorter, the period of the Fund's or class' operations). Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in a particular class of the Fund (assuming reinvestment
of all dividends and distributions). The financial highlights have been audited
by Ernst & Young LLP, independent accountants, whose report, along with each
Fund's financial statements, are included in the annual reports, and
incorporated by reference into the Statement of Additional Information. You may
obtain the annual report without charge by calling (800) 438-5789.
<TABLE>
<CAPTION>
Cash Investment Fund(a)
--------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95(d)
Class A Class A Class A Class A Class A
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................
Income from investment operations:
Net investment income.................................
Total from investment operations......................
Less distributions:
Dividends from net investment income..................
Total distributions...................................
Net asset value, end of period........................
Total return (b)......................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)..................
Ratio of operating expenses to average net assets ....
Ratio of net investment income to average net assets..
Ratio of operating expenses to average net assets
without waivers.......................................
</TABLE>
- --------------------
22
<PAGE>
<TABLE>
<CAPTION>
Cash
Investment
Fund(a) Money Market Fund(a)
- ---------- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Year Year Year Period Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended
2/28/95(e) 6/30/99 6/30/98 6/30/97 6/30/96 6/30/99 6/30/98 6/30/97 6/30/96
Class A Class A Class A Class A Class A Class B Class B Class B Class B
- ---------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Money Market Fund(a)
--------------------------------------------------
Period Year Year Period
Ended Ended Ended Ended
6/30/95(d, e) 6/30/99 6/30/98 6/30/97
Class B Class C Class C Class C
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...................
Income from investment operations:
Net investment income..................................
Total from investment operations.......................
Less distributions:
Dividends from net investment income...................
Total distributions....................................
Net asset value, end of period.........................
Total return (b).......................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...................
Ratio of operating expenses to average net assets .....
Ratio of net investment income to average net assets...
Ratio of operating expenses to average net assets
without waivers.......................................
</TABLE>
- -----------------
24
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Money Market Fund(a)
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95(d) 2/28/95(e)
Class A Class A Class A Class A Class A Class A
- ------- ------- ------- ------- ---------- ----------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
U.S. Treasury Money Market Fund(a)
-------------------------------------------------------------------------
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95(d) 2/28/95(e)
Class A Class A Class A Class A Class A Class A
------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............
Income from investment operations:
Net investment income............................
Total from investment operations.................
Less distributions:
Dividends from net investment income.............
Total distributions..............................
Net asset value, end of period...................
Total return (b).................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).............
Ratio of operating expenses to average net
assets .........................................
Ratio of net investment income to average net
assets..........................................
Ratio of operating expenses to average net assets
without waivers.................................
</TABLE>
- ----------------
26
<PAGE>
For More Information
More information about the Funds is available free upon request,
including the following:
Annual/Semi-Annual Reports
You will receive unaudited semi-annual reports and audited annual reports on a
regular basis from the Funds. In addition, you will also receive updated
prospectuses or supplements to this prospectus. In order to eliminate duplicate
mailings, the Funds will only send one copy of the above communications to (1)
accounts with the same primary record owner, (2) joint tenant accounts, (3)
tenant in common accounts and (4) accounts which have the same address.
Statement of Additional Information
Provides more details about the Funds and their policies. A current Statement of
Additional Information is on file with the Securities and Exchange Commission
and is incorporated by reference (is legally considered part of this
prospectus).
To Obtain Information:
By telephone
Call 1-800-438-5789
By mail
The Munder Funds
480 Pierce Street
Birmingham, MI 48009
On the Internet
Text-only versions of fund documents can be viewed online or downloaded from:
Securities and Exchange Commission
http://www.sec.gov
You can also obtain copies by visiting the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. (phone 1-800-SEC-0330) or by sending
your request and a duplicating fee to the Securities and Exchange Commission's
Public Reference Section, Washington, D.C. 20549-6009.
You may also find more information about the Funds on the Internet at:
http://www.munderfunds.com
The Munder Funds, Inc.
SEC file number: 811-7346
The Munder Funds Trust
SEC file number: 811-5899
<PAGE>
Class A & B Shares
[Munder Logo]
Prospectus
October 26, 1999
The Munder Lifestyle Funds
All-Season Conservative Fund
All-Season Moderate Fund
All-Season Aggressive Fund
As with all mutual funds, the
Securities and Exchange Commission
has not approved or disapproved these
securities nor passed upon the accuracy
or adequacy of this prospectus. It is a
criminal offense to state otherwise
<PAGE>
Table Of Contents
2 Risk/Return Summary
2 Goals, Principal Investment Strategies And Principal Risks
5 Who May Want To Invest
6 Performance
7 Fees And Expenses
10 More About The Funds
10 Glossary
12 Description Of The Underlying funds
15 Special Risks And Other Considerations
17 Additional Description of Investments And Investment Strategies
22 Your Investment
22 How To Reach The Funds
22 Purchasing Shares
23 Exchanging Shares
23 Redeeming Shares
24 Additional Policies For Purchases, Exchanges And Redemptions
25 Shareholder Privileges
26 Distribution And Service Arrangements
26 Share Class Selection
26 Applicable Sales Charge
28 CDSC
29 12b-1 Fees
29 Other Information
30 Pricing of Fund Shares
31 Distributions
32 Federal Tax Considerations
32 Taxes On Distributions
32 Taxes On Sales Or Exchanges
32 Other Considerations
33 Management
33 Investment Advisor
47 Portfolio Management
49 Financial Highlights
Back Cover For Additional Information
<PAGE>
Risk/Return Summary
- --------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goals and principal investment
strategies of the Funds and the principal risks of investing in the Funds. For
further information on these and the Funds' other investment strategies and
risks, please read the section entitled More About the Funds. Certain terms used
in this prospectus are defined in the Glossary.
An investment in the Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
Fund of Funds
Each Fund (sometimes referred to in this prospectus as a Lifestyle Fund) is a
fund of funds, which means that it invests almost all of its assets in other
mutual funds, rather than in individual securities. Each Lifestyle Fund invests
its assets in a variety of other Munder Funds, referred to as "underlying
funds."
The risks of investing in the Lifestyle Funds are dependent on which underlying
funds the Lifestyle Funds invest in, and to what extent. In addition, the
investment performance of each Lifestyle Fund is directly related to the
performance of the underlying funds in which it invests.
Conservative Fund
Goal
The Fund's goal is to provide current income with capital appreciation as a
secondary objective.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in fixed income securities.
The Fund may also invest a portion of its assets in underlying funds that invest
primarily in equity securities or money market instruments.
The advisor may periodically adjust the Fund's asset allocation among underlying
funds in response to changing economic and market conditions. The typical
allocation is expected to be: 70% Fixed Income Funds, 25% Equity Funds and 5%
Money Market Funds.
In the "More About the Funds" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
Among the principal risks of investing in the Fund are: Interest Rate Risk,
Credit Risk, Prepayment Risk and Stock Risk.
Because the mix of underlying funds held by the Fund can change from time to
time, the Fund may be subject to the following additional principal risks at
various times: Foreign Securities Risk, Currency Risk, Derivatives Risk, and
Small and Medium-Size Company Risk.
A description of the Fund's principal risks is provided below under "Summary of
Principal Risks." Further information about the Fund's investment strategies and
risks is provided under "More About the Funds."
Investment Approach of the Underlying Funds
. The underlying equity funds represented in each Lifestyle Fund vary from
growth to value styles of investing, from larger to smaller company stocks
and from domestic to international equities.
. The underlying fixed income funds reflect the advisor's core fixed income
philosophy: interest rate relationships, sector weighings and credit
analysis. Some exposure to international bonds may also be included.
2
<PAGE>
Moderate Fund
Goal
The Fund's goal is to provide high total return through both capital
appreciation and current income.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in equity securities and fixed
income securities.
The Fund may also invest a small portion of its assets in underlying money
market funds.
The advisor may periodically adjust the Fund's asset allocation among underlying
funds in response to changing economic and market conditions. The typical
allocation is expected to be: 60% Equity Funds, 35% Fixed Income Funds and 5%
Money Market Funds.
In the "More About the Funds" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
Among the principal risks of investing in the Fund are: Stock Risk, Interest
Rate Risk, Credit Risk and Prepayment Risk.
Because the mix of underlying funds held by the Fund can change from time to
time, the Fund may be subject to the following additional principal risks at
various times: Foreign Securities Risk, Currency Risk, Derivatives Risk, and
Small and Medium-Size Company Risk.
A description of the Fund's principal risks is provided below under "Summary of
Principal Risks." Further information about the Fund's investment strategies and
risks is provided under "More About the Funds."
Aggressive Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in equity securities.
The Fund may also invest a portion of its assets in underlying funds that invest
primarily in fixed income securities or money market instruments.
The advisor may periodically adjust the Fund's asset allocation among underlying
funds in response to changing economic and market conditions. The typical
allocation is expected to be: 85% Equity Funds, 15% Fixed Income Funds and 0%
Money Market Funds.
In the "More About the Funds" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
Among the principal risks of investing in the Fund are: Market Risk, Interest
Rate Risk, Credit Risk and Prepayment Risk.
Because the mix of underlying funds held by the Fund can change from time to
time, the Fund may be subject to the following additional principal risks at
various times: Foreign Securities Risk, Currency Risk, Derivatives Risk, and
Small and Medium-Size Company Risk.
A description of the Fund's principal risks is provided below under "Summary of
Principal Risks." Further information about the Fund's investment strategies and
risks is provided under "More about the Funds."
3
<PAGE>
Summary of Principal Risks
MARKET RISK is the risk of loss because the value of the securities in which a
Fund invests may decline in response to general economic conditions. Price
changes may be temporary or last for extended periods. For example, stock prices
have historically risen and fallen in periodic cycles. In addition, the value of
a Fund's investments may decline if the particular companies the Funds invest in
do not perform well.
INTEREST RATE RISK is the risk of loss because increases in prevailing interest
rates will cause fixed-income securities held by an underlying fund to decline
in value. Longer term bonds are generally more sensitive to interest rate
changes than shorter term bonds. Generally, the longer the average maturity of
the bonds held by the underlying fund, the more the Fund's share price will
fluctuate in response to interest rate changes.
CREDIT (OR DEFAULT) RISK is the risk of loss because an issuer of a security may
default on its payment obligations. Also, an issuer may suffer adverse changes
in financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security and in shares of the
Fund. A change in the quality rating of a bond can affect the bond's liquidity
and make it more difficult for the underlying fund to sell.
PREPAYMENT RISK is the risk of loss because a Fund may experience losses when an
issuer exercises its right to pay principal on an obligation held by an
underlying fund (such as a mortgage-backed security) earlier than expected. This
may happen during a period of declining interest rates. Under these
circumstances, the underlying fund may be unable to recoup all of its initial
investment and will suffer from having to reinvest in lower yielding securities.
The loss of higher yielding securities and the reinvestment at lower interest
rates can reduce the Fund's income, total return and share price.
FOREIGN SECURITIES RISK is the risk of loss because investments by an underlying
fund in foreign securities may experience greater and more rapid changes in
value than U.S. securities. Foreign securities are generally more volatile and
less liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available about
foreign companies. Issuers of foreign securities are generally not subject to
the same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards.
CURRENCY RISK is the risk of loss because a decline in the value of foreign
currencies relative to the U.S. dollar will reduce the value of an underlying
fund's portfolio securities denominated in those currencies.
EMERGING MARKETS RISK. Investing in emerging market countries heightens the
risks presented by investing in foreign securities and currencies and may result
in loss to the Fund. Numerous emerging countries have recently experienced
serious, and potentially continuing, economic and political problems. Stock
markets in many emerging countries are relatively small and risky. Foreigners
are often limited in their ability to invest in, and withdraw assets from, these
markets. Additional restrictions may be imposed under emergency conditions.
DERIVATIVES RISK is the risk that loss may result from an underlying fund's use
of futures and options on futures contracts, options, forward currency exchange
contracts and other forms of derivatives. The main risk with derivatives is that
some types can amplify a gain or loss, potentially earning or losing
substantially more money than the actual cost of the derivative instrument.
MEDIUM-SIZE COMPANY STOCK RISK is the risk of loss because the stocks of medium-
size companies may be more susceptible to market downturns and their prices may
be more volatile than the stocks of larger companies.
SMALL COMPANY STOCK RISK is the risk of loss because the stocks of small
companies may have more risks than those of larger companies. Small companies
often have narrower markets and more limited managerial and financial resources
than larger, more established companies. As a result, they may be more sensitive
to changing economic conditions, which could increase the volatility of an
underlying fund's portfolio. In addition, small company stocks typically are
traded in lower volume making them more difficult to sell.
4
<PAGE>
SECTOR RISK is the risk of loss due to concentrating investments in a particular
industry sector. Adverse economic, business or political developments affecting
that industry sector could have a major effect on the value of the underlying
fund's investments.
Who May Want To Invest
The All-Season Conservative Fund may be appropriate for investors who:
. Seek current income.
. Seek long term growth without taking undue risk.
The All-Season Moderate Fund may be appropriate for investors who:
. Seek a balance of both capital appreciation and income.
The All-Season Growth Fund may be appropriate for investors who:
. Seek long-term growth of capital.
. Can tolerate short-term fluctuations in the financial markets.
5
<PAGE>
Performance
The bar charts and tables below give some indication of: (a) the variability of
the Funds' returns by showing changes in each Fund's performance from year to
year over the life of the Fund; and (b) the risk of an investment in a Fund by
showing how each Fund's average annual total returns for different calendar
periods over the life of the Fund compare to those of a broad based securities
market index.
When you consider this information, please remember a Fund's performance in past
years is not necessarily an indication of how a Fund will perform in the future.
As of the date of this prospectus, the Conservative Fund has not completed a
full calendar year of operations. For this reason, a bar chart and performance
table showing performance information and information on the Fund's best and
worst calendar quarters is not provided in this prospectus.
Moderate Fund
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1998: _____%
_______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- --------------------- --------- -----------
Class A (4/4/97)
Class B (1/14/98)
[Index]
Since inception of Class ___**
Since inception of Class ___**
_______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
6
<PAGE>
Aggressive Fund
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1998: _____%
_____________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- --------------------- -------- -----------
Class A (10/7/97)
Class B (1/14/98)
[Index]
Since inception of Class ___**
Since inception of Class ___**
_____________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
7
<PAGE>
Fees And Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold shares the Funds. Please note that the following information does not
include fees that institutions may charge for services they provide to you.
<TABLE>
<CAPTION>
Class A Class B
Shareholder Fees (fees paid directly from your investment) Shares Shares
------ ------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases............ None 5.5%(a)
Sales Charge (Load) Imposed on Reinvested Dividends......... None None
Maximum Deferred Sales Charge (Load)........................ None(b) 5%(c)
Redemption Fees............................................. None None
Exchange Fees............................................... None None
</TABLE>
Annual Fund Operating Expenses (expenses that are paid from Fund assets)
as a % of net assets
Conservative Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------- --------------
<S> <C> <C>
Management Fees(1) .35% .35%
Distribution and/or Service (12b-1) Fees .30% 1.00%
Other Expenses(1) [_]% [_]%
--- ----
Total Annual Fund Operating Expenses(1) [_]% [_]%
=== ====
Moderate Fund
Class A Shares Class B Shares
-------------- --------------
Management Fees(1) .35% .35%
Distribution and/or Service (12b-1) Fees .30% 1.00%
Other Expenses(1) [_]% [_]%
--- ----
Total Annual Fund Operating Expenses(1) [_]% [_]%
=== ====
Aggressive Fund
Class A Shares Class B Shares
-------------- --------------
Management Fees(1) .35% .35%
Distribution and/or Service (12b-1) Fees .30% 1.00%
Other Expenses(1) [_]% [_]%
--- ----
Total Annual Fund Operating Expenses(1) [_]% [_]%
=== ====
</TABLE>
____________________
(a) The sales charge declines as the amount invested increases.
(b) A contingent deferred sales charge (CDSC) is a one-time fee charged at the
time of redemption. A 1% CDSC applies to redemptions of Class A shares within
one year of investment that were purchased with no initial sales charge as part
of an investment of $1,000,000 or more.
(c) The CDSC payable upon redemption of Class B shares declines over time.
(1) For the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of its management fees and voluntarily reimbursed certain operating
expenses. As a result of these voluntary fee waivers and expense
reimbursements, the actual Total Annual Fund Operating Expenses paid by the
Funds were as shown below. The advisor may terminate the fee waivers and/or
expense reimbursements at any time.
Conservative Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------- --------------
<S> <C> <C>
Management Fees [_]% [_]%
Distribution and/or Service (12b-1) Fees .30% 1.00%
Other Expenses [_]% [_]%
--- ----
Total Annual Fund Operating Expenses [_]% [_]%
=== ====
</TABLE>
8
<PAGE>
Moderate Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------- --------------
<S> <C> <C>
Management Fees [_]% [_]%
Distribution and/or Service (12b-1) Fees .30% 1.00%
Other Expenses [_]% [_]%
--- ----
Total Annual Fund Operating Expenses [_]% [_]%
=== ====
Aggressive Fund
Class A Shares Class B Shares
-------------- --------------
Management Fees [_]% [_]%
Distribution and/or Service (12b-1) Fees .30% 1.00%
Other Expenses [_]% [_]%
--- ----
Total Annual Fund Operating Expenses [_]% [_]%
=== ====
</TABLE>
In addition to the expenses shown above, shareholders of the Funds will
indirectly bear their pro rata shares of the annual operating expenses of the
underlying funds. As a result, the investment returns of the Funds will be net
of the expenses of the Underlying Funds. Since the Funds invest in other Munder
Funds, as a shareholder you will pay a higher expense ratio than if you had
purchased shares of an underlying fund directly. The underlying funds' total
annual fund operating expense ratios for the fiscal year ended June 30, 1999
ranged form [_]% to [_]%.
Example
The examples are intended to help you compare the cost of investing in each Fund
to the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in each Fund for the time periods indicated. The examples also
assume that your investment has a 5% return each year, that each Fund's
operating expenses remain the same and that all dividends and distributions are
reinvested. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Conservative Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares* Class B Shares**
-------------- --------------- ----------------
<S> <C> <C> <C>
1 Year $ $ $
3 Years $ $ $
5 Years $ $ $
10 Years*** $ $ $
Moderate Fund
Class A Shares Class B Shares* Class B Shares**
-------------- --------------- ----------------
1 Year $ $ $
3 Years $ $ $
5 Years $ $ $
10 Years*** $ $ $
Aggressive Fund
Class A Shares Class B Shares* Class B Shares**
-------------- --------------- ----------------
1 Year $ $ $
3 Years $ $ $
5 Years $ $ $
10 Years*** $ $ $
</TABLE>
__________________
*Assumes you sold your shares at the end of the time period.
**Assumes you stayed in the Fund.
***Reflects conversion of Class B shares to Class A shares (which pay lower
ongoing expenses) approximately six years after the date of original purchase.
9
<PAGE>
More About The Funds
- --------------------------------------------------------------------------------
This section describes the underlying funds in which the Funds may invest. It
also discusses the risks of investing in the Funds, which are dependent upon
which underlying funds the Funds invest in, and to what extent. Further,
included in this section is a chart that shows the maximum percentage of its
assets that a Fund may invest in each underlying fund. Please note that the
underlying funds may also invest in securities and are subject to restrictions
and additional risks which are described in the Statement of Additional
Information.
The Glossary below explains certain terms used throughout this prospectus.
Glossary
Types Of Securities
Equity securities include common stocks, preferred stocks, securities
convertible into common stocks, and rights and warrants to subscribe for the
purchase of common stocks. Equity securities may be listed on a stock exchange
or NASDAQ National Market System or unlisted. Warrants are rights to purchase
securities at a specified time at a specified price.
Fixed income securities are securities that pay interest at set times at either
fixed, floating or variable rates, or which are issued at a discount to their
principal amount instead of making periodic interest payments. Fixed income
securities include corporate bonds, debentures and other similar corporate debt
instruments, zero coupon bonds and variable amount master demand notes.
Convertible Securities. A convertible security is a bond or preferred stock that
may be converted (exchanged) into the common stock of the issuing company within
a specified time period for a specified number of shares. Convertible securities
offer the underlying funds a way to participate in the capital appreciation of
the common stock into which the securities are convertible, while earning higher
current income than is available from the common stock.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include U.S.
Treasury bills, U.S. Treasury notes, U.S. Treasury bonds and obligations of the
Federal Home Loan Corporation, Federal National Mortgage Association and
Government National Mortgage Association.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit of
banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Rating Agencies and Indices
Moody's is Moody's Investor Services, Inc.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
S&P is Standard & Poor's Rating Services.
S&P 500 is S&P's 500 Composite Stock Price Index, a widely recognized unmanaged
index of U.S. stock market activity.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Internal Revenue Code is the Internal Revenue Code of 1986, as amended.
NAV is the net asset value per share of a Fund. NAV is the value of a single
share of a Fund. Each Fund calculates NAV separately for each class. NAV is
calculated by (1) taking the current value of a Fund's total assets allocated to
a particular class of shares, (2) subtracting the liabilities and expenses
charged to that class (3) dividing that amount by the total number of shares of
that class outstanding.
10
<PAGE>
- --------------------------------------------------------------------------------
Asset Allocation Chart
- --------------------------------------------------------------------------------
The following chart shows the Fund's maximum investment (expressed as a
percentage of each Fund's assets) that each Fund may make in the underlying
funds.
<TABLE>
<CAPTION>
Conservative Moderate Aggressive
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Equity Funds
Equity Selection Fund...................... 10% 20% 30%
Growth & Income Fund....................... 10% 15% 20%
Growth Opportunities Fund.................. 10% 15% 20%
Index 500 Fund............................. 20% 30% 40%
International Equity Fund.................. 5% 10% 15%
Micro-Cap Equity Fund...................... 10% 10% 10%
Multi-Season Growth Fund................... 20% 30% 40%
NetNet Fund................................ 5% 5% 5%
Real Estate Equity Investment Fund......... 10% 20% 25%
Small-Cap Value Fund....................... 10% 20% 30%
Small Company Growth Fund.................. 20% 30% 40%
Framlington Emerging Markets Fund.......... 5% 10% 15%
Framlington Global Financial Services Fund. 5% 10% 15%
Framlington Healthcare Fund................ 5% 5% 10%
Framlington International Growth Fund...... 5% 10% 15%
Income Funds
Bond Fund.................................. 80% 50% 30%
Intermediate Bond Fund..................... 80% 50% 30%
International Bond Fund.................... 30% 20% 10%
U.S. Government Income Fund................ 60% 40% 20%
Money Market Funds
Cash Investment Fund....................... 15% 15% 15%
Money Market Fund.......................... 10% 10% 10%
U.S. Treasury Money Market Fund............ 10% 10% 10%
</TABLE>
11
<PAGE>
Description of Underlying Funds
- --------------------------------------------------------------------------------
Equity Funds
- --------------------------------------------------------------------------------
Equity Selection Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities which the
advisor believes are undervalued compared to stocks of other companies in the
same industry. The Fund generally invests in companies with market
capitalizations of at least $1 billion. The Fund diversifies its assets by
industry in approximately the same weightings as those of the S&P 500.
Growth & Income Fund
The Fund's goal is to provide capital appreciation and current income. The Fund
pursues its goal by investing primarily in dividend-paying equity securities and
fixed income securities which are convertible into or exchangeable for common
stock. The advisor generally selects large, well-known companies that it
believes have favorable prospects for dividend growth and capital appreciation.
The Fund will seek to produce a current yield greater than the S&P 500.
Growth Opportunities Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in the equity securities of
companies with market capitalizations between $500 million and $10 billion. Its
style, which focuses on both growth prospects and valuation, is known as GARP
(Growth at a Reasonable Price) and seeks to produce attractive returns during
various market environments.
Index 500 Fund
The Fund's goal is to provide performance and income that is comparable to the
S&P 500. The S&P 500 is an index of 500 stocks which emphasizes large
capitalization companies. The Fund pursues its goal by normally holding the
securities of at least 400 of the stocks in the S&P 500. The Fund is managed
through the use of a "quantitative" investment approach and tries to mirror the
composition and performance of the S&P 500 through statistical procedures. The
Fund will try to achieve a correlation between the performance of its portfolio
and that of the S&P 500 of at least .95. A correlation of 1.0 would mean that
the changes in the Fund's price mirror exactly the changes in the S&P 500.
International Equity Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing primarily in foreign securities, including American
Depositary Receipts. The Fund mostly invests in mature markets, but may also
invest in emerging markets. The Fund emphasizes companies with a market
capitalization of at least $250 million.
Micro-Cap Equity Fund
The Fund's goal is to provide capital appreciation. The Fund pursues its goal by
investing at least 65% of its assets in equity securities of small
capitalization companies having market capitalizations within the range of the
companies in the Wilshire Micro-Cap Index. There is no limit on the length of
operating history for the companies in which the Fund may invest. The Fund may
invest without limit in initial public offerings of small capitalization
companies. In addition, the Fund may invest up to 35% of its assets in equity
securities of medium and larger capitalization companies, including initial
public offerings of such companies.
Multi-Season Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities. The Fund
generally invests in equity securities of companies with market capitalizations
over $1 billion. Its style, which focuses on both growth prospects and
valuation, is known as GARP (Growth at a Reasonable Price) and seeks to produce
attractive returns during various market environments.
NetNet Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities. The Fund
invests in companies which are engaged in research, design, development or
manufacturing activities related to the Internet or Intranet. Investments will
also be made in companies involved to a significant extent in the business of
distributing products, processes or services for or through the Internet or
Intranet.
12
<PAGE>
Real Estate Equity Investment Fund
The Fund's goal is to provide both capital appreciation and current income. The
Fund pursues its goal by investing at least 65% of its total assets in equity
securities of U.S. companies which are principally engaged in the real estate
industry or which own significant real estate.
Small-Cap Value Fund
The Fund's goal is to provide long-term capital appreciation, with income as a
secondary objective. The Fund pursues its goal by investing at least 65% of its
assets in equity securities of small capitalization companies having market
capitalizations within the range of the companies in the Russell 2000 Index. The
advisor will concentrate on companies that it believes are undervalued.
Small Company Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing, under normal market conditions, at least 65% of its
assets in equity securities of small capitalization companies with market
capitalizations below $1 billion.
Value Fund
The Fund's primary goal is to provide long-term capital appreciation. Its
secondary goal is to provide income. The Fund pursues its goals by investing
primarily in the equity securities of well-established companies with
intermediate to large capitalizations, which typically exceed $750 million. The
Fund will invest at least 65% of its assets in equity securities. The advisor
will focus on companies that it believes are undervalued.
Framlington Emerging Markets Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of
companies in emerging market countries, as defined by the World Bank, the
International Finance Corporation, the United Nations or the European Bank for
Reconstruction and Development. It may also invest in foreign securities of
companies located in countries with mature markets.
Framlington Global Financial Services Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of U.S.
and foreign companies which are principally engaged in the financial services
industry and companies providing services primarily within the financial
services industry. The Fund focuses specifically on companies which are likely
to benefit from growth or consolidation in the financial services industry.
The Fund may invest in securities of companies located in countries with mature
markets and in those with emerging markets.
Framlington Healthcare Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing in equity securities of companies providing healthcare and
medical services and products worldwide. Currently, most of these companies are
located in the United States. The Fund's investments may include foreign
securities of companies located in countries with mature markets and in those
with emerging markets.
Framlington International Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of issuers
located in at least three foreign countries. The Fund may invest in companies
located in countries with mature markets and in those with emerging markets.
- --------------------------------------------------------------------------------
Income Funds
- --------------------------------------------------------------------------------
Bond Fund
The Fund's primary goal is to provide a high level of current income. Its
secondary goal is capital appreciation. The Fund pursues its goals by investing
at least 65% of its total assets in a broad range of bonds and other fixed
income securities. The Fund's dollar-weighted average maturity will generally
range between six and fifteen years. The Fund will purchase only fixed income
securities that are rated investment grade or better, or if unrated, are of
comparable quality.
Intermediate Bond Fund
The Fund's goal 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 Fund pursues its goals by investing at least 65% of its total
assets in a broad range of
13
<PAGE>
bonds and other fixed income securities. The Fund's dollar-weighted average
maturity will generally range between three and eight years. The Fund will
purchase only fixed income securities that are rated investment grade or better,
or if unrated, are of comparable quality.
International Bond Fund
The Fund's goal is to realize a competitive total return through a combination
of current income and capital appreciation. The Fund pursues its goal by
investing at least 65% of its total assets in a broad range of bonds and other
fixed income securities of foreign issuers. The Fund will invest in the
securities of issuers in at least three foreign countries. The Fund's dollar-
weighted average maturity will generally range between three and fifteen years.
The Fund may invest a portion of its assets in domestic obligations, including
U.S. Government securities and obligations of domestic banks and corporations.
U.S. Government Income Fund
The Fund's goal is to provide high current income. The Fund pursues its goal by
investing at least 65% of its total assets in a broad range of U.S. Government
securities and repurchase agreements relating to such securities. The Fund's
dollar-weighted average maturity generally will range between six and fifteen
years.
- --------------------------------------------------------------------------------
Money Market Funds
- --------------------------------------------------------------------------------
Cash Investment Fund
The Fund's primary goal is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal. The Fund
pursues its goal by investing in a broad range of U.S. dollar-denominated money
market instruments. The Fund invests solely in U.S. dollar-denominated debt
securities with remaining maturities of 13 months or less and maintains an
average dollar-weighted portfolio maturity of 90 days or less.
Money Market Fund
The Fund's primary goal is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal. The Fund
pursues its goal by investing in a broad range of U.S. dollar-denominated money
market instruments. The Fund invests solely in U.S. dollar-denominated debt
securities with remaining maturities of 13 months or less and maintains an
average dollar-weighted portfolio maturity of 90 days or less.
U.S. Treasury Money Market Fund
The Fund's goal is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal. The Fund
pursues its goal by investing its assets solely in short-term bills and notes,
issued by the U.S. Treasury (including "stripped" securities) and in repurchase
agreements relating to such obligations. The Fund invests solely in U.S. dollar-
denominated debt securities with remaining maturities of 13 months or less and
maintains an average dollar-weighted portfolio maturity of 90 days or less.
Special Risks And Other Considerations
Derivative Risk. Some underlying funds may purchase certain "derivative"
instruments. Derivatives are financial contracts whose value is based on an
underlying security, a currency exchange rate, an interest rate or a market
index. Many types of instruments representing a wide range of potential risks
and rewards are derivatives, including futures contracts options on futures
contracts, options, swaps, forward currency contracts and structured debt
obligations (including collateralized mortgage obligations and other types of
asset-backed securities, "stripped" securities and various floating rate
instruments).
Investment Strategy. Derivatives can be used for hedging (attempting to
reduce risk by offsetting one investment position with another) or
speculation (taking a position in the hope of increasing return). The
underlying funds may, but are not required to, use derivatives for hedging
purposes or for the purpose of remaining fully invested or maintaining
liquidity. The underlying funds will not use derivatives for speculative
purposes.
Special Risks. The use of derivative instruments exposes a Fund to
additional risks and transaction costs. Risks of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the direction that a portfolio manager
anticipates; (2) imperfect correlation between the price of derivative
instruments and movements in the prices of the securities, interest rates
or currencies being
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hedged; (3) the fact that skills needed to use these strategies are
different than those needed to select portfolio securities; (4) the
possible absence of a liquid secondary market for any particular instrument
and possible exchange imposed price fluctuation limits, either of which may
make it difficult or impossible to close out a position when desired; (5)
the risk that adverse price movements in an instrument can result in a loss
substantially greater than the underlying fund's initial investment in that
instrument (in some cases, the potential loss is unlimited); (6)
particularly in the case of privately-negotiated instruments, the risk that
the counterparty will not perform its obligations, which could leave the
underlying fund worse off than if it had not entered into the position; and
(7) the inability to close out certain hedged positions to avoid adverse
tax consequences.
Foreign Investment Risk. Certain underlying funds may invest in foreign
securities. Foreign securities include investments in non-U.S. dollar-
denominated securities traded outside of the United States and dollar-
denominated securities of foreign issuers traded in the United States. Foreign
securities also include American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") and Global Depository Receipts ("GDRs"). ADRs are
U.S. dollar-denominated receipts representing shares of foreign-based
corporations. ADRs are issued by U.S. banks or trust companies, and entitle the
holder to all dividends and capital gains that are paid out on the underlying
foreign shares. EDRs and GDRs are receipts issued by non-U.S. financial
institutions that often trade on foreign exchanges. They represent ownership in
an underlying foreign or U.S. security and are generally denominated in a
foreign currency.
Special Risks. Foreign securities involve special risks and costs.
Investment in the securities of foreign governments involves the risk that
foreign governments may default on their obligations or may otherwise not
respect the integrity of their debt.
Investment in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of taxes by foreign governments. Foreign investments may
also involve risks associated with the level of currency exchange rates,
less complete financial information about the issuers, less market
liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls or
freezes on the convertibility of currency, or the adoption of other
governmental restrictions might adversely affect an investment in foreign
securities. Additionally, foreign issuers may be subject to less stringent
regulation, and to different accounting, auditing and recordkeeping
requirements.
Currency exchange rates may fluctuate significantly over short periods of
time causing an underlying fund's net asset value to fluctuate as well. A
decline in the value of a foreign currency relative to the U.S. dollar will
reduce the value of a foreign currency-denominated security. To the extent
that an underlying fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined risk.
The underlying funds' respective net currency positions may expose them to
risks independent of their securities positions.
Additional risks are involved when investing in countries with emerging
economies or securities markets. In general, the securities markets of
these countries are less liquid, are subject to greater price volatility,
have smaller market capitalizations and may have problems with securities
registration and custody. In addition, because the securities settlement
procedures are less developed in these countries, an underlying fund may be
required to deliver securities before receiving payment and may also be
unable to complete transactions during market disruptions. As a result of
these and other risks, investments in these countries generally present a
greater risk of loss to the Fund.
A further risk of investing in foreign securities is the risk that an
underlying fund may be adversely affected by the conversion of certain
European currencies into the Euro. This conversion, which is under way, is
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scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in world
capital markets and affect European capital markets in particular.
Investment Grade Credit Risk. A security is considered investment grade if, at
the time of purchase, it is rated:
. BBB or higher by S&P;
. Baa or higher by Moody's;
. BBB or higher by Duff & Phelps; or
. BBB or higher by Fitch.
A security will be considered investment grade if it receives one of the above
ratings, even if it receives a lower rating from other rating organizations.
Investment Strategy. Except as stated in the next section, fixed
income and convertible securities purchased by the underlying funds
will generally be rated at least investment grade. The underlying
funds may also invest in unrated securities if the advisor or sub-
advisor believes they are comparable in quality.
Special Risks. Although securities rated "BBB" by S&P, Duff & Phelps
or Fitch, or "Baa" by Moody's are considered investment grade, they
have certain speculative characteristics. Therefore, they may be
subject to a higher risk of default than obligations with higher
ratings. 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
adviser or sub-advisor will consider such an event in determining
whether the underlying fund should continue to hold the security.
Non-Investment Grade Credit Risk. Non-investment grade fixed income and
convertible securities are generally rated "BB" or below by S&P, Duff & Phelps
or Fitch, or "Ba" by Moody's.
Investment Strategy. Certain underlying funds may invest a portion of
their total assets in non-investment grade securities when the advisor
or sub-advisor determines that such securities are desirable in light
of the underlying funds' investment objectives and portfolio mix.
Special Risks. Non-investment grade securities (sometimes referred to
as "junk bonds") are subject to greater risk than investment grade
securities. In addition, the market value of these securities tends to
be more sensitive to individual corporate developments and to changes
in interest rates and other economic developments than higher-rated
securities. They generally present a higher degree of credit risks
(default).
Investments in Financial Services Companies by Framlington Global Financial
Services Fund. Financial services companies are subject to extensive
governmental regulation which may limit both the financial commitments they can
make, and the interest rates and fees they can charge. Insurance companies may
be subject to severe price competition. Proposed legislation that would reduce
the separation between commercial and investment banking businesses, if enacted,
could significantly impact the industry and the Framlington Global Financial
Services Fund.
Investments in the Healthcare Industry by Framlington Healthcare Fund. The
Framlington Healthcare Fund will invest most of its assets in the healthcare
industry, which is particularly affected by rapidly changing technology and
extensive government regulation, including cost containment measures.
Investments in the Real Estate Industry by Real Estate Equity Investment Fund.
The Real Estate Equity Investment Fund will invest primarily in the real estate
industry and may invest more than 25% of its assets in any one sector of the
real estate industry. As a result, the Real Estate Equity Investment Fund will
be particularly vulnerable to declines in real estate prices and new
construction rates.
Short-Term Trading. The underlying funds may engage in short-term trading,
including initial public offerings.
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could
detract from a Fund's performance.
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Defensive Investing. Each Fund and underlying fund (except the Index 500 Fund)
may invest all or any portion of its assets in short-term obligations as a
temporary defensive measure in response to adverse market or economic
conditions.
Special Risks. If a Fund or one or more underlying funds adopts a defensive
strategy, the Fund may not achieve its investment objective.
Year 2000 Risk. Like other mutual funds, financial institutions, business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the advisor and the Funds' other
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. The advisor is taking steps that it
believes are reasonably designed to address year 2000 computer-related problems
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Funds' other major service providers.
Although there can be no assurances, the advisor believes that these steps will
be sufficient to avoid any adverse impact on any of the Funds. Similarly, there
can be no assurance that year 2000 issues will not affect the companies and
other issuers in which the underlying funds invest or affect worldwide markets
and economies.
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Additional Description Of Investments And Investment Strategies Of The Funds And
Underlying Funds
- --------------------------------------------------------------------------------
Asset-Backed Securities. Asset-backed securities are debt securities backed by
mortgages, installment sales contract and credit card receivables. The
securities are sponsored by entities such as government agencies, banks,
financial companies and commercial or industrial companies. In effect, these
securities "pass through" the monthly payments that individual borrowers make on
their mortgage or other assets net of any fees paid to the issuers. Examples of
these include guaranteed mortgage pass-through certificates, collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").
Special Risks. In addition to credit and market risk, asset-backed
securities involve repayment risk because the underlying assets (loans) may
be prepaid at any time. The value of these securities may also change
because of actual or perceived changes in the creditworthiness of the
originator, the servicing agent, the financial institution providing the
credit support, or the counterparty. Like other fixed income securities,
when interest rates rise the value of an asset-backed security generally
will decline. However, when interest rates decline, the value of an asset-
backed security with prepayment features may not increase as much as that
of other fixed income securities. In addition, non-mortgage asset-backed
securities involve certain risks not presented by mortgage-backed
securities. Primarily, these securities do not have the benefit of the same
security interest in the underlying collateral.
Borrowing and Reverse Repurchase Agreements. The Funds and underlying funds can
borrow money from banks and enter into reverse repurchase agreements with banks
and other financial institutions. Reverse repurchase agreements involve the sale
of securities held by a Fund (or underlying fund) subject to the Fund's (or
underlying fund) agreement to repurchase them at a mutually agreed upon date and
price (including interest).
Investment Strategy. Each Fund (or underlying fund) may borrow money in an
amount up to 5% of its assets for temporary emergency purposes and in an
amount up to 33 1/3% of its assets to meet redemptions. This is a
fundamental policy which can be changed only by shareholders.
Special Risks. Borrowings and reverse repurchase agreements by a Fund (or
underlying fund) may involve leveraging. If the securities held by the Fund
(or underlying fund) decline in value while these transactions are
outstanding, the Fund's net asset value will decline in value by
proportionately more than the decline in value of the securities. In
addition, reverse repurchase agreements involve the risks that the interest
income earned by the Fund (or underlying fund) (from the investment of the
proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by the Fund (or underlying fund)
will decline below the price the Fund (or underlying fund) is obligated to
pay to repurchase the securities, and that the
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<PAGE>
securities may not be returned to the Fund (or underlying fund).
Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation to exchange one currency for another on a future date at a specified
exchange rate.
Investment Strategy. Forward currency exchange contracts may be used for
hedging purposes and to help reduce the risks and volatility caused by
changes in foreign currency exchange rates. Foreign currency exchange
contracts will be used at the discretion of the advisor or sub-advisor, and
no underlying fund is required to hedge its foreign currency positions.
Special Risks. Forward currency contracts are privately negotiated
transactions, and can have substantial price volatility. When used for
hedging purposes, they tend to limit any potential gain that may be
realized if the value of an underlying fund's foreign holdings increases
because of currency fluctuations.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When an underlying fund purchases an option on a
futures contract, it has the right to assume a position as a purchaser or seller
of a futures contract at a specified exercise price during the option period.
When an underlying fund sells an option on a futures contract, it becomes
obligated to purchase or sell a futures contract if the option is exercised.
Investment Strategy. The underlying funds may invest in futures contracts
and options on futures contracts on domestic or foreign exchanges or boards
of trade. These instruments may be used for hedging purposes, to maintain
liquidity to meet potential shareholder redemptions, to invest cash
balances or dividends, or to minimize trading costs.
An underlying fund will not purchase or sell a futures contract unless,
after the transaction, the sum of the aggregate amount of margin deposits
on its existing futures positions and the amount of premiums paid for
related options used for non-hedging purposes is 5% or less of the
underlying fund's total assets.
Special Risks. Futures contracts and related options present the following
risks: imperfect correlation between the change in market value of an
underlying fund's securities and the price of futures contracts and
options; the possible inability to close a futures contract when desired;
losses due to unanticipated market movements, which are potentially
unlimited; and the possible inability of the advisor or sub-advisor to
correctly predict the direction of securities prices, interest rates,
currency exchange rates and other economic factors.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. Each underlying fund may invest up to 15% of its net
assets in securities that are illiquid.
Special Risks. To the extent that an underlying fund invests in illiquid
securities, the underlying fund risks not being able to sell the securities
at the time and the price that it would like. The underlying fund may have
to lower the price, sell substitute securities or forego an investment
opportunity, each of which may cause a loss to the underlying fund.
Investment Companies. To the extent consistent with their respective investment
objectives and policies, the underlying funds may invest in securities issued by
other investment companies.
Investment Strategy. Investments by an underlying fund in other investment
companies will be subject to the limitations of the 1940 Act.
Special Risks. As a shareholder of another investment company, an
underlying fund would be subject to the same risks as any other investor in
that company. In addition, it would bear a proportionate share of any fees
and expenses paid by that company. These would be in addition to the
advisory and other fees paid directly by the underlying fund.
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<PAGE>
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. The underlying funds may write (sell) covered call
options, buy put options, buy call options and write secured put options
for hedging purposes. Options may relate to particular securities, foreign
or domestic securities indices, financial instruments or foreign
currencies.
Special Risks. The value of options can be highly volatile, and their use
can result in loss if the advisor or sub-advisor is incorrect in its
expectation of price fluctuations. The successful use of options for
hedging purposes also depends in part on the ability of the advisor or sub-
advisor to predict future price fluctuations and the degree of correlation
between the options and securities markets.
Repurchase Agreements. Repurchase agreements involve the purchase of securities
by a Fund or underlying fund subject to the seller's agreement to repurchase
them at a mutually agreed upon date and price.
Investment Strategy. Each Fund or underlying fund may enter into repurchase
agreements with banks and broker-dealers that are deemed to be creditworthy
by the advisor or sub-advisor.
Special Risks. If the seller defaults or declares bankruptcy, a Fund or
underlying fund may suffer if the proceeds from the sale of the underlying
securities and other collateral are less than the repurchase price or if
there are delays in selling the underlying securities or collateral.
Securities Lending. In order to generate additional income, each underlying fund
may lend securities on a short-term basis to qualified institutions. By
reinvesting any cash collateral it receives in these transactions, the
underlying fund could realize additional income gains or losses.
Investment Strategy. Securities lending may represent no more than 25% of
the value of an underlying fund's total assets (including the loan
collateral).
Special Risks. The main risk when lending securities is that if the
borrower fails to return the securities or the invested collateral has
declined in value, the underlying fund could lose money.
Stripped Securities. These securities are issued by the U.S. Government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include participations in trusts that hold U.S. Treasury or agency
securities.
Special Risks. Stripped securities are very sensitive to changes in
interest rates and to the rate of principal repayments. A rapid or
unexpected increase in mortgage prepayments could severely depress the
price of certain stripped mortgage-backed securities and adversely affect
an underlying fund's total returns.
Temporary Investments. Short-term obligations refer to U.S. Government
securities, high-quality money market instruments and repurchase agreements with
maturities of 13 months or less. Generally, these obligations are purchased to
provide stability and liquidity to a Fund or underlying fund.
Investment Strategy. Each Fund or underlying fund may invest a portion of
its assets in short-term obligations pending investment or to meet
anticipated redemption requests.
Special Risks. A Fund or underlying fund may not achieve its investment
objective when its asset are invested in short-term obligations.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
instruments include variable amount master demand notes.
Special Risks. Variable and floating rate instruments are subject to the
same risks as fixed income investments, particularly
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<PAGE>
interest rate and credit risk. Because there is no active secondary market
for certain variable and floating rate instruments, they may be more
difficult to sell if the issuer defaults on its payment obligations or
during periods when an underlying fund is not entitled to exercise its
demand rights. As a result, the underlying fund could suffer a loss with
respect to these instruments.
When - Issued Securities, Delayed Delivery Transactions and Forward Commitments.
A purchase of "when-issued" securities refers to a transaction made
conditionally because the securities, although authorized, have not yet been
issued. A delayed delivery or forward commitment transaction involves a contract
to purchase or sell securities for a fixed price at a future date beyond the
customary settlement period.
Special Risks. Purchasing or selling securities on a when-issued, delayed
delivery or forward commitment basis involves the risk that the value of
the securities may change by the time they are actually issued or
delivered. These transactions also involve the risk that the seller may
fail to deliver the security or cash on the settlement date.
Zero Coupon Bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity.
Special Risks. The market prices of zero coupon bonds generally are more
volatile than the market prices of interest-bearing securities and are
likely to respond to a greater degree to changes in interest rates than
interest-bearing securities having similar maturities and credit quality.
An underlying fund's investments in zero coupon bonds may require the
underlying fund to sell some of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements.
Disclaimers. The Index 500 Fund is not sponsored, endorsed, sold or promoted by
S&P, nor does S&P guarantee the accuracy and/or completeness of the S&P 500(
Index or any data included therein. S&P makes no warranty, express or implied,
as to the results to be obtained by the Fund, owners of the Fund, any person or
any entity from the use of the S&P 500( Index or any data included therein. S&P
makes no express or implied warranties and expressly disclaims all such
warranties of merchantability or fitness for a particular purpose for use with
respect to the S&P( Index or any data included therein.
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Your Investment
- --------------------------------------------------------------------------------
This section describes how to do business with the Funds.
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How To Reach The Funds
- -----------------------
By telephone: 1-800-438-5789
Call for shareholder services.
By mail: The Munder Funds
480 Pierce Street
Birmingham, MI 48009
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Purchasing Shares
- -----------------------
Purchase Price of Shares
Class A shares of a Fund are sold at the NAV next determined after a purchase
order is received in proper form plus any applicable sales charge. Please see
"Distribution Arrangements" below for information about sales charges.
Class B shares of a Fund are sold at NAV next determined after a purchase order
is received in proper form.
Broker-dealers (other than the Funds' distributor) may charge you additional
fees for shares you purchase through them.
Policies for Purchasing Shares
Investment minimums
. Initial: $250
. Subsequent: $ 50
. Automatic Investment Plan: $ 50
Purchases over $250,000 must be for Class A shares.
Timing of orders
Purchase orders must be received by the Funds' distributor or transfer agent
before the close of regular trading on the New York Stock Exchange (normally,
4:00 p.m. Eastern time).
Methods for Purchasing Shares
Investors may purchase shares:
. By Broker. Any broker authorized by the Funds' distributor can sell you
shares of the Funds. Please note that brokers may charge you fees for their
services.
. By Mail. You may open an account by completing, signing and mailing the
attached account application form and a check or other negotiable bank
draft (payable to The Munder Funds) for $250 or more to: The Munder Funds,
c/o First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. Be sure to specify on your account application
form the class of shares being purchased. If the class is not specified,
your purchase will automatically be invested in Class A shares. For
additional investments, send a letter stating the Fund and share class you
wish to purchase, your name and your account number with a check for $50 or
more to the address listed above. [We do not accept third party checks.]
. By Wire. To open a new account, you should call the Funds at (800) 438-5789
to obtain an account number and complete wire instructions prior to wiring
any funds. Within seven days of purchase, you must send a completed account
application form containing your certified taxpayer identification number
to the Funds' transfer agent at The Munder Funds, c/o First Data Investor
Services Group, P.O. Box 60428, King of Prussia, Pennsylvania 19406-0428.
Wire instructions must state the Fund name, share class, your registered
name and your account number. Your bank wire should be sent through the
Federal Reserve Bank Wire System to:
Boston Safe Deposit and Trust Company
Boston, MA
ABA# 011001234
DDA# 16-798-3
Account No.:
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<PAGE>
You may make additional investments at any time using the wire procedures
described above. Note that banks may charge fees for transmitting wires.
. You may purchase shares through the Automatic Investment Plan.
. You may purchase shares through the Reinvestment Privilege.
Exchanging Shares
Policies for Exchanging Shares
. You may exchange Fund shares for shares of the same class of other Munder
Funds based on their relative net asset values.
. You may acquire shares of Funds by exchanging shares of the same class of
other Munder Funds.
. You may also acquire Class A shares of the Funds by exchanging Class K
shares of other Munder Funds. Class A shares of the Funds acquired in this
manner may be exchanged for Class K shares of other Munder Funds, but they
may not be exchanged for Class A shares of other Munder Funds.
. [Class A shares of a Munder money market fund that were (1) acquired
through the use of the exchange privilege and (2) can be traced back to a
purchase of shares in one or more Munder Funds for which a sales charge was
paid, can be exchanged for Class A shares of a Fund.]
. Class B shares will continue to age from the date of the original purchase
and will retain the same CDSC rate as they had before the exchange.
. You must meet the minimum purchase requirements for the Munder Fund of that
you purchase by exchange.
. If you are exchanging into shares of a Munder Fund with a higher sales
charge, you must pay the difference at the time of the exchange.
. A share exchange is a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund
you wish to purchase by exchange. You can obtain a prospectus for any
Munder Fund by contacting your broker or calling the Munder Funds at (800)
438-5789.
. Brokers may charge you a fee for handling exchanges.
. We may change, suspend or terminate the exchange privilege at any time. You
will be given notice of any material modifications except where notice is
not required.
Methods for Exchanging Shares
. Exchanges By Telephone. You may give exchange instructions by telephone to
the Funds at (800) 438-5789. You may not exchange shares by telephone if
you hold share certificates. We reserve the right to reject any telephone
exchange request and to place restrictions on telephone exchanges.
. Exchanges By Mail. You may send exchange orders to your broker or you may
send them directly to the Funds' transfer agent at The Munder Funds, c/o
First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428.
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the redemption
request in proper form. We will reduce the amount you receive by the amount of
any applicable contingent deferred sales charge (CDSC).
Please see "Distribution Arrangements" below for information about CDSCs.
Policies for Redeeming Shares
. For your protection, a signature guarantee is required for the following
redemption requests: (a) redemption proceeds greater than $50,000; (b)
redemption proceeds not being made payable to the recordowner of the
account; (c) redemption proceeds not being mailed to the address of record
on the account or (d) if the redemption proceeds are being transferred to
another Munder Fund account with a different
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registration. You can obtain a signature guarantee from a financial
institution such as a commercial bank, trust company, savings association
or from a securities firm having membership on a recognized securities
exchange.
Methods for Redeeming Shares
You may redeem shares of the Funds in several ways:
. By Mail. You may mail your redemption request to: The Munder Funds, c/o
First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. The redemption request should state the name of
the Fund, share class, account number, amount of redemption, account name
and where to send the proceeds. All account owners must sign.
. By Telephone. You can redeem your shares by contacting your broker or
calling the Funds at (800) 438-5789. There is no minimum requirement for
telephone redemptions.
If you are redeeming at least $1,000 of shares and you have authorized
expedited redemption on your account application form, simply call the
Funds prior to 4:00 p.m. (Eastern time), and request the redemption
proceeds be mailed to the commercial bank or registered broker-dealer you
designated on your account application form. We will send your redemption
proceeds to you on the next business day. We reserve the right at any time
to change or impose fees for this expedited redemption procedure.
During periods of unusual economic or market activity, you may experience
difficulties or delays in effecting telephone redemptions. In such cases
you should consider placing your redemption request by mail.
. You may redeem shares through the Automatic Withdrawal Plan.
Additional Policies For Purchases, Exchanges And Redemptions
. We consider orders to be in "proper form" when all required documents
are properly completed, signed and received.
. The Funds reserve the right to reject any purchase order.
. At any time, the Funds may change any of their purchase or redemption
procedures, and may suspend the sale of their shares.
. The Funds may delay sending redemption proceeds for up to seven days,
or longer if permitted by the Securities and Exchange Commission.
. We will typically send redemption amounts to you within seven business
days after you redeem shares. We may hold redemption amounts from the
sale of shares you purchased by check until the purchase check has
cleared, which may be as long as 15 days.
. To limit the Funds' expenses, we do not currently issue share
certificates.
. A Fund may temporarily stop redeeming shares if:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists and the Fund cannot sell its assets or
accurately determine the value of its assets; or
. the Securities and Exchange Commission orders the Funds to
suspend redemptions.
. [The Funds reserve the right to make payment for redeemed shares
wholly or in part by giving the redeeming shareholder portfolio
securities. The shareholder may pay transaction costs to dispose of
these securities.]
. We record all telephone calls for your protection and take measures to
identify the
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caller. As long as the Funds' transfer agent takes reasonable measures
to authenticate telephone requests on an investor's account, neither
the Funds, the Funds' distributor nor the transfer agent will be held
responsible for any losses resulting from unauthorized transactions.
. We may redeem your account if its value falls below $250 as a result
of redemptions (but not as a result of a decline in NAV). You will be
notified in writing and allowed 60 days to increase the value of your
account to the minimum investment level.
. If you purchased shares directly from the Funds, the Funds' transfer
agent will send you confirmations of the opening of an account and of
all subsequent purchases, exchanges or redemptions in the account. If
your account has been set up by a broker or other investment
professional, account activity will be detailed in their statements to
you.
. [The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. Each Fund
and its distributor reserve the right to refuse any purchase or
exchange request that could adversely affect the fund or its
operations, including those from any individual or group who, in the
Fund's view, is likely to engage in excessive trading or any order
considered market-timing activity. If a Fund refuses a purchase or
exchange request and the shareholder deems it necessary to redeem
their account, any CDSC as permitted by the prospectus will be
applicable.
Additionally, in no event will any Fund permit more than six exchanges
into or out of a Fund in any one-year period per account, tax
identification number, social security number or related investment
group. The Munder Money Market Funds are exempt from this policy.]
Shareholder Privileges
Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in a Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Funds at (800) 438-5789. The minimum pre-authorized investment amount
is $50. You may discontinue the AIP at any time. We may discontinue the AIP on
30 days' written notice to you.
Reinvestment Privilege. For 60 days after you sell shares of a Fund, you may
reinvest your redemption proceeds in shares of the same class of a Fund at NAV.
Any CDSC you paid on the amount you are reinvesting will be credited to your
account. You may use this privilege once in any given twelve-month period with
respect to your shares of a Fund. You or your broker must notify the Funds'
transfer agent in writing at the time of reinvestment in order to eliminate the
sales charge on your reinvestment.
Automatic Withdrawal Plan (AWP). If you have an account value of $2,500 or more
in a Fund, you may redeem shares on a monthly, quarterly, semi-annual or annual
basis. The minimum withdrawal is $50. We usually process withdrawals on the 20th
day of the month and promptly send you your redemption amount. You may enroll in
the AWP by completing the AWP application form available through the Funds'
transfer agent. To participate in the AWP you must have your dividends
automatically reinvested and may not hold share certificates. You may change or
cancel the AWP at any time upon notice to the Funds' transfer agent. You should
not buy Class A shares (and pay a sales charge) while you participate in the AWP
and you must pay any applicable CDSC when you redeem shares.
24
<PAGE>
Distribution Arrangements
- --------------------------------------------------------------------------------
Share Class Selection
Each Fund offers Class A and Class B shares. Each class has its own cost
structure, allowing you to choose the one that best meets your requirements
given the amount of your purchase and the intended length of your investment.
You should consider both ongoing annual expenses and initial sales charge or
CDSC in estimating the costs of investing in a particular class of shares.
Class A shares
. Front end sales charge. There are several ways to reduce these sale
charges.
. Lower annual expenses than Class B shares.
Class B shares
. No front end sales charge. All your money goes to work for you right away.
. Higher annual expenses than Class A shares.
. A CDSC on shares you sell within six years of purchase.
. Automatic conversion to Class A shares approximately six years after
issuance, thus reducing future annual expenses.
. CDSC is waived for certain redemptions.
Each Fund also issues Class Y shares, which have different sales charges,
expense levels and performance. Class Y shares are available to limited types of
investors. Call (800) 438-5789 to obtain more information about Class Y shares.
Applicable Sales Charge - Class A Shares
You can purchase Class A shares at NAV plus an initial sales charge. The sales
charge as a percentage of your investment decreases as the amount you invest
increases. The current sales charge rates and commissions paid to selected
dealers as follows:
<TABLE>
<CAPTION>
Sales Charge Dealer
as a Percentage of Reallowance
------------------
as a
Percentage
Your Net of the
---- --- ------
Investment Asset Offering
---------- ----- --------
Value Price
----- -----
<S> <C> <C> <C>
Less than $25,000.. 5.50% 5.82% 5.00%
$25,000 but less
than $50,000...... 5.25% 5.54% 4.75%
$50,000 but less
than $100,000...... 4.50% 4.71% 4.00%
$100,000 but less
than $250,000...... 3.50% 3.63% 3.25%
$250,000 but less
than $500,000...... 2.50% 2.56% 2.25%
$500,000 but less
than $1,000,000.... 1.50% 1.52% 1.25%
$1,000,000 or more.. None* None* (see below)**
</TABLE>
__________________________
* No initial sales charge applies on investments of $1 million or more.
However, a CDSC of 1% is imposed on certain redemptions within one year of
purchase.
** The Distributor will pay a 1% commission to dealers who initiate and are
responsible for purchases of $1 million or more.
Sales Charge Waivers - General
We will waive the initial sales charge on Class A shares for the following types
of purchasers:
1. individuals with an investment account or relationship with the advisor;
2. full-time employees and retired employees of the advisor, employees of the
Funds' service providers and immediate family members of such persons;
3. registered broker-dealers that have entered into selling agreements with the
Fund's distributor, for their own accounts or for retirement plans for their
employees or sold to registered representatives for full-time employees (and
their families) that certify to the distributor at the time of purchase that
such purchase is for their own account (or for the benefit of their families);
4. certain qualified employee benefit plans as described below;
5. individuals who reinvest a distribution from a qualified retirement plan for
which the advisor serves as investment advisor;
25
<PAGE>
6. individuals who reinvest the proceeds of redemptions from Class Y Shares of
another Munder Fund, within 60 days of redemption;
7. banks and other financial institutions that have entered into agreements
with the Munder Funds to provide shareholder services for customers (including
customers of such banks and other financial institutions, and the immediate
family members of such customers);
8. fee-based financial planners or employee benefit plan consultants acting for
the accounts of their clients;
9. employer sponsored retirement plans which are administered by Universal
Pensions, Inc. (UPI Plans); and
10. employer sponsored 401(k) plans that are administered by Merrill Lynch Group
Employee Services (Merrill Lynch Plans) which meet the criteria described below
under "Sales Charge Waivers - Qualified Employer Sponsored Retirement Plans."
Sales Charge Waivers - Qualified Employer Sponsored Retirement Plans
We will waive the initial sales charge on purchases of Class A shares by
employer sponsored retirement plans that are qualified under Section 401(a) or
Section 403(b) of the Internal Revenue Code (each, a Qualified Employee Benefit
Plan) and that (1) invest $1,000,000 or more in Class A shares offered by The
Munder Funds or (2) have at least 75 eligible plan participants.
In addition, we will waive the CDSC of 1% charged on certain redemptions within
one year of purchase for Qualified Employee Benefit Plan purchases that meet the
above criteria. A 1% commission will be paid by the distributor to dealers and
other entities (as permitted by applicable Federal and state law) who initiate
and are responsible for Qualified Employee Benefit Plan purchases that meet the
above criteria. This sales charge waiver does not apply to Simplified Employee
Pension Plans (SEPs), Individual Retirement Accounts (IRAs), UPI Plans and
Merrill Lynch Plans.
UPI Plans. We also will waive (i) the initial sales charge on Class A shares
purchased by UPI Plans for employees participating in an employer-sponsored or
administered retirement program operating under Section 408A of the Internal
Revenue Code and (ii) the CDSC of 1% imposed on certain redemptions within one
year of purchase for these accounts. The distributor will pay a 1% commission to
dealers and others (as permitted by applicable Federal and state law) who
initiate and are responsible for UPI Plan purchases.
Merrill Lynch Plans. We will waive the initial sales charge for all investments
by Merrill Lynch Plans if
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch Group
Employee Services (Merrill Lynch) and, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million
or more in assets invested in broker/dealer funds not advised or managed
by Merrill Lynch Asset Management, L.P. (MLAM) that are made available
pursuant to a Services Agreement between Merrill Lynch and the Fund's
distributor and in funds advised or managed by MLAM (collectively, the
Applicable Investments); or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch, and on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in Applicable
Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the Merrill
Lynch plan conversion manager, on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement.
For further information on sales charge waivers, call (800) 438-5789.
Sales Charge Reductions
You may qualify for reduced sales charges in the following cases:
. Letter of Intent. If you intend to purchase at least $25,000 of Class A
shares of the Funds you may wish to complete the Letter of Intent section
of your account application form. By doing so, you agree to invest a
certain amount over a 13-month period. You would pay a sales charge on any
Class A shares you purchase during the 13 months based on the total amount
to be invested under the Letter of Intent. You can apply any
26
<PAGE>
investments you made in any of the Munder Funds during the preceding 90-day
period toward fulfillment of the Letter of Intent (although there will be
no refund of sales charges you paid during the 90-day period). You should
inform the Funds' transfer agent that you have a Letter of Intent each time
you make an investment.
You are not obligated to purchase the amount specified in the Letter of
Intent. If you purchase less than the amount specified, however, you must
pay the difference between the sales charge paid and the sales charge
applicable to the purchases actually made. The Funds' custodian will hold
such amount in escrow. The custodian will pay the escrowed funds to your
account at the end of the 13 months unless you do not complete your
intended investment.
. Quantity Discounts. You may combine purchases of Class A shares that are
made by you, your spouse, your children under age 21 and your IRA when
calculating the sales charge. You must notify your broker or the Funds'
transfer agent to qualify.
. Right of Accumulation. You may add the value of any shares of non-money
market Munder Funds you already own to the amount of your next Class A
share investment for purposes of calculating the sales charge at the time
of the current purchase. You must notify your broker or the Funds' transfer
agent to qualify.
Certain brokers may not offer these programs or may impose conditions or fees to
use these programs. You should consult with your broker prior to purchasing the
Funds' shares.
For further information on sales charge reductions, call (800) 438-5789.
CDSC
You pay a CDSC when you redeem:
. Class A shares that were bought as part of an investment of at least $1
million within one year of buying them;
. Class B shares within six years of buying them.
These time periods include the time you held Class B shares of another Munder
Fund which you may have exchanged for Class B shares of the Fund you are
redeeming.
The CDSC schedule for Class B shares is set forth below. Consult the Statement
of Additional Information for the CDSC schedule for Class B shares acquired
through an exchange of shares purchased on or before June 27, 1995. The CDSC is
based on the original NAV at the time of your investment or the NAV at the time
of redemption, whichever is lower.
Years Since Purchase CDSC
- -------------------- ----
First................................ 5.00%
Second............................... 4.00%
Third................................ 3.00%
Fourth............................... 3.00%
Fifth................................ 2.00%
Sixth................................ 1.00%
Seventh and thereafter............... 0.00%
[At the time of purchase of Class B shares, the Funds' distributor pays sales
commissions of 4.00% of the purchase price to brokers that initiate and are
responsible for purchases of such Class B shares.]
You will not pay a CDSC to the extent that the value of the redeemed shares
represents:
. reinvestment of dividends or capital gains distributions; or
. capital appreciation of shares redeemed.
When you redeem shares, we will assume that you are redeeming first shares
representing reinvestment of dividends and capital gains distributions, then any
appreciation on shares redeemed, and then remaining shares held by you for the
longest period of time. [We will calculate the holding period of Class B shares
of a Fund acquired through an exchange of Class B shares of the Munder Money
Market Fund (which are available only by exchange of Class B shares of a Munder
Fund) from the date that the Class B shares of the initial Munder Fund were
purchased.]
CDSC Waivers
We will waive the CDSC payable upon redemptions for:
. redemptions made within one year after the death of a shareholder or
registered joint owner ;
. minimum required distributions made from an IRA or other retirement plan
account after you reach age 70 1/2;
. involuntary redemptions made by the Fund;
. redemptions limited to 10% per year of an account's net asset value. For
example, if you
27
<PAGE>
maintain an annual balance of $10,000 you can redeem up to $1,000 annually
free of charge.
We will waive the CDSC payable upon redemptions of shares which you purchased
after December 1, 1998 (or acquired through an exchange of shares of another
Munder Fund purchased after December 1, 1998) for:
. redemptions made from an IRA or other individual retirement plan account
established through Comerica Securities, Inc. after you reach age 59 1/2
and after the eighteen month anniversary of the purchase of Fund shares.
Consult the Statement of Additional Information for Class B CDSC waivers which
apply when you redeem shares acquired through an exchange of shares of another
Munder Fund purchased on or before June 27, 1995.
We will waive the CDSC for Class B shares for all redemptions by Merrill Lynch
Plans if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch; or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch; or
(iii) the Plan has less than 500 eligible employees, as determined by the
Merrill Lynch plan conversion manager, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement.
12b-1 Fees
The Funds have adopted Rule 12b-1 plans with respect to their Class A and Class
B shares that allow the Funds to pay distribution and other fees for the sale of
its shares and for services provided to shareholders. Under the plans, the
Funds may pay up to .25% of the daily net assets of Class A and Class B shares
to pay for certain shareholder services provided by institutions that have
agreements with the Funds' distributor to provide such services. The Funds may
also pay up to .75% of the daily net assets of the Class B shares to finance
activities relating to the distribution of its shares.
Because the fees are paid out of each Fund's assets on an on-going basis, over
time these fees will increase the cost of an investment in a Fund and may cost a
shareholder more than paying other types of sales charges.
Other Information
The advisor may, from time to time, make payments to banks, broker-dealers or
other financial institutions for certain services to the Funds and/or their
shareholders, including sub-administration, sub-transfer agency and shareholder
servicing. The advisor may make such payments out of its own resources and
there are no additional costs to the Funds or their shareholders.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee from
the Funds for providing shareholder services to its customers who own shares of
the Funds.
28
<PAGE>
Pricing Of Fund Shares
- --------------------------------------------------------------------------------
Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV is the value of a single share of a Fund. Each Fund calculates NAV
separately for each class. NAV is calculated by (1) taking the current value of
a Fund's total assets allocated to a particular class of shares, (2) subtracting
the liabilities and expenses charged to that class (3) dividing that amount by
the total number of shares of that class outstanding.
The Funds calculate NAV as of the close of business on the New York Stock
Exchange, normally 4:00 p.m. (Eastern time). If the New York Stock Exchange
closes early, the Funds will accelerate calculation of NAV and transaction
deadlines to that time.
The NAV of each underlying fund is generally based on the market value of the
securities held in the underlying fund. If market values are not available, the
fair value of securities is determined in good faith by, or using procedures
approved by, the boards of directors/trustees of the underlying funds.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. An underlying fund values foreign
securities at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the New York Stock Exchange. Certain
foreign currency exchange rates may also be determined at the latest rate prior
to the closing of the New York Stock Exchange. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at current rates.
Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the New York
Stock Exchange. If the advisor believes that such events materially affect the
value of portfolio securities, these securities may be valued at their fair
market value as determined in good faith by, or using procedures approved by,
the underlying funds' boards of directors/trustees.
Distributions
- --------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of a Fund's net income and
gains on its investments. Each Fund passes substantially all of its earnings
along to its shareholders as distributions. When a Fund earns dividends from
stocks and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these
gains are distributed to shareholders, it is called a capital gain distribution.
Each Fund pays dividends, if any, at least annually.
Each Fund distributes its net realized capital gains, if any, at least annually.
It is possible that a Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
Each Fund will pay distributions in additional shares of the same class of that
Fund. If you wish to receive distributions in cash, either, indicate this
request on your account application form or notify the Funds at (800) 438-5789.
29
<PAGE>
Federal Tax Considerations
- --------------------------------------------------------------------------------
Investments in a Fund may have tax consequences that you should consider. This
section briefly describes some of the more common federal tax consequences. A
more detailed discussion about the tax treatment of distributions from the Funds
and about other potential tax liabilities, including backup withholding for
certain taxpayers and about tax aspects of dispositions of shares of the Funds,
is contained in the Statement of Additional Information. You should consult your
tax adviser about your own particular tax situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. Shareholders not
subject to tax on their income generally will not be required to pay any tax on
distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held the
portfolio securities it sold. It does not depend on how long you held your Fund
shares.
Distributions are generally taxable to you in the year in which they are paid,
with one exception: distributions declared in October, November or December, but
not paid until January of the following year, are taxed as though they were paid
on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Funds will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Taxes On Sales Or Exchanges
If you sell shares of a Fund or exchange them for shares of another Munder Fund,
you generally will be subject to tax on any taxable gain. Taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale or an exchange will result in a taxable
gain.
Other Considerations
If you buy shares of a Fund just before the Fund makes any distribution, you
will pay the full price for the shares then receive back a portion of the money
you just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law, the
Funds must withhold a portion of your distributions and redemption proceeds to
pay federal income taxes.
30
<PAGE>
Management
- --------------------------------------------------------------------------------
Investment Advisor
Munder Capital Management, 480 Pierce Street, Birmingham, Michigan 48009 is the
investment advisor of each Fund and each underlying fund except Index 500 Fund
and International Equity Fund. The advisors provide overall investment
management for the Funds. As of September 30, 1999, the advisor [and its
affiliates] had approximately $__ billion in assets under management, of which
$__ billion were invested in equity securities, $__ billion were invested in
money market or other short-term instruments, $__ billion were invested in other
fixed income securities, and $__ billion in non-discretionary assets.
World Asset Management, L.L.C. ("World"), 255 East Brown Street, Birmingham,
Michigan 48009, is the investment advisor of Index 500 Fund and International
Equity Fund. World is a wholly-owned subsidiary of the advisor. As of September
30, 1999, World had approximately $__ in assets under management.
Framlington Overseas Investment Management Limited, a subsidiary of the advisor,
is the sub-advisor of the Framlington Emerging Markets Fund, Framlington Global
Financial Services Fund, Framlington Healthcare Fund and Framlington
International Growth Fund.
During the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of the advisory fees for each Fund. As a result, the payments shown
above for the Funds were less than the contractual advisory fees of .35% of each
Fund's average daily net assets.
Portfolio Manager
The portfolio manager for the Funds is Gerald Seizert. Mr. Seizert, Chief
Investment Officer - Equities of the advisor has managed the Funds since they
commenced operations.
31
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand each
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in a Fund (assuming reinvestment of all dividends and
distributions). The information has been audited by Ernst & Young LLP,
independent accountants, whose report, along with each Fund's financial
statements, are included in the annual reports of the Funds, and are
incorporated by reference into the Statement of Additional Information. You may
obtain the annual reports without charge by calling (800) 438-5789.
<TABLE>
<CAPTION>
Conservative Fund
-------------------------------------
Year Period Year Period
Ended Ended Ended Ended
6/30/99 6/30/98 6/30/99 6/30/98
Class A Class A Class B Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................................
Income from investment operations:
Net investment income...................................................
Net realized and unrealized gain/(loss) on investments..................
Total from investment operations........................................
Less distributions:
Dividends from net investment income....................................
Distributions from net realized gains...................................
Total distributions.....................................................
Net asset value, end of period..........................................
Total return (b)........................................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)....................................
Ratio of operating expenses to average net assets ......................
Ratio of net investment income to average net assets....................
Portfolio turnover rate.................................................
Ratio of operating expenses to average net assets without waivers.......
</TABLE>
______________________
<PAGE>
<TABLE>
<CAPTION>
Moderate Fund
-----------------------------------------------
Year Year Period Period Period
Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/99 6/30/98
Class A Class A Class A Class B Class B
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................................
Income from investment operations:
Net investment income..................................................
Net realized and unrealized gain/(loss) on investments................
Total from investment operations.......................................
Less distributions:
Dividends from net investment income...................................
Distributions from net realized gains..................................
Total distributions....................................................
Net asset value, end of period.........................................
Total return (b).......................................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...................................
Ratio of operating expenses to.........................................
average net assets.....................................................
Ratio of net investment income.........................................
to average net assets..................................................
Portfolio turnover rate................................................
Ratio of operating expenses
to average net assets without waivers..................................
</TABLE>
________________________
<PAGE>
<TABLE>
<CAPTION>
Aggressive Fund
-------------------------------------
Year Period Year Period
Ended Ended Ended Ended
6/30/99 6/30/98 6/30/99 6/30/98
Class A Class A Class B Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................................
Income from investment operations:
Net investment income...................................................
Net realized and unrealized gain/(loss) on investments.................
Total from investment operations........................................
Less distributions:
Dividends from net investment income....................................
Distributions from net realized gains...................................
Total distributions.....................................................
Net asset value, end of period..........................................
Total return (b)........................................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)....................................
Ratio of operating expenses to average net assets.......................
Ratio of net investment income to average net assets....................
Portfolio turnover rate.................................................
Ratio of operating expenses to average net
assets without waivers..................................................
</TABLE>
__________________________
<PAGE>
For More Information
More information about the Funds is available free upon request, including the
following:
Annual/Semi-Annual Reports
You will receive unaudited semi-annual reports and audited annual reports on a
regular basis from the Funds. In addition, you will also receive updated
prospectuses or supplements to this prospectus. In order to eliminate duplicate
mailings, the Funds will only send one copy of the above communications to (1)
accounts with the same primary record owner, (2) joint tenant accounts, (3)
tenant in common accounts and (4) accounts which have the same address.
Statement Of Additional Information
Provides more details about the Funds and their policies. A current Statement
of Additional Information is on file with the Securities and Exchange Commission
and is incorporated by reference (is legally considered part of this
prospectus).
To Obtain Information:
- --------------------------------------------------------------------------------
By telephone
1-800-438-5789
By mail
The Munder Funds
480 Pierce Street
Birmingham, MI 48009
On the Internet
Text-only versions of fund documents can be viewed online or downloaded from:
Securities and Exchange Commission
http://www.sec.gov
You can also obtain copies by visiting the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. (phone 1-800-SEC-0330) or by sending
your request and a duplicating fee to the Securities and Exchange Commission's
Public Reference Section, Washington, D.C. 20549-6009.
You may also find more information about the Funds on the Internet at:
http://www.munderfunds.com
- --------------------------------------------------------------------------------
<PAGE>
Class Y Shares
[Munder Logo]
Prospectus
October 26, 1999
The Munder Lifestyle Funds
All-Season Conservative Fund
All-Season Moderate Fund
All-Season Aggressive Fund
As with all mutual funds, the
Securities and Exchange Commission
has not approved or disapproved these
securities nor passed upon the
accuracy or adequacy of this
prospectus. It is a criminal
offense to state otherwise
<PAGE>
Table Of Contents
2 Risk/Return Summary
2 Goals, Principal Investment Strategies And Principal Risks
5 Who May Want To Invest
6 Performance
8 Fees And Expenses
9 More About The Funds
9 Glossary
11 Description Of The Underlying funds
13 Special Risks And Other Considerations
16 Additional Description of Investments And Investment Strategies
20 Your Investment
20 How To Reach The Funds
20 Purchasing Shares
21 Exchanging Shares
21 Redeeming Shares
21 Additional Policies For Purchases, Exchanges And Redemptions
22 Shareholder Privileges
23 Pricing of Fund Shares
23 Distributions
24 Federal Tax Considerations
24 Taxes On Distributions
24 Taxes On Sales Or Exchanges
24 Other Considerations
25 Management
25 Investment Advisor
25 Portfolio Manager
26 Financial Highlights
Back Cover For Additional Information
<PAGE>
Risk/Return Summary
- ------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goals and principal investment
strategies of the Funds and the principal risks of investing in the Funds. For
further information on these and the Funds' other investment strategies and
risks, please read the section entitled More About the Funds. Certain terms used
in this prospectus are defined in the Glossary.
An investment in the Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
- ------------------------------------------------------------------------------
Fund of Funds
Each Fund (sometimes referred to in this prospectus as a Lifestyle Fund) is a
fund of funds, which means that it invests almost all of its assets in other
mutual funds, rather than in individual securities. Each Lifestyle Fund invests
its assets in a variety of other Munder Funds, referred to as "underlying
funds."
The risks of investing in the Lifestyle Funds are dependent on which underlying
funds the Lifestyle Funds invest in, and to what extent. In addition, the
investment performance of each Lifestyle Fund is directly related to the
performance of the underlying funds in which it invests.
- ------------------------------------------------------------------------------
Conservative Fund
Goal
The Fund's goal is to provide current income with capital appreciation as a
secondary objective.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in fixed income securities.
The Fund may also invest a portion of its assets in underlying funds that invest
primarily in equity securities or money market instruments.
The advisor may periodically adjust the Fund's asset allocation among underlying
funds in response to changing economic and market conditions. The typical
allocation is expected to be: 70% Fixed Income Funds, 25% Equity Funds and 5%
Money Market Funds.
In the "More About the Funds" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
Among the principal risks of investing in the Fund are: Interest Rate Risk,
Credit Risk, Prepayment Risk and Stock Risk.
Because the mix of underlying funds held by the Fund can change from time to
time, the Fund may be subject to the following additional principal risks at
various times: Foreign Securities Risk, Currency Risk, Derivatives Risk, and
Small and Medium-Size Company Risk.
A description of the Fund's principal risks is provided below under "Summary of
Principal Risks." Further information about the Fund's investment strategies
and risks is provided under "More About the Funds."
- ------------------------------------------------------------------------------
Investment Approach of the Underlying Funds
. The underlying equity funds represented in each Lifestyle Fund vary from
growth to value styles of investing, from larger to smaller company stocks
and from domestic to international equities.
. The underlying fixed income funds reflect the advisor's core fixed income
philosophy: interest rate relationships, sector weighings and credit
analysis. Some exposure to international bonds may also be included.
- ------------------------------------------------------------------------------
2
<PAGE>
Moderate Fund
Goal
The Fund's goal is to provide high total return through both capital
appreciation and current income.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in equity securities and fixed
income securities.
The Fund may also invest a small portion of its assets in underlying money
market funds.
The advisor may periodically adjust the Fund's asset allocation among underlying
funds in response to changing economic and market conditions. The typical
allocation is expected to be: 60% Equity Funds, 35% Fixed Income Funds and 5%
Money Market Funds.
In the "More About the Funds" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
Among the principal risks of investing in the Fund are: Stock Risk, Interest
Rate Risk, Credit Risk and Prepayment Risk.
Because the mix of underlying funds held by the Fund can change from time to
time, the Fund may be subject to the following additional principal risks at
various times: Foreign Securities Risk, Currency Risk, Derivatives Risk, and
Small and Medium-Size Company Risk.
A description of the Fund's principal risks is provided below under "Summary of
Principal Risks." Further information about the Fund's investment strategies
and risks is provided under "More About the Funds."
Aggressive Fund
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in equity securities.
The Fund may also invest a portion of its assets in underlying funds that invest
primarily in fixed income securities or money market instruments.
The advisor may periodically adjust the Fund's asset allocation among underlying
funds in response to changing economic and market conditions. The typical
allocation is expected to be: 85% Equity Funds, 15% Fixed Income Funds and 0%
Money Market Funds.
In the "More About the Funds" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
Among the principal risks of investing in the Fund are: Market Risk, Interest
Rate Risk, Credit Risk and Prepayment Risk.
Because the mix of underlying funds held by the Fund can change from time to
time, the Fund may be subject to the following additional principal risks at
various times: Foreign Securities Risk, Currency Risk, Derivatives Risk, and
Small and Medium-Size Company Risk.
A description of the Fund's principal risks is provided below under "Summary of
Principal Risks." Further information about the Fund's investment strategies
and risks is provided under "More about the Funds."
3
<PAGE>
Summary of Principal Risks
MARKET RISK is the risk of loss because the value of the securities in which a
Fund invests may decline in response to general economic conditions. Price
changes may be temporary or last for extended periods. For example, stock prices
have historically risen and fallen in periodic cycles. In addition, the value of
a Fund's investments may decline if the particular companies the Funds invest in
do not perform well.
INTEREST RATE RISK is the risk of loss because increases in prevailing interest
rates will cause fixed-income securities held by an underlying fund to decline
in value. Longer term bonds are generally more sensitive to interest rate
changes than shorter term bonds. Generally, the longer the average maturity of
the bonds held by the underlying fund, the more the Fund's share price will
fluctuate in response to interest rate changes.
CREDIT (OR DEFAULT) RISK is the risk of loss because an issuer of a security may
default on its payment obligations. Also, an issuer may suffer adverse changes
in financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security and in shares of the
Fund. A change in the quality rating of a bond can affect the bond's liquidity
and make it more difficult for the underlying fund to sell.
PREPAYMENT RISK is the risk of loss because a Fund may experience losses when an
issuer exercises its right to pay principal on an obligation held by an
underlying fund (such as a mortgage-backed security) earlier than expected. This
may happen during a period of declining interest rates. Under these
circumstances, the underlying fund may be unable to recoup all of its initial
investment and will suffer from having to reinvest in lower yielding securities.
The loss of higher yielding securities and the reinvestment at lower interest
rates can reduce the Fund's income, total return and share price.
FOREIGN SECURITIES RISK is the risk of loss because investments by an underlying
fund in foreign securities may experience greater and more rapid changes in
value than U.S. securities. Foreign securities are generally more volatile and
less liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available about
foreign companies. Issuers of foreign securities are generally not subject to
the same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards.
CURRENCY RISK is the risk of loss because a decline in the value of foreign
currencies relative to the U.S. dollar will reduce the value of an underlying
fund's portfolio securities denominated in those currencies.
EMERGING MARKETS RISK. Investing in emerging market countries heightens the
risks presented by investing in foreign securities and currencies and may result
in loss to the Fund. Numerous emerging countries have recently experienced
serious, and potentially continuing, economic and political problems. Stock
markets in many emerging countries are relatively small and risky. Foreigners
are often limited in their ability to invest in, and withdraw assets from, these
markets. Additional restrictions may be imposed under emergency conditions.
DERIVATIVES RISK is the risk that loss may result from an underlying fund's use
of futures and options on futures contracts, options, forward currency exchange
contracts and other forms of derivatives. The main risk with derivatives is that
some types can amplify a gain or loss, potentially earning or losing
substantially more money than the actual cost of the derivative instrument.
MEDIUM-SIZE COMPANY STOCK RISK is the risk of loss because the stocks of medium-
size companies may be more susceptible to market downturns and their prices may
be more volatile than the stocks of larger companies.
SMALL COMPANY STOCK RISK is the risk of loss because the stocks of small
companies may have more risks than those of larger companies. Small companies
often have narrower markets and more limited managerial and financial resources
than larger, more established companies. As a result, they may be more sensitive
to changing economic conditions, which could increase the volatility of an
underlying fund's portfolio. In addition, small company stocks typically are
traded in lower volume making them more difficult to sell.
4
<PAGE>
SECTOR RISK is the risk of loss due to concentrating investments in a particular
industry sector. Adverse economic, business or political developments affecting
that industry sector could have a major effect on the value of the underlying
fund's investments.
Who May Want To Invest
The All-Season Conservative Fund may be appropriate for investors who:
. Seek current income.
. Seek long term growth without taking undue risk.
The All-Season Moderate Fund may be appropriate for investors who:
. Seek a balance of both capital appreciation and income.
The All-Season Growth Fund may be appropriate for investors who:
. Seek long-term growth of capital.
. Can tolerate short-term fluctuations in the financial markets.
5
<PAGE>
Performance
The bar charts and tables below give some indication of: (a) the variability of
the Funds' returns by showing changes in each Fund's performance from year to
year over the life of the Fund; and (b) the risk of an investment in a Fund by
showing how each Fund's average annual total returns for different calendar
periods over the life of the Fund compare to those of a broad based securities
market index.
When you consider this information, please remember a Fund's performance in past
years is not necessarily an indication of how a Fund will perform in the future.
Conservative Fund
[BAR CHART]
Calendar Year Total Return
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (4/3/97)
-------------- -------------
Class Y
[Index]
Moderate Fund
[BAR CHART]
Calendar Year Total Return
1998: _____%
_________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (4/3/97)
-------------- -------------
Class Y
[Index]
6
<PAGE>
Aggressive Fund
[BAR CHART]
Calendar Year Total Return
1998: _____%
________________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Return
(for the periods ended December 31, 1998)
Since
Inception
1 Year (4/3/97)
-------------- -------------
Class Y
[Index]
7
<PAGE>
Fees And Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold Class Y shares of the Funds. Please note that the following information
does not include fees that institutions may charge for services they provide to
you.
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases.................. None
Sales Charge (Load) Imposed on Reinvested Dividends............... None
Maximum Deferred Sales Charge (Load).............................. None
Redemption Fees................................................... None
Exchange Fees..................................................... None
Annual Fund Operating Expenses (expenses that are paid from Fund assets) as a %
of net assets
<TABLE>
<CAPTION>
Conservative Fund Moderate Fund Aggressive Fund
----------------- ------------- ---------------
<S> <C> <C> <C>
Management Fees(1) .35% .35% .35%
Other Expenses(1) [ ]% [ ]% [ ]%
---- ---- ----
Total Annual Fund Operating Expenses(1) [ ]% [ ]% [ ]%
==== ==== ====
</TABLE>
____________________________
(1) For the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of its management fees and voluntarily reimbursed certain operating
expenses. As a result of these voluntary fee waivers and expense
reimbursements, the actual Total Annual Fund Operating Expenses paid by the
Funds were as shown below. The advisor may terminate the fee waivers
and/or expense reimbursements at any time.
<TABLE>
<CAPTION>
Conservative Fund Moderate Fund Aggressive Fund
------------------ -------------- ----------------
<S> <C> <C> <C>
Management Fees(1) .35% .35% .35%
Other Expenses(1) [ ]% [ ]% [ ]%
---- ---- ----
Total Annual Fund Operating Expenses(1) [ ]% [ ]% [ ]%
==== ==== ====
</TABLE>
In addition to the expenses shown above, shareholders of the Funds will
indirectly bear their pro rata shares of the annual operating expenses of the
underlying funds. As a result, the investment returns of the Funds will be net
of the expenses of the Underlying Funds. Since the Funds invest in other Munder
Funds, as a shareholder you will pay a higher expense ratio than if you had
purchased shares of an underlying fund directly. The underlying funds' total
annual fund operating expense ratios for the fiscal year ended June 30, 1999
ranged form [ ]% to [ ]%.
Example
The examples are intended to help you compare the cost of investing in each Fund
to the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in each Fund for the time periods indicated. The examples also
assume that your investment has a 5% return each year, that each Fund's
operating expenses remain the same and that all dividends and distributions are
reinvested. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
Conservative Fund Moderate Fund Aggressive Fund
----------------- ------------- ---------------
<S> <C> <C> <C>
1 Year $ $ $
3 Years $ $ $
5 Years $ $ $
10 Years $ $ $
</TABLE>
8
<PAGE>
More About The Funds
- -------------------------------------------------------------------------------
This section describes the underlying funds in which the Funds may invest. It
also discusses the risks of investing in the Funds, which are dependent upon
which underlying funds the Funds invest in, and to what extent. Further,
included in this section is a chart that shows the maximum percentage of its
assets that a Fund may invest in each underlying fund. Please note that the
underlying funds may also invest in securities and are subject to restrictions
and additional risks which are described in the Statement of Additional
Information.
The Glossary below explains certain terms used throughout this prospectus.
Glossary
Types Of Securities
Equity securities include common stocks, preferred stocks, securities
convertible into common stocks, and rights and warrants to subscribe for the
purchase of common stocks. Equity securities may be listed on a stock exchange
or NASDAQ National Market System or unlisted. Warrants are rights to purchase
securities at a specified time at a specified price.
Fixed income securities are securities that pay interest at set times at either
fixed, floating or variable rates, or which are issued at a discount to their
principal amount instead of making periodic interest payments. Fixed income
securities include corporate bonds, debentures and other similar corporate debt
instruments, zero coupon bonds and variable amount master demand notes.
Convertible Securities. A convertible security is a bond or preferred stock that
may be converted (exchanged) into the common stock of the issuing company within
a specified time period for a specified number of shares. Convertible securities
offer the underlying funds a way to participate in the capital appreciation of
the common stock into which the securities are convertible, while earning higher
current income than is available from the common stock.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include U.S.
Treasury bills, U.S. Treasury notes, U.S. Treasury bonds and obligations of the
Federal Home Loan Corporation, Federal National Mortgage Association and
Government National Mortgage Association.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit of
banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Rating Agencies and Indices
Moody's is Moody's Investor Services, Inc.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
S&P is Standard & Poor's Rating Services.
S&P 500 is S&P's 500 Composite Stock Price Index, a widely recognized unmanaged
index of U.S. stock market activity.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Internal Revenue Code is the Internal Revenue Code of 1986, as amended.
NAV is the net asset value per share of a Fund. NAV is the value of a single
share of a Fund. Each Fund calculates NAV separately for each class. NAV is
calculated by (1) taking the current value of a Fund's total assets allocated to
a particular class of shares, (2) subtracting the liabilities and expenses
charged to that class (3) dividing that amount by the total number of shares of
that class outstanding.
9
<PAGE>
Asset Allocation Chart
The following chart shows the Fund's maximum investment (expressed as a
percentage of each Fund's assets) that each Fund may make in the underlying
funds.
<TABLE>
<CAPTION>
Conservative Fund Moderate Fund Aggressive Fund
------------------ -------------- ----------------
<S> <C> <C> <C>
Equity Funds
Equity Selection Fund......................................... 10% 20% 30%
Growth & Income Fund.......................................... 10% 15% 20%
Growth Opportunities Fund..................................... 10% 15% 20%
Index 500 Fund................................................ 20% 30% 40%
International Equity Fund..................................... 5% 10% 15%
Micro-Cap Equity Fund......................................... 10% 10% 10%
Multi-Season Growth Fund...................................... 20% 30% 40%
NetNet Fund................................................... 5% 5% 5%
Real Estate Equity Investment Fund............................ 10% 20% 25%
Small-Cap Value Fund.......................................... 10% 20% 30%
Small Company Growth Fund..................................... 20% 30% 40%
Framlington Emerging Markets Fund............................. 5% 10% 15%
Framlington Global Financial Services Fund.................... 5% 10% 15%
Framlington Healthcare Fund................................... 5% 5% 10%
Framlington International Growth Fund......................... 5% 10% 15%
Income Funds
Bond Fund..................................................... 80% 50% 30%
Intermediate Bond Fund........................................ 80% 50% 30%
International Bond Fund....................................... 30% 20% 10%
U.S. Government Income Fund................................... 60% 40% 20%
Money Market Funds
Cash Investment Fund.......................................... 15% 15% 15%
Money Market Fund............................................. 10% 10% 10%
U.S. Treasury Money Market Fund............................... 10% 10% 10%
</TABLE>
10
<PAGE>
Description of Underlying Funds
- --------------------------------------------------------------------------------
Equity Funds
- --------------------------------------------------------------------------------
Equity Selection Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities which the
advisor believes are undervalued compared to stocks of other companies in the
same industry. The Fund generally invests in companies with market
capitalizations of at least $1 billion. The Fund diversifies its assets by
industry in approximately the same weightings as those of the S&P 500.
Growth & Income Fund
The Fund's goal is to provide capital appreciation and current income. The Fund
pursues its goal by investing primarily in dividend-paying equity securities and
fixed income securities which are convertible into or exchangeable for common
stock. The advisor generally selects large, well-known companies that it
believes have favorable prospects for dividend growth and capital appreciation.
The Fund will seek to produce a current yield greater than the S&P 500.
Growth Opportunities Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in the equity securities of
companies with market capitalizations between $500 million and $10 billion. Its
style, which focuses on both growth prospects and valuation, is known as GARP
(Growth at a Reasonable Price) and seeks to produce attractive returns during
various market environments.
Index 500 Fund
The Fund's goal is to provide performance and income that is comparable to the
S&P 500. The S&P 500 is an index of 500 stocks which emphasizes large
capitalization companies. The Fund pursues its goal by normally holding the
securities of at least 400 of the stocks in the S&P 500. The Fund is managed
through the use of a "quantitative" investment approach and tries to mirror the
composition and performance of the S&P 500 through statistical procedures. The
Fund will try to achieve a correlation between the performance of its portfolio
and that of the S&P 500 of at least .95. A correlation of 1.0 would mean that
the changes in the Fund's price mirror exactly the changes in the S&P 500.
International Equity Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing primarily in foreign securities, including American
Depositary Receipts. The Fund mostly invests in mature markets, but may also
invest in emerging markets. The Fund emphasizes companies with a market
capitalization of at least $250 million.
Micro-Cap Equity Fund
The Fund's goal is to provide capital appreciation. The Fund pursues its goal by
investing at least 65% of its assets in equity securities of small
capitalization companies having market capitalizations within the range of the
companies in the Wilshire Micro-Cap Index. There is no limit on the length of
operating history for the companies in which the Fund may invest. The Fund may
invest without limit in initial public offerings of small capitalization
companies. In addition, the Fund may invest up to 35% of its assets in equity
securities of medium and larger capitalization companies, including initial
public offerings of such companies.
Multi-Season Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities. The Fund
generally invests in equity securities of companies with market capitalizations
over $1 billion. Its style, which focuses on both growth prospects and
valuation, is known as GARP (Growth at a Reasonable Price) and seeks to produce
attractive returns during various market environments.
NetNet Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities. The Fund
invests in companies which are engaged in research, design, development or
manufacturing activities related to the Internet or Intranet. Investments will
also be made in companies involved to a significant extent in the business of
distributing products, processes or services for or through the Internet or
Intranet.
11
<PAGE>
Real Estate Equity Investment Fund
The Fund's goal is to provide both capital appreciation and current income. The
Fund pursues its goal by investing at least 65% of its total assets in equity
securities of U.S. companies which are principally engaged in the real estate
industry or which own significant real estate.
Small-Cap Value Fund
The Fund's goal is to provide long-term capital appreciation, with income as a
secondary objective. The Fund pursues its goal by investing at least 65% of its
assets in equity securities of small capitalization companies having market
capitalizations within the range of the companies in the Russell 2000 Index.
The advisor will concentrate on companies that it believes are undervalued.
Small Company Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing, under normal market conditions, at least 65% of its
assets in equity securities of small capitalization companies with market
capitalizations below $1 billion.
Value Fund
The Fund's primary goal is to provide long-term capital appreciation. Its
secondary goal is to provide income. The Fund pursues its goals by investing
primarily in the equity securities of well-established companies with
intermediate to large capitalizations, which typically exceed $750 million. The
Fund will invest at least 65% of its assets in equity securities. The advisor
will focus on companies that it believes are undervalued.
Framlington Emerging Markets Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of
companies in emerging market countries, as defined by the World Bank, the
International Finance Corporation, the United Nations or the European Bank for
Reconstruction and Development. It may also invest in foreign securities of
companies located in countries with mature markets.
Framlington Global Financial Services Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of U.S.
and foreign companies which are principally engaged in the financial services
industry and companies providing services primarily within the financial
services industry. The Fund focuses specifically on companies which are likely
to benefit from growth or consolidation in the financial services industry. The
Fund may invest in securities of companies located in countries with mature
markets and in those with emerging markets.
Framlington Healthcare Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing in equity securities of companies providing healthcare and
medical services and products worldwide. Currently, most of these companies are
located in the United States. The Fund's investments may include foreign
securities of companies located in countries with mature markets and in those
with emerging markets.
Framlington International Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of issuers
located in at least three foreign countries. The Fund may invest in companies
located in countries with mature markets and in those with emerging markets.
- --------------------------------------------------------------------------------
Income Funds
- --------------------------------------------------------------------------------
Bond Fund
The Fund's primary goal is to provide a high level of current income. Its
secondary goal is capital appreciation. The Fund pursues its goals by investing
at least 65% of its total assets in a broad range of bonds and other fixed
income securities. The Fund's dollar-weighted average maturity will generally
range between six and fifteen years. The Fund will purchase only fixed income
securities that are rated investment grade or better, or if unrated, are of
comparable quality.
Intermediate Bond Fund
The Fund's goal 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 Fund pursues its goals by investing at least 65% of its total
assets in a broad range of
12
<PAGE>
bonds and other fixed income securities. The Fund's dollar-weighted average
maturity will generally range between three and eight years. The Fund will
purchase only fixed income securities that are rated investment grade or better,
or if unrated, are of comparable quality.
International Bond Fund
The Fund's goal is to realize a competitive total return through a combination
of current income and capital appreciation. The Fund pursues its goal by
investing at least 65% of its total assets in a broad range of bonds and other
fixed income securities of foreign issuers. The Fund will invest in the
securities of issuers in at least three foreign countries. The Fund's dollar-
weighted average maturity will generally range between three and fifteen years.
The Fund may invest a portion of its assets in domestic obligations, including
U.S. Government securities and obligations of domestic banks and corporations.
U.S. Government Income Fund
The Fund's goal is to provide high current income. The Fund pursues its goal by
investing at least 65% of its total assets in a broad range of U.S. Government
securities and repurchase agreements relating to such securities. The Fund's
dollar-weighted average maturity generally will range between six and fifteen
years.
- --------------------------------------------------------------------------------
Money Market Funds
- --------------------------------------------------------------------------------
Cash Investment Fund
The Fund's primary goal is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal. The Fund
pursues its goal by investing in a broad range of U.S. dollar-denominated money
market instruments. The Fund invests solely in U.S. dollar-denominated debt
securities with remaining maturities of 13 months or less and maintains an
average dollar-weighted portfolio maturity of 90 days or less.
Money Market Fund
The Fund's primary goal is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal. The Fund
pursues its goal by investing in a broad range of U.S. dollar-denominated money
market instruments. The Fund invests solely in U.S. dollar-denominated debt
securities with remaining maturities of 13 months or less and maintains an
average dollar-weighted portfolio maturity of 90 days or less.
U.S. Treasury Money Market Fund
The Fund's goal is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal. The Fund
pursues its goal by investing its assets solely in short-term bills and notes,
issued by the U.S. Treasury (including "stripped" securities) and in repurchase
agreements relating to such obligations. The Fund invests solely in U.S. dollar-
denominated debt securities with remaining maturities of 13 months or less and
maintains an average dollar-weighted portfolio maturity of 90 days or less.
Special Risks And Other Considerations
Derivative Risk. Some underlying funds may purchase certain "derivative"
instruments. Derivatives are financial contracts whose value is based on an
underlying security, a currency exchange rate, an interest rate or a market
index. Many types of instruments representing a wide range of potential risks
and rewards are derivatives, including futures contracts options on futures
contracts, options, swaps, forward currency contracts and structured debt
obligations (including collateralized mortgage obligations and other types of
asset-backed securities, "stripped" securities and various floating rate
instruments).
Investment Strategy. Derivatives can be used for hedging (attempting to
reduce risk by offsetting one investment position with another) or
speculation (taking a position in the hope of increasing return). The
underlying funds may, but are not required to, use derivatives for hedging
purposes or for the purpose of remaining fully invested or maintaining
liquidity. The underlying funds will not use derivatives for speculative
purposes.
Special Risks. The use of derivative instruments exposes a Fund to
additional risks and transaction costs. Risks of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the direction that a portfolio manager
anticipates; (2) imperfect correlation between the price of derivative
instruments and movements in the prices of the securities, interest rates
or currencies being
13
<PAGE>
hedged; (3) the fact that skills needed to use these strategies are
different than those needed to select portfolio securities; (4) the
possible absence of a liquid secondary market for any particular instrument
and possible exchange imposed price fluctuation limits, either of which may
make it difficult or impossible to close out a position when desired; (5)
the risk that adverse price movements in an instrument can result in a loss
substantially greater than the underlying fund's initial investment in that
instrument (in some cases, the potential loss is unlimited); (6)
particularly in the case of privately-negotiated instruments, the risk that
the counterparty will not perform its obligations, which could leave the
underlying fund worse off than if it had not entered into the position; and
(7) the inability to close out certain hedged positions to avoid adverse
tax consequences.
Foreign Investment Risk. Certain underlying funds may invest in foreign
securities. Foreign securities include investments in non-U.S. dollar-
denominated securities traded outside of the United States and dollar-
denominated securities of foreign issuers traded in the United States. Foreign
securities also include American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") and Global Depository Receipts ("GDRs"). ADRs are
U.S. dollar-denominated receipts representing shares of foreign-based
corporations. ADRs are issued by U.S. banks or trust companies, and entitle the
holder to all dividends and capital gains that are paid out on the underlying
foreign shares. EDRs and GDRs are receipts issued by non-U.S. financial
institutions that often trade on foreign exchanges. They represent ownership in
an underlying foreign or U.S. security and are generally denominated in a
foreign currency.
Special Risks. Foreign securities involve special risks and costs.
Investment in the securities of foreign governments involves the risk that
foreign governments may default on their obligations or may otherwise not
respect the integrity of their debt.
Investment in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of taxes by foreign governments. Foreign investments may
also involve risks associated with the level of currency exchange rates,
less complete financial information about the issuers, less market
liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls or
freezes on the convertibility of currency, or the adoption of other
governmental restrictions might adversely affect an investment in foreign
securities. Additionally, foreign issuers may be subject to less stringent
regulation, and to different accounting, auditing and recordkeeping
requirements.
Currency exchange rates may fluctuate significantly over short periods of
time causing an underlying fund's net asset value to fluctuate as well. A
decline in the value of a foreign currency relative to the U.S. dollar will
reduce the value of a foreign currency-denominated security. To the extent
that an underlying fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined risk.
The underlying funds' respective net currency positions may expose them to
risks independent of their securities positions.
Additional risks are involved when investing in countries with emerging
economies or securities markets. In general, the securities markets of
these countries are less liquid, are subject to greater price volatility,
have smaller market capitalizations and may have problems with securities
registration and custody. In addition, because the securities settlement
procedures are less developed in these countries, an underlying fund may be
required to deliver securities before receiving payment and may also be
unable to complete transactions during market disruptions. As a result of
these and other risks, investments in these countries generally present a
greater risk of loss to the Fund.
A further risk of investing in foreign securities is the risk that an
underlying fund may be adversely affected by the conversion of certain
European currencies into the Euro. This conversion, which is under way, is
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scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in world capital
markets and affect European capital markets in particular.
Investment Grade Credit Risk. A security is considered investment grade if, at
the time of purchase, it is rated:
. BBB or higher by S&P;
. Baa or higher by Moody's;
. BBB or higher by Duff & Phelps; or
. BBB or higher by Fitch.
A security will be considered investment grade if it receives one of the above
ratings, even if it receives a lower rating from other rating organizations.
Investment Strategy. Except as stated in the next section, fixed income
and convertible securities purchased by the underlying funds will generally
be rated at least investment grade. The underlying funds may also invest
in unrated securities if the advisor or sub-advisor believes they are
comparable in quality.
Special Risks. Although securities rated "BBB" by S&P, Duff & Phelps or
Fitch, or "Baa" by Moody's are considered investment grade, they have
certain speculative characteristics. Therefore, they may be subject to a
higher risk of default than obligations with higher ratings. 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 adviser or sub-advisor will consider such an
event in determining whether the underlying fund should continue to hold
the security.
Non-Investment Grade Credit Risk. Non-investment grade fixed income and
convertible securities are generally rated "BB" or below by S&P, Duff & Phelps
or Fitch, or "Ba" by Moody's.
Investment Strategy. Certain underlying funds may invest a portion of
their total assets in non-investment grade securities when the advisor or
sub-advisor determines that such securities are desirable in light of the
underlying funds' investment objectives and portfolio mix.
Special Risks. Non-investment grade securities (sometimes referred to as
"junk bonds") are subject to greater risk than investment grade securities.
In addition, the market value of these securities tends to be more
sensitive to individual corporate developments and to changes in interest
rates and other economic developments than higher-rated securities. They
generally present a higher degree of credit risks (default).
Investments in Financial Services Companies by Framlington Global Financial
Services Fund. Financial services companies are subject to extensive
governmental regulation which may limit both the financial commitments they can
make, and the interest rates and fees they can charge. Insurance companies may
be subject to severe price competition. Proposed legislation that would reduce
the separation between commercial and investment banking businesses, if enacted,
could significantly impact the industry and the Framlington Global Financial
Services Fund.
Investments in the Healthcare Industry by Framlington Healthcare Fund. The
Framlington Healthcare Fund will invest most of its assets in the healthcare
industry, which is particularly affected by rapidly changing technology and
extensive government regulation, including cost containment measures.
Investments in the Real Estate Industry by Real Estate Equity Investment Fund.
The Real Estate Equity Investment Fund will invest primarily in the real estate
industry and may invest more than 25% of its assets in any one sector of the
real estate industry. As a result, the Real Estate Equity Investment Fund will
be particularly vulnerable to declines in real estate prices and new
construction rates.
Short-Term Trading. The underlying funds may engage in short-term trading,
including initial public offerings.
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could detract
from a Fund's performance.
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Defensive Investing. Each Fund and underlying fund (except the Index 500 Fund)
may invest all or any portion of its assets in short-term obligations as a
temporary defensive measure in response to adverse market or economic
conditions.
Special Risks. If a Fund or one or more underlying funds adopts a
defensive strategy, the Fund may not achieve its investment objective.
Year 2000 Risk. Like other mutual funds, financial institutions, business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the advisor and the Funds' other
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. The advisor is taking steps that it
believes are reasonably designed to address year 2000 computer-related problems
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Funds' other major service providers.
Although there can be no assurances, the advisor believes that these steps will
be sufficient to avoid any adverse impact on any of the Funds. Similarly, there
can be no assurance that year 2000 issues will not affect the companies and
other issuers in which the underlying funds invest or affect worldwide markets
and economies.
Additional Description Of Investments And Investment Strategies Of The Funds And
Underlying Funds
Asset-Backed Securities. Asset-backed securities are debt securities backed by
mortgages, installment sales contract and credit card receivables. The
securities are sponsored by entities such as government agencies, banks,
financial companies and commercial or industrial companies. In effect, these
securities "pass through" the monthly payments that individual borrowers make on
their mortgage or other assets net of any fees paid to the issuers. Examples of
these include guaranteed mortgage pass-through certificates, collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").
Special Risks. In addition to credit and market risk, asset-backed
securities involve repayment risk because the underlying assets (loans) may
be prepaid at any time. The value of these securities may also change
because of actual or perceived changes in the creditworthiness of the
originator, the servicing agent, the financial institution providing the
credit support, or the counterparty. Like other fixed income securities,
when interest rates rise the value of an asset-backed security generally
will decline. However, when interest rates decline, the value of an asset-
backed security with prepayment features may not increase as much as that
of other fixed income securities. In addition, non-mortgage asset-backed
securities involve certain risks not presented by mortgage-backed
securities. Primarily, these securities do not have the benefit of the
same security interest in the underlying collateral.
Borrowing and Reverse Repurchase Agreements. The Funds and underlying funds can
borrow money from banks and enter into reverse repurchase agreements with banks
and other financial institutions. Reverse repurchase agreements involve the
sale of securities held by a Fund (or underlying fund) subject to the Fund's (or
underlying fund) agreement to repurchase them at a mutually agreed upon date and
price (including interest).
Investment Strategy. Each Fund (or underlying fund) may borrow money in an
amount up to 5% of its assets for temporary emergency purposes and in an
amount up to 33 1/3% of its assets to meet redemptions. This is a
fundamental policy which can be changed only by shareholders.
Special Risks. Borrowings and reverse repurchase agreements by a Fund (or
underlying fund) may involve leveraging. If the securities held by the
Fund (or underlying fund) decline in value while these transactions are
outstanding, the Fund's net asset value will decline in value by
proportionately more than the decline in value of the securities. In
addition, reverse repurchase agreements involve the risks that the interest
income earned by the Fund (or underlying fund) (from the investment of the
proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by the Fund (or underlying fund)
will decline below the price the Fund (or underlying fund) is obligated to
pay to repurchase the securities, and that the
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securities may not be returned to the Fund (or underlying fund).
Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation to exchange one currency for another on a future date at a specified
exchange rate.
Investment Strategy. Forward currency exchange contracts may be used for
hedging purposes and to help reduce the risks and volatility caused by
changes in foreign currency exchange rates. Foreign currency exchange
contracts will be used at the discretion of the advisor or sub-advisor, and
no underlying fund is required to hedge its foreign currency positions.
Special Risks. Forward currency contracts are privately negotiated
transactions, and can have substantial price volatility. When used for
hedging purposes, they tend to limit any potential gain that may be
realized if the value of an underlying fund's foreign holdings increases
because of currency fluctuations.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When an underlying fund purchases an option on
a futures contract, it has the right to assume a position as a purchaser or
seller of a futures contract at a specified exercise price during the option
period. When an underlying fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the option is
exercised.
Investment Strategy. The underlying funds may invest in futures contracts
and options on futures contracts on domestic or foreign exchanges or boards
of trade. These instruments may be used for hedging purposes, to maintain
liquidity to meet potential shareholder redemptions, to invest cash
balances or dividends, or to minimize trading costs.
An underlying fund will not purchase or sell a futures contract unless,
after the transaction, the sum of the aggregate amount of margin deposits
on its existing futures positions and the amount of premiums paid for
related options used for non-hedging purposes is 5% or less of the
underlying fund's total assets.
Special Risks. Futures contracts and related options present the following
risks: imperfect correlation between the change in market value of an
underlying fund's securities and the price of futures contracts and
options; the possible inability to close a futures contract when desired;
losses due to unanticipated market movements, which are potentially
unlimited; and the possible inability of the advisor or sub-advisor to
correctly predict the direction of securities prices, interest rates,
currency exchange rates and other economic factors.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. Each underlying fund may invest up to 15% of its net
assets in securities that are illiquid.
Special Risks. To the extent that an underlying fund invests in illiquid
securities, the underlying fund risks not being able to sell the securities
at the time and the price that it would like. The underlying fund may have
to lower the price, sell substitute securities or forego an investment
opportunity, each of which may cause a loss to the underlying fund.
Investment Companies. To the extent consistent with their respective investment
objectives and policies, the underlying funds may invest in securities issued by
other investment companies.
Investment Strategy. Investments by an underlying fund in other investment
companies will be subject to the limitations of the 1940 Act.
Special Risks. As a shareholder of another investment company, an
underlying fund would be subject to the same risks as any other investor in
that company. In addition, it would bear a proportionate share of any fees
and expenses paid by that company. These would be in addition to the
advisory and other fees paid directly by the underlying fund.
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Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. The underlying funds may write (sell) covered call
options, buy put options, buy call options and write secured put options
for hedging purposes. Options may relate to particular securities, foreign
or domestic securities indices, financial instruments or foreign
currencies.
Special Risks. The value of options can be highly volatile, and their use
can result in loss if the advisor or sub-advisor is incorrect in its
expectation of price fluctuations. The successful use of options for
hedging purposes also depends in part on the ability of the advisor or sub-
advisor to predict future price fluctuations and the degree of correlation
between the options and securities markets.
Repurchase Agreements. Repurchase agreements involve the purchase of securities
by a Fund or underlying fund subject to the seller's agreement to repurchase
them at a mutually agreed upon date and price.
Investment Strategy. Each Fund or underlying fund may enter into
repurchase agreements with banks and broker-dealers that are deemed to be
creditworthy by the advisor or sub-advisor.
Special Risks. If the seller defaults or declares bankruptcy, a Fund or
underlying fund may suffer if the proceeds from the sale of the underlying
securities and other collateral are less than the repurchase price or if
there are delays in selling the underlying securities or collateral.
Securities Lending. In order to generate additional income, each underlying
fund may lend securities on a short-term basis to qualified institutions. By
reinvesting any cash collateral it receives in these transactions, the
underlying fund could realize additional income gains or losses.
Investment Strategy. Securities lending may represent no more than 25% of
the value of an underlying fund's total assets (including the loan
collateral).
Special Risks. The main risk when lending securities is that if the
borrower fails to return the securities or the invested collateral has
declined in value, the underlying fund could lose money.
Stripped Securities. These securities are issued by the U.S. Government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include participations in trusts that hold U.S. Treasury or agency
securities.
Special Risks. Stripped securities are very sensitive to changes in
interest rates and to the rate of principal repayments. A rapid or
unexpected increase in mortgage prepayments could severely depress the
price of certain stripped mortgage-backed securities and adversely affect
an underlying fund's total returns.
Temporary Investments. Short-term obligations refer to U.S. Government
securities, high-quality money market instruments and repurchase agreements with
maturities of 13 months or less. Generally, these obligations are purchased to
provide stability and liquidity to a Fund or underlying fund.
Investment Strategy. Each Fund or underlying fund may invest a portion of
its assets in short-term obligations pending investment or to meet
anticipated redemption requests.
Special Risks. A Fund or underlying fund may not achieve its investment
objective when its asset are invested in short-term obligations.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
instruments include variable amount master demand notes.
Special Risks. Variable and floating rate instruments are subject to the
same risks as fixed income investments, particularly
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interest rate and credit risk. Because there is no active secondary market
for certain variable and floating rate instruments, they may be more
difficult to sell if the issuer defaults on its payment obligations or
during periods when an underlying fund is not entitled to exercise its
demand rights. As a result, the underlying fund could suffer a loss with
respect to these instruments.
When - Issued Securities, Delayed Delivery Transactions and Forward Commitments.
A purchase of "when-issued" securities refers to a transaction made
conditionally because the securities, although authorized, have not yet been
issued. A delayed delivery or forward commitment transaction involves a
contract to purchase or sell securities for a fixed price at a future date
beyond the customary settlement period.
Special Risks. Purchasing or selling securities on a when-issued, delayed
delivery or forward commitment basis involves the risk that the value of
the securities may change by the time they are actually issued or
delivered. These transactions also involve the risk that the seller may
fail to deliver the security or cash on the settlement date.
Zero Coupon Bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity.
Special Risks. The market prices of zero coupon bonds generally are more
volatile than the market prices of interest-bearing securities and are
likely to respond to a greater degree to changes in interest rates than
interest-bearing securities having similar maturities and credit quality.
An underlying fund's investments in zero coupon bonds may require the
underlying fund to sell some of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements.
Disclaimers. The Index 500 Fund is not sponsored, endorsed, sold or promoted by
S&P, nor does S&P guarantee the accuracy and/or completeness of the S&P 500
Index or any data included therein. S&P makes no warranty, express or implied,
as to the results to be obtained by the Fund, owners of the Fund, any person or
any entity from the use of the S&P 500 Index or any data included therein. S&P
makes no express or implied warranties and expressly disclaims all such
warranties of merchantability or fitness for a particular purpose for use with
respect to the S&P Index or any data included therein.
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Your Investment
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This section describes how to do business with the Funds.
How To Reach The Funds
By telephone: 1-800-438-5789
Call for account information.
By mail: The Munder Funds
480 Pierce Street
Birmingham, MI 48009
Purchasing Shares
Who May Purchase Shares
The following persons may purchase shares of the Funds:
. fiduciary and discretionary accounts of institutions;
. institutional investors (including: banks; savings institutions;
credit unions and other financial institutions; pension, profit
sharing and employee benefit plans and trusts; insurance companies;
investment companies; investment advisers and broker-dealers acting
for their own accounts or for the accounts of their clients);
. directors, trustees, officers and employees of the Munder Funds, the
advisor and the Funds' distributor;
. the advisor's investment advisory clients; and
. family members of employees of the advisor.
Each Fund also issues other classes of shares, which have different sales
charges, expense levels and performance. Call (800) 438-5789 to obtain more
information about the Funds' other classes of shares.
Purchase Price of Shares
Class Y shares of the Funds are sold at the NAV next determined after a purchase
order is received in proper form.
Broker-dealers (other than the Funds' distributor) may charge you a fee for
shares you purchase through them.
Policies for Purchasing Shares
Minimum initial investment
The minimum initial investment by fiduciary and discretionary accounts of
institutions and by institutional investors is $500,000. Other investors are not
subject to any minimum.
There is no minimum for subsequent investments.
Timing of orders
Purchase orders must be received by the Funds' distributor or transfer agent
before the close of regular trading on the New York Stock Exchange (normally,
4:00 p.m. Eastern time).
Methods for Purchasing Shares
You can purchase Class Y shares through the Fund's transfer agent or through the
Fund's distributor through arrangements with a broker-dealer or financial
institution.
. Through a Financial Institution. You may purchase shares through a
financial institution through procedures established with that institution.
Confirmations of share purchases will be sent to the institution.
. By Mail. You may open an account directly through the Fund's transfer agent
by completing, signing and mailing an account application form and a check
or other negotiable bank draft (payable to The Munder Funds) to: The Munder
Funds, c/o First Data Investor Services Group, P.O. Box 60428, King of
Prussia, Pennsylvania 19406-0428. You can obtain an account application
form by calling (800) 438-5789. For additional investments, send a letter
stating the Fund and share class you wish to purchase, your name and your
account number with a check for $50 or more to the address listed above.
[We do not generally accept third-party checks.]
. By Wire. You may make additional investments in the Funds by wire. Wire
instructions must state the Fund name, share class, your registered name
and your account number. Your bank wire should be sent through the Federal
Reserve Bank Wire System to:
Boston Safe Deposit and Trust Company
Boston, MA
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ABA# 011001234
DDA# 16-798-3
Account No.:
Note that banks may charge fees for transmitting wires.
. You may purchase shares through the Automatic Investment Plan.
Exchanging Shares
Policies for Exchanging Shares
. You may exchange your Fund shares for Class Y shares of other Munder Funds
based on their relative net asset values.
. You must meet the minimum purchase requirements for the Munder Fund that
you purchase by exchange.
. A share exchange may be a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund
you wish to purchase by exchange. You can obtain a prospectus for any
Munder Fund by contacting your broker or the Munder Funds at (800) 438-
5789.
. Brokers may charge you a fee for handling exchanges.
. We may modify or terminate the exchange privilege at any time. You will be
given notice of any material modifications except where notice is not
required.
[Methods for Exchanging Shares]
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the redemption
request in proper form.
Methods for Redeeming Shares
. [You may redeem shares of all Funds through your [broker-dealer] or
financial institution.]
. [Others Methods]
Policies for Redeeming Shares
. Shares held by an institution on behalf of its customers must be redeemed
in accordance with instructions and limitations pertaining to the account
at that institution.
. If we receive a redemption order for a Fund before 4:00 p.m. (Eastern
time), we will normally wire payment to the redeeming institution on the
next business day.
Additional Policies For Purchases, Exchanges And Redemptions
. We consider requests to be in "proper form" when all required
documents are properly completed, signed and received.
. The Funds reserve the right to reject any purchase order.
. At any time, the Funds may change any of their purchase, redemption or
exchange practices, and may suspend the sale of their shares.
. The Funds may delay sending redemption proceeds for up to seven days,
or longer if permitted by the Securities and Exchange Commission.
. To limit the Funds' expenses, we do not currently issue share
certificates.
. If you are redeeming recently purchased shares, your redemption
request may not be honored until your check or [electronic
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transaction] has cleared. This may delay your transaction for up to 15
days.
. A Fund may temporarily stop redeeming shares if:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists and the Fund cannot sell its assets or
accurately determine the value of its assets; or
. the Securities and Exchange Commission orders the Fund to suspend
redemptions.
. If accepted by a Fund, investors may purchase shares of the Fund with
securities which the Fund may hold. The advisor will determine if the
securities are consistent with the Funds objectives and policies. If
accepted, the securities will be valued the same way the Fund values
portfolio securities it already owns. Call the Funds at (800) 438-5789
for more information.
. The Funds reserve the right to make payment for redeemed shares wholly
or in part by giving the redeeming shareholder portfolio securities.
The shareholder may pay transaction costs to dispose of these
securities.
. We record all telephone calls for your protection and take measures to
identify the caller. As long as the Fund's transfer agent takes
reasonable measures to authenticate telephone requests on an
investor's account, neither the Funds, the Fund's distributor nor the
transfer agent will be held responsible for any losses resulting from
unauthorized transactions.
. We may redeem your account if its value falls below $250 as a result
of redemptions (but not as a result of a decline in net asset value).
You will be notified in writing and allowed 60 days to increase the
value of your account to the minimum investment level.
. If you purchased shares directly through the Funds' transfer agent,
the transfer agent will send you confirmations of the opening of an
account and of all subsequent purchases, exchanges or redemptions in
the account. Confirmations of transactions effected through an
institution will be sent to the institution.
. Financial institutions are responsible for transmitting orders and
payments for their customers on a timely basis.
Shareholder Privileges
Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in a Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Funds at (800) 438-5789. The minimum pre-authorized investment amount
is $50. You may discontinue the AIP at any time. We may discontinue the AIP on
30 days' written notice to you.
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Pricing Of Fund Shares
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Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV is the value of a single share of a Fund. Each Fund calculates NAV
separately for each class. NAV is calculated by (1) taking the current value of
a Fund's total assets allocated to a particular class of shares, (2) subtracting
the liabilities and expenses charged to that class (3) dividing that amount by
the total number of shares of that class outstanding.
The Funds calculate NAV as of the close of business on the New York Stock
Exchange, normally 4:00 p.m. (Eastern time). If the New York Stock Exchange
closes early, the Funds will accelerate calculation of NAV and transaction
deadlines to that time.
The NAV of each underlying fund is generally based on the market value of the
securities held in the underlying fund. If market values are not available, the
fair value of securities is determined in good faith by, or using procedures
approved by, the boards of directors/trustees of the underlying funds.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. An underlying fund values foreign
securities at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the New York Stock Exchange. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the New York Stock Exchange. Foreign securities quoted in foreign
currencies are translated into U.S. dollars at current rates. Occasionally,
events that affect these values and exchange rates may occur between the times
at which they are determined and the closing of the New York Stock Exchange. If
the advisor believes that such events materially affect the value of portfolio
securities, these securities may be valued at their fair market value as
determined in good faith by, or using procedures approved by, the underlying
funds' boards of directors/trustees.
Distributions
- --------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of a Fund's net income and
gains on its investments. Each Fund passes substantially all of its earnings
along to its shareholders as distributions. When a Fund earns dividends from
stocks and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a capital gain distribution.
Each Fund pays dividends, if any, at least annually.
Each Fund distributes its net realized capital gains, if any, at least annually.
It is possible that a Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
Each Fund will pay distributions in additional shares of the same class of that
Fund. If you wish to receive distributions in cash, either, indicate this
request on your account application form or notify the Funds at (800) 438-5789.
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Federal Tax Considerations
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Investments in a Fund may have tax consequences that you should consider. This
section briefly describes some of the more common federal tax consequences. A
more detailed discussion about the tax treatment of distributions from the Funds
and about other potential tax liabilities, including backup withholding for
certain taxpayers and about tax aspects of dispositions of shares of the Funds,
is contained in the Statement of Additional Information. You should consult your
tax adviser about your own particular tax situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. Shareholders not
subject to tax on their income generally will not be required to pay any tax on
distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held the
portfolio securities it sold. It does not depend on how long you held your Fund
shares.
Distributions are generally taxable to you in the year in which they are paid,
with one exception: distributions declared in October, November or December, but
not paid until January of the following year, are taxed as though they were paid
on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Funds will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Taxes On Sales Or Exchanges
If you sell shares of a Fund or exchange them for shares of another Munder Fund,
you generally will be subject to tax on any taxable gain. Taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale or an exchange will result in a taxable
gain.
Other Considerations
If you buy shares of a Fund just before the Fund makes any distribution, you
will pay the full price for the shares then receive back a portion of the money
you just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law, the
Funds must withhold a portion of your distributions and redemption proceeds to
pay federal income taxes.
24
<PAGE>
Management
- --------------------------------------------------------------------------------
Investment Advisor
Munder Capital Management, 480 Pierce Street, Birmingham, Michigan 48009 is the
investment advisor of each Fund and each underlying fund except Index 500 Fund
and International Equity Fund. The advisors provide overall investment
management for the Funds. As of September 30, 1999, the advisor [and its
affiliates] had approximately $__ billion in assets under management, of which
$__ billion were invested in equity securities, $__ billion were invested in
money market or other short-term instruments, $__ billion were invested in other
fixed income securities, and $__ billion in non-discretionary assets.
World Asset Management, L.L.C. ("World"), 255 East Brown Street, Birmingham,
Michigan 48009, is the investment advisor of Index 500 Fund and International
Equity Fund. World is a wholly-owned subsidiary of the advisor. As of September
30, 1999, World had approximately $__ in assets under management.
Framlington Overseas Investment Management Limited, a subsidiary of the advisor,
is the sub-advisor of the Framlington Emerging Markets Fund, Framlington Global
Financial Services Fund, Framlington Healthcare Fund and Framlington
International Growth Fund.
During the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of the advisory fees for each Fund. As a result, the payments shown
above for the Funds were less than the contractual advisory fees of .35% of each
Fund's average daily net assets.
The advisor may, from time to time, make payments to banks, broker-dealers or
other financial institutions for certain services to the Funds and/or their
shareholders, including sub-administration, sub-transfer agency and shareholder
servicing. The advisor may make such payments out of its own resources and there
are no additional costs to the Funds or their shareholders.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee from
the Funds for providing shareholder services to its customers who own shares of
the Funds.
Portfolio Manager
The portfolio manager for the Funds is Gerald Seizert. Mr. Seizert, Chief
Investment Officer - Equities of the advisor has managed the Funds since they
commenced operations.
25
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand each
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in a Fund (assuming reinvestment of all dividends and
distributions). The information has been audited by Ernst & Young LLP,
independent accountants, whose report, along with each Fund's financial
statements, are included in the annual reports of the Funds, and are
incorporated by reference into the Statement of Additional Information. You may
obtain the annual reports without charge by calling (800) 438-5789.
<TABLE>
<CAPTION>
Conservative Fund
-------------------------------
Year Year Period
Ended Ended Ended
6/30/99 6/30/98 6/30/97
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.........
Income from investment operations:
Net investment income........................
Net realized and unrealized gain/ (loss)
on investments...............................
Total from investment operations.............
Less distributions:
Dividends from net investment income.........
Distributions from net realized gains........
Total distributions..........................
Net asset value, end of period...............
Total return (b).............................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's).........
Ratio of operating expenses to average
net assets...................................
Ratio of net investment income to average
net assets...................................
Portfolio turnover rate......................
Ratio of operating expenses to average
net assets without waivers...................
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Moderate Fund
------------------------------
Year Year Period
Ended Ended Ended
6/30/99 6/30/98 6/30/97
-------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.......
Income from investment operations:
Net investment income......................
Net realized and unrealized gain/(loss)
on investments.............................
Total from investment operations...........
Less distributions:
Dividends from net investment income.......
Distributions from net realized gains......
Total distributions........................
Net asset value, end of period.............
Total return (b)...........................
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's).......
Ratio of operating expenses to
average net assets.........................
Ratio of net investment income to
average net assets.........................
Portfolio turnover rate....................
Ratio of operating expenses
to average net assets without waivers......
________________
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Aggressive Fund
--------------------------
Year Year Period
Ended Ended Ended
6/30/99 6/30/98 6/30/97
-------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period...........
Income from investment operations:
Net investment income..........................
Net realized and unrealized gain/(loss) on
investments....................................
Total from investment operations...............
Less distributions:
Dividends from net investment income...........
Distributions from net realized gains..........
Total distributions............................
Net asset value, end of period.................
Total return (b)...............................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...........
Ratio of operating expenses to average net
assets.........................................
Ratio of net investment income to average net
assets.........................................
Portfolio turnover rate........................
Ratio of operating expenses to average net
assets without waivers.........................
</TABLE>
28
<PAGE>
For More Information
More information about the Funds is available free upon request, including the
following:
Annual/Semi-Annual Reports
You will receive unaudited semi-annual reports and audited annual reports on a
regular basis from the Funds. In addition, you will also receive updated
prospectuses or supplements to this prospectus, In order to eliminate duplicate
mailings, the Funds will only send one copy of the above communications to (1)
accounts with the same primary record owner, (2) joint tenant accounts, (3)
tenant in common accounts and (4) accounts which have the same On the Internet
address.
Statement of Additional Information
Provides more details about the Funds and their policies. A current
Statement of Additional Information is on file with the Securities
and Exchange Commission and is incorporated by reference (is legally
considered part of this prospectus).
To Obtain Information
By telephone
1-800-438-5789
By mail
The Munder Funds
480 Pierce Street
Birmingham, MI 48009
On the Internet
Text-only versions of fund documents can be viewed online or download from:
Securities and Exchange Commission
http://www.sec.gov
You can also obtain copies by visiting the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. ( phone 1-800-SEC-0330) or by sending
your request and a duplicating fee to the Securities and Exchange Commission's
Public reference Section, Washington, D.c. 20549-6009.
You may also find more information about the Funds on the Internet at:
http://www.munderfunds.com
<PAGE>
Michigan Municipal Shares
[Munder Logo]
Prospectus
October 26, 1999
The Munder Short Term Treasury Fund
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved these securities nor passed upon
the accuracy or adequacy of this prospectus.
It is a criminal offense to state otherwise.
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
<C> <S>
2 Risk/Return Summary
2 Goal
2 Principal Investment Strategy
2 Principal Risks
2 Who May Want To Invest
3 Performance
4 Fees And Expenses
5 More About The Fund
6 Your Investment
6 How To Reach The Fund
6 Purchasing Shares
7 Redeeming Shares
7 Additional Policies For Purchases And Redemptions
9 Pricing of Fund Shares
9 Distributions
10 Federal Tax Considerations
10 Management
10 Investment Advisor
10 Portfolio Manager
11 Financial Highlights
Back Cover For Additional Information
</TABLE>
<PAGE>
Risk/Return Summary
- --------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goal and principal investment
strategy of the Munder Short Term Treasury Fund and the principal risks of
investing in the Fund. For further information on the Fund's principal and other
investment strategies and risks, please read the section entitled "More About
The Fund".
Goal
The Fund's goal is to provide investors with an enhanced money market return
consistent with capital preservation.
Principal Investment Strategy
The Fund pursues its goal by investing all of its assets in U.S. Treasury
securities and in repurchase agreements collateralized by U.S. Treasury
securities.
The Fund's dollar-weighted average portfolio maturity will usually not exceed
two years.
Principal Risks
All investments carry some degree of risk which will affect the value of the
Fund's portfolio investments, its investment performance and the price of its
shares.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other governmental agency.
The Fund is not a money market fund and although it seeks to maintain minimum
fluctuation of principal value, you may lose money if you invest in the Fund.
The Fund's principal investment risk is: Interest Rate Risk. In general, prices
of U.S. Treasury securities, like other fixed income securities, fall when
interest rates rise. Generally, the longer the average maturity of the
securities in the Fund, the more the Fund's share price will fluctuate in
response to interest rate changes.
Who May Want To Invest
The Fund may be appropriate for investors looking for a high level of income and
liquidity.
The Fund alone cannot provide a balanced investment program.
2
<PAGE>
Performance
The bar chart and tables below give some indication of the risk of an investment
in the Fund by showing how the Fund's performance compares with a broad based
securities market index.
When you consider this information, please remember the Fund's performance in
past years is not necessarily an indication of how the Fund will perform in the
future.
[BAR CHART]
Calendar Year Total Return
1998: _____%
- ------------------
Year-to-date through September 30, 1999: _____%
<TABLE>
<S> <C> <C>
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
</TABLE>
Average Annual Total Returns
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
[Since
1 Year Inception
(4/2/97)]
- ---------------------- ------------ -----------------
<S> <C> <C>
Michigan Municipal
Shares
[Index]
</TABLE>
3
<PAGE>
Fees And Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. Please note that the following information does not
include fees that institutions may charge for services they provide to you.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases....................... None
Sales Charge (Load) Imposed on Reinvested Dividends.................... None
Maximum Deferred Sales Charge (Load)................................... None
Redemption Fees........................................................ None
Exchange Fees.......................................................... None
</TABLE>
Annual Fund Operating Expenses (expenses that are paid from Fund assets)
as a % of net assets
<TABLE>
<S> <C>
Management Fees .25%
Shareholder Servicing Fees None
Other Expenses(1) [ ]%
--------
Total Annual Fund Operating Expenses (1) [ ]%
========
</TABLE>
- -------------------------------
(1) The advisor has voluntarily agreed to reimburse certain operating expenses
to keep the Fund's operating expenses at a specified amount. For the
fiscal year ended June 30, 1999, as a result of the advisor's expense
reimbursements, the actual Annual Fund Operating Expenses paid by the Fund
were:
<TABLE>
<S> <C>
Management Fees .25%
Shareholder Servicing Fees None
Other Expenses [ ]%
--------
Total Annual Fund Operating Expenses [ ]%
========
</TABLE>
The advisor may terminate the expense reimbursements at any time.
Example
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated. The example also
assumes that your investment has a 5% return each year, that the Fund's
operating expenses remain the same and that all dividends and distributions are
reinvested. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $
3 Years $
5 Years $
10 Years $
</TABLE>
4
<PAGE>
More About The Fund
- -------------------------------------------------------------------------------
The Fund's principal investment strategy and risks are summarized above in the
section entitled "Risk/Return Summary". A more complete description of the
Fund's investments and strategies and their associated risks is provided below.
The Fund may also use other strategies and is subject to further restrictions
and risks which are described in the Statement of Additional Information.
U.S. Treasury Securities. Securities purchased by the Fund are direct
obligations of the U.S. Treasury and are guaranteed by the full faith and credit
of the U.S. Government. These securities consist of U.S. Treasury bills, U.S.
Treasury notes and U.S. Treasury bonds. U.S. Treasury securities differ in their
interest rates, maturities and times of issuance. Treasury bills have initial
maturities of one year or less, Treasury notes have initial maturities of one to
ten years and Treasury bonds generally have initial maturities of greater than
ten years.
Repurchase Agreements. The Fund may buy U.S. Treasury securities from financial
institutions with the understanding that the seller will buy them back with
interest at a later date. If the seller is unable to honor its commitment to
repurchase the securities, the Fund could lose money.
When - Issued Securities, Delayed Delivery Transactions and Forward Commitments.
A purchase of "when-issued" securities refers to a transaction made
conditionally because the securities, although authorized, have not yet been
issued. A "delayed delivery" or "forward commitment" transaction involves a
contract to purchase or sell securities for a fixed price at a future date
beyond the customary settlement period. Purchasing or selling securities on a
when-issued, delayed delivery or forward commitment basis involves the risk that
the value of the securities may change by the time they are actually issued or
delivered. These transactions also involve the risk that the seller may fail to
deliver the security or cash on the settlement date.
Zero Coupon Securities. These are U.S. Treasury notes which have been stripped
of their unmatured interest coupons and receipts. These securities are issued at
a discount from their face value because interest payments are typically
postponed until maturity. The market prices of zero coupon U.S. Treasury
securities generally are more sensitive to changes in interest rates than
comparable securities that make current distributions of interest.
Securities Lending. The Fund may seek additional income by lending portfolio
securities to qualified institutions. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains or
losses. If the borrower fails to return the securities and the invested
collateral has declined in value, the Fund could lose money.
Short-Term Trading. The Fund may engage in short-term trading. A high rate of
portfolio turnover (100% or more) could produce higher transaction costs and
taxable distributions, which could detract from the Fund's performance. The
Fund's historical portfolio turnover rates are shown in the Financial
Highlights.
Year 2000 Risk. Like other mutual funds, financial institutions, business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the advisor and the Fund's other
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. The advisor is taking steps that it
believes are reasonably designed to address year 2000 computer-related problems
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Fund's other major service providers.
Although there can be no assurances, the advisor believes that these steps will
be sufficient to avoid any adverse impact on the Fund. Similarly, there can be
no assurance that year 2000 issues will not affect the issuers in which the Fund
invests or affect worldwide markets and economies.
Michigan Municipal League. The Michigan Municipal League is a non-profit
Michigan corporation whose purpose is the improvement of municipal government
and administration through cooperative effort. Its principal offices are located
at 1675 Green Street, Ann Arbor, Michigan. Its mailing address is P.O. Box 1487,
Ann Arbor, Michigan 48106-1487. The Michigan Municipal League does not sponsor
or provide services to the Fund.
5
<PAGE>
Your Investment
- -------------------------------------------------------------------------------
This section describes how to do business with the Fund.
How To Reach The Fund
By telephone: 1-800-438-5789
Call for account information
By mail: The Munder Funds
480 Pierce Street
Birmingham, MI 48009
Purchasing Shares
Who May Purchase Shares
The following persons may purchase shares of the Fund:
Michigan Municipal shares of the Fund are available exclusively to governmental
entities which are governed by Michigan Public Act 20 for investment purposes
and are full members or associate members (full service or limited) of the
Michigan Municipal League.
The Fund also issues Class Y shares, which are available to limited types of
investors. Call (800) 438-5789 to obtain more information concerning the Fund's
Class Y shares.
Purchase Price of Shares
Michigan Municipal shares of the Fund are sold at the net asset value per share
(NAV) next determined after a purchase order is received in proper form.
Policies for Purchasing Shares
Investment Minimums
The minimum initial investment is $[500,000].
Timing of orders
Purchase orders must be received by the Fund's transfer agent before the close
of regular trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern
time).
You should be aware that broker-dealers (other than the Fund's distributor) may
charge investors additional fees if shares are purchased through them.
Methods for Purchasing Shares
Investors may purchase shares through the Fund's transfer agent or by calling
(800) 438-5789.
Prior to your purchase of Michigan Municipal shares, a copy of your investment
guidelines or policies must be reviewed by the advisor to confirm that the Fund
is a permissible investment under your guidelines or policies. Please call the
Fund at (800) 438-5789 to arrange for this review. Any change or modification to
your investment guidelines or policies must be reviewed by the advisor to
confirm that the Fund remains a permissible investment.
. By Mail. You may open an account by completing, signing and mailing an
account application form and a check or other negotiable bank draft (payable
to The Munder Funds) to: The Munder Funds, c/o First Data Investor Services
Group, P.O. Box 60428, King of Prussia, Pennsylvania 19406-0428. For
additional investments, send a letter stating the Fund and share class you
wish to purchase, your name and your account number with a check to the
address listed above.
. By Wire. To open a new account, you should call the Fund at (800) 438-5789 to
obtain an account number and complete wire instructions prior to wiring any
funds. Within seven days of purchase, you must send a completed account
application form containing your certified taxpayer identification number to
the Fund's transfer agent at The Munder Funds, c/o First Data Investor
Services Group, P.O. Box 60428, King of Prussia, Pennsylvania 19406-0428.
Wire instructions must state the Fund name, share class, your registered name
and your account number. Your bank wire should be sent through the Federal
Reserve Bank Wire System to:
6
<PAGE>
Boston Safe Deposit and Trust Company
Boston, MA
ABA# 011001234
DDA# 16-798-3
Account No.:
You may make additional investments at any time using the wire procedures
described above. Note that banks may charge fees for transmitting wires.
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the redemption
request in proper form.
Methods for Redeeming Shares
You may redeem shares of the Fund in several ways:
. By Mail. You may mail your redemption request to: The Munder Funds, c/o First
Data Investor Services Group, P.O. Box 60428, King of Prussia, Pennsylvania
19406-0428. The redemption request should state the name of the Fund, share
class, account number, amount of redemption, account name and where to send
the proceeds. [All account owners must sign.]
. By Telephone. You can redeem your shares by calling the Fund at (800) 438-
5789. There is no minimum requirement for telephone redemptions.
If you are redeeming at least $1,000 of shares and you have authorized
expedited redemption on your account application form, simply call the Fund
prior to 4:00 p.m. (Eastern time), and request the funds be mailed to the
commercial bank or registered broker-dealer you designated on your account
application form. We will send your redemption amount to you on the next
business day. We reserve the right at any time to change or impose fees for
this expedited redemption procedure.
During periods of unusual economic or market activity, you may experience
difficulties or delays in effecting telephone redemptions. In such cases you
should consider placing your redemption request by mail.
Additional Policies For Purchases And Redemptions
. We consider requests to be in "proper form" when all required documents
are properly completed, signed and received.
. The Fund reserves the right to reject any purchase order.
. We may redeem your account if its value falls below $250 as a result of
redemptions (but not as a result of a decline in net asset value). You
will be notified in writing and allowed 60 days to increase the value of
your account to the minimum investment level.
. At any time, the Fund may change any of its purchase or redemption
procedures, and may suspend the sale of its shares.
. The Fund may delay sending redemption proceeds for up to seven days, or
longer if permitted by the Securities and Exchange Commission.
. To limit the Fund's expenses, we do not currently issue share
certificates.
. We will typically send redemption amounts to you within seven business
days after you redeem shares. We may hold redemption amounts from the
sale of shares you purchased by check until the purchase check has
cleared, which may be as long as 15 days.
. The Fund may temporarily stop redeeming shares if:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists and the Fund cannot sell its assets or accurately
determine the value of its assets;
. the Securities and Exchange Commission orders the Fund to suspend
redemptions.
. If accepted by the Fund, investors may purchase shares of the Fund with
securities that the Fund may hold. The advisor will determine if the
securities are consistent
7
<PAGE>
with the Fund's objectives and policies. If accepted, the securities
will be valued the same way the Fund values portfolio securities it
already owns. Call the Fund at (800) 438-5789 for more information.
. The Fund reserves the right to make payment for redeemed shares wholly
or in part by giving the redeeming shareholder portfolio securities.
The shareholder may pay transaction costs to dispose of these
securities.
. We record all telephone calls for your protection and take measures to
identify the caller. As long as the Fund's transfer agent takes
reasonable measures to authenticate telephone requests on an investor's
account, neither the Funds, the Funds' distributor nor the transfer
agent will be held responsible for any losses resulting from
unauthorized transactions.
. The Fund's transfer agent will send you confirmation of the opening of
an account and of all subsequent purchases or redemption in the account.
. Financial institutions are responsible for transmitting orders and
payments for their customers on a timely basis.
8
<PAGE>
Pricing Of Fund Shares
- -------------------------------------------------------------------------------
The Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV is the value of a single share of the Fund. NAV for the Michigan Municipal
shares is calculated by (1) taking the current value of the Fund's total assets
allocated to that class of shares, (2) subtracting the liabilities and expenses
charged to that class (3) dividing that amount by the total number of shares of
that class outstanding.
The Fund calculates NAV as of the close of business on the New York Stock
Exchange, normally 4:00 p.m. Eastern time. If the New York Stock Exchange closes
early, the Fund will accelerate its calculation of NAV and transaction deadlines
to that time.
Securities are generally valued at their market prices. Securities for which
market prices are not readily available are valued at fair value as determined
in good faith by, or using procedures approved by, the Board of Directors of the
Fund.
Distributions
- -------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of the Fund's net income and
gains on its investments. The Fund passes substantially all of its earnings
along to its shareholders as distributions. When the Fund earns dividends from
stocks and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. The Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a capital gain distribution. The
Fund pays dividends, if any, monthly.
The Fund distributes its net realized capital gains, if any, at least annually.
It is possible that the Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of shares.
The Fund will pay distributions in additional shares of the Fund. If you wish to
receive distributions in cash, either indicate this request on your account
application form or notify the Fund by calling (800) 438-5789.
9
<PAGE>
Federal Tax Considerations
- -------------------------------------------------------------------------------
As governmental entities, shareholders of Michigan Municipal shares of the Fund
will not be subject to Federal income tax on distributions from the Fund or on
sales of the Fund's shares.
Management
- -------------------------------------------------------------------------------
Investment Advisor
The Fund's investment advisor is Munder Capital Management, 480 Pierce Street,
Birmingham, Michigan 48009. As of September 30, 1999, the advisor and its
affiliates had approximately $__ billion in assets under management, of which
$__ billion were invested in equity securities, $__ billion were invested in
money market or other short-term instruments, $__ billion were invested in other
fixed income securities, and $__ billion in non-discretionary assets.
The advisor provides overall investment management for the Fund and is
responsible for purchases and sales of portfolio securities.
During the fiscal year ended June 30, 1999, the Fund paid an advisor fee equal
to 0.25% of the average daily net assets of the Fund.
The advisor may, from time to time, make payments to banks, broker-dealers or
other financial institutions for certain services to the Fund and/or its
shareholders, including sub-administration, sub-transfer agency and shareholder
servicing. The advisor may make such payments out of its own resources and
there are no additional costs to the Fund or its shareholders.
Portfolio Manager
Sharon E. Fayolle manages the Fund. Ms. Fayolle has been Vice President and
Director of Money Market Trading for the advisor since 1996. Prior to that she
managed an international portfolio for Ford Motor Company.
10
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). The financial highlights have been audited by Ernst & Young
LLP, whose report along with the Fund's financial statements, are included in
the annual report and is incorporated by reference into the Statement of
Additional Information. You may obtain the annual report without charge by
calling (800) 438-5789.
<TABLE>
<CAPTION>
Short Term Treasury Fund (a)
-----------------------------
Year Year Period
Ended Ended Ended
6/30/99 6/30/98 6/30/97
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period........................
Income from investment operations:
Net investment income.......................................
Net realized and unrealized gain on investments.............
Total from investment operations............................
Less distributions:
Distributions from net investment income....................
Distributions from net realized gains.......................
Total distributions.........................................
Net asset value, end of period..............................
Total return (b)............................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)........................
Ratio of operating expenses to average net assets...........
Ratio of net investment income to average net assets........
Ratio of operating expenses to average net assets
without expenses reimbursed................................
Portfolio turnover..........................................
</TABLE>
- --------------------------
11
<PAGE>
For More Information
More information about the Fund is available free upon request, including the
following:
Annual/Semi-Annual Reports
You will receive unaudited semi-annual reports and audited annual reports on a
regular basis from the Fund. In addition, you will also receive updated
Prospectuses or Supplements to this Prospectus. In order to eliminate duplicate
mailings, the Fund will only send one copy of the above communications to (1)
accounts with the same primary record owner, (2) joint tenant accounts, (3)
tenant in common accounts and (4) accounts which have the same address.
Statement Of Additional Information
Provides more details about the Fund and its policies. A current Statement of
Additional Information is on file with the Securities and Exchange Commission
and is incorporated by reference (is legally considered part of this
prospectus).
To Obtain Information:
- --------------------------------------------------------------------------------
By telephone
Call 1-800-438-5789
By mail
The Munder Funds
480 Pierce Street
Birmingham, MI 48009
On the Internet
Text-only versions of fund documents can be viewed online or downloaded from:
Securities and Exchange Commission
http://www.sec.gov
You can also obtain copies by visiting the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. (phone 1-800-SEC-0330) or by sending
your request and a duplicating fee to the Securities and Exchange Commission's
Public Reference Section, Washington, D.C. 20549-6009.
- --------------------------------------------------------------------------------
The Munder Funds, Inc.
SEC file number: 811-7346
<PAGE>
Class A, B & C Shares
[Munder Logo]
Prospectus
October 26, 1999
The Munder NetNet Fund
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved these securities nor passed upon the
accuracy or adequacy of this prospectus. It is a
criminal offense to state otherwise.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
2 Risk/Return Summary
2 Goal
2 Principal Investment Strategy
2 Principal Risks
3 Who May Want To Invest
4 Performance
5 Fees And Expenses
6 More About The Fund
9 Your Investment
9 How To Reach The Fund
9 Purchasing Shares
10 Exchanging Shares
10 Redeeming Shares
11 Additional Policies For Purchases, Exchanges And Redemptions
12 Shareholder Privileges
13 Distribution Arrangements
13 Share Class Selection
13 Applicable Sales Charge
15 Cdsc
16 12b-1 Fees
16 Other Information
17 Pricing of Fund Shares
18 Distributions
19 Federal Tax Considerations
19 Taxes On Distributions
19 Taxes On Sales Or Exchanges
19 Other Considerations
20 Management
20 Investment Advisor
20 Portfolio Manager
21 Financial Highlights
Back Cover For Additional Information
</TABLE>
<PAGE>
Risk/Return Summary
- --------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goal and principal investment
strategy of the Munder NetNet Fund and the principal risks of investing in the
Fund. For further information on the Fund's principal and other investment
strategy and risks, please read the section entitled "More About The Fund".
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategy
The Fund pursues its goal by investing, under normal market conditions, at least
65% of its assets in equity securities.
The Fund invests in two types of companies:
. companies that engage in activities (such as research, design, development
or manufacturing) related to the Internet or Intranet; and
. companies significantly involved in the business of distributing products,
processes or services for or through the Internet or Intranet.
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 Fund may also invest in foreign securities and purchase and sell options.
Principal Risks
All investments carry some degree of risk which will affect the value of the
Fund's portfolio investments, its investment performance and the price of its
shares. As a result, you may lose money if you invest in the Fund.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other governmental agency.
The Fund is subject to the following principal investment risks:
Stock Market Risk. The value of the securities in which the Fund invests may
decline in response to general economic conditions. Price changes may be
temporary or last for extended periods. For example, stock prices have
historically risen and fallen in periodic cycles. In addition, the value of the
Fund's investments may decline if the particular companies the Fund invests in
do not perform well.
Sector Risk. The Fund will invest primarily in companies engaged in Internet and
Intranet related activities. The value of such companies is particularly
vulnerable to rapidly changing technology[, extensive government regulation] and
relatively high risks of obsolescence caused by scientific and technological
advances. The value of the Fund's shares may fluctuate more than shares of a
fund investing in a broader range of industries.
Smaller Company Stock Risk. The stocks of small or medium - size companies may
be more susceptible to market downturns, and their prices may be more volatile
than those of larger companies. Small companies often have narrower markets and
more limited managerial and financial resources than larger, more established
companies. In addition, Small company stocks typically are traded in lower
volume, and their issuers are subject to greater degrees of changes in their
earnings and prospects.
Derivatives Risk. The Fund may suffer a loss from its use of options, which are
forms of derivatives. The primary risk with many derivatives is that they can
amplify a gain or loss, potentially earning or losing substantially more money
than the actual cost of the derivative instrument.
Foreign Securities Risk. Investments by the Fund in foreign securities present
risks of loss in addition to those presented by investments in U.S. securities.
Foreign securities are generally more volatile and less liquid than U.S.
securities, in part because of greater political and economic risks and because
there is less public information available about foreign companies. Issuers of
foreign securities are
2
<PAGE>
generally not subject to the same degree of regulation as are U.S. issuers. The
reporting, accounting and auditing standards of foreign countries may differ, in
some cases significantly, from U.S. standards.
Who May Want to Invest
The Fund may be appropriate for investors:
. Looking to invest over the long term and willing to ride out market swings.
. Willing to accept greater risks than those of associated with fixed income
investments.
. Looking to invest in a diversified stock portfolio focused on a particular
stock market segment.
The Fund alone cannot provide a balanced investment program.
3
<PAGE>
Performance
The bar chart and tables below give some indication of: (a) the variability of
the Fund's returns by showing changes in the Fund's performance from year to
year over the life of the Fund; and (b) the risk of an investment in the Fund by
showing how the Fund's average annual total returns for different calendar
periods over the life of the Fund compare to those of a broad based securities
market index.
When you consider this information, please remember the Fund's performance in
past years is not necessarily an indication of how the Fund will perform in the
future.
Netnet Fund
[BAR CHART]
Calendar Year Total Return (Class A)
The annual returns in the bar chart are for the Fund's Class A Shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
1997: _____%
1998: _____%
______________
Year-to-date through September 30, 1999: _____%
Best Quarter: Q____199__ _____%
Worst Quarter: Q____199__ _____%
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since
Class- Inception Date 1 Year Inception
- ---------------------- ------------ ------------
Class A (8/9/96)
Class B (6/1/98)
[Index] *
Since inception of Class ___**
Since inception of Class ___**
______________
*Index return from __/__/9__
**Index return from month-end of applicable class inception date.
The average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charge [and conversion of Class B shares to Class A
shares after the applicable period.]
4
<PAGE>
Fees and Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Fund. Please note that the following information does not
include fees that institutions may charge for services they provide to you.
<TABLE>
<CAPTION>
Class A Class B Class C
Shareholder Fees (fees paid directly from your investment) Shares Shares Shares
------ ------ ------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases........................... 5.5%(a) None None
Sales Charge (Load) Imposed on Reinvested Dividends........................ None None None
Maximum Deferred Sales Charge (Load)....................................... None(b) 5%(c) 1%(d)
Redemption Fees............................................................ None None None
Exchange Fees.............................................................. None None None
</TABLE>
Annual Fund Operating Expenses (expenses that are paid from fund assets)
(as a % of net assets)
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class B Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Management Fees 1.00% 1.00% 1.00%
Distribution and/or Service (12b-1) Fees .25% 1.00% 1.00%
Other Expenses(1) [ ]% [ ]% [ ]%
---- ---- ----
Total Annual Fund Operating Expenses(1) [ ]% [ ]% [ ]%
==== ==== ====
</TABLE>
_________________
(a) The sales charge declines as the amount invested increases.
(b) A contingent deferred sales charge (CDSC) is a one-time fee charged at the
time of redemption. A 1% CDSC applies to redemptions of Class A shares within
one year of investment that were purchased with no initial sales charge as part
of an investment of $1,000,000 or more.
(c) The CDSC payable upon redemption of Class B shares declines over time.
(d) A 1% CDSC applies to redemptions of Class C shares within one year of
purchase.
(1) The advisor has voluntarily agreed to reimburse certain operating expenses
to keep the Fund's annual operating expenses at a specified level. As a
result, for the fiscal year ended June 30, 1999, the actual operating
expenses paid by the Fund were:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class B Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Management Fees 1.00% 1.00% 1.00%
Distribution and/or Service (12b-1) Fees .25% 1.00% 1.00%
Other Expenses [ ]% [ ]% [ ]%
---- ---- ----
Total Annual Fund Operating Expenses [ ]% [ ]% [ ]%
==== ==== ====
</TABLE>
The advisor may terminate the expense reimbursements at any time.
Example
The example is intended to help you compare the cost of investing in the Fund to
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 in the Fund for the time periods indicated. The examples also assumes
that your investment has a 5% return each year, that the Fund's operating
expenses remain the same and that all dividends and distributions are
reinvested. Although, your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
Class A Class B Class B Class C Class C
Shares Shares* Shares** Shares* Shares**
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1 Year $ $ $ $ $
3 Years $ $ $ $ $
5 Years $ $ $ $ $
10 Years*** $ $ $ $ $
</TABLE>
_________________
* Assumes you sold your shares at the end of the time period.
** Assumes you stayed in the Fund.
*** Reflects conversion of Class B shares to Class A shares (which pay lower
ongoing expenses) approximately six years after date of original purchase.
5
<PAGE>
More About The Fund
- -------------------
The Fund's principal investment strategy and risks are summarized above in the
section entitled "Risk/Return Summary." A more complete description of the
Fund's investments and strategies and their associated risks is provided below.
The Fund may also invest in other securities and is subject to further
restrictions and risks which are described in the Statement of Additional
Information.
Equity Securities. The Fund invests in equity securities which include common
stocks, preferred stocks and securities convertible into common stocks. There is
no limit on the market capitalization of the companies in which the Fund may
invest, or in the length of operating history for the companies. The Fund may
invest without limit in initial public offerings.
Foreign Securities. Foreign securities include investments in non-U.S. dollar-
denominated securities traded outside of the United States and dollar-
denominated securities of foreign issuers traded in the United States. Foreign
securities also include investments such as American Depository Receipts
("ADRs") which are U.S. dollar-denominated receipts representing shares of
foreign-based corporations. ADRs are issued by U.S. banks or trust companies,
and entitle the holder to all dividends and capital gains that are paid out on
the underlying foreign shares.
Investment Strategy. The Fund may invest up to 25% of its total assets in
foreign securities.
Special Risks. Foreign securities involve special risks and costs.
Investment in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of additional taxes by foreign governments. Foreign
investments may also involve risks associated with the level of currency
exchange rates, less complete financial information about the issuers, less
market liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls or
freezes on the convertibility of currency, or the adoption of other
governmental restrictions might adversely affect an investment in foreign
securities. Additionally, foreign issuers may be subject to less stringent
regulation, and to different accounting, auditing and recordkeeping
requirements.
Currency exchange rates may fluctuate significantly over short periods of
time causing the Fund's net asset value to fluctuate as well. A decline in
the value of a foreign currency relative to the U.S. dollar will reduce the
value of a foreign currency-denominated security. To the extent that the
Fund is invested in foreign securities while also maintaining currency
positions, it may be exposed to greater combined risk. The Fund's net
currency positions may expose it to risks independent of its securities
positions.
A further risk of investing in foreign securities is the risk that the Fund
may be adversely affected by the conversion of certain European currencies
into the Euro. This conversion, which is under way, is scheduled to be
completed in the year 2002. However, problems with the conversion process
and delays could increase volatility in world markets and affect European
markets in particular.
Derivatives. Derivatives are financial contracts whose value is based on an
underlying security, a currency exchange rate, an interest rate or a market
index. Many types of instruments representing a wide range of potential risks
and rewards are derivatives, including futures contracts, options on futures
contracts and options.
Investment Strategy. Derivatives can be used for hedging (attempting to
reduce risk by offsetting one investment position with another) or
speculation (taking a position in the hope of increasing return). The Fund
may, but is not required to, use derivatives for hedging purposes or for
the purpose of remaining fully invested or maintaining liquidity. The Fund
will not use derivatives for speculative purposes.
Special Risks. The use of derivative instruments exposes the Fund to
additional risks and transaction costs. Risks of
6
<PAGE>
derivative instruments include: (1) the risk that interest rates,
securities prices and currency markets will not move in the direction that
a portfolio manager anticipates; (2) imperfect correlation between the
price of derivative instruments and movements in the prices of the
securities, interest rates or currencies being hedged; (3) the fact that
skills needed to use these strategies are different than those needed to
select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument and possible exchange imposed price
fluctuation limits, either of which may make it difficult or impossible to
close out a position when desired; (5) the risk that adverse price
movements in an instrument can result in a loss substantially greater than
the Fund's initial investment in that instrument (in some cases, the
potential loss is unlimited); (6) particularly in the case of privately-
negotiated instruments, the risk that the counterparty will not perform its
obligations, which could leave the Fund worse off than if it had not
entered into the position; and (7) the inability to close out certain
hedged positions to avoid adverse tax consequences.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When the Fund purchases an option on a futures
contract, it has the right to assume a position as a purchaser or seller of a
futures contract at a specified exercise price during the option period. When
the Fund sells an option on a futures contract, it becomes obligated to purchase
or sell a futures contract if the option is exercised.
Investment Strategy. The Fund may invest in futures contracts and options
on futures contracts on domestic or foreign exchanges or boards of trade.
These instruments may be used for hedging purposes, to maintain liquidity
to meet potential shareholder redemptions, to invest cash balances or
dividends, or to minimize trading costs.
The Fund will not purchase or sell a futures contract unless, after the
transaction, the sum of the aggregate amount of margin deposits on its
existing futures positions and the amount of premiums paid for related
options used for non-hedging purposes is 5% or less of the Fund's total
assets.
Special Risks. Futures contracts and related options present the following
risks: imperfect correlation between the change in market value of the
Fund's securities and the price of futures contracts and options; the
possible inability to close a futures contract when desired; losses due to
unanticipated market movements, which are potentially unlimited; and the
possible inability of the advisor to correctly predict the direction of
securities prices, interest rates, currency exchange rates and other
economic factors.
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. The Fund may write (sell) covered call options, buy
put options, buy call options and write secured put options for hedging
purposes. Options may relate to particular securities, foreign or domestic
securities indices, financial instruments or foreign currencies.
Special Risks. The value of options can be highly volatile, and their use
can result in loss if the advisor is incorrect in its expectation of price
fluctuations. The successful use of options for hedging purposes also
depends in part on the ability of the advisor to predict future price
fluctuations and the degree of correlation between the options and
securities markets.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. The Fund may invest up to 15% of its net assets in
securities that are illiquid.
Special Risks. To the extent that the Fund invests in illiquid securities,
the Fund risks not being able to sell the securities at the time and the
price that it would like. The Fund may have to lower the price, sell
substitute securities or forego an investment
7
<PAGE>
opportunity, each of which may cause a loss to the Fund.
Securities Lending. In order to generate additional income, the Fund may lend
securities on a short-term basis to qualified institutions. By reinvesting any
cash collateral it receives in these transactions, the Fund could realize
additional income gains or losses.
Investment Strategy. Securities lending may represent no more than 25% of
the value of the Fund's total assets (including the loan collateral).
Special Risks. The main risk when lending Fund securities is that if the
borrower fails to return the securities or the invested collateral has
declined in value, the Fund could lose money.
Borrowing and Reverse Repurchase Agreements. The Fund can borrow money from
banks and enter into reverse repurchase agreements with banks and other
financial institutions. Reverse repurchase agreements involve the sale of
securities held by the Fund subject to the Fund's agreement to repurchase them
at a mutually agreed upon date and price (including interest).
Investment Strategy. The Fund may borrow money in an amount up to 5% of its
assets for temporary, emergency purposes and in an amount up to 33 1/3% of
its assets to meet redemptions. This is a fundamental policy which can be
changed only by shareholders.
Special Risks. Borrowings and reverse repurchase agreements by the Fund may
involve leveraging. If the securities held by the Fund decline in value
while these transactions are outstanding, the Fund's net asset value will
decline in value by proportionately more than the decline in value of the
securities. In addition, reverse repurchase agreements involve the risks
that the interest income earned by the Fund (from the investment of the
proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by the Fund will decline below the
price the Fund is obligated to pay to repurchase the securities, and that
the securities may not be returned to the Fund.
Short-Term Trading. The Fund's historical portfolio turnover rates are shown in
the Financial Highlights.
Investment Strategy. The Fund may engage in short-term trading, including
initial public offerings.
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could detract
from the Fund's performance.
Defensive Investing. The Fund may invest all or any portion of its assets in
short-term obligations as a temporary defensive measure in response to adverse
market or economic conditions.
Special Risks. The Fund may not achieve its investment objective when its
assets are invested in short-term obligations.
Year 2000 Risk. Like other mutual funds, financial institutions, business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the advisor and the Fund's other
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. The advisor is taking steps that it
believes are reasonably designed to address year 2000 computer-related problems
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Fund's other major service providers.
Although there can be no assurances, the advisor believes that these steps will
be sufficient to avoid any adverse impact on the Fund. Similarly, there can be
no assurances that year 2000 issues will not affect the companies and other
issuers in which the Fund invests or affect worldwide markets and economies.
8
<PAGE>
Your Investment
- --------------------------------------------------------------------------------
This section describes how to do business with the Fund.
How To Reach The Fund
By telephone: 1-800-438-5789
Call for shareholder services.
By mail: The Munder Funds
480 Pierce Street
Birmingham, Michigan 48009
Purchasing Shares
Purchase Price of Shares
Class A shares of the Fund are sold at NAV next determined after a purchase
order is received in proper form PLUS any applicable sales charge. Please see
"Distribution Arrangements" below for information about sales charges.
Class B and Class C shares of the Fund are sold at NAV next determined after a
purchase order is received in proper form.
Broker-dealers (other than the Fund's distributor) may charge you additional
fees for shares you purchase through them.
Policies for Purchasing Shares
Investment Minimums
. Initial: $250
. Subsequent: $ 50
. Automatic Investment Plan: $ 50
Purchases over $250,000 must be for Class A or Class C shares.
Timing of Orders
Purchase orders must be received by the Fund's distributor or the Fund's
transfer agent before the close of regular trading on the New York Stock
Exchange (normally, 4:00 p.m. Eastern time).
Methods for Purchasing Shares
Investors may purchase shares:
. By Broker. Any broker authorized by the Fund's distributor can sell you
shares of the Fund. Please note that brokers may charge you fees for their
services.
. By Mail. You may open an account by completing, signing and mailing the
attached account application form and a check or other negotiable bank
draft (payable to The Munder Funds) for $250 or more to: The Munder Funds,
c/o First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. Be sure to specify on your account application
form the class of shares being purchased. If the class is not specified,
your purchase will automatically be invested in Class A shares. For
additional investments, send a letter stating the Fund and share class you
wish to purchase, your name and your account number with a check for $50 or
more to the address listed above. [We do not accept third-party checks.]
. By Wire. To open a new account, you should call the Fund at (800) 438-5789
to obtain an account number and complete wire instructions prior to wiring
any funds. Within seven days of purchase, you must send a completed account
application form containing your certified taxpayer identification number
to the Fund's transfer agent at The Munder Funds, c/o First Data Investor
Services Group, P.O. Box 60428, King of Prussia, Pennsylvania 19406-0428.
Wire instructions must state the Fund name, share class, your registered
name and your account number. Your bank wire should be sent through the
Federal Reserve Bank Wire System to:
Boston Safe Deposit and Trust Company
Boston, MA
ABA# 011001234
DDA# 16-798-3
Account No.:
9
<PAGE>
You may make additional investments at any time using the wire procedures
described above. Note that banks may charge fees for transmitting wires.
. You may purchase shares through the Automatic Investment Plan.
. You may purchase shares through the Reinvestment Privilege.
Exchanging Shares
Policies for Exchanging Shares
. You may exchange Fund shares for shares of the same class of other Munder
Funds based on their relative net asset values.
. [Class A shares of a Munder money market fund that were (1) acquired
through the use of the exchange privilege and (2) can be traced back to a
purchase of shares in one or more Munder Funds for which a sales charge was
paid, can be exchanged for Class A shares of the Fund.]
. Class B and Class C shares will continue to age from the date of the
original purchase and will retain the same CDSC rate as they had before the
exchange.
. You must meet the minimum purchase requirements for the Munder Fund that
you purchase by exchange.
. If you are exchanging into shares of a Munder Fund with a higher sales
charge, you must pay the difference at the time of the exchange.
. A share exchange is a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund
you wish to purchase by exchange. You can obtain a prospectus for any
Munder Fund by contacting your broker or calling the Munder Fund at (800)
438-5789.
. Brokers may charge you a fee for handling exchanges.
. We may change, suspend or terminate the exchange privilege at any time. You
will be given notice of any material modifications except where notice is
not required.
Methods for Exchanging Shares
. Exchanges By Telephone. You may give exchange instructions by telephone to
the Fund at (800) 438-5789. You may not exchange shares by telephone if you
hold share certificates. We reserve the right to reject any telephone
exchange request and to place restrictions on telephone exchanges.
. Exchanges By Mail. You may send exchange orders to your broker or may send
them directly to the Fund's transfer agent at The Munder Funds, c/o First
Data Investor Services Group, P.O. Box 60428, King of Prussia, Pennsylvania
19406-0428.
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the redemption
request in proper form. We will reduce the amount you receive by the amount of
any applicable contingent deferred sales charge (CDSC).
Please see "Distribution Arrangements" below for information about CDSCs.
Policies for Redeeming Shares
. For your protection, a SIGNATURE GUARANTEE is required for the following
redemption requests: (a) redemption proceeds greater than $50,000; (b)
redemption proceeds not being made payable to the record owner of the
account; (c) redemption proceeds not being mailed to the address of record
on the account or (d) if the redemption proceeds are being transferred to
another Munder Fund account with a different registration. You can obtain a
signature guarantee from a financial institution such as a commercial bank,
trust company, savings association or from a securities firm having
membership on a recognized securities exchange.
10
<PAGE>
Methods for Redeeming Shares
You may redeem shares of the Fund in several ways:
. By Mail. You may mail your redemption request to: The Munder Funds, c/o
First Data Investor Services Group, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. The redemption request should state the name of
the Fund, share class, account number, amount of redemption, account name
and where to send the proceeds. All account owners must sign.
. By Telephone. You can redeem your shares by contacting your broker or
calling the Fund at (800) 438-5789. There is no minimum requirement for
telephone redemptions.
If you are redeeming at least $1,000 of shares and you have authorized
expedited redemption on your account application form, simply call the Fund
prior to 4:00 p.m. (Eastern time), and request the redemption proceeds be
mailed to the commercial bank or registered broker-dealer you designated on
your account application form. We will send your redemption proceeds to you
on the next business day. We reserve the right at any time to change or
impose fees for this expedited redemption procedure.
During periods of unusual economic or market activity, you may experience
difficulties or delays in effecting telephone redemptions. In such cases
you should consider placing your redemption request by mail.
. You may redeem shares through the Automatic Withdrawal Plan.
Additional Policies For Purchases, Exchanges and Redemptions
. We consider orders to be in "proper form" when all required documents
are properly completed, signed and received.
. The Fund reserves the right to reject any purchase order.
. At any time, the Fund may change any of its purchase or redemption
procedures, and may suspend the sale of its shares.
. The Fund may delay sending redemption proceeds for up to seven days,
or longer if permitted by the Securities and Exchange Commission.
. We will typically send redemption amounts to you within seven business
days after you redeem shares. We may hold redemption amounts from the
sale of shares you purchased by check until the purchase check has
cleared, which may be as long as 15 days.
. To limit the Fund's expenses, we do not currently issue share
certificates.
. The Fund may temporarily stop redeeming shares if:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists and the Fund cannot sell its assets or
accurately determine the value of its assets; or
. the Securities and Exchange Commission orders the Fund to suspend
redemptions.
. If accepted by the Fund, investors may purchase shares of the Fund
with securities which the Fund may hold. The advisor will determine if
the securities are consistent with the Fund's objectives and policies.
If accepted, the securities will be valued the same way the Fund
values portfolio securities it already owns. Call the Fund at (800)
438-5789 for more information.
. The Fund reserves the right to make payment for redeemed shares wholly
or in part by giving the redeeming shareholder portfolio securities.
The shareholder will pay transaction costs to dispose of these
securities.
. We record all telephone calls for your protection and take measures to
identify the caller. As long as the Fund's transfer agent takes
reasonable measures to authenticate telephone requests on an
investor's account, neither the Fund, the Fund's distributor nor the
transfer agent will be held responsible for any losses resulting from
unauthorized transactions.
11
<PAGE>
. We may redeem your account if its value falls below $250 as a result
of redemptions (but not as a result of a decline in net asset value).
You will be notified in writing and allowed 60 days to increase the
value of your account to the minimum investment level.
. If you purchased shares directly from the Fund, the Fund's transfer
agent will send you confirmations of the opening of an account and of
all subsequent purchases, exchanges or redemptions in the account. If
your account has been set up by a broker or other investment
professional, account activity will be detailed in their statements to
you.
. [The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. The Fund
and its distributor reserve the right to refuse any purchase or
exchange request that could adversely affect the fund or its
operations, including those from any individual or group who, in the
Fund's view, is likely to engage in excessive trading or any order
considered market-timing activity. If the Fund refuses a purchase or
exchange request and the shareholder deems it necessary to redeem
their account, any CDSC as permitted by the prospectus will be
applicable.
Additionally, in no event will the Fund permit more than six exchanges
into or out of a Fund in any one-year period per account, tax
identification number, social security number or related investment
group. The Munder Money Market Funds are exempt from this policy.]
Shareholder Privileges
Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in the Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Fund at (800) 438-5789. The minimum pre-authorized investment amount is
$50. You may discontinue the AIP at any time. We may discontinue the AIP on 30
days' written notice to you.
Reinvestment Privilege. For 60 days after you sell shares of the Fund, you may
reinvest your redemption proceeds in shares of the same class of the Fund at
NAV. Any CDSC you paid on the amount you are reinvesting will be credited to
your account. You may use this privilege once in any given twelve-month period
with respect to your shares of the Fund. You or your broker must notify the
Fund's transfer agent in writing at the time of reinvestment in order to
eliminate the sales charge on your reinvestment.
Automatic Withdrawal Plan (AWP). If you have an account value of $2,500 or more
in the Fund, you may redeem shares on a monthly, quarterly, semi-annual or
annual basis. The minimum withdrawal is $50. We usually process withdrawals on
the 20/th/ day of the month and promptly send you your redemption amount. You
may enroll in the AWP by completing the AWP application form available through
the Fund's transfer agent. To participate in the AWP you must have your
dividends automatically reinvested and may not hold share certificates. You may
change or cancel the AWP at any time upon notice to the Fund's transfer agent.
You should not buy Class A shares (and pay a sales charge) while you participate
in the AWP and you must pay any applicable CDSC when you redeem shares.
12
<PAGE>
Distribution Arrangements
- -----------------------------------------------------------------------------
Share Class Selection
The Fund offers Class A, Class B and Class C shares. Each class has its own cost
structure, allowing you to choose the one that best meets your requirements
given the amount of your purchase and the intended length of your investment.
You should consider both ongoing annual expenses and initial sales charge or
CDSC in estimating the costs of investing in a particular class of shares.
Class A Shares
. Front end sales charge. There are several ways to reduce these sale
charges.
. Lower annual expenses than Class B and Class C shares.
Class B Shares
. No front end sales charge. All your money goes to work for you right away.
. Higher annual expenses than Class A shares.
. A CDSC on shares you sell within six years of purchase.
. Automatic conversion to Class A shares approximately six years after
issuance, thus reducing future annual expenses.
. CDSC is waived for certain redemptions.
Class C Shares
. No front end sales charge or CDSC, except for a CDSC for redemptions made
within the first year after investing. All your money goes to work for you
right away.
. Shares do not convert to another class.
. Higher annual expenses than Class A shares.
The Fund also issues Class Y shares, which have different sales charges, expense
levels and performance. Class Y shares are available to limited types of
investors. Call (800) 438-5789 to obtain more information concerning Class Y
shares.
Applicable Sales Charge - Class A Shares
You can purchase Class A shares at the NAV plus an initial sales charge. The
sales charge as a percentage of your investment decreases as the amount you
invest increases. The current sales charge rates and commissions paid to
selected dealers are as follows:
<TABLE>
<CAPTION>
Sales Charge Dealer
as a Percentage of Reallowance
------------------
as a
Percentage
Your Net of the
---- --- ------
Investment Asset Offering
---------- ----- --------
Value Price
----- -----
<S> <C> <C> <C>
Less than $25,000... 5.50% 5.82% 5.00%
$25,000 but less
than $50,000....... 5.25% 5.54% 4.75%
$50,000 but less
than $100,000...... 4.50% 4.71% 4.00%
$100,000 but less
than $250,000...... 3.50% 3.63% 3.25%
$250,000 but less
than $500,000...... 2.50% 2.56% 2.25%
$500,000 but less
than $1,000,000.... 1.50% 1.52% 1.25%
$1,000,000 or
more............... None* None* (see below)**
</TABLE>
__________________________
*No initial sales charge applies on investments of $1 million or more. However,
[a CDSC of 1% is imposed on certain redemptions within one year of purchase.]
**The distributor will pay a 1% commission to dealers who initiate and are
responsible for purchases of $1 million or more.
Sales Charge Waivers - General
We will waive the initial sales charge on Class A shares for the following types
of purchasers:
1. individuals with an investment account or relationship with the advisor;
2. full-time employees and retired employees of the advisor, employees of the
Fund's service providers and immediate family members of such persons;
3. registered broker-dealers that have entered into selling agreements with
the distributor, for their own accounts or for retirement plans for their
employees or sold to registered representatives for full-time employees (and
their families) that certify to the distributor at the time of purchase that
such purchase is for their own account (or for the benefit of their families);
4. certain qualified employee benefit plans as described below;
5. individuals who reinvest a distribution from a qualified retirement plan
for which the advisor serves as investment advisor;
13
<PAGE>
6. individuals who reinvest the proceeds of redemptions from Class Y Shares of
the Munder Funds within 60 days of redemption;
7. banks and other financial institutions that have entered into agreements
with the Munder Funds to provide shareholder services for customers (including
customers of such banks and other financial institutions, and the immediate
family members of such customers);
8. fee-based financial planners or employee benefit plan consultants acting
for the accounts of their clients;
9. employer sponsored retirement plans which are administered by Universal
Pensions, Inc. (UPI Plans);
10. employer sponsored 401(k) plans that are administered by Merrill Lynch
Group Employee Services (Merrill Lynch Plans) which meet the criteria described
below under "Sales Charge Waivers - Qualified Employer Sponsored Retirement
Plans;" and
11. with respect to subsequent purchases of shares of the Fund, individuals who
were shareholders of the Fund prior to June 1, 1998.
Sales Charge Waivers - Qualified Employer Sponsored Retirement Plans
We will waive the initial sales charge on purchases of Class A shares by
employer sponsored retirement plans that are qualified under Section 401(a) or
Section 403(b) of the Internal Revenue Code (each, a Qualified Employee Benefit
Plan) and that (1) invest $1,000,000 or more in Class A shares offered by The
Munder Funds or (2) have at least 75 eligible plan participants.
In addition, we will waive the CDSC of 1% charged on certain redemptions within
one year of purchase for Qualified Employee Benefit Plan purchases that meet the
above criteria. A 1% commission will be paid by the distributor to dealers and
other entities (as permitted by applicable Federal and state law) who initiate
and are responsible for Qualified Employee Benefit Plan purchases that meet the
above criteria. This sales charge waiver does not apply to Simplified Employee
Pension Plans (SEPs), Individual Retirement Accounts (IRAs), UPI Plans and
Merrill Lynch Plans.
UPI Plans. We also will waive (i) the initial sales charge on Class A shares
purchased by UPI Plans for employees participating in an employer-sponsored or
administered retirement program operating under Section 408A of the Internal
Revenue Code and (ii) the CDSC of 1% imposed on certain redemptions within one
year of purchase for these accounts. The distributor will pay a 1% commission to
dealers and others (as permitted by applicable Federal and state law) who
initiate and are responsible for UPI Plan purchases.
Merrill Lynch Plans. We will waive the initial sales charge for all investments
by Merrill Lynch Plans if
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch Group
Employee Services (Merrill Lynch) and, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million
or more in assets invested in broker/dealer funds not advised or managed
by Merrill Lynch Asset Management, L.P. (MLAM) that are made available
pursuant to a Services Agreement between Merrill Lynch and the Fund's
distributor and in funds advised or managed by MLAM (collectively, the
Applicable Investments); or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch, and on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in Applicable
Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the Merrill
Lynch plan conversion manager, on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement.
For further information on sales charge waivers, call (800) 438-5789.
Sales Charge Reductions
You may qualify for reduced sales charges in the following cases:
. Letter of Intent. If you intend to purchase at least [$25,000] of Class A
shares of the Fund, you may wish to complete the Letter of Intent section
of your account application form. By doing so, you agree to invest a
certain amount over a 13-month period. You would pay a sales
14
<PAGE>
charge on any Class A shares you purchase during the 13 months based on the
total amount to be invested under the Letter of Intent. You can apply any
investments you made in any of the Munder Funds during the preceding 90-day
period toward fulfillment of the Letter of Intent (although there will be
no refund of sales charges you paid during the 90-day period). You should
inform the Fund's transfer agent that you have a Letter of Intent each time
you make an investment.
You are not obligated to purchase the amount specified in the Letter of
Intent. If you purchase less than the amount specified, however, you must
pay the difference between the sales charge paid and the sales charge
applicable to the purchases actually made. The Fund's custodian will hold
such amount in escrow. The custodian will pay the escrowed funds to your
account at the end of the 13 months unless you do not complete your
intended investment.
. Quantity Discounts. You may combine purchases of Class A shares that are
made by you, your spouse, your children under age 21 and your IRA when
calculating the sales charge. You must notify your broker or the Fund's
transfer agent to qualify.
. Right Of Accumulation. You may add the value of any shares of non-money
market Munder Funds you already own to the amount of your next Class A
share investment for purposes of calculating the sales charge at the time
of the current purchase. You must notify your broker or the transfer agent
to qualify.
Certain brokers may not offer these programs or may impose conditions or fees to
use these programs. You should consult with your broker prior to purchasing the
Fund's shares.
For further information on sales charge reductions, call (800) 438-5789.
CDSC
You pay a CDSC when you redeem:
. Class A shares that were bought as part of an investment of at least $1
million within one year of buying them;
. Class B shares within six years of buying them; and
. Class C shares within one year of buying them.
These time periods include the time you held Class B or Class C shares of
another Munder Fund which you may have exchanged for Class B or Class C shares
of the Fund.
The CDSC schedule for Class B shares is set forth below. If you acquired Class B
shares by exchanging shares of another Munder Fund which you purchased on or
before June 27, 1995, consult the Statement of Additional Information for the
applicable CDSC schedule. The CDSC is based on the original NAV at the time of
your investment or the NAV at the time of redemption, whichever is lower.
<TABLE>
<CAPTION>
Years Since Purchase CDSC
- -------------------- ----
<S> <C>
First................................ 5.00%
Second............................... 4.00%
Third................................ 3.00%
Fourth............................... 3.00%
Fifth................................ 2.00%
Sixth................................ 1.00%
Seventh and thereafter.............. 0.00%
</TABLE>
At the time of sale of Class B shares, the distributor pays sales commissions of
4.00% of the purchase price to brokers that initiate and are responsible for
purchases of such Class B shares.
You will not pay a CDSC to the extent that the value of the redeemed shares
represents:
. reinvestment of dividends or capital gains distributions; or
. capital appreciation of shares redeemed.
When you redeem shares, we will assume that you are redeeming first shares
representing reinvestment of dividends and capital gains distributions, then any
appreciation on shares redeemed, and then remaining shares held by you for the
longest period of time. [We will calculate the holding period of Class B shares
of the Fund acquired through an exchange of Class B shares of the Munder Money
Market Fund (which are available only by exchange of Class B shares of a Munder
Fund were purchased.]
CDSC Waivers
We will waive the CDSC payable upon redemptions of shares of the Fund (which you
purchases or acquired through an exchange of shares of another Munder Fund
purchased after June 27, 1995) for:
. redemptions made within one year after the death of a shareholder or
registered joint owner;
. minimum required distributions made from an IRA or other retirement plan
account after you reach age 70 1/2;
15
<PAGE>
. involuntary redemptions made by the Fund;
. redemptions limited to 10% per year of an account's net asset value. For
example, if you maintain an annual balance of $10,000 you can redeem up to
$1,000 annually free of charge.
We will waive the CDSC payable upon redemptions of shares of the Fund which you
purchased after December 1, 1998 (or acquired through an exchange of shares of
another Munder Fund purchased after December 1, 1998) for:
. redemptions made from an IRA or other individual retirement plan account
established through Comerica Securities, Inc. after you reach age 59 1/2
and after the eighteen month anniversary of the purchase of Fund shares.
Consult the Statement of Additional Information for Class B CDSC waivers that
apply when you redeem shares of the Fund acquired through an exchange of shares
of another Munder Fund purchased on or before June 27, 1995.
We will waive the CDSC for Class B shares for all redemptions by Merrill Lynch
Plans if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch; or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch; or
(iii) the Plan has less than 500 eligible employees, as determined by the
Merrill Lynch plan conversion manager, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement.
12B-1 Fees
The Fund has adopted Rule 12b-1 plans with respect to its Class A, Class B and
Class C shares that allow the Fund to pay distribution and other fees for the
sale of its shares and for services provided to shareholders. Under the plans,
the Fund may pay up to .25% of the daily net assets of Class A , Class B and
Class C shares to pay for certain shareholder services provided by institutions
that have agreements with the Fund's distributor to provide such services. The
Fund may also pay up to .75% of the daily net assets of the Class B and Class C
shares to finance activities relating to the distribution of its shares.
Because the fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of an investment in the Fund and may cost
a shareholder more than paying other types of sales charges.
Other Information
The advisor may, from time to time, make payments to banks, broker-dealers or
other financial institutions for certain services to the Fund and/or its
shareholders, including sub-administration, sub-transfer agency and shareholder
servicing. The advisor may make such payments out of its own resources and there
are no additional costs to the Fund or its shareholders.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee from
the Fund for providing shareholder services to its customers who own shares of
the Fund.
16
<PAGE>
Pricing Of Fund Shares
- --------------------------------------------------------------------------------
The Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV is the value of a single share of the Fund. The Fund calculates NAV
separately for each class. NAV is calculated by (1) taking the current value of
the Fund's total assets allocated to a particular class of shares, (2)
subtracting the liabilities and expenses charged to that class (3) dividing that
amount by the total number of shares of that class outstanding.
The Fund calculates NAV as of the close of business on the New York Stock
Exchange, normally 4:00 p.m. (Eastern time). If the New York Stock Exchange
closes early, the Fund will accelerate its calculation of NAV and transaction
deadlines to that time.
NAV is generally based on the market value of the securities held by the Fund.
If market values are not available, the fair value of securities is determined
in good faith by, or using procedures approved by, the Board of Directors of the
Fund.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. The Fund values foreign securities at
the latest closing price on the exchange on which they are traded immediately
prior to the closing of the New York Stock Exchange. Certain foreign currency
exchange rates may also be determined at the latest rate prior to the closing of
the New York Stock Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the New York Stock Exchange. If the advisor
believes that such events materially affect the value of portfolio securities,
these securities may be valued at their fair market value as determined in good
faith by, or using procedures approved by, the Fund's Board of Directors.
Foreign securities may trade in their primary markets on weekends or other days
when the Fund does not price its shares. Therefore, the value of the Fund's
portfolio may change on days when shareholders will not be able to buy or sell
their shares.
Distributions
- --------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of the Fund's net income and
gains on its investments. The Fund passes substantially all of its earnings
along to its shareholders as distributions. When the Fund earns dividends from
stocks and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. The Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a capital gain distribution.
The Fund pays dividends, if any, annually.
The Fund distributes its net realized capital gains, if any, at least annually.
It is possible that the Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
The Fund will pay distributions in additional shares of the Fund. If you wish to
receive distributions in cash, either indicate this request on your account
application form or notify the Fund by calling (800) 438-5789.
17
<PAGE>
Federal Tax Considerations
- --------------------------------------------------------------------------------
Investments in the Fund may have tax consequences that you should consider. This
section briefly describes some of the more common federal tax consequences. A
more detailed discussion about the tax treatment of distributions from the Fund
and about other potential tax liabilities, including backup withholding for
certain taxpayers and about tax aspects of dispositions of shares of the Fund,
is contained in the Statement of Additional Information. You should consult your
tax adviser about your own particular tax situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. Shareholders not
subject to tax on their income generally will not be required to pay any tax on
distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held the
portfolio securities it sold. It does not depend on how long you held the Fund
shares.
Distributions are generally taxable in the year in which they are paid, with one
exception: distributions declared in October, November or December, but not paid
until January of the following year, are taxed as though they were paid on
December 31 of the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Fund will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Taxes On Sales Or Exchanges
If you sell shares of the Fund or exchange them for shares of another Munder
Fund, you generally will be subject to tax on any taxable gain. Taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale or an exchange will result in a taxable
gain.
Other Considerations
If you buy shares of the Fund just before the Fund makes any distribution, you
will pay the full price for the shares and then receive back a portion of the
money you have just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law, the Fund
must withhold a portion of your distributions and redemption proceeds to pay
federal income taxes.
18
<PAGE>
Management
- --------------------------------------------------------------------------------
Investment Advisor
The Fund's investment advisor is Munder Capital Management, 480 Pierce Street,
Birmingham, Michigan 48009. As of September 30, 1999, the advisor and its
affiliates had approximately $__ billion in assets under management, of which
$__ billion were invested in equity securities, $__ billion were invested in
money market or other short-term instruments, $__ billion were invested in other
fixed income securities, and $__ billion in non-discretionary assets.
The advisor provides overall investment management for the Fund and is
responsible for all purchases and sales of portfolio securities.
During the fiscal year ended June 30, 1999, the advisor was paid an advisory fee
equal to 1.00% of the average daily net assets of the Fund.
Portfolio Managers
A committee of professional portfolio managers employed by the advisor makes
investment decisions for the Fund.
19
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand the
financial performance of each class of shares of the Fund for the period of the
class's operations. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in a particular class of the Fund
(assuming reinvestment of all dividends and distributions). The information has
been audited by Ernst & Young LLP, independent accountants, whose report along
with the Fund's financial statements, are included in the annual report, and are
incorporated by reference into the Statement of Additional Information. You may
obtain the annual report without charge by calling (800) 438-5789.
<TABLE>
<CAPTION>
NetNet Fund (a)
-------------------------------------------------------------------
Year Year Period Year Period Period
Ended Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/99 6/30/98 6/30/99
Class A Class A Class A Class B Class B Class C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................
Income from investment operations:
Net investment income.......................................
Net realized and unrealized gain on investments.............
Total from investment operations............................
Less distributions:
Distributions from net investment income....................
Distributions from net realized gains.......................
Total distributions.........................................
Net asset value, end of period..............................
Total return (b)............................................
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)........................
Ratio of operating expenses to average net assets...........
Ratio of net investment income to average net assets........
Ratio of operating expenses to average net assets
without expenses reimbursed.................................
Portfolio turnover..........................................
</TABLE>
_______________________
20
<PAGE>
For More Information
More information about the Fund is available free upon request, including the
following:
Annual/Semi-Annual Reports
You will receive unaudited semi-annual reports and audited annual reports on a
regular basis from the Fund. In addition, you will also receive updated
prospectuses or supplements to this prospectus. In order to duplicate mailings,
the Fund will only send one copy of the above communications to (1) accounts
with the same primary record owner, (2) joint tenant accounts, (3) tenant in
common accounts and (4) accounts which have the same address.
Statement Of Additional Information
Provides more details about the Fund and its policies. A current Statement of
Additional Information is on file with the Securities and Exchange Commission
and is incorporated by reference (is legally considered part of this
prospectus).
To Obtain Information:
- --------------------------------------------------------------------------------
By telephone
Call 1-800-438-5789
By mail
The Munder Funds
480 Pierce Street
Birmingham, MI 48009
On the Internet
Text-only versions of fund documents can be viewed online or downloaded from:
Securities and Exchange Commission
http://www.sec.gov
You can also obtain copies by visiting the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. (phone 1-800-SEC-0330) or by sending
your request and a duplicating fee to the Securities and Exchange Commission's
Public Reference Section, Washington, D.C. 20549-6009.
You may also find more information about the Fund on the Internet at:
http://www.munderfunds.com
- --------------------------------------------------------------------------------
<PAGE>
THE MUNDER FUNDS, INC., THE MUNDER FUNDS TRUST
AND THE MUNDER FRAMLINGTON FUNDS TRUST
<TABLE>
<CAPTION>
<S> <C>
Munder Balanced Fund Munder Framlington International Growth Fund
Munder Equity Selection Fund Munder Bond Fund
Munder Index 500 Fund Munder Intermediate Bond Fund
Munder Growth Opportunities Fund Munder International Bond Fund
Munder Growth & Income Fund Munder Short Term Treasury Fund
Munder International Equity Fund Munder U.S. Government Income Fund
Munder Micro-Cap Equity Fund Munder Michigan Tax-Free Bond Fund
Munder Multi-Season Growth Fund Munder Tax-Free Bond Fund
Munder NetNet Fund Munder Tax-Free Short-Intermediate Bond Fund
Munder Real Estate Equity Investment Fund (formerly Munder Tax-Free Intermediate Bond Fund)
Munder Small-Cap Value Fund Munder Cash Investment Fund
Munder Small Company Growth Fund Munder Money Market Fund
Munder Value Fund Munder Tax-Free Money Market Fund
Munder Framlington Emerging Markets Fund Munder U.S. Treasury Money Market Fund
Munder Framlington Global Financial Services Fund
Munder Framlington Healthcare Fund
</TABLE>
(collectively, the "Funds")
STATEMENT OF ADDITIONAL INFORMATION
October 26, 1999
This Statement of Additional Information ("SAI"), which has been filed with
the Securities and Exchange Commission (the "SEC"), provides supplementary
information pertaining to all classes of shares representing interests in each
of the investment portfolios listed above. The Munder Funds, Inc. (the
"Company") currently offers a selection of fifteen investment portfolios, eleven
of which are described in this SAI; The Munder Funds Trust (the "Trust")
currently offers a selection of fourteen investment portfolios, each of which is
described in this SAI; and The Munder Framlington Funds Trust ("Framlington")
currently offers a selection of four investment portfolios, each of which is
described in this SAI. This SAI is not a prospectus, and should be read only in
conjunction with the Company's, the Trust's, and Framlington's Prospectuses
dated October 26, 1999. A copy of each Prospectus may be obtained through Funds
Distributor, Inc. (the "Distributor"), or by calling (800) 438-5789. [The
financial statements for the Company, the Trust and Framlington including notes
thereto, dated June 30, 1999 are incorporated by reference into this SAI from
the annual reports of the Company, the Trust and Framlington.]
An investment in a Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other governmental
agency.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
History and General Information......................................... 3
Fund Investments........................................................ 4
Risk Factors and Special Considerations -- Index 500 Fund............... 18
Risk Factors and Special Considerations -- Michigan Tax-Free Bond Fund
and Tax-Free Short-Intermediate Bond Fund............................... 20
Investment Limitations.................................................. 22
Temporary Defensive Position............................................ 27
Management of the Fund.................................................. 27
Investment Advisory and Other Service Arrangements...................... 32
Portfolio Transactions.................................................. 45
Additional Purchase and Redemption Information.......................... 47
Net Asset Value......................................................... 51
Performance Information................................................. 52
Taxes................................................................... 60
Additional Information Concerning Shares................................ 67
Other Information....................................................... 69
Registration Statement.................................................. 69
Financial Statements.................................................... 70
Appendix A.............................................................. A-1
Appendix B.............................................................. B-1
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this SAI or in each Prospectus in connection
with the offering made by each Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Funds or the Distributor. The Prospectuses do not constitute an offering
by the Funds or by the Distributor in any jurisdiction in which such offering
may not lawfully be made.
2
<PAGE>
HISTORY AND GENERAL INFORMATION
The following Funds are described in this SAI:
The Munder Funds Trust
- ----------------------
Munder Balanced Fund ("Balanced Fund")
Munder Growth & Income Fund ("Growth & Income Fund")
Munder Index 500 Fund ("Index 500 Fund")
Munder International Equity Fund ("International Equity Fund")
Munder Small Company Growth Fund ("Small Company Growth Fund")
Munder Bond Fund ("Bond Fund")
Munder Intermediate Bond Fund ("Intermediate Bond Fund")
Munder U.S. Government Income Fund ("U.S. Income Fund")
Munder Michigan Tax-Free Bond Fund ("Michigan Bond Fund")
Munder Tax-Free Bond Fund ("Tax-Free Bond Fund")
Munder Tax-Free Short-Intermediate Bond Fund ("Tax-Free Short-Intermediate Bond
Fund")
Munder Cash Investment Fund ("Cash Investment Fund")
Munder Tax-Free Money Market Fund ("Tax-Free Money Market Fund")
Munder U.S. Treasury Money Market Fund ("U.S. Treasury Money Market Fund")
The Munder Funds, Inc.
- ----------------------
Munder Equity Selection Fund ("Equity Selection Fund")
Munder Growth Opportunities Fund ("Growth Opportunities Fund")
Munder Micro-Cap Equity Fund ("Micro-Cap Fund")
Munder Multi-Season Growth Fund ("Multi-Season Fund")
Munder NetNet Fund ("NetNet Fund")
Munder Real Estate Equity Investment Fund ("Real Estate Fund")
Munder Small-Cap Value Fund ("Small-Cap Value Fund")
Munder Value Fund ("Value Fund")
Munder International Bond Fund ("International Bond Fund")
Munder Short Term Treasury Fund ("Short Term Treasury Fund")
Munder Money Market Fund ("Money Market Fund")
The Munder Framlington Funds Trust
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Munder Framlington Emerging Markets Fund ("Emerging Markets Fund")
Munder Framlington Global Financial Services Fund ("Global Financial Services
Fund")
Munder Framlington Healthcare Fund ("Healthcare Fund")
Munder Framlington International Growth Fund ("International Growth Fund")
The Company, the Trust and Framlington are each open-end investment
management companies. All of the Funds are diversified except for the
International Bond Fund, the Michigan Bond Fund and the Tax-Free
Short-Intermediate Bond Fund.
The Trust was organized on August 30, 1989 under the name "PDB Fund," which
was changed in November 1989 to "Opportunity Funds," in February 1990 to
"Ambassador Funds" and in June 1995 to "The Munder Funds Trust." The Tax-Free
Short-Intermediate Bond Fund originally commenced operations on February 9, 1987
under the name Tax-Free Intermediate Bond Fund as a separate portfolio of the
St. Clair Tax-Free Fund, Inc. On November 20, 1992, the St. Clair Tax-Free
Intermediate Bond Fund was reorganized as the Ambassador Tax-Free Intermediate
Bond Fund. The Company was organized as a Maryland corporation on November 18,
1992. Framlington was organized as a Massachusetts business trust on October 30,
1996.
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As stated in each Prospectus, the investment advisor of each Fund (other
than the Index 500 Fund and the International Equity Fund) is Munder Capital
Management (the "Advisor"). The principal partners of the Advisor are Old MCM,
Inc. ("Old MCM"), Munder Group LLC, WAM Holdings, Inc. ("WAM") and WAM Holdings
II, Inc. ("WAM II"). Old MCM was founded in April 1985 as a Delaware corporation
and was a registered investment advisor. WAM and WAM II are indirect, wholly-
owned subsidiaries of Comerica Incorporated which owns or controls approximately
88% of the partnership interests in the Advisor.
World Asset Management, L.L.C. ("World"), a Delaware limited liability
company, is the investment advisor for the Index 500 Fund and the International
Equity Fund. World is a wholly-owned subsidiary of the Advisor.
Framlington Overseas Investment Management Limited (the "Sub-Advisor")
serves as sub-advisor for the Emerging Markets, Global Financial Services,
Healthcare and International Growth Funds (the "Framlington Funds"). The Sub-
Advisor is a subsidiary of Framlington Group Limited, incorporated in England
and Wales which, through its subsidiaries, provides a wide range of investment
services. Framlington Group Limited is a wholly-owned subsidiary of Framlington
Holdings Limited which is, in turn, owned 49% by the Advisor and 51% by Credit
Commercial de France S.A., a French banking corporation listed on the Societe
des Bourses Francaises.
Capitalized terms used in this SAI and not otherwise defined have the same
meanings as are given to them in each Prospectus.
FUND INVESTMENTS
The following supplements the information contained in each Prospectus
concerning the investment objectives and policies of the Funds. With the
exception of the investment objectives of Multi-Season Fund, Real Estate Fund
and Money Market Fund, each Fund's investment objective is a non-fundamental
policy and may be changed without the authorization of the holders of a majority
of the Fund's outstanding shares. The Tax-Free Bond Fund and Tax-Free Money
Market Fund each have a fundamental policy to invest at least 80% of its
respective assets in municipal obligations bearing tax-exempt interest; all
other investment policies, other than those specifically designated as
fundamental, are non-fundamental policies and may be changed without the
authorization of the holders of a majority of a Fund's outstanding shares. There
can be no assurance that a Fund will achieve its objective.
A description of applicable credit ratings is set forth in Appendix A to
this SAI.
For purposes of this SAI, the Equity Selection Fund, Global Financial
Services Fund, Growth & Income Fund, Growth Opportunities Fund, Index 500 Fund,
International Equity Fund, Micro-Cap Fund, Multi-Season Fund, NetNet Fund, Real
Estate Fund, Small-Cap Value Fund, Small Company Growth Fund, Value Fund,
International Growth Fund, Emerging Markets Fund and Healthcare Fund are
referred to as the "Equity Funds"; the Bond Fund, Intermediate Bond Fund and
U.S. Income Fund are referred to as the "Bond Funds"; the Michigan Bond Fund,
Tax-Free Bond Fund and Tax-Free Short-Intermediate Bond Fund are referred to as
the "Tax-Free Bond Funds" and Cash Investment Fund, Money Market Fund, Tax-Free
Money Fund and U.S. Treasury Money Market Fund are referred to as the "Money
Market Funds."
Borrowing. Each of the Funds is authorized to borrow money in amounts up
to 5% of the value of its total assets at the time of such borrowings for
temporary purposes, and 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 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 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. Borrowed funds are subject to
interest costs that may or may not be offset by amounts earned on the borrowed
funds. A Fund may also be required to maintain minimum average balances in
connection with such borrowing or to pay a commitment or other fees to maintain
a line of credit; either of these
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requirements would increase the cost of borrowing over the stated interest rate.
Each Fund may, in connection with permissible borrowings, transfer as collateral
securities owned by the Fund.
Foreign Securities. Each Equity Fund (except Global Financial Services
Fund, Real Estate Fund, International Equity Fund, International Growth Fund,
Emerging Markets Fund and Healthcare Fund), each Bond Fund, each Tax-Free Bond
Fund, the Balanced Fund, the Cash Investment Fund and the Money Market Fund may
invest up to 25% of its assets in foreign securities. Under normal market
conditions, the International Equity Fund, International Bond Fund and
International Growth Fund will each invest at least 65% of its assets in
securities of issuers located in at least three countries other than the United
States. The Global Financial Services Fund will invest at least 65% of its
assets in securities of issuers located in at least three countries, one of
which may be the United States. The Emerging Markets Fund will invest at least
65% of its assets in emerging market countries. There is no limit on the
Healthcare Fund's investments in foreign securities. The Multi-Season Fund and
NetNet Fund typically will only purchase foreign securities which are
represented by American Depositary Receipts ("ADRs") listed on a domestic
securities exchange or included in the NASDAQ National Market System, or foreign
securities listed directly on a domestic securities exchange or included in the
NASDAQ National Market System. ADRs are receipts typically issued by a United
States bank or trust company evidencing ownership of the underlying foreign
securities. Certain 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.
The International Bond Fund will primarily invest in foreign debt
obligations denominated in foreign currencies, including the European Currency
Unit ("ECU"), which are issued by foreign governments and governmental agencies,
instrumentalities or political subdivisions; debt securities issued or
guaranteed by supranational organizations (as defined below); corporate debt
securities; bank or bank holding company debt securities and other debt
securities including those convertible into foreign stock. Certain European
currencies are being converted into the Euro. This conversion, which is under
way, is scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in world markets and
affect European Markets in particular. For the purposes of the 65% minimum with
respect to the International Bond Fund's designation as an international bond
fund, the securities described in this paragraph are considered "international
bonds."
Income and gains on foreign 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 trading 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. Such concerns are particularly
heightened for emerging markets and Eastern European countries.
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 a
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
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amounts of private property in the past, in many cases without adequate
compensation, and there can be no assurance that such expropriation will not
occur in the future. In the event of such expropriation, the Fund could lose a
substantial portion of any investments it has made in the affected countries.
Further, no accounting standards exist in Eastern European countries. Finally,
even though certain Eastern European currencies may be convertible into United
States dollars, the conversion rates may be artificial rather than their actual
market values and they may be adverse to a Fund.
The Advisor, World or the Sub-Advisor endeavors to buy and sell foreign
currencies on as favorable a basis as practicable. Some price spread on currency
exchange (to cover service charges) may be incurred, particularly when the Fund
changes investments from one country to another or when proceeds of the sale of
Fund shares in U.S. dollars are used for the purchase of securities in foreign
countries. Also, some countries may adopt policies which would prevent the Fund
from transferring cash out of the country or withhold portions of interest and
dividends at the source. There is the possibility of expropriation,
nationalization or confiscatory taxation, withholding and other foreign taxes on
income or other amounts, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), default in foreign
government securities, political or social instability or diplomatic
developments that could affect investments in securities of issuers in foreign
nations.
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 a Fund are uninvested and no return is earned
thereon. The inability of a 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 a 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.
A 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 a 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, World or the Sub-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.
Forward 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), the Balanced Fund, the Bond
Funds and the International Bond Fund are authorized to enter into forward
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 a
Fund to establish a rate of currency exchange for a future point in time.
When entering into a contract for the purchase or sale of a security, a
Fund may enter into a forward currency contract for the amount of the purchase
or sale price to protect against variations, between the date the
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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, World or the Sub-Advisor anticipates that a particular
foreign currency may decline substantially relative to the U.S. dollar or other
leading currencies, in order to reduce risk, a Fund may enter into a forward
contract to sell, for a fixed amount, the amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency. Similarly, when the obligations held by a Fund create a
short position in a foreign currency, the Fund may enter into a forward contract
to buy, for a fixed amount, an amount of foreign currency approximating the
short position. With respect to any forward currency contract, it will not
generally be possible to match precisely the amount covered by that contract and
the value of the securities involved due to the changes in the values of such
securities resulting from market movements between the date the forward 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. A Fund will also incur
costs in connection with forward currency contracts and conversions of foreign
currencies and U.S. dollars.
Cash or liquid securities equal to the amount of a Fund's assets that could
be required to consummate forward contracts will be designated on the records of
the Funds' custodian except to the extent the contracts are otherwise "covered."
For the purpose of determining the adequacy of the designated securities, the
designated 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
designated daily so that the value of the designated securities will equal the
amount of such commitments by the Fund. A forward contract to sell a foreign
currency is "covered" if a 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 a Fund holds a forward contract (or put option)
permitting the Fund to sell the same currency at a price as high as or higher
than the Fund's price to buy the currency.
Futures Contracts And Related Options. The Equity Funds, the Balanced
Fund, the Bond Funds, the Tax-Free Bond Funds and the International Bond Fund
may purchase and sell futures contracts on interest-bearing securities or
securities indices, and may purchase and sell call and put options on futures
contracts. For a detailed description of futures contracts and related options,
see Appendix B to this SAI.
Illiquid Securities. The Equity Funds, Balanced Fund, Tax-Free Bond Funds,
International Bond Fund and the Bond Funds may invest up to 15%, and each of the
Money Market Funds may invest up to 10%, of the value of its net assets
(determined at time of acquisition) in securities that are illiquid. Illiquid
securities would generally include securities for which there is a limited
trading market, repurchase agreements and time deposits with notice/termination
dates in excess of seven days, and certain securities that are subject to
trading restrictions because they are not registered under the Securities Act of
1933, as amended (the "Act"). If, after the time of acquisition, events cause
this limit to be exceeded, the Fund will take steps to reduce the aggregate
amount of illiquid securities as soon as reasonably practicable in accordance
with the policies of the SEC.
Each Fund (except U.S. Treasury Money Market Fund and Short Term Treasury
Fund) may invest in commercial obligations issued in reliance on the "private
placement" exemption from registration afforded by Section 4(2) of the Act
("Section 4(2) paper"). A Fund may also purchase securities that are not
registered under the Act, but which can be sold to qualified institutional
buyers in accordance with Rule 144A under the Act, ("Rule 144A securities").
Section 4(2) paper is restricted as to disposition under the Federal securities
laws, and generally is sold to institutional investors who agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction. Section 4(2) paper
normally is resold to other institutional investors through or with the
assistance of the issuer or investment dealers which make a market in the
Section 4(2) paper, thus providing liquidity. Rule 144A securities generally
must be sold only to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to be
liquid, that investment will be included within the Fund's limitation on
investment in illiquid securities. The Advisor, World or the Sub-Advisor will
determine the liquidity of such investments pursuant to guidelines established
by the Boards of Directors/Trustees. It is possible that unregistered securities
purchased by
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the Fund in reliance upon Rule 144A could have the effect of increasing the
level of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a period, uninterested in purchasing these securities.
Interest Rate Swap Transactions. Each of the Bond Funds and the
International Bond Fund may enter into interest rate swap agreements for
purposes of attempting to obtain a particular desired return at a lower cost to
the Funds than if the Funds had invested directly in an instrument that yielded
that desired return. Interest rate swap transactions involve the exchange by a
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 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 Funds' ability to engage in certain interest rate transactions. Gains from
transaction in interest rate swaps distributed to shareholders of the Funds will
be taxable as ordinary income or, in certain circumstances, as long-term capital
gains to the shareholders.
Each of the 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 Funds' obligations under a swap
agreement will be accrued daily (offset against any amounts owed to the Fund).
Accrued but unpaid net amounts owed to a swap counterparty will be covered by
designating cash, U.S. Government securities or other high-grade liquid
securities on the books of the Fund's custodian, to avoid any potential
leveraging of a Fund's portfolio.
The 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 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 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 adversely affect the Funds' ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.
Investment Company Securities. Each of the Funds (other than the Short
Term Treasury Fund) may invest in securities issued by other investment
companies. As a shareholder of another investment company, a Fund would bear its
pro rata portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the expenses each Fund bears
directly in connection with its own operations. Each Fund currently intends to
limit its investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made: (i)
not more than 5% of the value of the Fund's total assets will be invested in the
securities of any one investment company; (ii) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of investment
companies as a group; and (iii) not more than 3% of the outstanding voting stock
of any one investment company will be owned by the Fund.
Lending Of Portfolio Securities. To enhance the return on its portfolio,
each of the 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 assets; and 33
1/3% 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 Funds will receive any interest or dividends paid on the
loaned securities. In addition, it is anticipated that a Fund may share with the
borrower some
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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 Funds will lend securities, the Advisor,
World (with respect to the Index 500 Fund or International Equity Fund) or the
Sub-Advisor (with respect to the Framlington Funds) will consider all relevant
facts and circumstances. The Funds will only enter into loan arrangements with
broker-dealers, banks or other institutions which the Advisor, World or the Sub-
Advisor has determined are creditworthy under guidelines established by the
Boards of Directors/Trustees.
Lower-rated Debt Securities. It is expected that each Fund (other than the
Money Market Funds, Index 500 Fund and Growth & Income Fund) will invest not
more than 5% of its total assets in securities that are rated below investment
grade by Standard & Poor's Rating Service, a division of McGraw-Hill Companies,
Inc. ("S&P"), or Moody's Investors Service, Inc. ("Moody's"), or in comparable
unrated securities. The Growth & Income Fund may invest up to 20% of the value
of its total assets in such securities. The Money Market Funds and the Index 500
Fund may not invest in such securities. 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 Fund's portfolio, with a commensurate effect on the
value of each of the Fund's shares. Therefore, an investment in the 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 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 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 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 Funds may have to replace the security
with a lower yielding security, thus resulting in a decreased return to the
Funds. A description of applicable credit ratings is set forth in Appendix A of
this SAI.
Money Market Instruments. Each of the Funds (except the Short Term
Treasury Fund) may invest from time to time in "money market instruments," a
term that includes, among other things, bank obligations, commercial paper,
variable amount master demand notes and corporate bonds with remaining
maturities of 397 days or less.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Funds will invest in obligations of foreign
banks or foreign branches of U.S.
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banks only where the Advisor, World or the Sub-Advisor deems the instrument to
present minimal credit risks, such investments may nevertheless entail risks
that are different from those of investments in domestic obligations of U.S.
banks due to differences in political, regulatory and economic systems and
conditions. All investments in bank obligations are limited to the obligations
of financial institutions having more than $1 billion in total assets at the
time of purchase.
Investments by a Fund in commercial paper will consist of issues rated at
the time of purchase A-1 and/or P-1 by S&P or Moody's. In addition, the Funds
may acquire unrated commercial paper and corporate bonds that are determined by
the Advisor, World (with respect to the Index 500 Fund or International Equity
Fund) or the Sub-Advisor (with respect to the Framlington Funds) 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 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, a Fund
may demand payment of the principal of the instrument at any time. The notes
are not typically rated by credit rating agencies, but issuers of variable
amount master demand notes must satisfy the same criteria as set forth above for
issuers of commercial paper. If an issuer of a variable amount master demand
note defaulted on its payment obligation, a Fund might be unable to dispose of
the note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Funds invest in
variable amount master notes only when the Advisor, World or the Sub-Advisor
deems the investment to involve minimal credit risk.
Mortgage-related Securities. 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
U.S. 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. Opinions relating to the validity of municipal
obligations and to the exemption of interest thereon from regular Federal income
tax are rendered by bond counsel or counsel to the respective issuers at the
time of issuance. Neither the Company, the Trust nor the Advisor will review
the proceedings relating to the issuance of municipal obligations or the bases
for such opinions.
An issuer's obligations under its municipal obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of
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municipalities to levy taxes. The power or ability of an issuer to meet its
obligations for the payment of interest on and principal of its municipal
obligations may be materially adversely affected by litigation or other
conditions.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal obligations. For example, under the Tax Reform Act of 1986
interest on certain private activity bonds must be included in an investor's
Federal alternative minimum taxable income, and corporate investors must include
all tax-exempt interest in their Federal alternative minimum taxable income. The
Trust cannot predict what legislation, if any, may be proposed in Congress in
the future as regards the Federal income tax status of interest on municipal
obligations in general, or which proposals, if any, might be enacted. Such
proposals, if enacted, might materially adversely affect the availability of
municipal obligations for investment by the Tax-Free Bond Funds and the Tax-Free
Money Market Fund and the liquidity and value of such Funds. In such an event
the Board of Trustees would reevaluate the Fund's investment objective and
policies and consider changes in its structure or possible dissolution.
The Cash Investment Fund and the Money Market Fund each may, when deemed
appropriate by the Advisor in light of the 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.
Neither the Cash Investment Fund nor the Money Market Fund expects to invest
more than 5% of its net assets in such municipal obligations during the current
fiscal year.
Non-Domestic Bank Obligations. Non-domestic bank obligations include
Eurodollar Certificates of Deposit ("ECDs"), which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs"), which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs"), which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs,
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank and held in
the United States; and Yankee Bankers' Acceptances ("Yankee BAs"), which are
U.S. dollar denominated bankers' acceptances issued by a U.S. branch of a
foreign bank and held in the United States.
Options. Each of the Equity Funds, Balanced Fund, Bond Funds,
International Bond Fund and Tax-Free Bond Funds (other than Tax-Free Short-
Intermediate Bond Fund) may write covered call options, buy put options, buy
call options and write secured put options. For a detailed description on
options, see Appendix B to this SAI.
Real Estate Securities. The Real Estate Fund may invest without limit in
shares of real estate investment trusts ("REITs"). The Equity Funds and the
Balanced Fund may also invest in REITs. REITs pool investors' funds for
investment primarily in income producing real estate or real estate loans or
interests. A REIT is not taxed on income distributed to shareholders if it
complies with several requirements relating to its organization, ownership,
assets, and income and a requirement that it distribute to its shareholders at
least 95% of it taxable income (other than net capital gains) for each taxable
year. REITs can generally be classified as Equity REITs, Mortgage REITs and
Hybrid REITs. Equity REITs, which invest the majority of their assets directly
in real property, derive their income primarily from rents. Equity REITs can
also realize capital gains 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 Funds
will not invest in real estate directly, but only in securities issued by real
estate companies. However, the Funds 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
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losses, limitations on rents, changes in neighborhood values, 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 REITs under the Internal Revenue Code of 1986, as amended (the "Internal
Revenue 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. Each of the Funds may agree to purchase securities
from financial institutions such as member banks of the Federal Reserve System,
any foreign bank or any domestic or foreign broker/dealer that is recognized as
a reporting government securities dealer, subject to the seller's agreement to
repurchase the securities at an agreed-upon time and price ("repurchase
agreements"). The Short Term Treasury Fund will only invest in repurchase
agreements fully collateralized by U.S. Treasury securities. The Advisor, World
or the Sub-Advisor will review and continuously monitor the creditworthiness of
the seller under a repurchase agreement, and will require the seller to maintain
collateral 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 or less.
The repurchase price under repurchase agreements 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).
Securities subject to repurchase agreements will be held, as applicable, by
the Trust's, Framlington's or the Company's custodian in the Federal
Reserve/Treasury book-entry system or by another authorized securities
depositary. Repurchase agreements are considered to be loans by a Fund under the
1940 Act.
Reverse Repurchase Agreements. Each Fund may borrow funds for temporary or
emergency purposes by selling portfolio securities to financial institutions
such as banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Fund may decline below the repurchase price. A Fund will pay interest on amounts
obtained pursuant to a reverse repurchase agreement. While reverse repurchase
agreements are outstanding, a Fund will maintain cash, U.S. Government
securities or other liquid securities designated on the books of the Fund or the
Fund's custodian in an amount at least equal to the market value of the
securities, plus accrued interest, subject to the agreement.
Rights and Warrants. The Equity Funds and the Balanced Fund may purchase
warrants, which are privileges issued by corporations enabling the owners to
subscribe to and purchase a specified number of shares of the corporation at a
specified price during a specified period of time. Subscription rights normally
have a short life span to expiration. The purchase of warrants involves the risk
that a 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.
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Short Sales. The Global Financial Services Fund may make short sales of
securities. A short sale is a transaction in which the Fund sells a security it
does not own in anticipation that the market price of that security will
decline. When the Fund makes a short sale, it must borrow the security sold
short and deliver it to the broker-dealer through which it made the short sale
as collateral for its obligation to deliver the security upon conclusion of the
sale. The Fund may also sell securities that it owns or has the right to acquire
at no additional cost but does not intend to deliver to the buyer, a practice
known as selling short "against-the-box." The Fund may have to pay a fee to
borrow particular securities and is often obligated to pay over any payments
received on such borrowed securities. The Fund's obligation to replace the
borrowed security will be secured by collateral deposited with the broker-
dealers, usually cash, U.S. Government securities or other highly liquid
securities similar to those borrowed. The Fund will also be required to deposit
similar collateral with its custodian to the extent necessary so that the value
of both collateral deposits in the aggregate is at all times equal to as least
100% of the current market value of the security sold short. Depending on
arrangements made with the broker-dealer from which it borrowed the security
regarding payment over any received by the Fund on such security, the Fund may
not received any payments (including interest) on its collateral deposited with
such broker-dealer. The Fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short sales.
If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a capital
gain. Any gain is limited to the price at which it sold the security short; its
potential loss is theoretically unlimited.
Stand-by Commitments. The Balanced Fund, Cash Investment Fund, Money
Market Fund, the Tax-Free Bond Funds and Tax-Free Money Market Fund may each
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 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 a 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 and the Trust expects that stand-by commitments will generally
be available without the payment of any direct or indirect consideration.
However, if necessary or advisable, a 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 a Fund will not
exceed 1/2 of 1% of the value of such Fund's total assets calculated immediately
after each stand-by commitment is acquired.
The Funds intend to enter into stand-by commitments only with dealers,
banks and broker/dealers which, in the Advisor's opinion, present minimal credit
risks. The Tax-Free Bond Funds and the Tax-Free Money Market Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes. The acquisition of a
stand-by commitment will not affect the valuation of the underlying municipal
obligation. The actual stand-by commitment will be valued at zero in determining
net asset value. Accordingly, where a Fund pays directly or indirectly for a
stand-by commitment, its cost will be reflected as an unrealized loss for the
period during which the commitment is held by such Fund and will be reflected in
realized gain or loss when the commitment is exercised or expires.
Stock Index Futures, Options on Stock and Bond Indices and Options on Stock
and Bond Index Futures Contracts. The Equity Funds, the Balanced Fund, the Bond
Funds and the Tax-Free Bond Funds (other than the Tax-Free Short-Intermediate
Bond Fund) may purchase and sell stock index futures, options on stock and bond
indices and options on stock and bond index futures contracts as a hedge against
movements in the equity and bond markets. The Tax-Free Short-Intermediate Bond
Fund may purchase and sell bond index futures contracts. 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
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of the last trading day of the contract and the price at which the agreement is
made. No physical delivery of securities is made.
Options on stock and bond indices are similar to options on specific
securities, described above, except that, rather than the right to take or make
delivery of the specific security at a specific price, an option on a stock or
bond index gives the holder the right to receive, upon exercise of the option,
an amount of cash if the closing level of that stock or bond index is greater
than, in the case of a call option, or less than, in the case of a put option,
the exercise price of the option. This amount of cash is equal to such
difference between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple. The writer of the option
is obligated, in return for the premium received, to make delivery of this
amount. Unlike options on specific securities, all settlements of options on
stock or bond indices are in cash, and gain or loss depends on general movements
in the stocks included in the index rather than price movements in particular
stocks.
If the Advisor, World (with respect to the Index 500 Fund and the
International Equity Fund) or the 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 futures contract or index option resulting from the
increase in the index. If, on the other hand, the Advisor, World or the Sub-
Advisor, as the case may be, 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 Funds' portfolio may also be expected to decline, but that
decrease would be offset in part by the increase in the value of the Fund's
position in such futures contract or put option.
The Equity Funds, the Balanced Fund, the Bond Funds and the Tax-Free Bond
Funds (other than Tax-Free Short-Intermediate Bond Fund) may purchase and write
call and put options on stock index futures contracts and each such Fund and the
International Bond Fund may purchase and write call and put options on bond
index futures contracts. Each such 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 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 Funds intend to purchase.
In connection with transactions in stock or bond index futures, stock or
bond index options and options on stock or bond index futures, the Funds will be
required to deposit as "initial margin" an amount of cash or short-term U.S.
Government securities equal to between 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 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.
Stripped Securities. Certain 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 principal 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
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the underlying U.S. Government obligations for federal tax and securities
purposes. The Company, the Trust and Framlington are 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.
The U.S. Treasury Department has facilitated transfers of ownership of zero
coupon securities by accounting separately for the beneficial ownership of
particular interest coupon and principal payments on U.S. Treasury securities
through the Federal Reserve book-entry record-keeping system. The Federal
Reserve program as established by the U.S. Treasury Department is known as
"STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities." Under the STRIPS program, a 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 Bond Fund, Intermediate Bond Fund, International Bond Fund
and U.S. Income Fund may invest in stripped mortgage-backed securities ("SMBS"),
which represent beneficial ownership interests in the principal distributions
and/or the interest distributions on mortgage assets. SMBS are usually
structured with two classes that receive different proportions of the interest
and principal distributions on a pool of mortgage assets. One type of SMBS will
have one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most common case, one class of SMBS will
receive all of the interest (the interest-only or "IO" class), while the other
class will receive all of the principal (the principal-only or "PO" class). SMBS
may be issued by FNMA or FHLMC.
The original principal amount, if any, of each SMBS class represents the
amount payable to the holder thereof over the life of such SMBS class from
principal distributions of the underlying mortgage assets, which will be zero in
the case of an IO class. Interest distributions allocable to a class of SMBS, if
any, consist of interest at a specified rate on its principal amount, if any, or
its notional principal amount in the case of an IO class. The notional principal
amount is used solely for purposes of the determination of interest
distributions and certain other rights of holders of such IO class and does not
represent an interest in principal distributions of the mortgage assets.
Yields on SMBS will be extremely sensitive to the prepayment experience on
the underlying mortgage loans, and there are other associated risks. For IO
classes of SMBS and SMBS that were purchased at prices exceeding their principal
amounts there is a risk that a Fund may not fully recover its initial
investment.
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 Boards of Directors/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 a 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 may purchase obligations issued or
guaranteed by the U.S. Government and, except in the case of the U.S. Treasury
Money Market Fund and the Short Term Treasury Fund, U.S. Government agencies and
instrumentalities. The U.S. Treasury Money Market Fund and the Short Term
Treasury Fund will purchase obligations issued by the U.S. Treasury. Obligations
of certain agencies and instrumentalities of the U.S. Government, such as those
of 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
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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, U.S.
Treasury Notes and U.S. 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, GNMA, 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 a Fund may have stated maturities in excess of a Fund's
maturity limitation if the Fund can demand payment of the principal of the
instrument at least once during such period on not more than thirty days' notice
(this demand feature is not required if the instrument is guaranteed by the U.S.
Government or an agency thereof). These instruments may include variable amount
master demand notes that permit the indebtedness to vary in addition to
providing for periodic adjustments in the interest rates. The Advisor or the
Sub-Advisor, as the case may be, 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 a 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 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 Fund
involved can recover payment of principal as specified in the instrument.
Variable rate U.S. Government obligations held by the 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 a Fund
could suffer a loss if the issuer defaulted or during periods that a Fund is not
entitled to exercise its demand rights.
Variable and floating rate instruments held by a 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 Bond Funds, International Bond Fund,
Cash Investment Fund and Money Market Fund may make limited investments in
guaranteed investment contracts ("GICs") issued by U.S. insurance companies.
Pursuant to such contracts, a Fund makes cash contributions to a deposit fund of
the insurance company's general account. The insurance company then credits to
the Fund on a monthly basis interest which is based on an index (in most cases
this index is expected to be the Salomon Brothers CD Index), but is guaranteed
not to be less than a certain minimum rate. A GIC is normally a general
obligation of the issuing insurance company and not funded by a separate
account. The purchase price paid for a GIC becomes part of the general assets of
the insurance company, and the contract is paid from the company's general
assets. A 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
Boards of Directors/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 Fund's
limitation on illiquid investments.
When-Issued Purchases and Forward Commitments (Delayed-Delivery
Transactions). When-issued purchases and forward commitments (known as delayed-
delivery transactions) are commitments by a Fund to
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purchase or sell particular securities with payment and delivery to occur at a
future date (perhaps one or two months later). These transactions permit the
Fund to lock-in a price or yield on a security, regardless of future changes in
interest rates.
When a Fund agrees to purchase securities on a when-issued or forward
commitment basis, the Fund will designate cash or liquid portfolio securities
equal to the amount of the commitment. Normally, the Fund will designate
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to designate additional assets in order to
ensure that the value of the account remains equal to the amount of the Fund's
commitments. It may be expected that the market value of the Fund's net assets
will fluctuate to a greater degree when it designates portfolio securities to
cover such purchase commitments than when it designates cash. Because a Fund's
liquidity and ability to manage its portfolio might be affected when it
designates cash or portfolio securities to cover such purchase commitments, the
Advisor or the Sub-Advisor expects that its commitments to purchase when-issued
securities and forward commitments will not exceed 25% of the value of a Fund's
total assets absent unusual market conditions.
A 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, a Fund may dispose of or renegotiate a commitment after it is
entered into, and may sell securities it has committed to purchase before those
securities are delivered to the Fund on the settlement date. In these cases the
Fund may realize a taxable capital gain or loss.
When a Fund engages in when-issued and forward commitment transactions, it
relies on the other party to consummate the trade. Failure of such party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the market value of
a Fund starting on the day the Fund agrees to purchase the securities. The Fund
does not earn interest on the securities it has committed to purchase until they
are paid for and delivered on the settlement date.
Yields and Ratings. The yields on certain obligations, including the money
market instruments in which each 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., Fitch IBCA, Inc. and other
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 Cash Investment Fund and Money Market Fund 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. Each of Cash Investment Fund, Money
Market Fund and Tax-Free Money Market Fund 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 Fund's total assets at the time of purchase, provided that the Fund may
invest up to 25% of its total assets in the securities of any one issuer rated
in the highest rating category by an NRSRO 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 Directors/Trustees, that the unrated and single rated securities are
of comparable quality to the appropriate rated securities.
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Other. Subsequent to its purchase by a Fund, a rated security may cease to
be rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Boards of Directors/Trustees or the Advisor or the
Sub-Advisor, pursuant to guidelines established by the Boards, will consider
such an event in determining whether the Fund involved should continue to hold
the security in accordance with the interests of the Fund and applicable
regulations of the SEC.
RISK FACTORS AND SPECIAL CONSIDERATIONS -- INDEX 500 FUND
Traditional methods of fund investment management typically involve
relatively frequent changes in a portfolio of securities on the basis of
economic, financial and market analysis. Index funds such as the Index 500 Fund
are not managed in this manner. Instead, with the aid of a computer program,
World purchases and sells securities for the Fund in an attempt to produce
investment results that substantially duplicate the performance of the common
stocks included in the S&P 500 Composite Stock Price Index ("S&P 500"), taking
into account redemptions, sales of additional Fund shares, and other adjustments
as described below.
The Fund does not expect to hold at any particular time all of the stocks
included in the S&P 500. World believes, however, that through the application
of capitalization weighing and sector balancing techniques it will be able to
construct and maintain the Fund's investment portfolio so that it reasonably
tracks the performance of the S&P 500. World will compare the industry sector
diversification of the stocks the Fund would acquire solely on the basis of
their weighted capitalizations with the industry sector diversification of all
issuers included in the S&P 500. This comparison is made because World believes
that, unless the Fund holds all stocks included in the S&P 500, the selection of
stocks for purchase by the Fund solely on the basis of their weighted market
capitalizations would tend to place heavier concentration in certain industry
sectors that are dominated by the larger corporations, such as communications,
automobile, oil and energy. As a result, events disproportionately affecting
such industries could affect the performance of the Fund differently than the
performance of the S&P 500. Conversely, if smaller companies were not purchased
by the Fund, the representation of industries included in the S&P 500 that are
not dominated by the most heavily market-capitalized companies would be reduced
or eliminated.
For these reasons, World will identify the sectors which are (or, except
for sector balancing, would be) most underrepresented in the Fund's portfolio
and will purchase balancing securities in these sectors until the portfolio's
sector weightings closely match those of the S&P 500. This process continues
until the portfolio is fully invested (except for cash holdings).
Redemptions of a substantial number of shares of the Fund could reduce the
number of issuers represented in the Fund's investment portfolio, which could,
in turn, adversely affect the accuracy with which the Fund tracks the
performance of the S&P 500.
If an issuer drops in ranking, or is eliminated entirely from the S&P 500,
World may be required to sell some or all of the common stock of such issuer
then held by the Fund. Such sales of portfolio securities may be made at times
when, if World were not required to effect purchases and sales of portfolio
securities in accordance with the S&P 500, such securities might not be sold.
These sales may result in lower prices for the securities than may have been
realized or in losses that may not have been incurred if World were not required
to effect the purchases and sales. The failure of an issuer to declare or pay
dividends, the institution against an issuer of potentially materially adverse
legal proceedings, the existence or threat of defaults materially and adversely
affecting an issuer's future declaration and payment of dividends, or the
existence of other materially adverse credit factors will not necessarily be the
basis for the disposition of portfolio securities, unless such event causes the
issuer to be eliminated entirely from the S&P 500. However, although World does
not intend to screen securities for investment by the Fund by traditional
methods of financial and market analysis, World will monitor the Fund's
investment with a view towards removing stocks of companies which exhibit
extreme financial distress or which may impair for any reason the Fund's ability
to achieve its investment objective.
The Fund will invest primarily in the common stocks that constitute the S&P
500 in accordance with their relative capitalization and sector weightings as
described above. It is possible, however, that the Fund will from time to time
receive, as part of a "spin-off" or other corporate reorganization of an issuer
included in the S&P 500,
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securities that are themselves outside the S&P 500. Such securities will be
disposed of by the Fund in due course consistent with the Fund's investment
objective.
In addition, the Fund may invest in Standard & Poor's Depository Receipts
("SPDRs"). SPDRs are securities that represent ownership in the SPDR Trust, a
long-term unit investment trust which is intended to provide investment results
that generally correspond to the price and yield performance of the S&P 500.
SPDR holders are paid a "Dividend Equivalent Amount" that corresponds to the
amount of cash dividends accruing to the securities in the SPDR Trust, net of
certain fees and expenses charged to the Trust. Because of these fees and
expenses, the dividend yield for SPDRs may be less than that of the S&P 500.
SPDRs are traded on the American Stock Exchange.
The Fund may also purchase put and call options on the S&P 500 and S&P 100
stock indices, which are traded on national securities exchanges. In addition,
the Fund may enter into transactions involving futures contracts (and futures
options) on these two stock indices and may purchase securities of other
investment companies that are structured to seek a similar correlation to the
S&P 500. These transactions are effected in an effort to have fuller exposure to
price movements in the S&P 500 pending investment of purchase orders or while
maintaining liquidity to meet potential shareholder redemptions. Transactions in
option and stock index futures contracts may be desirable to hedge against a
price movement in the S&P 500 at times when the Fund is not fully invested in
stocks that are included in the S&P 500. For example, by purchasing a futures
contract, the Fund may be able to reduce the potential that cash inflows will
disrupt its ability to track the S&P 500, since the futures contracts may serve
as a temporary substitute for stocks which may then be purchased in an orderly
fashion. Similarly, because futures contracts only require a small initial
margin deposit, the Fund may be able, as an effective matter, to be fully
invested in the S&P 500 while keeping a cash reserve to meet potential
redemptions. See Appendix B to this SAI.
Disclaimers. The Index 500 Fund is not sponsored, endorsed, sold or
promoted by Standard & Poor's Ratings Service, a division of McGraw-Hill
Companies, Inc. ("S&P"). S&P makes no representation or warranty, express or
implied, to the owners of the Index 500 Fund or any member of the public
regarding the advisability of investing in securities generally or in the Index
500 Fund particularly or the ability of the S&P 500 Index to trace general stock
market performance. S&P's only relationship to the Trust is the licensing of
certain trademarks and trade names of S&P and of the S&P 500 Index which is
determined, composed and calculated by S&P without regard to the Trust or the
Index 500 Fund. S&P has no obligation to take the needs of the Trust or the
owners of the Index 500 Fund into consideration in determining, composing or
calculating the S&P 500 Index. S&P is not responsible for and has not
participated in the determination of the prices and amount of the Index 500 Fund
or the timing of the issuance or sale of the Index 500 Fund or in the
determination or calculation of the equation by which the Index 500 Fund is to
be converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of the Index 500 Fund.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500
Index or any data included therein and S&P shall have no liability for any
errors, omissions, or interruptions therein. S&P makes no warranty, express or
implied, as to results to be obtained by the Trust, owners of the Index 500
Fund, or any other person or entity from the use of the S&P 500 Index or any
data included therein. S&P makes no express or implied warranties, and expressly
disclaims all warranties of merchantability of fitness for a particular purpose
or use with respect to the S&P 500 Index or any data included therein. Without
limiting any of the foregoing, in no event shall S&P have any liability for any
special, punitive, indirect, or consequential damages (including lost profits),
even if notified of the possibility of such damages.
"Standard & Poor's", "S&P", "S&P 500", "Standard & Poor's 500", and "500"
are trademarks of McGraw-Hill, Inc. and have been licensed for use by the Trust.
The Index 500 Fund is not sponsored, endorsed, sold or promoted by S&P and S&P
makes no representation regarding the advisability of investing in the Index 500
Fund.
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RISK FACTORS AND SPECIAL CONSIDERATIONS - MICHIGAN BOND FUND AND
TAX-FREE SHORT-INTERMEDIATE BOND FUND
[TO BE REVISED]
The information set forth below is derived in substantial part from the
official statements prepared in connection with the issuance of Michigan
municipal bonds and similar obligations and other sources that are generally
available to investors. The information is provided as general information
intended to give a recent historical description and is not intended to indicate
future or continuing trends in the financial or other positions of the State of
Michigan (the "State"). The Trust has not independently verified this
information.
The State's Constitution limits the amount of total State revenues raised
from taxes and other sources. State revenues (excluding federal aid and revenues
for payment of principal and interest on general obligation bonds) in any fiscal
year are limited to a specified percentage of State personal income in the prior
calendar year or average of the prior three calendar years, whichever is
greater. The percentage is based upon the ratio of the 1978-79 fiscal year
revenues to total 1977 State personal income. If any fiscal year revenues exceed
the revenue limitation by 1%, the entire amount exceeding the limitation must be
rebated in the following fiscal year's personal income tax or single business
tax. Annual excesses of less than 1% may be transferred into the State's Budget
Stabilization Fund. The State may raise taxes in excess of the limit in
emergency situations.
The State Constitution limits the purposes for which State general
obligation debt may be issued. Such debt is limited to short-term debt for State
operating purposes, short and long-term debt for the purpose of making loans to
school districts and long-term debt for voter approved purposes. The State's
Constitution also directs or restricts the use of certain revenues.
The State finances its operations through the State's General Fund and
special revenue funds. The General Fund receives revenues of the State that are
not specifically required to be included in the special revenue funds. General
Fund revenues are obtained approximately 55% from the payment of State taxes and
45% from federal and non-tax revenue sources. Tax revenues credited to the
General Fund include the personal income tax, the single business tax and
approximately 15% of the sales tax collections.
Expenditures are not permitted by the State Constitution to exceed
available revenues. The State Constitution requires that the Governor, with the
approval of the appropriating committees of the State House and Senate, reduce
expenditures whenever it appears that the actual revenues will be less than the
originally projected revenues upon which the budget was based.
In 1994, a ballot proposal ("Proposal A") to implement extensive property
tax and school finance reform measures was subject to voter approval and in fact
approved on March 15, 1994. Under Proposal A as approved, effective May 1, 1994,
the State sales and use tax increased from 4% to 6%, the State income tax
decreased from 4.6% to 4.4%, the cigarette tax increased from $.25 to $.75 per
pack, and an additional tax of 16% of the wholesale price is imposed on certain
other tobacco products. As of January 1, 1995, a 0.75% real estate transfer tax
also became effective. In 1994, a State education property tax of 6 mills was
imposed on all real property and personal property currently subject to the
general property tax. In addition, all school boards can now, with voter
approval, levy up to the lesser of 18 mills or the number of mills levied in
1993 for school operating purposes, on non-homestead property. Proposal A
contained additional provisions regarding the ability of local school districts
to levy taxes as well as a limit on assessment increases for each parcel of
property, beginning in 1995 to the lesser of 5% or the rate of inflation. When
property is subsequently sold, its assessed value is adjusted equal to 50% of
true cash value. Under Proposal A, much of the additional revenue generated by
these taxes is dedicated to the State School Aid Fund.
Proposal A shifts significant portions of the cost of local school
operations from local school districts to the State and raises additional State
revenues to fund these additional State expenses. These additional revenues will
be included within the State's constitutional revenue limitations and may impact
the State's ability to raise additional revenues in the future.
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The State is a party to various legal proceedings seeking damages or
injunctive or other relief. In addition to routine litigation, certain of these
proceedings could, if unfavorably resolved from the point of view of the State,
substantially affect State programs or finances. These lawsuits involve programs
generally in the areas of corrections, highway maintenance, social services, tax
collection, commerce and budgetary reductions to school districts and
governmental units and court funding. Although no opinion is expressed with
respect to the ultimate disposition and consequences of any litigation in
combination with any State Revenue loss, the implementation of any tax reduction
proposal or the failure of the State to realize any budget assumption, the
Attorney General of the State has indicated in a recent official statement
prepared in connection with issuance of general obligation bonds of the State
that, except as listed below, such ultimate dispositions and consequences of any
single proceeding or all legal proceedings should not themselves have a material
adverse effect on the security for such bonds.
On August 22, 1994, the Ingham Circuit and probate courts, together with
the 55th District Court, filed suits in the Court of Claims and Ingham County
Circuit Court against the State of Michigan and Ingham County for declaratory
and injunctive relief, and for damages, due to the alleged failure of the State
Court Administrative Office to properly calculate Ingham County's reimbursement
under the court funding statute. These cases have been dismissed by stipulation
of the parties because the plaintiffs are raising the same claims as members of
a class action captioned as 10th Judicial Circuit, et al v State of Michigan, et
al. Plaintiffs assert that the amount in controversy exceeds $5 million dollars.
The case is currently pending final class certification.
In an order dated June 10, 1997 and a decision rendered July 31, 1997, the
Michigan Supreme Court decided, in the consolidated cases of Durant v State of
Michigan and Schmidt v State of Michigan, that the special education, special
education transportation, bilingual education, driver training and school lunch
programs provided by local school districts are state mandated programs within
the meaning of Michigan Constitution, Article 9, (S) 29 (part of the so-called
Headlee Amendment) and, therefore, the state is obligated to fund these programs
at levels established by the Headlee Amendment. In fashioning a remedy in this
case of first impression under the Headlee Amendment, the Court concluded that,
in future cases, the correct remedy will typically be limited to a declaratory
judgment. However, due to the protracted nature of the Durant and Schmidt
litigation, the Court ruled that money damages, without interest, shall be paid
to the 84 plaintiff school districts for the full amount of the underfunding for
the state mandated programs during the 1991-92, 1992-93, and 1993-94 school
years. On November 19, 1997, the Governor signed legislation providing
approximately $212 million to the 84 plaintiff school districts to cover the
underfunding for those three years. That payment was made to the 84 plaintiff
school districts on April 15, 1998 from the State's Budget Stabilization Fund.
The board of education of each plaintiff school district is to determine the
appropriate distribution of the award between taxpayer relief and/or use by the
district for other public purposes. The Court has affirmed the award to
plaintiffs of their costs including attorney fees. Approximately 400 other
school districts have asserted similar claims. In companion legislation signed
by the Governor on November 19, 1997, the State will pay each "non-Durant"
school district for its underfunded state mandated program costs for those same
three years, if the district agreed, by March 2, 1998, to waive any claim
against the State of the same nature as the claims made by the 84 Durant
plaintiffs through September 30, 1997. All "non-Durant" school districts
submitted the statutory waiver by March 2, 1998. It is estimated that the
aggregate payments to the "non-Durant" school districts will, over time, total
$632 million. Those payments, commencing in fiscal year 1998-1999, will be paid
out of the Budget Stabilization Fund and the General Fund, half in annual
payments over 10 years and half in annual payments over 15 years.
On May 14, 1998, more than 100 Michigan school districts and individuals
filed suit in the Michigan Court of Appeals, asserting that the current version
of the state school aid act violates the Headlee Amendment, in much the same
manner as prior versions of the act were ruled unconstitutional by the Michigan
Supreme Court in Durant v State Board of Education, 456 Mich 175 (1977). Durant,
et al. v State, et al. ("Durant II"). The Durant II plaintiffs are claiming
damages of approximately $347 million for the 1997-1998 school year for the
State's alleged underfunding of special education services, special education
transportation, and school lunch programs. The Durant II plaintiffs are also
requesting a declaratory judgment that the current version of the state school
aid act will not provide proper funding levels for future school years. They
also seek attorney fees and costs of the litigation.
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The principal sectors of Michigan's diversified economy are the
manufacturing of durable goods (including automobiles and components and office
equipment), tourism and agriculture. The health of the State's economy, and in
particular its durable goods manufacturing industries, is susceptible to a long-
term increase in the cost of energy and energy related products. As reflected in
historical employment figures, the State's economy has lessened its dependence
upon durable goods manufacturing. In 1960, employment in such industry accounted
for 33% of the State's work force. By 1997, this figure had fallen to 14.5%.
Although manufacturing (including auto-related manufacturing) continues to be an
important part of the State's economy, approximately 66% of the civilian labor
force is currently engaged in service related employment.
On October 1, 1997, the State created the Year 2000 Project Office to
provide guidance, coordinate oversight for application software, manage Year
2000 funds, provide monitoring support, quality assurance and other matters. The
State has undertaken an inventory and assessment of all applications and
classified the software, has appropriated funds to carry out the project and
informed State agencies of the need to develop contingent plans for mission-
critical systems. The State's goal is to have all critical applications operable
by December 31, 1998, and all other applications operable by September 30, 1999.
Although the State is currently on schedule to meet its objectives for Year
2000 compliance, the State has not yet achieved Year 2000 compliance. Although
the State has expressed its belief that it will continue to meet the objectives
and time frames set forth above for the Year 2000 Project, there can be no
assurance that such completion will be done in a timely manner or that any other
organization or governmental agency with which the State electronically
interacts, including State vendors and the federal government, will be Year 2000
compliant. In the event of any such occurrences, the State may face material
adverse consequences with respect to its revenues and operations.
As of the date of this SAI, the State's general obligation bonds have been
rated "AA+" by Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc. ("S&P"), "Aa1" by Moody's Investors Service, Inc. ("Moody's"),
and "AA+" by Fitch ICBA ("Fitch"). In January, 1998, the State received an
upgrade from S&P from its prior rating of "AA". In March, 1998, the State
received an upgrade from Moody's from its prior rating of "Aa2". In April, 1998,
the State received an upgrade from Fitch from its prior rating of "AA". Such
ratings are in each case based upon certain information and materials concerning
the Bonds and the State furnished by the State to such rating agencies. Any
explanation of the significance of such ratings may be obtained only from the
rating agencies furnishing the same. There is no assurance that such ratings
will prevail for any given period of time or that they will not be revised
downward or withdrawn entirely by any or all of such rating agencies if, in the
judgment of any or all of them, circumstances so warrant. Any such downward
revision or withdrawal of such ratings, or any or all of them, may have an
adverse effect on the market price of the Bonds. To the extent that the
portfolio of Michigan municipal bonds is comprised of revenue of general
obligations of local governments or authorities, rather than general obligations
of the State of Michigan itself, ratings on such Michigan obligations will be
different from those given to the State of Michigan and their value may be
independently affected by economic matters not directly impacting the State.
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 of the Trust may:
1. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
or certificates of deposit for any such securities) if more than 5% of
the value of the Fund's total assets (taken at current value) would be
invested in the securities of such issuer, or more than 10% of the
issuer's outstanding voting securities would be owned by the Fund or
the Trust, except that (a) with respect to each Fund, other than the
Michigan Bond Fund and the Tax-Free Short-Intermediate Bond Fund, up
to 25% of the value of the Fund's total assets (taken at current
value) may be invested without regard to these limitations and (b)
with respect to the Michigan Bond Fund and the Tax-Free Short-
Intermediate Bond Fund,
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up to 50% of the value of the Fund's total assets may be invested
without regard to these limitations so long as no more than 25% of the
value of the Fund's total assets are invested in the securities of any
one issuer. For purposes of this limitation, a security is considered
to be issued by the entity (or entities) whose assets and revenues
back the security. A guarantee of a security is not deemed to be a
security issued by the guarantor when the value of all securities
issued and guaranteed by the guarantor, and owned by the Fund, does
not exceed 10% of the value of the Fund's total assets;
2. Borrow money or issue senior securities except that each Fund may
borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts up to one-third of the value of its
total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets, except in connection with any such borrowing
and then in amounts not in excess of one-third of the value of the
Fund's total assets at the time of such borrowing. No Fund will
purchase securities while its aggregate borrowings (including reverse
repurchase agreements and borrowing from banks) in excess of 5% of its
total assets are outstanding. Securities held in escrow or separate
accounts in connection with a Fund's investment practices are not
deemed to be pledged for purposes of this limitation;
3. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no
limitation with respect to (i) instruments that are issued (as defined
in investment limitation 1 above) or guaranteed by the United States,
any state, territory or possession of the United States, the District
of Columbia or any of their authorities, agencies, instrumentalities
or political subdivisions, (ii) with respect to the Money Market Funds
only, instruments issued by domestic branches of U.S. banks and (iii)
repurchase agreements secured by the instruments described in clause
(i) and, with respect to the Money Market Funds, clause (ii); (b)
wholly-owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related
to financing the activities of the parents; and (c) utilities will be
divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be
considered a separate industry;
4. Purchase or sell real estate, except that each Fund may purchase
securities of issuers which deal in real estate and may purchase
securities which are secured by interests in real estate;
5. Acquire any other investment company or investment company security
except in connection with a merger, consolidation, reorganization or
acquisition of assets or where otherwise permitted by the 1940 Act;
6. Act as an underwriter of securities within the meaning of the
Securities Act of 1933, as amended, except to the extent that the
purchase of obligations directly from the issuer thereof, or the
disposition of securities, in accordance with the Fund's investment
objective, policies and limitations may be deemed to be underwriting;
7. Write or sell put options, call options, straddles, spreads, or any
combination thereof except for transactions in options on securities,
securities indices, futures contracts, options on futures contracts
and transactions in securities on a when-issued or forward commitment
basis, and except that each Equity and Bond Fund may enter into
forward currency contracts in accordance with its investment
objectives and policies. Notwithstanding the above, the Tax-Free
Short-Intermediate Bond Fund may not write or purchase options,
including puts, calls, straddles, spreads, or any combination
thereof;
8. Purchase securities of companies for the purpose of exercising
control;
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9. Purchase securities on margin, make short sales of securities or
maintain a short position, except that (a) this investment limitation
shall not apply to a Fund's transactions in futures contracts and
related options, a Fund's sale of securities short against the box or
a Fund's transactions in securities on a when-issued or forward
commitment basis, and (b) a Fund may obtain short-term credit as may
be necessary for the clearance of purchases and sales of portfolio
securities;
10. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs, except that each Fund
may, to the extent appropriate to its investment policies, purchase
publicly traded securities of companies engaging in whole or in part
in such activities, may enter into futures contracts and related
options, and may engage in transactions in securities on a when-issued
or forward commitment basis, and except that each Equity Fund and Bond
Fund may enter into forward currency contracts in accordance with its
investment objectives and policies; or
11. Make loans, except that each Fund may purchase and hold debt
instruments (whether such instruments are part of a public offering or
privately negotiated), may enter into repurchase agreements and may
lend portfolio securities in accordance with its investment objective
and policies.
In addition, the Tax-Free Short-Intermediate Bond Fund may not:
1. Purchase or retain securities of any issuer if the officers or
Trustees of the Trust or its Advisor who own beneficially more than
one-half of 1% of the securities of such issuer together own
beneficially more than 5% of such securities;
2. Invest more than 10% of its total assets in the securities of issuers
which together with any predecessors have a record of less than three
years continuous operation; or
3. Participate on a joint or joint and several basis in any securities
trading account.
No Fund of Framlington may:
1. Purchase securities (except U.S. Government securities) if more than
5% of its total assets will be invested in the securities of any one
issuer, except that up to 25% of the assets of the Fund may be
invested without regard to this 5% limitation;
2. Invest 25% or more of its total assets in securities issued by one or
more issuers conducting their principal business activities in the
same industry (except that the Healthcare Fund will invest more than
25% of its total assets in securities of issuers conducting their
principal business activities in healthcare industries and the Global
Financial Services Fund will invest more than 25% of its total assets
in securities of issuers conducting their principal business
activities in the financial services industry);
3. Borrow money or enter into reverse repurchase agreement except that
the Fund 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 for the purpose of meeting
redemption requests, in amounts (when aggregated with amounts borrowed
under clause (i)) not exceeding 33 1/3% of its total assets;
4. Pledge, mortgage or hypothecate its assets other than to secure
borrowings permitted by investment limitation 3 above (collateral
arrangements with respect to margin requirements for options and
futures transactions are not deemed to be pledges or hypothecations
for this purpose);
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5. Make loans of securities to other persons in excess of 25% of the
Fund's total assets; provided the Fund may invest without limitation
in short-term debt obligations (including repurchase agreements) and
publicly distributed debt obligations;
6. Underwrite securities of other issuers, except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933, as amended,
in selling portfolio securities;
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;
8. Purchase securities on margin, or make short sales of securities
(except that the Global Financial Services Fund may make short sales
of securities), except for the use of short-term credit necessary for
the clearance of purchases and sales of portfolio securities, but the
Fund may make margin deposits in connection with transactions in
options, futures and options of futures;
9. Make investments for the purpose of exercising control or management;
10. Invest in commodities or commodity futures contracts, provided that
this limitation shall not prohibit the purchase or sale by the Fund of
forward foreign currency exchange contracts, financial futures
contracts and options on financial futures contracts, foreign currency
futures contracts, and options on securities, foreign currencies and
securities indices, as permitted by the Fund's Prospectus; or
11. Issue senior securities, except as permitted by the 1940 Act.
Additional investment restrictions adopted by each Fund of Framlington
which may be changed by the Board of Trustees, provide that each Fund may
not:
1. Invest more than 15% of its net assets in illiquid securities;
2. Own more than 10% (taken at market value at the time of purchase) of
the outstanding voting securities of any single issuer; or
3. Invest in other investment companies except as permitted under the
1940 Act.
No Fund of the Company may:
1. Invest more than 25% of its total assets in any one industry (i)
provided that securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities are not considered to represent
industries; (ii) except that the Real Estate Fund will invest more
than 25% of its assets in securities of issuers in the real estate
industry; (iii) except that the NetNet Fund will invest more than 25%
of its assets in securities of companies engaged in the research,
design, development, manufacturing or distribution of products,
processes or services for use with the Internet or Intranet related
businesses; and (iv) provided that with respect to the Equity
Selection Fund, utilities will be divided according to their services,
for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry;
2. (For each Fund except the International Bond Fund) with respect to 75%
of the Fund's assets, invest more than 5% of the Fund's assets (taken
at a market value at the time of purchase) in the outstanding
securities of any single issuer or own more than 10% of the
outstanding voting securities of any one issuer, in each case other
than securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
25
<PAGE>
3. Borrow money or issue senior securities (as defined in the 1940 Act)
except that the Funds may borrow (i) for temporary purposes in amounts
not exceeding 5% of its total assets and (ii) to meet redemption
requests, in amounts (when aggregated with amounts borrowed under
clause (i)) not exceeding 33 1/3% of its total assets;
4. Pledge, mortgage or hypothecate its assets other than to secure
borrowings permitted by investment limitation 3 above (collateral
arrangements with respect to margin requirements for options and
futures transactions are not deemed to be pledges or hypothecations
for this purpose);
5. Make loans of securities to other persons in excess of 25% of a Fund's
total assets and 33 1/3% of the Money Market 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;
7. (For each Fund except the Real Estate Fund) 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. The Real Estate Fund may not buy or sell real estate;
however, this prohibition does not apply to the purchase or sale of
(i) securities which are secured by real estate, (ii) securities
representing interests in real estate, (iii) securities of companies
operating in the real estate industry including real estate investment
trusts, and (iv) the holding and sale of real estate acquired as a
result of the ownership of securities;
8. Purchase securities on margin, or make short sales of securities,
except for the use of short-term credit necessary for the clearance of
purchases and sales of portfolio securities, but the Funds (with the
exception of the Money Market Fund and Short Term Treasury Fund) may
make margin deposits in connection with transactions in options,
futures and options on futures;
9. Make investments for the purpose of exercising control or management;
or
10. Invest in commodities or commodity futures contracts, provided that
this limitation shall not prohibit the purchase or sale by the Growth
Opportunities, Multi-Season, NetNet, Real Estate, Value and
International Bond Funds of forward currency contracts, financial
futures contracts and options on financial futures contracts, and
options on securities and on securities, foreign currencies and on
securities indices, as permitted by each Fund's prospectus.
In addition, the Short Term Treasury Fund may not:
1. Borrow money or enter into reverse repurchase agreements except that
the Fund may (i) borrow money or enter into reverse repurchase
agreements for temporary purposes in amounts exceeding 5% of its total
assets and (ii) borrow money for the purpose of meeting redemption
requests, in amounts (when aggregated with amounts borrowed under
clause (i)) not exceeding 33 1/3% of its total assets;
2. Pledge, mortgage or hypothecate its assets other than to secure
borrowings permitted by investment limitation 1 above; or
3. Issue any senior securities (as such term is defined in Section 18(f)
of the 1940 Act) except to the extent the activities permitted by
other enumerated investment limitations for the Company above may be
deemed to give rise to a senior security.
26
<PAGE>
Additional investment restrictions adopted by each Fund of the Company,
which may be changed by the Board of Directors, provide that a Fund may not:
1. Invest more than 15% of its net assets (10% of net assets for the
Money Market Fund) (taken at market value at the time of purchase) in
securities which cannot be readily resold because of legal or
contractual restrictions and (in the case of International Bond Fund
and Short Term Treasury Fund only) which are not otherwise marketable;
2. (For each Fund except the International Bond Fund and Short Term
Treasury Fund) own more than 10% (taken at market value at the time of
purchase) of the outstanding voting securities of any single issuer;
3. (For each Fund except Short Term Treasury Fund) purchase or sell
interests in oil, gas or other mineral exploration or development
plans or leases); or
4. Invest in other investment companies except as permitted under the
1940 Act.
In addition, the International Bond Fund may not with respect to 50% of the
Fund's assets, invest more than 5% of the Fund's assets (taken at a market value
at the time of purchase) in the outstanding securities of any single issuer or
own more than 10% of the outstanding voting securities of any one issuer, in
each case other than securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, at the close of each quarter of its taxable year.
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.
TEMPORARY DEFENSIVE POSITION
During periods of unusual economic or market conditions or for temporary
defensive purposes or liquidity, each Fund (other than the Index 500 Fund) may
invest without limit in cash and in U.S. dollar-denominated high quality money
market and other short-term instruments. These investments may result in a
lower yield than would be available from investments with a lower quality or
longer term.
MANAGEMENT OF THE FUND
TRUSTEES, DIRECTORS AND OFFICERS
The trustees, directors and executive officers of the Trust, Framlington
and the Company, and their business addresses, ages, and principal occupations
during the past five years, are:
27
<PAGE>
<TABLE>
<CAPTION>
Positions with Trust, Company and Principal Occupation
Name, Address and Age Framlington+ During Past Five Years
- --------------------- ------------ ----------------------
<S> <C> <C>
Charles W. Elliott Trustee/Director and Chairman of Senior Advisor to the President,
1024 Essex Circle the Board of Trustees and Western Michigan University (since
Kalamazoo, MI 49008 Directors July 1995); Executive Vice President,
Age: 67 Administration & Chief Financial
Officer, Kellogg Company (January 1987
through June 1995). Board of
Directors, Steelcase Financial
Corporation; Board of Directors,
Enesco Group.
John Rakolta, Jr. Trustee/Director and Vice Chairman Chairman and Chief Executive Officer,
1876 Rathmor of the Boards of Trustees and Walbridge Aldinger Company
Bloomfield Hills, MI 48304 Directors (construction company).
Age: 52
Thomas B. Bender Trustee/Director Partner, Financial & Investment
7 Wood Ridge Road Management Group.
Glen Arbor, MI 49636
Age: 66
David J. Brophy Trustee/Director Professor, University of Michigan.
1025 Martin Place Director, River Place Financial
Ann Arbor, MI 48104 Corporation.
Age: 63
Dr. Joseph E. Champagne Trustee/Director Dean, University Center, Macomb
319 East Snell Road College (since September 1997);
Rochester, MI 48306 Corporate and Executive Consultant
Age: 61 (since September 1993); Chancellor,
Lamar University (September 1994 to
September 1995); Chairman of Board of
Directors, Ross Controls of Troy,
Michigan.
Thomas D. Eckert Trustee/Director President and Chief Executive Officer,
10726 Falls Pointe Drive Capital Automotive REIT (real estate
Great Falls, VA 22066 investment trust specializing in
Age: 51 retail automotive properties) (since
November 1997); President,
Mid-Atlantic Region of Pulte Home
Corporation (developer of residential
land and construction of housing
units) (1983 to 1997); Director,
Celotex Corporation (building products
manufacturer).
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C>
Lee P. Munder* Trustee/Director and President Chairman of the Advisor (since
1029 N. Ocean Blvd. February 1998); Chief Executive
Palm Beach, FL 33480 Officer of the Advisor (1995 to 1998);
Age: 54 Chief Executive Officer, World Asset
Management (January 1995-December
1997); Chief Executive Officer, Old
MCM (predecessor of Advisor) (since
February 1985); Director, LPM
Investment Services, Inc. ("LPM");
Director, Capital Automotive REIT.
Terry H. Gardner Vice President, Vice President and Chief Financial
480 Pierce Street Chief Financial Officer, Treasurer Officer of the Advisor (since 1993),
Suite 300 and Secretary Vice President and Chief Financial
Birmingham, MI 48009 Officer, Old MCM (since 1993);
Age: 38 Secretary, LPM (since June 1993).
Paul Tobias Vice President Chief Executive Officer of the Advisor
480 Pierce Street (since February 1998); Chief Operating
Suite 300 Officer of the Advisor (since April
Birmingham, MI 48009 1995); Executive Vice President of the
Age: 48 Advisor (April 1995 to February 1998);
Executive Vice President, Comerica,
Inc. (October 1990 to April 1995).
Gerald Seizert Vice President Chief Investment Officer/Equities of
480 Pierce Street the Advisor (since April 1995);Chief
Suite 300 Executive Officer of the Advisor
Birmingham, MI 48009 (February 1998-August 1999); Executive
Age: 47 Vice President of the Advisor (April
1995 to February 1998); Managing
Director (1991 to 1995), Director
(1992 to 1995), and Vice President
(1984 to 1991) of Loomis, Sayles and
Company, L.P. (investment counseler).
Elyse G. Essick Vice President Vice President and Director of
480 Pierce Street Communications and Client Services
Suite 300 of the Advisor (since January 1995).
Birmingham, MI 48009
Age: 41
James C. Robinson Vice President Executive Vice President and Chief
480 Pierce Street Investment Officer/Fixed Income of the
Suite 300 Advisor (since January 1995).
Birmingham, MI 48009
Age: 38
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C>
Leonard J. Barr Vice President Vice President and Director of Core
480 Pierce Street Equity Research of the Advisor (since
Suite 300 January 1995 ); Director and Senior
Birmingham, MI 48009 Vice President, Old MCM (since 1988);
Age: 55 Director of LPM (since June 1993).
Ann F. Putallaz Vice President Vice President and Director of
480 Pierce Street Retirement Services Group of the
Suite 300 Advisor (since January 1995).
Birmingham, MI 48009
Age: 54
Therese Hogan Assistant Secretary Director, State Regulation Department,
101 Federal Street First Data Investor Services Group
Boston, MA 02110 (since June 1994).
Age: 37
Libby Wilson Assistant Secretary Director of Mutual Fund Operations
480 Pierce Street of the Advisor (since July 1999);
Suite 300 Global Portfolio Client Associate of
Birmingham, MI 48009 Invesco Global Asset Management (investment
Age: 30 advisor) (March 1999 to July 1999); Manager
of Mutual Funds Operations of the Advisor
(May 1996 to March 1999); Administrator
of Mutual Funds Operations (March 1993 to
May 1996).
Mary Ann Shumaker Assistant Secretary Associate General Counsel of the
480 Pierce Street Advisor (since July 1997); and
Suite 300 Counsel, Miro Weiner & Kramer (law firm)
Birmingham, MI 48009 (1991 to 1997).
Age: 34
</TABLE>
_______________________
+ Individual holds same position with St. Clair Funds, Inc., ("St. Clair") a
registered investment company.
* Trustee/Director is an "Interested person" of the Trust, Framlington and
the Company as defined in the 1940 Act.
Trustees who are not interested persons of the Trust and Framlington and
Directors who are not interested persons of the Company receive an aggregate fee
from the Trust, Framlington the Company and St. Clair for service on those
organizations' respective Boards, comprised of an annual retainer fee of $35,000
and a fee of $3,000 for each Board meeting attended; and are reimbursed for all
out-of-pocket expenses relating to attendance at such meetings.
The following table summarizes the compensation paid by the Trust,
Framlington, the Company and St. Clair to their respective Trustees/Directors
for the year ended June 30, 1999.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Charles W. Elliot John Rakolta, Jr. Thomas B. David J. Dr. Joseph E. Thomas D.
Chairman Vice Chairman Bender Brophy Champagne Eckert
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Aggregate Compensation
from the Company $ 8,908 $ 8,908 $ 8,908 $ 8,908 $ 8,908 $ 8,908
(comprised of 15 funds)
- ---------------------------------------------------------------------------------------------------------------------------
Aggregate Compensation
from the Trust $29,448 $29,448 $29,448 $29,448 $29,448 $29,448
(comprised of 14 funds)
- ---------------------------------------------------------------------------------------------------------------------------
Aggregate Compensation
from Framlington $ 713 $ 713 $ 713 $ 713 $ 713 $ 713
(comprised of 4 funds)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Charles W. Elliot John Rakolta, Jr. Thomas B. David J. Dr. Joseph E. Thomas D.
Chairman Vice Chairman Bender Brophy Champagne Eckert
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggregate Compensation
from St. Clair $ 931 $ 931 $ 931 $ 931 $ 931 $ 931
- ------------------------------------------------------------------------------------------------------------------------
Pension Retirement
Benefits Accrued as
Part of Fund Expenses None None None None None None
- ------------------------------------------------------------------------------------------------------------------------
Estimated Annual
Benefits upon Retirement None None None None None None
- ------------------------------------------------------------------------------------------------------------------------
Total from the Fund
Complex $ 40,000 $ 40,000 $40,000 $40,000 $ 40,000 $ 40,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
No officer, director or employee of the Advisor, World, the Sub-Advisor,
the Custodian, the Distributor, the Administrator or the Transfer Agent
currently receives any compensation from the Trust, Framlington or the Company.
As of September 26, 1999, the Trustees and officers of the Trust, as a group,
owned less than 1% of all classes of outstanding shares of the Funds of the
Trust, the Trustees and officers of Framlington, as a group, owned less than 1%
of all classes of outstanding shares of the Funds of Framlington except the
_______ Fund in which Trustees and officers, as a group, owned ______% of Class
_____shares of the Fund, and the Directors and officers of the Company, as a
group, owned less than 1% of all classes of outstanding shares of the Funds of
the Company except _____ Fund in which the Directors and officers, as a group,
owned ______% of Class ____ shares of the Fund.
[Lee P. Munder and Terry H. Gardner are administrators of a pension plan
for employees of Munder Capital Management, which as of September 26, 1999,
owned _____ Class ____ shares of the _______ Fund, which represented less than
1% of the outstanding Class _____ Shares of the Fund. As of the same date, the
pension plan owned _____ Class ___ shares of the Fund, which represented ____%
of the outstanding Class ___ shares the Fund.]
As of September 26, 1999, the Advisor and its affiliates, through common
ownership, owned beneficially _______ Class ____ shares of the Fund, which
represented less than ___%, of the outstanding Class ___ shares of the Fund,
respectively.
Shareholder and Trustee Liability. Under Massachusetts law, shareholders of
a business trust may, under certain circumstances, be held personally liable for
the obligations of the trust. However, the Trust's and Framlington's Declaration
of Trust, as amended, each provide that shareholders shall not be subject to any
personal liability in connection with the assets of the Trust or Framlington for
the acts or obligations of the Trust or Framlington, and that every note, bond,
contract, order or other undertaking made by the Trust or Framlington shall
contain a provision to the effect that the shareholders are not personally
liable thereunder. Each Declaration of Trust, as amended, provides for
indemnification out of the trust property of any shareholder held personally
liable solely by reason of his or her being or having been a shareholder and not
because of his or her acts or omissions or some other reason. Each Declaration
of Trust, as amended, also provides that the Trust and Framlington shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Trust or Framlington, and shall satisfy any judgment
thereon. Thus, the risk of a shareholder's incurring financial loss on account
of shareholder liability is limited to circumstances in which the Trust or
Framlington itself would be unable to meet its obligations.
Each Declaration of Trust, as amended, further provides that all persons
having any claim against the Trustees, the Trust or Framlington shall look
solely to the trust property for payment; that no Trustee of the Trust or
Framlington shall be personally liable for or on account of any contract, debt,
tort, claim, damage, judgment or
31
<PAGE>
decree arising out of or connected with the administration or preservation of
the trust property or the conduct of any business of the Trust or Framlington;
and that no Trustee shall be personally liable to any person for any action or
failure to act except by reason of his own bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties as a trustee. With the exception
stated, each Declaration of Trust, as amended, provides that a Trustee is
entitled to be indemnified against all liabilities and expenses reasonably
incurred by him in connection with the defense or disposition of any proceeding
in which he may be involved or with which he may be threatened by reason of
being or having been a Trustee, and that the Trustees will indemnify officers,
representatives and employees of the Trust and Framlington to the same extent
that Trustees are entitled to indemnification.
INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS
Investment Advisor, World and Sub-Advisor. The Advisor of each Fund (other
than the Index 500 Fund and the International Equity Fund) is Munder Capital
Management, a Delaware general partnership. The Advisor replaced Woodbridge
Capital Management, Inc. ("Woodbridge") as investment advisor to the investment
portfolios of the Trust and replaced Munder Capital Management, Inc. as the
investment advisor to the investment portfolios of the Company on January 31,
1995, upon the closing agreement (the "Joint Venture Agreement") among Old MCM,
Comerica, Woodbridge and WAM, pursuant to which Old MCM contributed its
investment advisory business and Comerica contributed the investment advisor
business of its indirect subsidiaries, Woodbridge and World Asset Management, to
the Advisor. The general partners of the Advisor are WAM, WAM II, Old MCM and
Munder Group LLC. WAM and WAM II 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 advisor for the Index 500 Fund and the International Equity
Fund is World Asset Management, L.L.C., a Delaware limited liability company.
World is a wholly-owned subsidiary of the Advisor.
The Funds have entered into Investment Advisory Agreements (the "Advisory
Agreements"), dated July 2, 1998, with the Advisor or World which have been
approved by the shareholders.
Under the terms of the Advisory Agreements, the Advisor or World 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 or World, subject
to review by the Trust's and the Company's Boards of Directors/Trustees. Under
the terms of the Advisory Agreement between the Advisor and Framlington, the
Advisor furnishes overall investment management for the Framlington Funds,
provides research and credit analysis, oversees the purchase and sale of
portfolio securities by the Sub-Advisor, maintains books and records with
respect to the Funds' securities transactions and provides periodic and special
reports to the Board of Trustees as requested.
The Advisory Agreements will continue in effect for a period of two years
from their effective dates. If not sooner terminated, each Advisory Agreement
will continue in effect for successive one year periods thereafter, provided
that each continuance is specifically approved annually by (a) the vote of a
majority of the Boards of Directors/Trustees 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 such approval, and (b) either (i)
the vote of a majority of the outstanding voting securities of the affected
Fund, or (ii) the vote of a majority of the Boards of Directors/Trustees. Each
Advisory Agreement is terminable with respect to a Fund by vote of the Boards of
Directors/Trustees, 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 or World. The Advisor or World may also terminate its advisory
relationship with respect to a Fund without penalty on 90 days' written notice
to the Trust, Framlington or the Company, as applicable. Each Advisory Agreement
terminates automatically in the event of its assignment (as defined in the 1940
Act).
The Sub-Advisor is a subsidiary of Framlington Group Limited, which is
incorporated in England and Wales and, through its subsidiaries, provides a wide
range of investment services. Framlington Group Limited is a
32
<PAGE>
wholly owned subsidiary of Framlington Holdings Limited which is, in turn, owned
49% by the Advisor and 51% by Credit Commercial de France S.A., a French banking
corporation listed on the Societe des Bourses Francaises.
The Framlington Funds have entered into a Sub-Advisory Agreement, dated
July 2, 1998, with the Advisor and the Sub-Advisor which has been approved by
the shareholders of the Framlington Funds. Under the terms of the Sub-Advisory
Agreement, the Sub-Advisor provides sub-advisory services to the Framlington
Funds. Subject to the supervision of the Advisor, the Sub-Advisor is responsible
for the management of each Fund's portfolio, including decisions regarding
purchases and sales of portfolio securities by the Framlington Funds. The Sub-
Advisor is also responsible for arranging the execution of portfolio management
decisions, including the selection of brokers to execute trades and the
negotiation of related brokerage commissions.
The Sub-Advisory Agreement, with respect to each Fund, will continue in
effect with respect to each Fund for a period of two years from its effective
date. If not sooner terminated, the Sub-Advisory Agreement will continue in
effect for successive one year periods thereafter, provided that each
continuance is specifically approved annually by (a) the vote of a majority of
the Board of Trustees who are not parties to the Sub-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) with respect to
a Fund, the vote of a majority of the outstanding voting securities of that
Fund, or (ii) the vote of a majority of the Board of Trustees. The Sub-Advisory
Agreement is terminable by vote of the Board of Trustees, or, with respect to a
Fund, by the holders of a majority of the outstanding voting securities of that
Fund, at any time without penalty, on 60 days' written notice to the Sub-
Advisor, or by the Advisor on 90 days' written notice to the Sub-Advisor. The
Sub-Advisor may also terminate its sub-advisory relationship with a Fund without
penalty on 90 days' written notice to Framlington. The Sub-Advisory Agreement
terminates automatically in the event of its assignment (as defined in the 1940
Act).
For the advisory services provided and expenses assumed by it, the Advisor
has agreed to a fee from each Fund computed daily and payable monthly at the
rates set forth below:
1.25% of average daily net assets
. Emerging Markets Fund**
1.00% of the first $500 million of average daily net assets and .75%
of net assets in excess of $500 million
. Multi-Season Fund*
1.00% of the first $250 million of average daily net assets and .75%
of net assets in excess of $250 million
. International Growth Fund**
. Healthcare Fund**
1.00% of average daily net assets
. Micro-Cap Fund**
. NetNet Fund**
.75% of average daily net assets
. Equity Selection Fund
. Global Financial Services Fund
. Growth & Income Fund
. Growth Opportunities Fund
. International Equity Fund
. Small-Cap Value Fund
. Small Company Growth Fund
.74% of average daily net assets
. Real Estate Fund
33
<PAGE>
. Value Fund
.65% of average daily net assets
. Balanced Fund
.50% of average daily net assets
. Bond Fund
. Intermediate Bond Fund
. International Bond Fund
. U.S. Income Fund
. Michigan Bond Fund
. Tax-Free Bond Fund
. Tax-Free Short-Intermediate Bond Fund
.40% of average daily net assets
. Money Market Fund
.35% of average daily net assets
. Cash Investment Fund
. Tax-Free Money Market Fund
. U.S. Treasury Money Market Fund
.25% of average daily net assets
. Short Term Treasury Fund**
________________________
* The Advisor expects to receive, after waivers, an advisory fee at the
annual rate of .75% of average daily net assets of Multi-Season Fund during
the current fiscal year.
** The Advisor expects to voluntarily reimburse expenses during the current
fiscal year with respect to the Micro-Cap Fund, the NetNet Fund, Short Term
Treasury Fund, Growth Opportunities Fund, International Growth Fund,
Emerging Markets Fund, Healthcare Fund and Global Financial Services Fund.
The Advisor may discontinue such fee waivers and/or expense reimbursements
at any time, in its sole discretion.
The Advisor pays the Sub-Advisor a monthly fee equal on an annual basis to
up to 0.50% of average daily net assets up to $250 million, reduced to .375% of
average daily net assets in excess of $250 million for the International Growth
Fund and the Healthcare Fund, up to .625% of average daily net assets for the
Emerging Markets Fund and .375% of average daily net assets for the Global
Financial Services Fund.
For the advisory services provided and expenses assumed by it, World has
agreed to a fee from each Fund computed daily and payable monthly at the rates
set forth below:
.20% of the first $250 million of average daily net assets;
0.12% of the next $250 million of net assets
and .07% of net assets in excess of $500 million
. Index 500 Fund
.75% of average daily net assets
. International Equity Fund
For the fiscal year ended June 30, 1997 (and for the period from
commencement of operations through June 30, 1997 for the International Growth,
Emerging Markets, Healthcare, Micro-Cap, Small-Cap Value, Short Term Treasury
and International Bond Funds), the Advisor received fees after waivers, if any,
of $445,259 for the
34
<PAGE>
Balanced Fund, $1,650,704 for the Growth & Income Fund, $249,764 for the Index
500 Fund, $1,720,496 for the International Equity Fund, $1,884,242 for the Small
Company Growth Fund, $751,954 for the Bond Fund, $2,554,647 for the Intermediate
Bond Fund, $1,175,733 for the U.S. Income Fund, $132,451 for the Michigan Bond
Fund, $1,006,688 for the Tax-Free Bond Fund, $1,584,769 for the Tax-Free Short-
Intermediate Bond Fund, $3,454,159 for the Cash Investment Fund, $879,155 for
the Tax-Free Money Market Fund, $1,101,183 for the U.S. Treasury Money Market
Fund, $3,189,742 for the Multi-Season Fund, $259,015 for the Real Estate Fund,
$599,286 for the Money Market Fund, $401,505 for the Value Fund, $71,843 for the
International Growth Fund, $25,210 for the Emerging Markets Fund, $11,440 for
the Healthcare Fund, $6,479 for the Micro-Cap Equity Fund, $20,442 for the
Small-Cap Value Fund, $51,885 for the Short Term Treasury Fund and $143,476 for
the International Bond Fund.
For the fiscal year ended June 30, 1998 (and for the period from
commencement of operations through June 30, 1998 for the Global Financial
Services Fund and Growth Opportunities Fund), the Advisor received fees after
waivers, if any, of $524,133 for the Balanced Fund, $1,900,685 for the Growth &
Income Fund, $884,003 for the Index 500 Fund, $1,628,425 for the International
Equity Fund, $3,045,349 for the Small Company Growth Fund, $1,116,093 for the
Bond Fund, $2,770,357 for the Intermediate Bond Fund, $1,386,132 for the U.S.
Income Fund, $261,589 for the Michigan Bond Fund, $1,017,292 for the Tax-Free
Bond Fund, $1,542,255 for the Tax-Free Short-Intermediate Bond Fund, $3,750,786
for the Cash Investment Fund, $1,075,987 for the Tax-Free Money Market Fund,
$470,094 for the U.S. Treasury Money Market Fund, $6,169,411 for the Multi-
Season Fund, $612,857 for the Real Estate Fund, $454,600 for the Money Market
Fund, $1,066,142 for the Value Fund, $516,840 for the International Growth Fund,
$554,427 for the Emerging Markets Fund, $143,897 for the Healthcare Fund,
$304,989 for the Micro-Cap Equity Fund, $1,028,013 for the Small-Cap Value Fund,
$135,827 for the Short Term Treasury Fund, $253,258 for the International Bond
Fund, $62,684 for NetNet Fund, $302 for the Global Financial Services Fund and
$193 for the Growth Opportunities Fund.
For the fiscal year ended June 30, 1999 (and for the period of commencement
of operations through June 30, 1999 for the Equity Selection Fund) the Advisor
received fees after waivers, if any, of $ for the Balanced Fund, $ for the
Equity Selection Fund, $ for the Growth & Income Fund, $ for the Growth
Opportunities Fund $ for the Index 500 Fund, $ for the International Equity
Fund, $ for the Micro-Cap Equity Fund, $ for the Multi-Season Fund, $ for
NetNet Fund, $ for the Real Estate Fund, $ for the Small-Cap Value Fund, $
for the Small Company Growth Fund, $ for the Value Fund, $ for the Bond
Fund, $ for the Intermediate Bond Fund, $ for the International Bond Fund,
$ for the Michigan Bond Fund, $ for the Short Term Treasury Fund, $ for
the Tax-Free Bond Fund, $ for the Tax-Free Short-Intermediate Bond Fund,
$ for the U.S. Income Fund, $ for the Cash Investment Fund, $ for the
Money Market Fund, $ for the Tax-Free Money Market Fund, $ for the U.S.
Treasury Money Market Fund, $ for the International Growth Fund, $ for
the Emerging Markets Fund, $ for the Healthcare Fund and $ for the Global
Financial Services Fund.
For the fiscal year ended June 30, 1997 the Advisor voluntarily waived
advisory fees and/or reimbursed expenses in the amounts of $1,063,248 for the
Multi-Season Fund, $10,143 for the Real Estate Fund, $17,688 for the Value Fund,
$360,721 for the Index 500 Fund and $51,815 for the Michigan Bond Fund.
For the fiscal year ended June 30, 1998, the Advisor voluntarily waived
advisory fees and/or reimbursed expenses in the amounts of $421,846 for the
Index 500 Fund, $75,264 for the Micro-Cap Equity Fund, $1,214,795 for the Multi-
Season Growth Fund, $110,473 for the Emerging Markets Fund, $112,541 for the
Healthcare Fund, $105,456 for the International Growth Fund, $62,711 for the
Short Term Treasury Fund, $33,890 for the NetNet Fund and $2 for the Growth
Opportunities Fund.
For the fiscal year ended June 30, 1999, the Advisor voluntarily waived
advisory fees and/or reimbursed expenses in the amounts of $ for the Growth
Opportunities Fund, $ for the Index 500 Fund, $ for the Micro-Cap Equity
Fund, $ for the Multi-Season Growth Fund, $ for the NetNet Fund, $
for the Short Term Treasury Fund, $ for the Emerging Markets Fund, $ for
the Healthcare Fund and $ for the International Growth Fund.
Distribution Agreements. The Trust, Framlington and the Company have
entered into distribution agreements, under which the Distributor, as agent,
sells shares of each Fund on a continuous basis. The Distributor
35
<PAGE>
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 - Class A, Class B and Class C Shares.
Each Fund has adopted a Service Plan with respect to its Class A Shares pursuant
to which it uses its assets to finance activities relating to the provision of
certain shareholder services. Under the Service and Distribution Plans for Class
A Shares, the Distributor is paid an annual service fee at the rate of up to
0.25% of the value of average daily net assets of the Class A Shares of each
Fund. Each Fund has also adopted Service and Distribution Plans with respect to
its Class B and Class C Shares, pursuant to which it uses its assets to finance
activities relating to the distribution of its shares to investors and provision
of certain shareholder services. Under the Service and Distribution Plans for
Class B and Class C Shares, the Distributor is paid an annual service fee of up
to 0.25% of the value of average daily net assets of the Class B and Class C
Shares of each Fund and an annual distribution fee at the rate of up to 0.75% of
the value of average daily net assets of the Class B and Class C 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 Boards of Directors/Trustees, including a
majority of the Directors/Trustees who are not interested persons of the Trust,
Framlington or 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/Trustees in the
manner described above. Each Plan may be terminated at any time, without
penalty, by vote of a majority of the Non-Interested Plan Directors or by a vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of the relevant class of the respective Fund on not more than 30 days' written
notice to any other party to the Plan. Pursuant to each Plan, the Distributor
will provide the Boards of Directors/Trustees periodic reports of amounts
expended under the Plan and the purpose for which such expenditures were made.
The Directors/Trustees have determined that the Plans will benefit the
Trust, Framlington, the Company and their respective shareholders by (i)
providing an incentive for broker or bank personnel to provide continuous
shareholder servicing after the time of sale; (ii) retaining existing accounts;
(iii) facilitating portfolio management flexibility through continued cash flow
into the Funds; and (iv) maintaining a competitive sales structure in the mutual
fund industry.
With respect to Class B and Class C Shares of each Fund, the Distributor
expects to pay sales commissions to dealers authorized to sell a Fund's Class B
and Class C Shares at the time of sale. The Distributor will use its own funds
(which may be borrowed) to pay such commissions pending reimbursement by the
relevant Plan. In addition, the Advisor may use its own resources to make
payments to the Distributor or dealers authorized to sell the Funds' shares to
support their sales efforts.
36
<PAGE>
Fees paid to the Distributor Pursuant to Class A Service Plans for the last
three fiscal years.
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
6/30/97 6/30/98 6/30/99
-------------------------------------------
<S> <C> <C> <C>
Funds of the Trust
Balanced Fund $ 981 $ 1,274 $
Bond Fund $ 2,203 $ 2,735 $
Cash Investment Fund $ 0 $269,773 $
Growth & Income Fund $ 5,324 $ 14,520 $
Index 500 Fund $ 48,763 $140,154 $
Intermediate Bond Fund $ 13,919 $ 17,654 $
International Equity Fund $ 13,505 $ 15,618 $
Michigan Bond Fund $ 1,206 $ 2,067 $
Small Company Growth Fund $ 17,843 $ 59,251 $
Tax-Free Bond Fund $ 1,206 $ 7,966 $
Tax-Free Short-Intermediate Bond $ 14,678 $ 17,556 $
Fund
Tax-Free Money Market Fund $ 0 $154,996 $
U.S. Income Fund $ 0 $ 6,581 $
U.S. Treasury Money Market Fund $ 0 $ 18,269 $
Funds of the Company
Equity Selection Fund N/A N/A $
Growth Opportunities Fund N/A $ 0+ $
International Bond Fund $ 39* $ 400 $
Micro -Cap Fund $ 79* $ 14,218 $
Money Market Fund $ 1,198* $ 31,560 $
Multi-Season Fund $ 30,811 $ 55,691 $
NetNet Fund N/A $ 2,066 $
Real Estate Fund $ 1,559 $ 6,769 $
Short Term Treasury Fund N/A $ 11++ $
Small-Cap Value Fund $ 558* $ 10,714 $
Value Fund $ 2,347 $ 10,919 $
Funds of Framlington
Emerging Markets Fund $ 285 $ 1,804 $
Global Financial Services Fund N/A $ 0 $
Healthcare Fund $ 241 $ 7,066 $
International Growth Fund $ 759 $ 3,287 $
</TABLE>
____________________________________
* Figures reflect period from commencement of operations through June 30,
1997.
+ As of June 30, 1998, the Growth Opportunities Fund and the Global Financial
Services Fund had not commenced selling of Class A Shares.
++ As of June 2, 1998, Class A Shares of Short Term Treasury Fund were closed
to all investments.
37
<PAGE>
Fees paid to the Distributor Pursuant to Class B Service and Distribution Plans
for the last three fiscal years.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1999
DISTRIBUTION DISTRIBUTION DISTRIBUTION
AND SERVICE AND SERVICE AND SERVICE
FEES CDSC'S FEES CDSCS FEES CDSCS
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Funds of the Trust
Balanced Fund $ 1,249 $ 0.00 $ 3,890 $ 1,004 $ $
Bond Fund $ 5,482 $ 447.26 $ 6,329 $ 245 $ $
Growth & Income Fund $ 3,519 $ 535.41 $ 10,447 $ 2,013 $ $
Index 500 Fund $153,426 $ 0.00 $421,479 $51,363 $ $
Intermediate Bond Fund $ 2,627 $ 0.00 $ 5,683 $ 1,556 $ $
International Equity Fund $ 10,398 $ 318.86 $ 11,221 $ 2,246 $ $
Michigan Bond Fund $ 2,779 $ 0.00 $ 4,234 $ 27 $ $
Small Company Growth $21, 679 $ 930.13 $107,506 $ 6,931 $ $
Fund
Tax-Free Bond Fund $ 566 $ 0.00 $ 3,552 $ 50 $ $
Tax-Free Short- $ 1,782 $ 0.00 $ 3,575 $ 0 $ $
Intermediate Bond Fund
U.S. Income Fund $ 13,452 $ 0.00 $ 12,408 $ 1 $ $
Funds of the Company
Equity Selection Fund N/A N/A N/A N/A $ $
Growth Opportunities Fund N/A N/A $ 0*** $ 0 $ $
International Bond Fund $ 11* $ 0.00 $ 401 $ 0 $ $
Micro-Cap Fund $ 513* $ 0.00 $ 81,387 $18,345 $ $
Money Market Fund $ 1,925 $ 711.20 $ 7,836 $ 2,888 $ $
Multi-Season Fund $ 27,446 $ 0.00 $942,437 $57,921 $ $
NetNet Fund N/A N/A $ 1,359** $ 0 $ $
Real Estate Fund $731,958 $26,020.64 $ 63,758 $ 6,409 $ $
Short Term Treasury Fund $ 116* $ 0.00 $ 1,848** $ 92 $ $
Small-Cap Value Fund $ 648* $ 0.00 $ 15,054 $ 590 $ $
Value Fund $ 2,689 $ 0.00 $ 15,819 $ 129 $ $
Funds Of Framlington
Emerging Markets Fund $ 95* $ 0.00 $ 4,169 $ 1,670 $ $
Global Financial Services N/A N/A $ 0*** $ 0 $ $
Fund
Healthcare Fund $ 1,240* $ 0.00 $ 42,842 $ 7,556 $ $
International Growth Fund $ 175* $ 0.00 $ 2,170 $ 190 $ $
</TABLE>
_____________________________________
* Figures reflect period from commencement of operations through June 30,
1997.
** Figures reflect period from commencement of operations through June 30,
1998.
*** As of June 30, 1998, the Growth Opportunities Fund and the Global Financial
Services Fund had not commenced selling of Class B Shares. As of June 2,
1998, Class B Shares of Short Term Treasury Fund were closed to all
investments.
38
<PAGE>
Fees Paid to the Distributor Pursuant to Class C Service and Distribution Plans
for the last three fiscal years.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1999
DISTRIBUTION DISTRIBUTION DISTRIBUTION
AND SERVICE AND SERVICE AND SERVICE
FEES CDSC's FEES CDSC's FEES CDSC's
--------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Funds of the Trust
Balanced Fund $ 337 $ 0.00 $ 880 $ 29 $ $
Bond Fund $ 787 $ 0.00 $ 1,545 $ 862 $ $
Growth & Income Fund $ 2,683 $ 0.00 $ 7,781 $ 67 $ $
Index 500 Fund N/A N/A N/A N/A $ $
Intermediate Bond Fund $ 1,136 $ 0.00 $ 1,584 $ 7,747 $ $
International Equity Fund $18,452 $ 0.00 $ 23,594 $11,988 $ $
Michigan Bond Fund $ 568 $ 0.00 $ 747 $ 0 $ $
Small Company Growth $13,938 $212.00 $ 51,322 $13,088 $ $
Fund
Tax-Free Bond Fund N/A* N/A $ 396 $ 0 $ $
Tax-Free Short- N/A* N/A N/A*** N/A*** $ $
Intermediate Bond
Fund
U.S. Income Fund $ 93 $ 0.00 $ 268 $ 35 $ $
Funds of the Company
Equity Selection Fund N/A N/A N/A N/A $ $
Growth Opportunities N/A N/A $ 0*** $ 0 $ $
Fund
International Bond Fund N/A* N/A $ 2 $ 0 $ $
Micro-Cap Fund $ 48** $ 0.00 $ 42,988 $24,200 $ $
Money Market Fund $ 5,932 $ 0.00 $ 13,170 $ 3 $ $
Multi-Season Fund $73,808 $391.84 $112,333 $ 556 $ $
NetNet Fund N/A N/A N/A*** N/A $ $
Real Estate Fund $1, 829 $ 2.38 $ 10,810 $ 261 $ $
Short Term Treasury Fund N/A* N/A $ 159*** $ 10 $ $
Small-Cap Value Fund $ 223** $ 0.00 $ 9,109 $ 159 $ $
Value Fund $ 4,397 $ 0.00 $ 8,593 $ 23 $ $
Funds of Framlington
Emerging Markets Fund $ 49** $ 0.00 $ 448 $ 0 $ $
Global Financial Services $ 0*** $ 0 $ $
Fund
Healthcare Fund $ 125** $ 0.00 $ 20,953 $ 474 $ $
International Growth Fund $ 63** $ 0.00 $ 1,303 $ 142 $ $
</TABLE>
___________________________________
* As of June 30, 1997, the following funds had not commenced selling Class C
Shares: Tax-Free Bond Fund, Tax-Free Short-Intermediate Bond Fund,
International Bond Fund and Short Term Treasury Fund.
** Figures reflect period from commencement of operations through June 30,
1997.
*** As of June 30, 1998, the Growth Opportunities Fund, the Index 500 Fund, the
NetNet Fund and the Global Financial Services Fund had not commenced
selling Class C shares. As of June 2, 1998, Class C Shares of Short Term
Treasury were closed to all investments.
39
<PAGE>
The following amounts were paid by each Fund under its Class B Service and
Distribution Plans during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
Printing and
Mailing of Interest
Prospectuses to Carrying or
other than Compensation other
Current Compensation Compensation to Sales Financing
Advertising Shareholders to Underwriters to Dealers Personnel Charges
----------- ------------ --------------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Funds of the Trust
Balanced Fund $ $ $ $ $ $
Bond Fund $ $ $ $ $ $
Growth & Income Fund $ $ $ $ $ $
Index 500 Fund $ $ $ $ $ $
Intermediate Bond Fund $ $ $ $ $ $
International Equity $ $ $ $ $ $
Fund
Michigan Bond Fund $ $ $ $ $ $
Small Company Growth $ $ $ $ $ $
Fund
Tax-Free Bond Fund $ $ $ $ $ $
Tax-Free Short- $ $ $ $ $ $
Intermediate Bond
Fund
U.S. Income Fund $ $ $ $ $ $
Funds of the Company
Equity Selection Fund
Growth Opportunities $ $ $ $ $ $
Fund
International Bond Fund $ $ $ $ $ $
Micro-Cap Fund $ $ $ $ $ $
Money Market Fund $ $ $ $ $ $
Multi-Season Fund $ $ $ $ $ $
NetNet Fund $ $ $ $ $ $
Real Estate Fund $ $ $ $ $ $
Small-Cap Value Fund $ $ $ $ $ $
Value Fund $ $ $ $ $ $
Funds of Framlington
Emerging Markets Fund $ $ $ $ $ $
Global Financial $ $ $ $ $ $
Services Fund
Healthcare Fund $ $ $ $ $ $
International Growth $ $ $ $ $ $
Fund
</TABLE>
40
<PAGE>
The following amounts were paid by each Fund under its Class B Service and
Distribution Plans during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
Printing and
Mailing of Interest
Prospectuses Carrying or
to other than Compensation Compensation other
Current to Compensation to Sales Financing
Advertising Shareholders Underwriters to Dealers Personnel Charges
----------- ------------ ------------ ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Funds of the Trust
Balanced Fund $ $ $ $ $ $
Bond Fund $ $ $ $ $ $
Growth & Income Fund $ $ $ $ $ $
Index 500 Fund $ $ $ $ $ $
Intermediate Bond Fund $ $ $ $ $ $
International Equity Fund $ $ $ $ $ $
Michigan Bond Fund $ $ $ $ $ $
Small Company Growth $ $ $ $ $ $
Fund
Tax-Free Bond Fund $ $ $ $ $ $
Tax-Free Short-Intermediate $ $ $ $ $ $
Bond Fund
U.S. Income Fund $ $ $ $ $ $
Funds of the Company
Equity Selection Fund
Growth Opportunities Fund $ $ $ $ $ $
International Bond Fund $ $ $ $ $ $
Micro-Cap Fund $ $ $ $ $ $
Money Market Fund $ $ $ $ $ $
Multi-Season Fund $ $ $ $ $ $
NetNet Fund* $ $ $ $ $ $
Real Estate Equity $ $ $ $ $ $
Investment Fund $ $ $ $ $ $
Small-Cap Value Fund $ $ $ $ $ $
Value Fund $ $ $ $ $ $
Funds oF Framlington
Emerging Markets Fund $ $ $ $ $ $
Global Financial Services $ $ $ $ $ $
Fund
Healthcare Fund $ $ $ $ $ $
International Growth Fund $ $ $ $ $ $
</TABLE>
Shareholder Servicing Arrangements - Class K Shares. As stated in each
Fund's Prospectus, Class K Shares are sold to investors through institutions
which enter into Shareholder Servicing Agreements with the Trust, Framlington or
the Company to provide support services to their Customers who beneficially own
Class K Shares in consideration of the Funds' payment of not more than 0.25% (on
an annualized basis) of the average daily net assets of the Class K Shares
beneficially owned by the Customers.
41
<PAGE>
Services provided by institutions under their service agreements may
include: (i) aggregating and processing purchase and redemption requests for
Class K Shares from Customers and placing net purchase and redemption orders
with the Distributor; (ii) providing Customers with a service that invests the
assets of their accounts in Class K Shares pursuant to specific or pre-
authorized instructions; (iii) processing dividend payments on behalf of
Customers; (iv) providing information periodically to Customers showing their
positions in Class K Shares; (v) arranging for bank wires; (vi) responding to
Customer inquiries relating to the services performed by the institutions; (vii)
providing subaccounting with respect to Class K Shares beneficially owned by
Customers or the information necessary for subaccounting; (viii) if required by
law, forwarding shareholder communications from the Trust, Framlington or the
Company (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to Customers; (ix)
forwarding to Customers proxy statements and proxies containing any proposals
regarding the Trust's, Framlington's or the Company's arrangements with
institutions; and (x) providing such other similar services as the Trust,
Framlington or the Company may reasonably request to the extent the institutions
are permitted to do so under applicable statutes, rules and regulations.
Pursuant to the Trust's, Framlington's and the Company's agreements with
such institutions, the Boards of Directors/Trustees will review, at least
quarterly, a written report of the amounts expended under Trust's, Framlington's
and the Company's agreements with institutions and the purposes for which the
expenditures were made. In addition, the arrangements with institutions must be
approved annually by a majority of the Boards of Directors/Trustees, including a
majority of the Directors/Trustees who are not "interested persons" as defined
in the 1940 Act, and have no direct or indirect financial interest in such
arrangements.
The Boards of Directors/Trustees have approved the arrangements with
institutions based on information provided by the service contractors that there
is a reasonable likelihood that the arrangements will benefit the Funds and
their shareholders by affording the Funds greater flexibility in connection with
the servicing of the accounts of the beneficial owners of their shares in an
efficient manner.
Administrator. State Street Bank and Trust Company ("State Street" or the
"Administrator"), whose principal business address is 225 Franklin Street,
Boston, Massachusetts, 02110, serves as administrator for the Trust, Framlington
and the Company pursuant to administration agreements (each, an "Administration
Agreement"). State Street has agreed to maintain office facilities for the
Trust, Framlington and the Company; oversee 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. State Street may enter into an
agreement with one or more third parties pursuant to which such third parties
will provide administrative services on behalf of the Funds.
Each Administration Agreement provides that the Administrator performing
services thereunder shall not be liable under the Agreement except for its bad
faith, negligence or willful misconduct in the performance of its duties and
obligations thereunder.
Prior to November 1, 1997, First Data Investor Services Group, Inc.
("Investor Services Group") located at 53 State Street, Boston, Massachusetts
02109 served as administrator to the Funds.
For the fiscal year ended June 30, 1997, the administration fees of
Investor Services Group accrued were: Balanced Fund - $77,364; Growth & Income
Fund - $248,644; Index 500 Fund - $405,016; International Equity Fund -$259,162;
Small Company Growth Fund - $283,755; Bond Fund - $169,932; Intermediate Bond
Fund - $577,425; U.S. Income Fund - $265,637; Michigan Bond Fund - $41,620; Tax-
Free Bond Fund - $227,508; Tax-Free Short-Intermediate Bond Fund - $358,214;
Cash Investment Fund - $1,115,110; Tax-Free Money Market Fund -$283,803;
$480,310-Multi-Season Fund; $39,493-Real Estate Fund, $169,405-Money Market
Fund, $61,224-Value Fund and U.S. Treasury Money Market Fund - $355,592,
respectively.
For the period from commencement of operations through June 30, 1997,
administration fees of Investor Services Group accrued were $9,644 - Emerging
Markets Fund; $9,644 - Healthcare Fund, $9,644 - International
42
<PAGE>
Growth Fund, $730- Micro-Cap Fund; $14,220 - Small-Cap Value Fund; $32,343 -
International Bond Fund and $23,349 - Short Term Treasury Fund.
For the period July 1, 1997 through October 31, 1997, administration fees
to Investor Services Group accrued were: $14,689 for Balanced Fund, $29,146 for
Bond Fund, $184,587 for Cash Investment Fund, $47,089 for Growth & Income Fund,
$109,244 for Index 500 Fund, $95,635 for Intermediate Bond Fund, $42,940 for
International Equity Fund, $8,786 for Michigan Bond Fund, $68,964 for Small
Company Growth Fund, $37,599 for Tax-Free Bond Fund, $56,420 for Tax-Free Short-
Intermediate Bond Fund, $53,524 for Tax-Free Money Market Fund, $49,187 for U.S.
Income Fund, $39,194 for U.S. Treasury Money Market Fund, $9,604 for
International Bond Fund, $2,199 for Micro-Cap Fund, $23,555 for Money Market
Fund, $104,045 for Multi-Season Fund, $631 for NetNet Fund, $12,483 for Real
Estate Fund, $10,358 for Short Term Treasury Fund, $19,515 for Small Cap Value
Fund, $20,603 for Value Fund, $6,740 for International Growth Fund, $6,740 for
Emerging Markets Fund, and $6,740 for Healthcare Fund.
For the period November 1, 1997 through June 30, 1998, administration fees
of State Street accrued were: $27,469 for Balanced Fund, $86,722 for Bond Fund,
$374,880 for Cash Investment Fund, $85,474 for Growth & Income Fund, $235,148
for Index 500 Fund, $193,688 for Intermediate Bond Fund, $70,559 for
International Equity Fund, $18,511 for Michigan Bond Fund, $142,877 for Small
Company Growth Fund, $68,797 for Tax-Free Bond Fund, $104,833 for Tax-Free
Short-Intermediate Bond Fund, $106,996 for Tax-Free Money Market Fund, $95,641
for U.S. Income Fund, $32,072 for U.S. Treasury Money Market Fund, $16,884 for
International Bond Fund, $13,505 for Micro-Cap Fund, $36,373 for Money Market
Fund, $240,139 for Multi-Season Fund, $2,614 for NetNet Fund, $30,617 for Real
Estate Fund, $18,052 for Short Term Treasury Fund, $51,728 for Small Cap Value
Fund, $54,313 for Value Fund, $13 for Growth Opportunities Fund, $19,511 for
International Growth Fund, $16,445 for Emerging Markets Fund, $5,819 for
Healthcare Fund, and $15 for Global Financial Services Fund.
For the fiscal year ended June 30, 1999, administration fees of State
Street accrued were:
Custodian. State Street serves as the custodian (the "Custodian") to the
Funds pursuant to custodian agreements (each, a "Custodian Contract") between
State Street and the Company, the Trust and Framlington, respectively. State
Street is also the custodian with respect to the custody of foreign securities
held by the Funds. State Street has in turn entered into additional agreements
with financial institutions located in foreign countries with respect to the
custody of such securities. Under the Custodian Contracts, State Street (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/Trustees concerning
the Funds' operations.
Transfer and Dividend Disbursing Agent. Investor Services Group serves as
the transfer and dividend disbursing agent for the Funds pursuant to transfer
agency agreements with the Trust, Framlington and the Company, respectively,
under which Investor Services Group (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 Directors/Trustees concerning the
operations of each Fund.
Banking Laws. As stated in the Funds' Class K Shares Prospectus, Class K
Shares of the Funds are sold to customers of banks and other institutions. Such
banks and institutions may include Comerica Incorporated (a publicly-held bank
holding company), its affiliates and subsidiaries ("Comerica") and other
institutions that have entered into agreements with the Company, the Trust and
Framlington providing for shareholder services for their customers.
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its
43
<PAGE>
shares, and prohibit banks generally from underwriting securities, but such
banking laws and regulations do not prohibit such a holding company or affiliate
or banks generally from acting as investment advisor, administrator, transfer
agent or custodian to such an investment company, or from purchasing shares of
such a company as agent for and upon the order of customers. The Advisor,
[World] and State Street are subject to such banking laws and regulations.
The Advisor, [World] and State Street believe they may perform the services
for the Trust, Framlington and the Company contemplated by their respective
agreements with each of them without violation of applicable banking laws and
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 certain services for the Funds.
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 Trust, Framlington or the Company, the Trust,
Framlington or the Company might be required to alter materially or discontinue
the arrangements with the institutions and change the method of operations. It
is not anticipated, however, that any change in the Funds' method of operations
would affect the net asset value per share of the Funds or result in a financial
loss to any shareholder of the Funds.
It should be noted that future changes in either Federal or state statutes
and regulations relating to permissible activities of banks and their
subsidiaries or affiliates, as well as future judicial or administrative
decisions or interpretations of current and future statutes and regulations,
could prevent Comerica and certain other institutions from continuing to perform
certain services for Class K shares of the Funds.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Comerica and/or other institutions in connection with
the provision of services on behalf of Class K shares of the Funds, the Trust,
Framlington or the Company might be required to alter materially or discontinue
the arrangements with the institutions and change the method of operations with
respect to Comerica and certain other institutions. It is not anticipated,
however, that any change in the Funds' method of operations would affect the net
asset value per share of the Funds or result in a financial loss to any holder
of Class K shares of the Funds.
Other Information Pertaining to Administration, Custodian and Transfer
Agency Agreements. Except as noted in this SAI 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, World, Sub-Advisor,
Administrator, Custodian and Transfer Agent; fees and expenses of officers and
Boards of Directors/Trustees; taxes; interest; legal and auditing fees;
brokerage fees and commissions; certain fees and expenses in registering and
qualifying the Fund and its shares for distribution under Federal and state
securities laws; expenses of preparing prospectuses and statements of additional
information and of printing and distributing prospectuses and statements of
additional information to existing shareholders; the expense of reports to
shareholders, shareholders' meetings and proxy solicitations; fidelity bond and
directors' and officers' liability insurance premiums; and the expense of using
independent pricing services. Any general expenses of the Trust, Framlington or
the Company that are not readily identifiable as belonging to a particular
investment portfolio of the Trust, Framlington or the Company are allocated
among all investment portfolios of the Trust, Framlington or the Company by or
under the direction of the Boards of Directors/Trustees in a manner that the
Boards determine to be fair and equitable. The Advisor, World, Sub-Advisor,
Administrator, Custodian and Transfer Agent may voluntarily waive all or a
portion of their respective fees from time to time.
44
<PAGE>
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Boards of Directors/Trustees, the
Advisor, World or the Sub-Advisor, as the case may be, makes decisions with
respect to and places orders for all purchases and sales of portfolio securities
for the Funds.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Transactions on foreign
stock exchanges involve payment for brokerage commissions which are generally
fixed.
Over-the-counter issues, including corporate debt and government
securities, are normally traded through dealers on a "net" basis (i.e., without
commission), or directly with the issuer. With respect to over-the-counter
transactions, the Advisor, World or the Sub-Advisor, as the case may be, will
normally deal directly with dealers who make a market in the instruments except
in those circumstances where more favorable prices and execution are available
elsewhere. The cost of foreign and domestic securities purchased from
underwriters includes an underwriting commission or concession, and the prices
at which securities are purchased from and sold to dealers include a dealer's
mark-up or mark-down.
The Funds may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Funds will engage in this practice, however, only when the Advisor, World or
the Sub-Advisor, as the case may be, believes such practice to be in the Funds'
interests.
Since the Money Market Funds will invest only in short-term debt
instruments, their annual portfolio turnover rates will be relatively high, but
brokerage commissions are normally not paid on money market instruments, and
portfolio turnover is not expected to have a material effect on the net
investment income of a Money Market Fund. The portfolio turnover rate of a Fund
is calculated by dividing the lesser of a Fund's annual sales or purchases of
portfolio securities (exclusive of purchases or sales of securities whose
maturities at the time of acquisition were thirteen months or less for the Money
Market Funds or one year or less for the Equity and Bond Funds) by the monthly
average value of the securities held by the Fund during the year. The 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.
[Each Fund's portfolio turnover rate is included in the prospectuses under
the section entitled "Financial Highlights." For the fiscal year ended June 30,
1999, the portfolio turnover rate for the Bond Fund and the Intermediate Bond
Fund was _____% and ______%, respectively. The portfolio turnover of the Bond
Fund and the Intermediate Bond Fund was affected by fluctuating interest rate
conditions which at times required increased dispositions and acquisitions of
securities to maintain each Fund's maturity structure.]
In its Advisory Agreements, the Advisor and World and, in the case of the
Framlington Funds, the Sub-Advisor pursuant to the Sub-Advisory Agreement each
agree to select broker-dealers in accordance with guidelines established by the
Boards of Directors/Trustees from time to time and in accordance with applicable
law. In assessing the terms available for any transaction, the Advisor, World or
the Sub-Advisor, as the case may be, 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 and Sub-
Advisory Agreements authorize the Advisor, World or the Sub-Advisor, as the case
may be, subject to the prior approval of the Boards of Directors/Trustees, to
cause the Funds to pay a broker-dealer which furnishes brokerage and research
services a higher commission than that which might be charged by another broker-
dealer for effecting the same transaction, provided that the Advisor, World or
the Sub-Advisor, as the case may be, 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, World or
the Sub-Advisor to the Funds. Such brokerage and research services might consist
of reports and statistics
45
<PAGE>
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, World or the Sub-
Advisor, as the case may be, and does not reduce the advisory fees payable to
the Advisor, World or the Sub-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.
The table below shows information on brokerage commissions paid by the
Funds. For the fiscal year ended June 30, 1997:
<TABLE>
<CAPTION>
% of Brokerage Commission
$ Amount Brokerage Representing $ Amount of Transactions
Commission Research Services Involving Research Services
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Fund $ 57,518 30.47% $ 17,526
Growth & Income Fund $386,237 21.02% $ 81,184
Index 500 Fund $ 71,050 0.00% $ 0
International Equity Fund $101,527 0.00% $ 0
Small Company Growth Fund $852,094 3.72% $ 31,719
Micro-Cap Fund* $ 8,813 3.85% $ 339
Multi-Season Fund $366,341 31.40% $115,038
Real Estate Fund $ 3,649 2.96% $ 108
Small Cap Value Fund* $ 67,889 7.81% $ 5,304
Value Fund* $ 83,242 11.04% $ 9,192
International Growth Fund* $232,163 28.39% $ 65,918
Emerging Markets Fund* $ 87,174 1.09% $ 946
Healthcare Fund* $ 36,584 1.29% $ 472
Short Term Treasury Fund* $ 2,012 11.28% $ 227
- ------------------------
</TABLE>
*For the period from commencement of operations through June 30, 1997
The table below shows information on brokerage commissions paid by the
Funds. For the fiscal year ended June 30, 1998:
<TABLE>
<CAPTION>
% of Brokerage Commission
$ Amount Brokerage Representing Research $ Amount of Transactions
Commission Services Involving Research Services
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Fund $ 73,143 6.55% $ 4,793
Growth & Income Fund $ 431,055 11.01% $47,460
Index 500 Fund $ 41,022 0.00% $ 0
International Equity Fund $ 135,364 0.00% $ 0
Small Company Growth Fund $1,860,600 1.68% $31,342
Micro-Cap Fund $ 599,304 1.26% $ 7,561
Multi-Season Fund $ 566,155 9.80% $55,508
NetNet Fund $ 86,894 0.00% $ 0
Real Estate Fund $ 102,670 0.00% $ 0
Small Cap Value Fund $ 437,217 3.27% $14,300
Value Fund $ 557,514 3.27% $18,204
Growth Opportunities Fund* $ 2,152 0.00% $ 0
International Growth Fund $ 252,419 6.84% $17,273
Emerging Markets Fund $ 430,410 1.46% $ 6,274
Healthcare Fund $ 20,464 5.97% $ 1,221
Global Financial Services Fund* $ 3,342 0.00% $ 0
- -------------------------
</TABLE>
*For the period from commencement of operations through June 30, 1998
46
<PAGE>
The table below shows information on brokerage commissions paid by the
Funds. For the fiscal year ended June 30, 1999:
<TABLE>
<CAPTION>
% of Brokerage Commission
$ Amount Brokerage Representing Research $ Amount of Transactions
Commission Services Involving Research Services
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Fund $ % $
Growth & Income Fund $ % $
Index 500 Fund $ % $
International Equity Fund $ % $
Small Company Growth Fund $ % $
Micro-Cap Fund $ % $
Multi-Season Fund $ % $
NetNet Fund $ % $
Real Estate Fund $ % $
Small Cap Value Fund $ % $
Value Fund $ % $
Growth Opportunities Fund $ % $
International Growth Fund $ % $
Emerging Markets Fund $ % $
Healthcare Fund $ % $
Global Financial Services Fund $ % $
</TABLE>
Portfolio securities will not be purchased from or sold to the Advisor,
World, Sub-Advisor, 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 and for other investment accounts
managed by the Advisor, World or the Sub-Advisor are made independently of each
other in the light of differing conditions. However, the same investment
decision may be made for two or more of such accounts. In such cases,
simultaneous transactions are inevitable. Purchases or sales are then averaged
as to price and allocated as to amount in a manner deemed equitable to each such
account. While in some cases this practice could have a detrimental effect on
the price or value of the security as far as a Fund is concerned, in other cases
it is believed to be beneficial to a Fund. To the extent permitted by law, the
Advisor, World or the Sub-Advisor, as the case may be, may aggregate the
securities to be sold or purchased for a Fund with those to be sold or purchased
for other investment companies or accounts in executing transactions.
A Fund will not purchase securities while the Advisor, World, the Sub-
Advisor or any affiliated person (as defined in the 1940 Act) is a member of any
underwriting or selling group for such securities except pursuant to procedures
adopted by the Trust's or Framlington Board of Trustees or the Company's Board
of Directors in accordance with Rule 10f-3 under the 1940 Act.
The Trust, the Company and Framlington are required to identify the
securities of their regular brokers or dealers (as defined in Rule 10b-1 under
the 1940) Act or their parent companies held by them as of the close of their
most recent fiscal year and state the value of such holdings. As of June 30,
1999, the ______Fund held securities of _______ valued at $_______
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. As described in the Prospectuses, shares of the Funds may be
purchased in a number of different ways. Such alternative sales arrangements
permit an investor to choose the method of purchasing shares that is most
beneficial depending on the amount of the purchase, the length of time the
investor expects to hold shares and other relevant circumstances. An investor
may place orders directly through the Transfer Agent or the Distributor or
through arrangements with his/her authorized broker.
47
<PAGE>
Applicable Sales Charge and Dealer Reallowances- Class A Shares. As
described in the Prospectuses for the Funds, you must pay a sales charge at the
time of purchase of Class A Shares. The sales charge as a percentage of your
investment decreases as the amount you invest increases. The current sales
charge rates and commissions paid to selected dealers are as follows:
<TABLE>
<CAPTION>
EQUITY FUNDS Sales Charge
As a Percentage of Dealer reallowance
------------------ aS a Percentage
Your Investment Net Asset Value of the Offering Price
--------------- --------------- ---------------------
<S> <C> <C> <C>
Less than $25,000........................... 5.50% 5.82% 5.00%
$25,000 but less than$50,000................ 5.25% 5.54% 4.75%
$50,000 but less than $100,000............. 4.50% 4.71% 4.00%
$100,000 but less than $250,000............. 3.50% 3.63% 3.25%
$250,000 but less than $500,000............. 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000........... 1.50% 1.52% 1.25%
$1,000,000 or more.......................... None* None* (see below)**
</TABLE>
__________________________
* No initial sales charge applies on investments of $1 million or more.
However, a CDSC of 1% is imposed on certain redemptions within one year of
purchase. Class A Shares of the Trust Funds purchased on or before June 27,
1995 are subject to a different CDSC, which is described in the SAI.
** The Distributor will pay a 1% commission to dealers who initiate and are
responsible for purchases of $1 million or more.
Income Funds
<TABLE>
<CAPTION>
Sales Charge as a Percentage of Discount to Selected
------------------------------- Dealers as a Percentage
Your Investment Net Asset Value of Investment
--------------- --------------- -------------
<S> <C> <C> <C>
Less than $100,000.......................... 4.00% 4.17% 3.75%
$100,000 but less than $250,000............. 3.00% 3.09% 2.75%
$250,000 but less than $500,000............. 2.00% 2.04% 1.75%
$500,000 but less than $1,000,000........... 1.25% 1.27% 1.00%
$1,000,000 or more.......................... None* None* (see below)**
</TABLE>
____________________
* No initial sales charge applies on investments of $1 million or more.
However, a CDSC of 1% is imposed on certain redemptions within one year of
purchase. Class A Shares of the Trust Funds purchased on or before June 27,
1995 are subject to a different CDSC, which is described in the SAI.
** The Distributor will pay 1% commission to dealers who initiate and are
responsible for purchases of $1 million or more.
Index 500 Fund
<TABLE>
<CAPTION>
Sales Charge Discount to
as a Percentage of Selected Dealers
------------------- as a Percentage of
Your Investment Net Asset Value Investment
--------------- --------------- ----------
<S> <C> <C> <C>
Less than $100,000....................... 2.50% 2.56% 2.25%
$100,000 but less than $250,000.......... 2.00% 2.04% 1.75%
$250,000 but less than $500,000.......... 1.50% 1.52% 1.25%
$500,000 but less than $1,000,000........ 1.00% 1.01% .75%
$1,000,000 but less than $3,000,000...... None* None* .10%
$3,000,000 but less than $5,000,000...... None* None* .05%
$5,000,000 or............................ None* None* None
more....................................
</TABLE>
__________________
* There is no initial sales charge on purchases of $1 million or more of Class
A Shares of the Fund; however, a CDSC in the amount of the Discount to Selected
Dealers shown above will be imposed on the lower of the original purchase price
or the net asset value of the shares at the time of redemption if such shares
are redeemed within one year after the date of purchase.
48
<PAGE>
The Distributor may pay the entire commission to dealers. If that occurs,
the dealer may be considered an "underwriter" under Federal securities laws.
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. The redemption price for Fund shares is the net asset value
next determined after receipt of the redemption request in proper order. The
redemption proceeds will be reduced by the amount of any applicable contingent
deferred sales charge ("CDSC").
Contingent Deferred Sales Charge - Class B Shares. Class B Shares redeemed
within six years of purchase are subject to a CDSC. The CDSC is based on the
original net asset value at the time of investment or the net asset value at the
time of redemption, whichever is lower.
The CDSC Schedule for Class B Shares of the Trust Funds purchased before
June 27, 1995 is set forth below. The Prospectuses describe the CDSC Schedule
for Class B Shares of Funds of the Trust, the Company and Framlington purchased
after June 27, 1995.
Class B Shares of the Trust Funds
Purchased on or Before June 27, 1995
<TABLE>
<CAPTION>
Redemption During CDSC
- --------------------------------------------------------------------------------------------------
<S> <C>
1/st/ Year Since Purchase............................................................. 4.00%
2/nd/ Year Since Purchase............................................................. 4.00%
3/rd/ Year Since Purchase............................................................. 3.00%
4/th/ Year Since Purchase............................................................. 3.00%
5/th/ Year Since Purchase............................................................. 2.00%
6th Year Since Purchase............................................................... 1.00%
</TABLE>
CDSC Waivers - Class B Shares of the Trust Funds Purchased on or Before
June 27, 1995. The CDSC will be waived with respect to Class B Shares of the
Trust Funds purchased on or before June 27, 1995 in the following circumstances:
(1) total or partial redemptions made within one year following the death
or disability of a shareholder or registered joint owner;
(2) minimum required distributions made in connection with an IRA or other
retirement plan following attainment of age 59 1/2; and
(3) redemptions pursuant to a Fund's right to liquidate a shareholder's
account involuntarily.
CDSC Waivers - Class B Shares of the Company Funds Purchased on or before
June 27, 1995. The CDSC will be waived on the following types of redemptions
with respect to Class B Shares of the Company Funds purchased on or before June
27, 1995:
(1) redemptions by investors who have invested a lump sum amount of $1
million or more in the Fund;
(2) redemptions by the officers, directors, and employees of the Advisor
or the Distributor and such persons' immediate families;
49
<PAGE>
(3) dealers or brokers who have a sales agreement with the Distributor,
for their own accounts, or for retirement plans for their employees or
sold to registered representatives or full time employees (and their
families) that certify to the Distributor at the time of purchase that
such purchase is for their own account (or for the benefit of their
families);
(4) involuntary redemptions effected pursuant to the Fund's right to
liquidate shareholder accounts having an aggregate net asset value of
less than $250; and
(5) redemptions the proceeds of which are reinvested in the Fund within 90
days of the redemption.
Contingent Deferred Sales Charge - Class A and Class C Shares. The
Prospectuses describe the CDSC for Class A or C Shares of the Funds of the
Trust, the Company and Framlington purchased after June 27, 1995.
Class A Shares of the Trust Funds purchased on or before June 27, 1995
without a sales charge by reason of a purchase of $500,000 or more are subject
to a CDSC of 1.00% of the lower of the original purchase price or the net asset
value at the time of redemption if such shares are redeemed within two years of
the date of purchase. Class A Shares of the Trust Funds purchased on or before
June 27, 1995 that are redeemed will not be subject to the CDSC to the extent
that the value of such shares represents: (1) reinvestment of dividends or other
distributions; (2) Class A Shares redeemed more than two years after their
purchase; (3) a minimum required distribution made in connection with IRA or
other retirement plans following attainment of age 59 1/2; or (4) total or
partial redemptions made within one year following the death or disability of a
shareholder or registered joint owner.
No CDSC is imposed to the extent that the current net asset value of the
shares redeemed does not exceed (a) the current net asset value of shares
purchased through reinvestment of dividends or capital gain distributions plus
(b) the current net asset value of shares purchased more than one year prior to
the redemption, plus (c) increases in the net asset value of the shareholder's
shares above the purchase payments made during the preceding one year.
The holding period of Class A or Class C Shares of a Fund acquired through
an exchange of the corresponding class of shares of the Munder Money Market Fund
(which are available only by exchange of Class A or Class C Shares of the Fund,
as the case may be) and the Company Funds, the Framlington Funds and the non-
money market funds of the Trust will be calculated from the date that the Class
A or Class C Shares of the Fund were initially purchased.
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing all
Class A Shares on which a front-end sales charge has been assessed; then of
shares acquired pursuant to the reinvestment of dividends and distributions; and
then of amounts representing the cost of shares purchased one year or more prior
to the redemption.
Other Redemption Information. 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.
The Funds reserve the right to suspend or postpone redemptions during any
period when: (i) trading on the New York Stock Exchange (the "NYSE") is
restricted by applicable rules and regulations of the SEC; (ii) the NYSE is
closed other than for customary weekend and holiday closings; (iii) the SEC has
by order permitted such suspension or postponement for the protection of the
shareholders; or (iv) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of a Fund not
reasonably practicable.
The Funds may involuntarily redeem an investor's shares if the net asset
value of such shares is less than $250; 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
50
<PAGE>
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 $250 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' Prospectuses, a shareholder exchanging at least $1,000 of shares (for
which certificates have not been issued) and who has authorized expedited
exchanges on the application form filed with the Transfer Agent may exchange
shares by telephoning the Funds at (800) 438-5789. Telephone exchange
instructions must be received by the Transfer Agent by 4:00 p.m., Eastern 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
Money Market Funds. The value of the portfolio securities of the Money
Market Funds is calculated using the amortized cost method of valuation. Under
this method the market value of an instrument is approximated by amortizing the
difference between the acquisition cost and value at maturity of the instrument
on a straight-line basis over the remaining life of the instrument. The effect
of changes in the market value of a security as a result of fluctuating interest
rates is not taken into account. The market value of debt securities usually
reflects yields generally available on securities of similar quality. When such
yields decline, market values can be expected to increase, and when yields
increase, market values can be expected to decline.
As indicated, the amortized cost method of valuation may result in the
value of a security being higher or lower than its market price, the price a
Fund would receive if the security were sold prior to maturity. The Boards of
Directors/Trustees have established procedures reasonably designed, taking into
account current market conditions and the Funds' investment objectives, for the
purpose of maintaining a stable net asset value of $1.00 per share for each
Money Market Fund for purposes of sales and redemptions. These procedures
include a review by the Boards of Directors/Trustees, at such intervals as they
deem appropriate, of the extent of any deviation of net asset value per share,
based on available market quotations, from the $1.00 amortized cost per share.
Should that deviation exceed 1/2 of 1% for a Fund, the Boards of
Directors/Trustees will promptly consider whether any and, if any, what action
should be initiated. If the Board believes that the extent of any deviation from
a Money Market Fund's $1.00 amortized cost price per share may result in
material dilution of other unfair results to new or existing investors, it will
take such steps as it considers appropriate to eliminate or reduce any such
dilution or unfair results to the extent reasonably practicable. Such action may
include redeeming shares in kind, selling portfolio securities prior to
maturity, reducing or withholding dividends, shortening the average portfolio
maturity, reducing the number of outstanding shares without monetary
consideration, and utilizing a net asset value per share as determined by using
available market quotations.
Pursuant to Rule 2a-7 under the 1940 Act, each of the Money Market Funds
will maintain a dollar-weighted average portfolio maturity appropriate to its
objective of maintaining a stable net asset value per share, provided that such
Funds will not purchase any security with a remaining maturity (within the
meaning of Rule 2a-7 under the 1940 Act) greater than 397 days (securities
subject to repurchase agreements, variable and floating rate securities, and
certain other securities may bear longer maturities), nor maintain a dollar-
weighted average portfolio maturity which exceeds 90 days. In addition, the
Funds may acquire only U.S. dollar denominated obligations that present minimal
credit risks and that are "First Tier Securities" at the time of investment.
First Tier Securities are those that are rated in the highest rating category by
at least two nationally recognized security rating organizations NRSROs or by
one if it is the only NRSRO rating such obligation or, if unrated, determined to
be of comparable
51
<PAGE>
quality. A security is deemed to be rated if the issuer has any security
outstanding of comparable priority and security which has received a short-term
rating by an NRSRO. The Advisor will determine that an obligation presents
minimal credit risks or that unrated investments are of comparable quality, in
accordance with guidelines established by the Board of Directors/Trustees. There
can be no assurance that a constant net asset value will be maintained for each
Money Market Fund.
All Funds. [Securities traded on a national securities exchange or on
NASDAQ for which there were no sales on the date of valuation and securities
traded on other over-the-counter markets, including listed securities for which
the primary market is believed to be over-the-counter, are valued at the mean
between the most recently quoted bid and asked prices. Options will be valued at
market value or fair value if no market exists. Futures contracts will be valued
in like manner, except that open futures contract sales will be valued using the
closing settlement price or, in the absence of such a price, the most recently
quoted asked price. Restricted securities and securities and assets for which
market quotations are not readily available are valued at fair value by the
Advisor under the supervision of the Boards of Directors/Trustees. Debt
securities with remaining maturities of 60 days or less are valued at amortized
cost, unless the Boards of Directors/Trustees determines that such valuation
does not constitute fair value at that time. Under this method, such securities
are valued initially at cost on the date of purchase (or the 61st day before
maturity).] In determining the approximate market value of portfolio
investments, the Trust, Framlington or 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
Trust's, Framlington's or 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.
In-Kind Purchases
With the exception of the Real Estate Fund, payment for shares may, in the
discretion of the Advisor, World or the Sub-Advisor, be made in the form of
securities that are permissible investments for the Funds as described in the
Prospectuses. Shares of the Real Estate Fund will not be issued for
consideration other than cash. For further information about this form of
payment please contact the Transfer Agent. In connection with an in-kind
securities payment, a Fund will require, among other things, that the securities
(a) meet the investment objectives and policies of the Fund; (b) are acquired
for investment and not for resale; (c) are liquid securities that are not
restricted as to transfer either by law or liquidity of markets; (d) have a
value that is readily ascertainable by a listing on a nationally recognized
securities exchange; and (e) are valued on the day of purchase in accordance
with the pricing methods used by the Fund and that the Fund receive satisfactory
assurances that (i) it will have good and marketable title to the securities
received by it; (ii) that the securities are in proper form for transfer to the
Fund; and (iii) adequate information will be provided concerning the basis and
other tax matters relating to the securities.
PERFORMANCE INFORMATION
Yield of the Money Market Funds
The Money Market Funds' current and effective yields are computed using
standardized methods required by the SEC. The annualized yield is computed by:
(a) determining the net change in the value of a hypothetical account having a
balance of one share at the beginning of a seven-calendar day period; (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared and all dividends declared on both the original share and such
additional shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising the sum to
a power equal to 365/7 and subtracting 1. Based on the foregoing computations,
the table below shows the annualized yields for all share classes of the Cash
Investment, Money
52
<PAGE>
Market, Tax-Free Money Market and U.S. Treasury Money Market Funds for the
seven-day period ended June 30, 1999.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A Class B Class C Class K Class Y
- ---------------------------------------------------------------------------------------------------------------------------
Effective Effective Effective Effective Effective
Yield Yield Yield Yield Yield Yield Yield Yield Yield Yield
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Investment % % % % % % % % % %
Fund
- ---------------------------------------------------------------------------------------------------------------------------
Money Market % % % % % % % % % %
Fund
- ---------------------------------------------------------------------------------------------------------------------------
Tax-Free Money % % % % % % % % % %
Market Fund
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury % % % % % % % % % %
Money Market
Fund
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition, a standardized "tax-equivalent yield" may be quoted for the
Tax-Free Money Market Fund, which is computed by: (a) dividing the portion of
the Fund's yield (as calculated above) that is exempt from Federal income tax by
1 minus a stated Federal income tax rate; and (b) adding the figure resulting
from (a) above to that portion, if any, of the yield that is not exempt from
Federal income tax. For the seven-day period ended June 30, 1999, the tax-
equivalent yield for Class A, Class K and Class Y Shares of the Tax-Free Money
Market Fund was ___% (Class A), ____% (Class K) and ____% (Class Y) calculated
for all share classes based on a stated tax rate of 31%. The fees which may be
imposed by institutions on their Customers are not reflected in the calculations
of yields for the Funds.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yields of each Fund will fluctuate, they cannot be
compared with yields on savings accounts or other investment alternatives that
provide an agreed to or guaranteed fixed yield for a stated period of time.
However, yield information may be useful to an investor considering temporary
investments in money market instruments. In comparing the yield of one money
market fund to another, consideration should be given to each Fund's investment
policies including the types of investments made, lengths of maturities of the
portfolio securities, and whether there are any special account charges which
may reduce the effective yield.
Performance of the Non-Money Market Funds
Yield. The Bond Funds', International Bond Fund's and Short Term Treasury
Fund's 30-day (or one month) standard yield described in the applicable
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 and waivers);
c =average daily number of shares outstanding during the period entitled to
receive dividends;
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
53
<PAGE>
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 that have a current market discount is calculated by using
the coupon rate of interest instead of the yield to maturity. In the case of
tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original issue discount (market discount), the yield to maturity
is the imputed rate based on the original issue discount calculation. On the
other hand, in the case of tax-exempt obligations that are issued with original
issue discount but which have the discounts based on current market value that
are less than the then-remaining portion of the original issue discount (market
premium), the yield to maturity is based on the market value.
With respect to mortgage- or other receivables-backed debt obligations
purchased at a discount or premium, the formula generally calls for amortization
of the discount or premium. The amortization schedule will be adjusted monthly
to reflect changes in the market value of such debt obligations. Expenses
accrued for the period (variable "b" in the formula) include all recurring fees
charged by 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). A Fund's maximum offering price per share for purposes of the formula
includes the maximum sales charge imposed -- currently 5.50% of the per share
offering price for Class A Shares of the Equity Funds (with the exception of the
Index 500 Fund, currently 2.50% of the per share offering price for Class A) and
the Balanced Fund and 4.00% of the per share offering price for Class A Shares
of the Bond Fund, International Bond Fund, Short Term Treasury Fund and Tax-Free
Bond Funds. The tax-equivalent yield for each Tax-Free Bond Fund below is based
on a stated federal tax rate of 31% and, with respect to Michigan Bond Fund, a
Michigan state tax rate of 4%.
Class A Shares
- --------------
The standard yields and/or tax-equivalent yields of the Class A Shares of
the following Funds for the 30-day period ended June 30, 1999 were:
<TABLE>
<CAPTION>
30-Day Yield Tax-Equivalent 30-Day Yield
------------ ---------------------------
<S> <C> <C>
Bond Fund % %
Intermediate Bond Fund % %
U.S. Income Fund % %
International Bond Fund % %
Michigan Bond Fund % %
Tax-Free Bond Fund % %
Tax-Free Short-Intermediate Bond Fund % %
</TABLE>
Class B Shares
- --------------
The standard yields and/or tax-equivalent yields of the Class B Shares of
the following Funds for the 30-day period ended June 30, 1999 were:
<TABLE>
<CAPTION>
30-Day Yield Tax-Equivalent 30-Day Yield
------------ ---------------------------
<S> <C> <C>
Bond Fund % %
Intermediate Bond Fund % %
U.S. Income Fund % %
International Bond Fund % %
Michigan Bond Fund % %
Tax-Free Bond Fund % %
Tax-Free Short-Intermediate Bond Fund % %
</TABLE>
54
<PAGE>
Class C Shares
- --------------
The standard yields and/or tax-equivalent yields of the Class C Shares of
the following Funds for the 30-day period ended June 30, 1999 were:
<TABLE>
<CAPTION>
30-Day Yield Tax-Equivalent 30-Day Yield
------------ ---------------------------
<S> <C> <C>
Bond Fund % %
Intermediate Bond Fund % %
U.S. Income Fund % %
International Bond Fund % %
Michigan Bond Fund % %
Tax-Free Bond Fund % %
</TABLE>
Class K Shares
- --------------
The standard yields and/or tax-equivalent yields of the Class K Shares of
the following Funds for the 30-day period ended June 30, 1999 were:
<TABLE>
<CAPTION>
30-Day Yield Tax-Equivalent 30-Day Yield
------------ ---------------------------
<S> <C> <C>
Bond Fund % %
Intermediate Bond Fund % %
U.S. Income Fund % %
International Bond Fund % %
Michigan Bond Fund % %
Tax-Free Bond Fund % %
Tax-Free Short-Intermediate Bond Fund % %
</TABLE>
Michigan Municipal Shares
- -------------------------
The standard yields and/or tax-equivalent yields of the Michigan Municipal
Shares of the Short Term Treasury Fund for the 30-day period ended June 30, 1999
were:
<TABLE>
<CAPTION>
30-Day Yield Tax-Equivalent 30-Day Yield
------------ ---------------------------
<S> <C> <C>
Short Term Treasury Fund % %
</TABLE>
Class Y Shares
- --------------
The standard yields and/or tax-equivalent yields of the Class Y Shares of
the following Funds for the 30-day period ended June 30, 1999 were:
<TABLE>
<CAPTION>
30-Day Yield Tax-Equivalent 30-Day Yield
------------ ---------------------------
<S> <C> <C>
Bond Fund % %
Intermediate Bond Fund % %
U.S. Income Fund % %
International Bond Fund % %
Short Term Treasury Fund % %
Michigan Bond Fund % %
Tax-Free Bond Fund % %
Tax-Free Short-Intermediate Bond Fund % %
</TABLE>
Total Return. 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:
P (1 + T)/n/ = ERV
Where:
P = hypothetical initial payment of $1,000;
55
<PAGE>
T = average annual total return;
n = period covered by the computation, expressed in years; and
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).
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 Funds' average annual total return and load adjusted
aggregate total return quotations for Class A Shares will reflect the deduction
of the maximum sales charge charged in connection with the purchase of such
shares - currently 5.50% of the per share offering price for Class A Shares of
the Equity Funds (with the exception of the Index 500 Fund, currently 2.50% of
the per share offering price for Class A) and the Balanced Fund and 4.00% of the
per share offering price for Class A Shares of the Bond Fund, International Bond
Fund and Tax-Free Bond Funds; and the Funds' load adjusted average annual total
return and load adjusted aggregate total return quotations for Class B Shares
will reflect any applicable CDSC; provided that the Funds may also advertise
total return data without reflecting any applicable CDSC sales charge imposed on
the purchase of Class A Shares or Class B Shares in accordance with the views of
the SEC. Quotations which do not reflect the sales charge will, of course, be
higher than quotations which do.
Based on the foregoing calculation, set forth below are the average annual
total return figures for the Class A, B, C, K and Y Shares of each of the
following Funds for the 12 month and 5 year periods ended June 30, 1999 and
since commencement of operations.
<TABLE>
12 Month 5 Year Inception 12 Month 5 Year Inception
Period Ended Period Ended through Period Ended Period Ended through
Fund-Inception Date 6/30/99* 6/30/99* 6/30/99* 6/30/99** 6/30/99** 6/30/99**
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Funds of the Trust
Balanced Fund
Class A-4/30/93
Class B-6/21/94
Class C-1/24/96
Class K-4/16/93
Class Y-4/13/93
Growth & Income Fund
Class A-8/8/94
Class B-8/9/94
Class C-12/5/95
Class K-7/5/94
Class Y-7/5/94
</TABLE>
56
<PAGE>
<TABLE>
12 Month 5 Year Inception 12 Month 5 Year Inception
Period Ended Period Ended through Period Ended Period Ended through
Fund-Inception Date 6/30/99* 6/30/99* 6/30/99* 6/30/99** 6/30/99** 6/30/99**
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Index 500 Fund
Class A-12/9/92
Class B-10/31/95
Class C
Class K12/7/92
Class Y-12/1/91
International Equity
Fund
Class A-11/30/92
Class B-3/9/94
Class C-9/29/95
Class K-11/23/92
Class Y-12/1/91
Small Company Growth
Fund
Class A-11/23/92
Class B-4/28/94
Class C-9/26/95
Class K-11/23/92
Class Y-12/1/91
Bond Fund
Class A-12/9/92
Class B-3/13/96
Class C-3/25/96
Class K-11/23/92
Class Y-12/1/91
Intermediate Bond Fund
Class A-11/24/92
Class B-10/25/94
Class C-4/19/96
Class K-11/20/92
Class Y-12/1/91
US Income Fund
Class A-7/28/94
Class B-9/6/95
Class C-8/12/96
Class K-7/5/94
Class Y-7/5/94
Michigan Bond Fund
Class A-2/15/94
Class B-7/5/94
Class C-10/4/96
Class K-1/3/94
Class Y-1/3/94
</TABLE>
57
<PAGE>
<TABLE>
12 Month 5 Year Inception 12 Month 5 Year Inception
Period Ended Period Ended through Period Ended Period Ended through
Fund-Inception Date 6/30/99* 6/30/99* 6/30/99* 6/30/99** 6/30/99** 6/30/99**
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax-Free Bond Fund
Class A-10/9/95
Class B-12/6/94
Class C-7/7/98
Class K-7/5/94
Class Y-7/21/94
Tax-Free Short-
Intermediate Bond Fund
Class A-11/30/92
Class B-5/16/96
Class C-7/8/98
Class K-2/9/87++
Class Y-12/17/92
Funds of Framlington
Emerging Markets Fund
Class A-1/14/97
Class B-2/25/97
Class C-3/3/97
Class K-1/10/97
Class Y-12/31/96
Global Financial
Services Fund
Class Y -
Healthcare Fund
Class A-2/14/97
Class B-1/31/97
Class C-1/13/97
Class K-4/1/97
Class Y-12/31/96
International Growth
Fund
Class A-2/20/97
Class B-3/19/97
Class C-2/13/97
Class K-1/10/97
Class Y-12/31/96
Funds of the Company
Equity Selection Fund
Class Y - / /98
Growth Opportunities
Fund
Class Y - / /98
</TABLE>
58
<PAGE>
<TABLE>
12 Month 5 Year Inception 12 Month 5 Year Inception
Period Ended Period Ended through Period Ended Period Ended through
Fund-Inception Date 6/30/99* 6/30/99* 6/30/99* 6/30/99** 6/30/99** 6/30/99**
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
International Bond
Fund
Class A-10/17/96
Class B-6/9/97
Class C-6/3/98
Class K-3/25/97
Class Y-10/2/96
Micro-Cap Fund
Class A-12/26/96
Class B-2/24/97
Class C-3/31/97
Class K-12/31/96
Class Y-12/26/96
Multi-Season Fund
Class A-8/4/93
Class B-4/29/93
Class C-9/20/93
Class K-6/23/95
Class Y-8/16/93
NetNet Fund
Class A-8/19/96
Class B-6/1/98
Class C
Class Y-6/1/98
Short Term Treasury
Fund
Michigan Municipal
Shares-4/2/97
Class Y-1/29/97
Small-Cap Fund
Class A-1/10/97
Class B-2/11/97
Class C-1/13/97
Class K-12/31/96
Class Y-12/26/96
Real Estate Fund
Class A-9/30/94
Class B-10/3/94
Class C-1/5/96
Class K-10/3/96
Class Y-10/3/94
</TABLE>
59
<PAGE>
<TABLE>
12 Month 5 Year Inception 12 Month 5 Year Inception
Period Ended Period Ended through Period Ended Period Ended through
Fund-Inception Date 6/30/99* 6/30/99* 6/30/99* 6/30/99** 6/30/99** 6/30/99**
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Value Fund
Class A-9/14/95
Class B-9/19/95
Class C-2/9/96
Class K-11/30/95
Class Y-8/18/95
</TABLE>
____________________________________________________________
* Figures do not include the effect of the sales charge.
** Figures include the effect of the applicable sales charge.
+ As of June 15, 1998, Class K Shares of Short Term Treasury Fund were
renamed the Michigan Municipal Shares.
++ For the ten year period ended June 30, 1999, the average annual return for
Class K Shares was _____%.
As of June 30, 1999, the following Classes had not commenced operations:
Class A Shares of the Equity Selection Fund, Global Financial Services Fund and
Growth Opportunities Fund; Class B Shares of the Equity Selection Fund, Global
Financial Services Fund, Growth Opportunities Fund, Cash Investment Fund,
International Bond Fund, Tax-Free Money Market Fund and U.S. Treasury Money
Market Fund; Class C Shares of the Equity Selection Fund, Global Financial
Services Fund, Growth Opportunities Fund, Cash Investment Fund, Tax-Free Money
Market Fund, Index 500 Fund, and U.S. Treasury Money Market Fund; and Class K
Shares of the Equity Selection Fund, Global Financial Services Fund and Growth
Opportunities Fund.
The foregoing performance data reflects the imposition of the maximum sales
load on Class A Shares but does not reflect payments under the Trust's Class K
Plan or Class A Plan, which were not imposed before December 31, 1993.
All Funds. 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. In addition, as stated in the Funds' Prospectuses, the tax-equivalent
yield (and hypothetical examples illustrating the effect of tax-equivalent
yields) of a Fund may be quoted in advertisements or reports to shareholders.
Hypothetical examples showing the difference between a taxable and a tax-free
investment may also be provided to shareholders.
TAXES
The following summarizes certain additional Federal and state income tax
considerations generally affecting the Funds and their shareholders that are not
described in the Funds' Prospectuses. 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. This discussion is based upon present provisions of
the Internal Revenue Code, the regulations promulgated thereunder, and judicial
and administrative ruling authorities, all of which are subject to change, which
change may be retroactive. Prospective investors should consult their own tax
advisors with regard to the federal tax consequences of the purchase, ownership
and disposition of Fund shares, as well as the tax consequences arising under
the laws of any state, foreign country, or other taxing jurisdiction.
General. Each Fund intends to elect and qualify to be taxed separately as a
regulated investment company under Subchapter M of the Internal Revenue 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
60
<PAGE>
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 Internal Revenue
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 satisfying 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"). Interest (including
original issue discount and accrued market discount) received by a Fund at
maturity or on disposition of a security held for less than three months will
not be treated (in contrast to other income which is attributable to realized
market appreciation) as gross income from the sale or other disposition of
securities held for less than three months for this purpose.
In addition to the foregoing requirements, at the close of each quarter of
its taxable year, at least 50% of the value of 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.
Distributions of net investment income received by a Fund from investments
in debt securities (other than interest on tax-exempt municipal obligations held
by the Tax-Free Bond Funds and Tax-Free Money Market Fund) 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 gain from the sale or exchange of a capital asset held for
more than one year, regardless of the length of time a shareholder has held his
or her Fund shares and regardless of whether the distribution is paid in cash or
reinvested in shares. The Funds expect that capital gain dividends will be
taxable to shareholders as long-term gain. Capital gain dividends are not
eligible for the dividends-received deduction.
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.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent imposition of the excise tax, a Fund must distribute during each
calendar year an amount equal to the sum of (1) at least 98% of its ordinary
income (not taking into account
61
<PAGE>
any capital gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for certain ordinary
losses, as prescribed by the Code) for the one-year period ending on October 31
of the calendar year, and (3) any ordinary income and capital gains for previous
years that was not distributed during those years. A distribution will be
treated as paid on December 31 of the current calendar year if it is declared by
a Fund in October, November or December with a record date in such a month and
paid by a Fund during January of the following calendar year. Such distributions
will be taxable to shareholders in the calendar year in which the distributions
are declared, rather than the calendar year in which the distributions are made.
To prevent application of the excise tax, a Fund intends to make its
distributions in accordance with the calendar year distribution requirement.
Although a 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, a Fund may be subject to
the tax laws of such states or localities.
The Trust, the Framlington Trust and 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 an incorrect tax identification
number or no number at all, (ii) who is subject to backup withholding by the
Internal Revenue Service for failure to report the receipt of taxable interest
or dividend income properly, or (iii) who has failed to certify that he is not
subject to backup withholding or that he is an "exempt recipient."
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 and treated
as long-term capital gains. Furthermore, a loss realized by a shareholder on the
redemption, sale or exchange of shares of a Fund with respect to which exempt-
interest dividends have been paid will, to the extent of such exempt-interest
dividends, be disallowed if such shares have been held by the shareholder for
six months or less.
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 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.
Tax-Free Bond Funds and Tax-Free Money Market Fund. The Michigan Bond Fund,
Tax-Free Bond Fund, Tax-Free Short-Intermediate Bond Fund, and Tax-Free Money
Market Fund are designed to provide investors with current tax-exempt interest
income. Shares of the Funds would not be suitable for tax-exempt institutions
and
62
<PAGE>
may not be suitable for retirement plans qualified under Section 401 of the
Code, H.R. 10 plans and individual retirement accounts since such plans and
accounts are generally tax-exempt and, therefore, not only would not gain any
additional benefit from the Funds' dividends being tax-exempt but also such
dividends would be taxable when distributed to the beneficiary. In addition, the
Funds may not be an appropriate investment for entities which are "substantial
users" of facilities financed by private activity bonds or "related persons"
thereof. "Substantial user" is defined under U.S. Treasury Regulations to
include a non-exempt person who regularly uses a part of such facilities in his
trade or business and (a) whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of the total
revenues derived by all users of such facilities, (b) who occupies more than 5%
of the entire usable area of such facilities, or (c) for whom such facilities or
a part thereof were specifically constructed, reconstructed or acquired.
"Related persons" generally include certain related natural persons, affiliated
corporations, a partnership and its partners and an S corporation and its
shareholders.
In order for the Funds to pay exempt-interest dividends with respect to any
taxable year, at the close of each quarter of each Fund's taxable year at least
50% of the value of the Fund's assets must consist of tax-exempt municipal
obligations. Exempt-interest dividends distributed to shareholders are not
included in the shareholder's gross income for regular federal income tax
purposes. However, all shareholders required to file a federal income tax return
are required to report the receipt of exempt-interest dividends and other tax-
exempt interest on their returns. Moreover, while such dividends and interest
are exempt from regular federal income tax, they may be subject to alternative
minimum tax in two circumstances. First, exempt-interest dividends derived from
certain "private activity" bonds issued after August 7, 1986 will generally
constitute an item of tax preference for both corporate and non-corporate
taxpayers. Second, exempt-interest dividends derived from all bonds, regardless
of the date of issue, must be taken into account by corporate taxpayers in
determining the amount of certain adjustments for alternative minimum tax
purposes. Receipt of exempt-interest dividends may result in collateral federal
income tax consequences to certain other taxpayers, including financial
institutions, property and casualty insurance companies, individual recipients
of Social Security or Railroad Retirement benefits, and foreign corporations
engaged in a trade or business in the United States. Prospective investors
should consult their own tax advisors as to such consequences.
The percentage of total dividends paid by the Fund with respect to any
taxable year which qualifies as federal exempt-interest dividends will be the
same for all shareholders receiving dividends during such year. If a shareholder
receives an exempt-interest dividend with respect to any share and such share is
held for six months or less, any loss on the sale or exchange of such share will
be disallowed to the extent of the amount of such dividends.
Interest on indebtedness incurred by a shareholder to purchase or carry
shares of the Funds generally is not deductible for federal income tax purposes
if the Funds distribute exempt-interest dividends during the shareholder's
taxable year.
Investors may be subject to state and local taxes on income derived from an
investment in a Fund. In certain states, income derived from a Fund which is
attributable to interest on obligations of that state or any municipality or
political subdivision thereof may be exempt from taxation.
Shareholders are advised to consult their own tax advisers with respect to
the particular tax consequences to them of an investment in a Fund. Persons who
may be "substantial users" (or "related persons" of substantial users) of
facilities financed by industrial development bonds should consult their tax
advisers before investing in a Fund.
Michigan Tax Considerations - Michigan Bond Fund and Tax-Free Short-
Intermediate Bond Fund. As stated in the Michigan Bond Fund Prospectus and the
Tax-Free Short-Intermediate Bond Fund Prospectus, dividends paid by the Fund
that are derived from interest attributable to tax-exempt Michigan Municipal
Obligations will be exempt from Michigan Income Tax and Michigan Single Business
Tax. Conversely, to the extent that the Fund's dividends are derived from
interest on obligations other than Michigan Municipal Obligations, such
dividends will be subject to Michigan Income and Michigan Single Business Taxes,
even though the dividends may be exempt for federal Income Tax purposes.
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In particular, gross interest income and dividends derived from obligations
or securities of the State of Michigan and its political subdivisions, exempt
from federal Income Tax, are exempt from Michigan Income Tax under Act No. 281,
Public Acts of Michigan, 1967, as amended, and are exempt from Michigan Single
Business Tax under Act No. 228, Public Acts of Michigan, 1975, as amended. The
Michigan Income Tax act levies a flat-rate income tax on individuals, estates,
and trusts. The Single Business Tax Act levies a tax upon the "adjusted tax
base" of most individuals, corporations, financial organizations, partnerships,
joint ventures, estates, and trusts with "business activity" in Michigan.
The transfer of obligations or securities of the State of Michigan and its
political subdivisions by the Fund, as well as the transfer of Fund shares by a
shareholder, is subject to Michigan taxes measured by gain on the sale, payment,
or other disposition thereof.
International Equity Fund, International Growth Fund, Emerging Markets
Fund, Global Financial Services Fund and International Bond Fund. Income
received by the International Equity Fund, the International Growth Fund, the
Emerging Markets Fund, the Global Financial Services Fund and the International
Bond Fund from sources within foreign countries may be subject to withholding
and other foreign taxes. The payment of such taxes will reduce the amount of
dividends and distributions paid to the Funds' shareholders. So long as a Fund
qualifies as a regulated investment company, certain distribution requirements
are satisfied, and more than 50% of the value of the Fund's assets at the close
of the taxable year consists of securities of foreign corporations, the Fund may
elect, subject to limitation, to pass through its foreign tax credits to its
shareholders. The Fund may qualify for and make this election in some, but not
necessarily all, of its taxable years. If a Fund were to make an election, an
amount equal to the foreign income taxes paid by the Fund would be included in
the income of its shareholders and the shareholders would be entitled to credit
their portions of this amount against their U.S. tax due, if any, or to deduct
such portions from their U.S. taxable income, if any. Shortly after any year for
which it makes such an election, a Fund will report to its shareholders, in
writing, the amount per share of such foreign tax that must be included in each
shareholder's gross income and the amount which will be available for deduction
or credit. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Certain limitations are imposed on the extent to
which the credit (but not the deduction) for foreign taxes may be claimed.
Shareholders who choose to utilize a credit (rather than a deduction) for
foreign taxes will be subject to limitations, including the restriction that the
credit may not exceed the shareholder's United States tax (determined without
regard to the availability of the credit) attributable to his or her total
foreign source taxable income. For this purpose, the portion of dividends and
distributions paid by the Fund from its foreign source income will be treated as
foreign source income. The Fund's gains and losses from the sale of securities
will generally be treated as derived from United States sources and certain
foreign currency gains and losses likewise will be treated as derived from
United States sources. The limitation on the foreign tax credit is applied
separately to foreign source "passive income", such as the portion of dividends
received from the Fund which qualifies as foreign source income. In addition,
only a portion of the foreign tax credit will be allowed to offset any
alternative minimum tax imposed on corporations and individuals. Because of
these limitations, shareholders may be unable to claim a credit for the full
amount of their proportionate shares of the foreign income taxes paid by the
Fund.
Taxation of Certain Financial Instruments. Special rules govern the Federal
income tax treatment of financial instruments that may be held by some of the
Funds. These rules may have a particular impact on the amount of income or gain
that the Funds must distribute to their respective shareholders to comply with
the Distribution Requirement, on the income or gain qualifying under the Income
Requirement, all described above.
Market Discount. If a Fund purchases a debt security at a price lower than
the stated redemption price of such debt security, the excess of the stated
redemption price over the purchase price is "market discount". If the amount of
market discount is more than a de minimis amount, a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which the Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that principal payment first to the portion of the market discount on
the debt security that has accrued but has not previously been includable in
income. In general, the amount of market discount that must be included for each
period is equal to the lesser of (i) the amount of market discount accruing
during such period (plus any accrued
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market discount for prior periods not previously taken into account) or (ii) the
amount of the principal payment with respect to such period. Generally, market
discount accrues on a daily basis for each day the debt security is held by a
Fund at a constant rate over the time remaining to the debt security's maturity
or, at the election of the Fund, at a constant yield to maturity which takes
into account the semi-annual compounding of interest. Gain realized on the
disposition of a market discount obligations must be recognized as ordinary
interest income (not capital gain) to the extent of the "accrued market
discount."
Original Issue Discount. Certain debt securities acquired by the Funds may
be treated as debt securities that were originally issued at a discount. Very
generally, original issue discount is defined as the difference between the
price at which a security was issued and its stated redemption price at
maturity. Although no cash income on account of such discount is actually
received by a Fund, original issue discount that accrues on a debt security in a
given year generally is treated for federal income tax purposes as interest and,
therefore, such income would be subject to the distribution requirements
applicable to regulated investment companies.
Some debt securities may be purchased by the Fund, at a discount that
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes
(see above).
Hedging Transactions. The taxation of equity options and over-the-counter
options on debt securities is governed by Code section 1234. Pursuant to Code
section 1234, the premium received by a Fund for selling a put or call option is
not included in income at the time of receipt. If the option expires, the
premium is short-term capital gain to the Fund. If the Fund enters into a
closing transaction, the difference between the amount paid to close out its
position and the premium received is short-term capital gain or loss. If a call
option written by a Fund is exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the amount realized upon the sale
of such security and any resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term depending upon the holding period of the
security. With respect to a put or call option that is purchased by a Fund, if
the option is sold, any resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term, depending upon the holding period of the
option. If the option expires, the resulting loss is a capital loss and is long-
term or short-term, depending upon the holding period of the option. If the
option is exercised, the cost of the option, in the case of a call option, is
added to the basis of the purchased security and, in the case of a put option,
reduces the amount realized on the underlying security in determining gain or
loss.
Any regulated futures and foreign currency contracts and certain options
(namely, nonequity options and dealer equity options) in which a Fund may invest
may be "Section 1256 contracts." Gains or losses on Section 1256 contracts are
generally considered 60% long-term and 40% short-term capital gains or losses;
however, foreign currency gains or losses arising from certain section 1256
contracts may be treated as ordinary income or loss. Also, Section 1256
contracts held by a Fund at the end of each taxable year (and generally for
purposes of the 4% excise tax, on October 31 of each year) are "marked to
market" with the result that unrealized gains or losses are treated as though
they were realized.
Generally, hedging transactions, if any, undertaken by a Fund may result in
"straddles" for U.S. Federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Funds. In addition, losses
realized by a Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which such losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences of hedging transactions to the Funds are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by the Funds which is taxed as ordinary income when
distributed to shareholders.
The Funds may make one or more of the elections available under the Code
which are applicable to straddles. If a Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
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Because application of the straddle rules may affect the character of gains
or losses, and may defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be more than or less than the
distributions of substantially as compared to a fund that did not engage in such
hedging transactions.
The diversification requirements applicable to the Funds' assets may limit
the extent to which the Funds will be able to engage in transactions in options,
futures or forward contracts.
Constructive Sales. Recently enacted rules may affect the timing and
character of gain if a Fund engages in transactions that reduce or eliminate its
risk of loss with respect to appreciated financial positions. If the Fund enters
into certain transactions in property while holding substantially identical
property, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the
constructive sale. The character of gain from a constructive sale would depend
upon the Fund's holding period in the property. Loss from a constructive sale
would be recognized when the property was subsequently disposed of, and its
character would depend on the Fund's holding period and the application of
various loss deferral provisions of the Code.
Currency Fluctuations - "Section 988" Gains or Losses. Under the Code,
gains or losses attributable to fluctuations in exchange rates which occur
between the time a Fund accrues receivables or liabilities denominated in a
foreign currency and the time the Fund actually collects such receivables or
pays such liabilities generally are treated as ordinary income and loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain futures, forward contracts and options, gains or
losses attributable to fluctuations in the value of the foreign currency between
the date of acquisition of the security or contract and the date of disposition
also are treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "Section 988" gains or losses, may increase or decrease the
amount of a Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
Passive Foreign Investment Companies. Certain Funds may invest in shares of
foreign corporations that may be classified under the Code as passive foreign
investment companies ("PFICs"). In general, a foreign corporation is classified
as a PFIC if at least on-half of its assets constitute investment-type assets,
or 75% or more of its gross income investment-type income. If a Fund receives a
so-called "excess distribution" with respect to PFIC shares, the Fund itself may
be subject to a tax on a portion of the excess distribution, whether or not the
corresponding income is distributed by the Fund to shareholders. In general,
under the PFIC rules, an excess distribution is treated as having been realized
ratably over the period during which the Fund held the PFIC shares. Each Fund
will itself be subject to tax on the portion, if any, of an excess distribution
that is so allocated to prior Fund taxable years and an interest factor will be
added to the tax, as if the tax had been payable in such prior taxable years.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
The Funds may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions were received from the PFIC in a given year. If this election were
made, the special rules, discussed above, relating to the taxation of excess
distributions, would not apply. In addition, another election would involve
marking to market the Fund's PFIC shares at the end of each taxable year, with
the result that unrealized gains would be treated as though they were realized
and reported as ordinary income. Any mark-to market losses and any loss from an
actual disposition of Fund shares would be deductible as ordinary losses to the
extent of any net mark-to-market gains included in income in prior years.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.
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Fund shareholders may be subject to state, local and foreign taxes on their
Fund distributions. In many states, Fund distributions which are derived from
interest on certain U.S. Government obligations are exempt from taxation. The
tax consequences to a foreign shareholder of an investment in the Fund may be
different from those described herein. Foreign shareholders are advised to
consult their own tax advisers with respect to the particular tax consequences
to them of an investment in the Fund. Shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Other Taxation
The foregoing discussion relates only to U.S. federal income tax law and
certain state taxes as applicable to U.S. persons (i.e., U.S. citizens and
residents and domestic corporations, partnerships, trusts and estates).
Distributions by the Funds, and dispositions of Fund shares also may be subject
to other 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). Future legislative or administrative
changes or court decisions may significantly change the conclusions expressed
herein, and any such changes or decisions may have a retroactive effect with
respect to the transactions contemplated herein.
ADDITIONAL INFORMATION CONCERNING SHARES
The Trust and Framlington are Massachusetts business trusts. Under each
Declaration of Trust, the beneficial interest in the Trust or Framlington may be
divided into an unlimited number of full and fractional transferable shares. The
Company is a Maryland corporation. The Trust's and Framlington's Declaration of
Trust and the Company's Articles of Incorporation authorize the Boards of
Directors/Trustees to classify or reclassify any unissued shares of the Trust,
Framlington and 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 such authority, the Trust's
Board of Trustees has authorized the issuance of an unlimited number of shares
of beneficial interest in the Trust, representing interests in the Balanced,
Growth & Income, Index 500, International Equity, Small Company Growth, Bond,
Intermediate Bond, U.S. Income, Michigan Bond, Tax-Free Bond, Tax-Free Short-
Intermediate Bond, Cash Investment, Tax-Free Money Market and U.S. Treasury
Money Market Funds. The shares of each Fund (other than the Cash Investment
Fund, Tax-Free Money Market Fund and U.S. Treasury Money Market Fund) are
offered in five separate classes: Class A, Class B, Class C, Class K and Class Y
Shares. The Cash Investment Fund, Tax-Free Money Market Fund and U.S. Treasury
Money Market Fund offer only Class A Shares, Class K Shares and Class Y Shares.
Pursuant to the authority of Framlington's Declaration of Trust, the Trustees
have authorized the issuance of an unlimited number of shares of beneficial
interest in Framlington representing interests in the International Growth Fund,
Emerging Markets Fund, Global Financial Services Fund and Healthcare Fund. The
shares of each Fund are offered in five separate classes: Class A, Class B,
Class C, Class K and Class Y Shares. 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, Growth
Opportunities Fund, Micro-Cap Fund, Multi-Season Fund, Real Estate Fund, Small-
Cap Value Fund, Value Fund, International Bond Fund, Money Market Fund, All-
Season Conservative Fund, All-Season Moderate Fund, All-Season Aggressive Fund,
Financial Services Fund, Short Term Treasury Fund and NetNet Fund. The shares of
each Fund (other than the Money Market Fund, All-Season Conservative Fund, All-
Season Moderate Fund, All-Season Aggressive Fund, Financial Services Fund, Short
Term Treasury Fund and the NetNet Fund) are offered in five separate classes:
Class A, Class B, Class C, Class K and Class Y Shares. The Money Market Fund
offers only Class A, Class B and Class C Shares (which may be acquired only
through an exchange of shares from the corresponding classes of other funds of
the Trust, Framlington and the Company) and Class Y Shares. The All-Season
Conservative Fund, All-Season Moderate Fund and All-Season Aggressive Fund offer
only Class A, Class B and Class Y Shares. The Short Term
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Treasury Fund offers Class Y Shares and the Michigan Municipal Shares (formerly,
Class K Shares). The NetNet Fund offers only Class A, Class B, Class C and Class
Y Shares.
The Boards of the Trust, the Company and Framlington have adopted plans
pursuant to Rule 18f-3 under the 1940 Act ("Multi-Class Plans") on behalf of
each Fund. Each 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 the Trust, Framlington or
the Company or an individual Fund, shareholders of a particular Fund would be
entitled to receive the assets available for distribution belonging to such
Fund, and a proportionate distribution, based upon the relative net asset values
of the Trust's, Framlington's or the Company's respective Funds, of any general
assets not belonging to any particular Fund which are available for
distribution. Shareholders of a Fund are entitled to participate in the net
distributable assets of the particular Fund involved on liquidation, based on
the number of shares of the Fund that are held by each shareholder.
Holders of all outstanding shares of 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, only Class B Shares will be
entitled to vote on matters submitted to a vote of shareholders pertaining to
the Fund's Class B Plan, only Class C Shares of a Fund will be entitled to vote
on matters submitted to a vote of shareholders pertaining to the Fund's Class C
Plan, and only Class K Shares of a Fund will be entitled to vote on matters
submitted to a vote of shareholders pertaining to the Class K Plan. Further,
shareholders of all of the Funds, as well as those of any other investment
portfolio now or hereafter offered by the Trust, Framlington or the Company,
will vote together in the aggregate and not separately on a Fund-by-Fund basis,
except as otherwise required by law or when permitted by the Boards of
Directors/Trustees. 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 Trust, Framlington or the Company shall not be
deemed to have been effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each Fund affected by the matter. A Fund
is affected by a matter, (i) unless it is clear that the interests of each Fund
in the matter are substantially identical or (ii) that the matter does not
affect any interest of the Fund. Under the Rule, the approval of an investment
advisory agreement, sub-advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to a Fund only if
approved by a majority of the outstanding shares of such Fund. However, the Rule
also provides that the ratification of the appointment of independent auditors,
the approval of principal underwriting contracts and the election of trustees
may be effectively acted upon by shareholders of the Trust, Framlington or the
Company voting together in the aggregate without regard to a particular Fund.
Shares of each of the Trust, Framlington and the Company have noncumulative
voting rights and, accordingly, the holders of more than 50% of each of the
Trust's, Framlington's and the Company's outstanding shares (irrespective of
class) may elect all of the trustees or 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 applicable
Prospectus, shares will be fully paid and non-assessable by each of the Trust,
Framlington and the Company.
Annual shareholder meetings to elect trustees or directors will not be held
unless and until such time as required by law. At that time, the trustees then
in office will call a shareholders' meeting to elect trustees. Except as set
forth above, the trustees will continue to hold office and may appoint successor
trustees. Meetings of the shareholders of the Trust, Framlington or the Company
shall be called by the trustees or directors upon the written request of
shareholders owning at least 10% of the outstanding shares entitled to vote.
The Trust's and Framlington's Declaration of Trust, as amended, each
authorizes the Board of Trustees, without shareholder approval (unless otherwise
required by applicable law), to: (i) sell and convey the assets belonging to a
class of shares to another management investment company for consideration which
may include securities issued by the purchaser and, in connection therewith, to
cause all outstanding shares of such class to be redeemed at a price which is
equal to their net asset value and which may be paid in cash or by distribution
of the
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securities or other consideration received from the sale and conveyance; (ii)
sell and convert the assets belonging to one or more classes of shares into
money and, in connection therewith, to cause all outstanding shares of such
class to be redeemed at their net asset value; or (iii) combine the assets
belonging to a class of shares with the assets belonging to one or more other
classes of shares if the Board of Trustees reasonably determines that such
combination will not have a material adverse effect on the shareholders of any
class participating in such combination and, in connection therewith, to cause
all outstanding shares of any such class to be redeemed or converted into shares
of another class of shares at their net asset value. However, the exercise of
such authority may be subject to certain restrictions under the 1940 Act. The
Trust's and Framlington's Board of Trustees may authorize the termination of any
class of shares after the assets belonging to such class have been distributed
to its shareholders.
OTHER INFORMATION
Counsel. The law firm of Dechert Price & Rhoads, 1775 Eye Street, N.W.,
Washington, D.C. 20006, has passed upon certain legal matters in connection with
the shares offered by the Funds and serves as counsel to the Trust, Framlington
and the Company.
Independent Accountants. Ernst & Young LLP, 200 Clarendon Street, Boston,
Massachusetts 02116, serves as the Trust's, Framlington's and the Company's
independent accountants.
Control Persons and Principal Holders of Securities. [As of September 26,
1999, Comerica Bank, One Detroit Center, 500 Woodward Ave., Detroit, Michigan
48226, held of record substantially all of the outstanding shares of the Funds
as agent or trustee for its customers. As a result, Comerica Bank will be able
to affect the outcome of matters presented for a vote of each Fund's
shareholders. As of September 26, 1999, the following persons were beneficial
owners of 5% or more of the outstanding shares of any class of a Fund because
they possessed voting or investment power with respect to such shares:]
<TABLE>
<CAPTION>
Percentage of
Total Shares
Name of Fund - Class Name and Address Outstanding
- -------------------- ---------------- -----------
<S> <C> <C>
</TABLE>
As of September 26, 1999, Munder Capital Management, on behalf of their
clients owned % of the Fund Class ___ shares.
Shareholder Approvals. As used in this SAI, 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.
REGISTRATION STATEMENT
This SAI and each of the Fund's Prospectuses do not contain all the information
included in the Fund's registration statement filed with the SEC under the 1933
Act with respect to the securities offered hereby, certain portions of which
have been omitted pursuant to the rules and regulations of the SEC. The
registration statement, including the exhibits filed therewith, may be examined
at the offices of the SEC in Washington, D.C. Text-only versions of fund
documents can be viewed online or downloaded from the SEC at
http:/www.sec.gov.
Statements contained herein and in each of the Fund's Prospectuses as to
the contents of any contract or other documents referred to are not necessarily
complete, and, in such instance, reference is made to the copy of such contract
or other documents filed as an exhibit to the Fund's registration statement,
each such statement being qualified in all respects by such reference.
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FINANCIAL STATEMENTS
[The financial statements for the Trust, Framlington and the Company
including the notes thereto, dated June 30, 1999 have been audited by Ernst &
Young LLP and are incorporated by reference into this SAI from the Annual
Reports of the Trust, Framlington and the Company dated as of June 30, 1999. The
information under the caption "Financial Highlights" of the Funds for the period
from commencement of operations through June 30, 1999, appearing in the related
Prospectuses dated October 26, 1999 has been derived from the financial
statements audited by Ernst & Young LLP [except for periods ended prior to June
30, 1995 for the Multi-Season Fund and Money Market Fund,] which have been
derived from the financial statements audited by other independent auditors.
Such financial statements and financial highlights are included or incorporated
by reference herein in reliance upon their reports given upon the authority of
such firms as experts in accounting and auditing.]
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APPENDIX A
----------
- Rated Investments -
Corporate Bonds
- ---------------
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 edged." 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 appear 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 well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
"B":
Bonds that are rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
"Caa":
Bonds that are rated "Caa" are of poor standing. These issues may be
in default or present elements of danger may exist with respect to
principal or interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated "Aa" through "B". The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
A-1
<PAGE>
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 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 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 issuers (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
instruments rated "Prime-2" are offered by issuers (or related supporting
institutions) which 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 susceptible to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted "A-1+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1."
Rated commercial paper purchased by a 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 Boards of Trustees and
Directors.
A-2
<PAGE>
APPENDIX B
The Equity Funds, the Balanced Fund and the Bond Funds may enter into
certain futures transactions and options for hedging purposes. Each of the
Equity Funds, Balanced Fund, Bond Funds, International Bond Fund and Tax-Free
Bond Funds (other than Tax-Free Short-Intermediate Bond Fund) may also write
covered call options, buy put options, buy call options and write secured put
options. 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.
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.
B-1
<PAGE>
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 advisor 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 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 advisor 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 advisor 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 designated on the books of
the Fund's custodian 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 advisor 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
B-2
<PAGE>
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.
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 indices,
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
indices, such as the Standard & Poor's 100 or indices 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
<TABLE>
<CAPTION>
Portfolio Futures
<S> <C>
Anticipate buying $62,500 in Equity Securities -Day Hedge is Placed-
Buying 1 Index Futures at 125
Value of Futures = $62,500/Contract
Buy Equity Securities with Actual Cost = $65,000 Day Hedge is Lifted-
</TABLE>
B-3
<PAGE>
<TABLE>
<S> <C>
Increase in Purchase Price = $2,500 Sell 1 Index Futures at 130
Value of Futures = $65,000/Contract
Gain on Futures = $2,500
</TABLE>
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
<TABLE>
<CAPTION>
Portfolio Futures
<S> <C>
Anticipate Selling $1,000,000 in Equity Securities - Day Hedge is Placed-
Sell 16 Index Futures at 125
Value of Futures = $1,000,000
Equity Securities - Own Stock Day Hedge is Lifted-
with Value = $960,000 Buy 16 Index Futures at 120
Loss in Portfolio Value = $40,000 Value of Futures = $960,000
Gain on Futures = $40,000
</TABLE>
III. Margin Payments
---------------
Unlike the purchase or sale 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 Fund's custodian in 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 securities 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 Advisor, World or the Sub-Advisor may elect to close the
position by taking an opposite position, subject to the availability of a
secondary market, which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or gain.
IV. Risks of Transactions in Futures Contracts
------------------------------------------
There are several risks in connection with the use of futures by the
Funds as hedging devices. One risk arises because of the imperfect correlation
between movements in the price of futures and movements in the price of the
instruments which are the subject of the hedge. The price of futures may move
more than or less than the price of the instruments being hedged. If the price
of 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
B-4
<PAGE>
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 Advisor, World or the Sub-Advisor. 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 Advisor, World or the Sub-Advisor. 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 the futures instruments held
in the Fund may decline. If this occurs, 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 securities 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 Fund's custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Advisor, World or the
Sub-Advisor 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. When there is no liquid market, 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.
B-5
<PAGE>
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 commodities 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
Advisor's, World's or the Sub-Advisor'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
it may be disadvantageous to do so.
V. Options on Futures Contracts
----------------------------
The 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 from(call) or sell to(put) 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 SAI. The Fund may enter into currency transactions with counterparties
which have received (or the guarantors of
B-6
<PAGE>
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 or World.
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, World or the
Sub-Advisor considers that the Austrian schilling is correlated to the German
mark (the "D-mark"), the Fund holds securities denominated in shillings and the
Advisor, World or the Sub-Advisor believes that the value of the schillings will
decline against the U.S. dollar, the Advisor, World or the Sub-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 designate liquid, high grade
assets on the books of the Fund's custodian to the extent the Fund's obligations
are not otherwise "covered" through ownership of the underlying currency.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Buyers and sellers of currency futures are subject to the same risks that
apply to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close to positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
VII. Other Matters
-------------
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
B-7
<PAGE>
VII. Options
-------
Each of the Equity Funds, Balanced Fund, Bond Funds, International
Bond Fund and Tax-Free Bond Funds (other than Tax-Free Short-Intermediate Bond
Fund) may write covered call options, buy put options, buy call options and
write secured put options. Such options may relate to particular securities and
may or may not be listed on a national securities exchange and issued by the
Options Clearing Corporation. Options trading is a highly specialized activity
which entails greater than ordinary investment risk. Options on particular
securities may be more volatile than the underlying securities, and therefore,
on a percentage basis, an investment in options may be subject to greater
fluctuation than an investment in the underlying securities themselves.
A call option for a particular security gives the purchaser of the
option the right to buy, and the writer of the option 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, and the writer of the option the obligation to buy,
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 wishes to terminate its obligation may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after being notified of the exercise of an option. Likewise, an investor who is
the holder of an option may liquidate its position by effecting a "closing sale
transaction." The cost of such a closing purchase plus transaction costs may be
greater than the premium received upon the original option, in which event the
Fund will have incurred a loss in the transaction. There is no guarantee in any
instance 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 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 Fund investments. If a Fund desires to sell a
particular security from its portfolio on which it has written a call option, it
will effect a closing transaction prior to or concurrent with the sale of the
security.
The Funds may write options in connection with buy-and-write
transactions; that is, the Funds may purchase a security and then write a call
option against that security. The exercise price of the call the 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 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.
In the case of writing a call option on a security, the option is
"covered" if a 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 liquid securities in
such amount as are earmarked on the books of the Fund's custodian) upon
conversion or exchange of other securities held by it. For a call option on an
index, the option is covered if a Fund maintains with its custodian cash or
liquid securities equal to the contract value. A call option is also covered if
a Fund holds a call on the same security or index as the call
B-8
<PAGE>
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 in cash or liquid securities is
earmarked on the books of the Fund's custodian. A Fund will limit its investment
in uncovered call options purchased or written by the Fund to 33 1/3% of the
Fund's total assets. A Fund will write put options only if they are "secured" by
cash or liquid securities earmarked on the books of the Fund's custodian in an
amount not less than the exercise price of the option at all times during the
option period.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the relevant Fund's gain will be limited to the
premium received. If the market price of the underlying security declines or
otherwise is below the exercise price, the Fund may elect to close the position
or take delivery of the security at the exercise price and the Fund's return
will be the premium received from the put option minus the amount by which the
market price of the security is below the exercise price.
The Funds may purchase put options to hedge against a decline in the
value of their portfolios. By using put options in this way, a Fund will reduce
any profit it might otherwise have realized in the underlying security by the
amount of the premium paid for the put option and by transaction costs. The
Funds may purchase call options to hedge against an increase in the price of
securities that they anticipate purchasing in the future. The premium paid for
the call option plus any transaction costs will reduce the benefit, if any,
realized by a 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 a Fund purchases an option, the premium paid by it is recorded as
an asset of the Fund. When the Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of this asset or deferred credit will be
subsequently marked to market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the average of the closing bid and asked
prices. If an option purchased by the Fund expires unexercised the Fund realizes
a loss equal to the premium paid. If the Fund enters into a closing sale
transaction on an option purchased by it, the Fund will realize a gain if the
premium received by the Fund on the closing transaction is more than the premium
paid to purchase the option, or a loss if it is less. If an option written by
the Fund expires on the stipulated expiration date or if the Fund enters into a
closing purchase transaction, it will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the net premium received when the option is
sold) and the deferred credit related to such option will be eliminated. If an
option written by the Fund is exercised, the proceeds of the sale will be
increased by the net premium originally received and the Fund will realize a
gain or loss.
There are several risks associated with transactions in options on
securities and indices. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. An option writer unable to effect a closing purchase transaction
will not be able to sell the underlying security (in the case of a covered call
option) or liquidate the earmarked securities (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 a Fund will be able to close an unlisted
option position. Furthermore, unlisted options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to do so in
connection with the purchase or sale of options.
In addition, a liquid secondary market for particular options, whether
traded over-the-counter or on a national securities exchange (an "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
B-9
<PAGE>
times be adequate to handle current trading volume; 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 a 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 the issuing country's economy.
B-10
<PAGE>
THE MUNDER LIFESTYLE FUNDS
480 Pierce Street
Birmingham, Michigan 48009
Telephone (800) 438-5789
STATEMENT OF ADDITIONAL INFORMATION
October 26, 1999
This Statement of Additional Information ("SAI"), 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 Conservative Fund (the "Conservative Fund"),
the Munder All-Season Moderate Fund (the "Moderate Fund"), and the Munder All-
Season Aggressive Fund (the "Aggressive 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
SAI 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 SAI is not a prospectus, and should be read only in conjunction
with the Funds' Prospectus dated October 26, 1999. The contents of this SAI 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. [The financial statements for the Company
including the notes thereto, dated June 30, 1999 are incorporated by reference
into this SAI from the annual reports of the Company.]
An investment in a Fund or the Underlying Fund is not a bank deposit and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other governmental agency.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
History and General Information............................................. 3
Fund Investments............................................................ 3
Risk Factors and Special Considerations--Index 500 Fund..................... 17
Investment Limitations...................................................... 19
Temporary Defensive Position................................................ 20
Management of the Funds..................................................... 20
Investment Advisory and Other Service Arrangements.......................... 24
Portfolio Transactions...................................................... 28
Additional Purchase and Redemption Information.............................. 30
Net Asset Value............................................................. 31
Performance Information..................................................... 31
Taxes....................................................................... 33
Additional Information Concerning Shares.................................... 37
Other Information........................................................... 38
Registration Statement...................................................... 39
Financial Statements........................................................ 39
Appendix A.................................................................. A-1
Appendix B.................................................................. B-1
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this SAI or in the Prospectuses in connection
with the offering made by the Prospectuses 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 Prospectuses do not constitute an offering
by the Funds or by the Distributor in any jurisdiction in which such offering
may not lawfully be made.
2
<PAGE>
GENERAL
The Company was organized as a Maryland corporation on November 18, 1992
and is registered under the Investment Company Act of 1940 as an open-end
management investment company. The Munder All-Season Conservative Fund, Munder
All-Season Moderate Fund and Munder All-Season Aggressive Fund were formerly
known as Munder All-Season Maintenance Fund, Munder All-Season Development Fund
and Munder All-Season Accumulation Fund, respectively. 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 each Prospectus, the investment advisor of each Fund, and each
of the Underlying Funds (other than the Index 500 Fund and the International
Equity Fund), is Munder Capital Management (the "Advisor"). The investment
advisor for the Index 500 Fund and the International Equity Fund is World Asset
Management, L.L.C. ("World"), a Delaware limited liability company. World is a
wholly-owned subsidiary of the Advisor. The principal partners of the Advisor
are Old MCM, Inc. ("Old MCM"), Munder Group LLC and WAM Holdings, Inc. ("WAM")
and WAM Holdings II, Inc. ("WAM II"). Old MCM was founded in April 1985 as a
Delaware corporation and was a registered investment advisor. WAM and WAM II
are an indirect, wholly owned subsidiaries of Comerica Incorporated which owns
or controls approximately 88% of the partnership interests in the Advisor.
Framlington Overseas Investment Management Limited serves as sub-advisor
("Sub-Advisor") to the Framlington Emerging Markets Fund, Framlington Global
Financial Services Fund, Framlington Healthcare Fund and the Framlington
International Growth Fund, (collectively, the "Framlington Funds"), which are
the four series of Framlington. The Sub-Advisor is a subsidiary of Framlington
Group Limited, incorporated in England and Wales which, through its
subsidiaries, provides a wide range of investment services. Framlington Group
Limited is a wholly-owned subsidiary of Framlington Holdings Limited which is,
in turn, owned 49% by the Advisor and 51% by Credit Commercial de France S.A., a
French banking corporation listed on the Societe des Bourses Francaises.
Capitalized terms used in this SAI and not otherwise defined have the same
meanings as are given to them in the Prospectuses.
Assets of the Funds will be allocated among the Underlying Funds within the
ranges set forth in the Prospectuses. 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 Conservative Fund seeks to provide 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 Moderate Fund seeks to provide high total return through 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 Aggressive Fund seeks to provide long-term capital appreciation. The
Fund seeks its objective by concentrating its investments in Underlying Funds
that invest primarily in equity securities.
FUND INVESTMENTS
The following supplements the information contained in each Prospectus
concerning the investment objectives and policies of the Underlying Funds. With
the exception of Multi-Season Growth Fund, Real Estate Equity Investment Fund
and Money Market 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
3
<PAGE>
Fund's outstanding shares. There can be no assurance that a Fund will achieve
its objective. A description of applicable credit ratings is set forth in
Appendix A to this SAI. For purposes of this SAI, the Equity Selection Fund,
Growth & Income Fund, Growth Opportunities Fund, Index 500 Fund, International
Equity Fund, Micro-Cap Equity Fund, Multi-Season Growth Fund (the "Multi-Season
Fund"), NetNet Fund, Real Estate Equity Investment Fund (the "Real Estate
Fund"), Small-Cap Value Fund, Small Company Growth Fund, Value Fund and the
Framlington Funds are referred to as the "Equity Funds." The Bond Fund,
Intermediate Bond Fund, International Bond Fund and U.S. Government Income Fund
are referred to as the "Fixed Income Funds." The 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. Borrowed funds are
subject to interest costs that may or may not be offset by amounts earned on the
borrowed funds. 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 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 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 NetNet Fund, Real Estate
Fund, International Equity Fund, Framlington Emerging Markets Fund, Framlington
Global Financial Services Fund, Framlington Healthcare Fund and Framlington
International Growth Fund), each Fixed Income Fund (except International Bond
Fund), each of the Cash Investment Fund and the Money Market Fund may invest up
to 25% of its assets in foreign securities. Under normal market conditions, the
International Equity Fund, Framlington International Growth Fund and
International Bond Fund each will invest at least 65% of its assets in
securities of issuers located in at least three other countries, one of which
may be the United States. Framlington Global Financial Services Fund will
invest at least 65% of its assets in securities of issuers located in at least
three countries other than the United States. The Framlington Emerging Markets
Fund will invest at least 65% of its assets in companies in emerging market
countries. There is no limit on the Framlington Healthcare Fund's investments
in foreign securities. The Multi-Season Fund and the NetNet Fund typically will
only purchase foreign securities which are represented by American Depositary
Receipts ("ADRs") listed on a domestic securities exchange or included in the
NASDAQ National Market System, or foreign securities listed directly on a
domestic securities exchange or included in the NASDAQ National Market System.
ADRs are receipts typically issued by a United States bank or trust company
evidencing ownership of the underlying foreign securities. Certain 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.
The International Bond 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
4
<PAGE>
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.
Certain European currencies are being converted into the Euro. This conversion,
which is under way, is scheduled to be completed in the year 2002. However,
problems with the conversion process and delays could increase volatility in
world markets and affect European markets in particular.
For the purposes of the 65% minimum with respect to the International Bond
Fund's designation as an international bond fund, the securities described in
this paragraph are considered "international bonds."
Income and gains on foreign 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 trading 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 less regulation of stock exchanges, brokers, and
listed companies than in the United States. Such concerns are particularly
heightened for emerging markets and Eastern European countries.
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 rather than their actual
market values and they may be adverse to an Underlying Fund.
The Advisor, World or the Sub-Advisor endeavors to buy and sell foreign
currencies on as favorable a basis as practicable. Some price spread on currency
exchange (to cover service charges) may be incurred, particularly when 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. Certain European
currencies are being converted into the Euro. This conversion, which is under
way, is scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in the world markets and
affect European markets in particular. 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.
5
<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.
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, World or the Sub-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.
Forward 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 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 currency 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 currency contract for the amount of the
purchase or sale price to protect against variations, between the date the
security is purchased or sold and the date on which payment is made or received,
in the value of the foreign currency relative to the U.S. dollar or other
foreign currency.
When the Advisor, World or the Sub-Advisor anticipates that a particular
foreign currency may decline substantially relative to the U.S. dollar or other
leading currencies, in order to reduce risk, 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 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 currency contracts and conversions of foreign currencies and U.S.
dollars.
Cash or liquid securities equal to the amount of an Underlying Fund's
assets that could be required to consummate forward contracts will be designated
on the records of the Underlying Funds or those of the Underlying
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Fund's custodian except to the extent the contracts are otherwise "covered." For
the purpose of determining the adequacy of the securities in the account, the
deposited securities will be valued at market or fair value. If the market or
fair value of such securities declines, additional cash or securities will be
placed in the account daily so that the value of the account will equal the
amount of such commitments by the 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.
Futures Contracts and Related Options. The Equity and Fixed Income Funds
may purchase and sell futures contracts on interest-bearing securities or
securities indices, and may purchase and sell call and put options on futures
contracts. For a detailed description of futures contracts and related options,
see Appendix B to this SAI.
Illiquid Securities. Each of the Equity Funds and the Fixed Income Funds
may invest up to 15%, and each of the Money Market Funds may invest up to 10%,
of the value of its net assets (determined at time of acquisition) in securities
that are illiquid. Illiquid securities would generally include securities for
which there is a limited trading market, repurchase agreements and time deposits
with notice/termination dates in excess of seven days, and certain securities
that are subject to trading restrictions because they are not registered under
the Securities Act of 1933, as amended (the "Act"). If, after the time of
acquisition, events cause this limit to be exceeded, the Underlying Fund will
take steps to reduce the aggregate amount of illiquid securities as soon as
reasonably practicable in accordance with the policies of the SEC.
Each Underlying Fund (except U.S. Treasury Money Market Fund) may invest in
commercial obligations issued in reliance on the "private placement" exemption
from registration afforded by Section 4(2) of the Act ("Section 4(2) paper").
An Underlying Fund may also purchase securities that are not registered under
the Act, but which can be sold to qualified institutional buyers in accordance
with Rule 144A under the Act, ("Rule 144A securities"). Section 4(2) paper is
restricted as to disposition under the Federal securities laws, and generally is
sold to institutional investors who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors through or with the assistance of the
issuer or investment dealers which make a market in the Section 4(2) paper, thus
providing liquidity. Rule 144A securities generally must be sold only to other
qualified institutional buyers. If a particular investment in Section 4(2)
paper or Rule 144A securities is not determined to be liquid, that investment
will be included within the Underlying Fund's limitation on investment in
illiquid securities. The Advisor, World or the Sub-Advisor will determine the
liquidity of such investments pursuant to guidelines established by the Boards
of Directors/Trustees. It is possible that unregistered securities purchased by
the Underlying Fund in reliance upon Rule 144A 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.
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
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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 designating cash, U.S. Government securities or other high-
grade debt securities on the books of the Underlying Fund's custodian, 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 adversely affect the Fixed Income Funds' ability to terminate
existing swap agreements or to realize amounts to be received under such
agreements.
Investment Company Securities. The Underlying Funds may invest in
securities issued by other investment companies. As a shareholder of another
investment company, an Underlying Fund would bear its pro rata portion of the
other investment company's expenses, including advisory fees. These expenses
would be in addition to the expenses each Underlying Fund bears directly in
connection with its own operations. Each Underlying Fund currently intends to
limit its investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made: (i)
not more than 5% of the value of the Underlying Fund's total assets will be
invested in the securities of any one investment company; (ii) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group; and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Underlying Fund.
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 assets;
and 33 1/3% 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, World or the
Sub-Advisor 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, World or the Sub-Advisor has determined are
creditworthy under guidelines established by the Boards of
Directors/Trustees.
Lower-Rated Debt Securities. It is expected that each Underlying Fund
(other than the Money Market Funds, Index 500 Fund and Growth & Income Fund)
will invest not more than 5% of its total assets in securities that are rated
below investment grade by Standard & Poor's Rating Service, a division of
McGraw-Hill Companies, Inc. ("S&P") or Moody's Investor Services, Inc.
("Moody's"), or in comparable unrated securities. The Growth & Income Fund may
invest up to 20% of the value of its total assets in such securities. Such
securities are also known as junk bonds. The yields on lower-rated debt and
comparable unrated securities generally are higher than the
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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 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 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. A description of applicable credit ratings is set forth in
Appendix A of this SAI.
Money Market Instruments. 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, World or the Sub-Advisor deems the instrument to present minimal credit
risks, such investments may nevertheless entail risks that are different from
those of investments in domestic obligations of U.S. banks due to differences in
political, regulatory and economic systems and conditions. All investments in
bank obligations are limited to the obligations of financial institutions having
more than $1 billion in total assets at the time of purchase.
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. In
addition, the Funds and the Underlying Funds may acquire unrated commercial
paper and corporate bonds that are determined by the Advisor, World or the 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
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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, 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 Underlying Fund might be unable to dispose of the note because of
the absence of a secondary market and might, for this or other reasons, suffer a
loss to the extent of the default. The Funds and the Underlying Funds invest in
variable amount master notes only when the Advisor, World or the 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. Opinions relating to the validity of municipal
obligations and to the exemption of interest thereon from regular Federal income
tax are rendered by bond counsel or counsel to the respective issuers at the
time of issuance. Neither the Company, the Trust nor the Advisor will review
the proceedings relating to the issuance of municipal obligations or the bases
for such opinions.
An issuer's obligations under its municipal obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its municipal obligations may be
materially adversely affected by litigation or other conditions.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal obligations. For example, under the Tax Reform Act of
1986 interest on certain private activity bonds must be included in an
investor's Federal alternative minimum taxable income, and corporate investors
must include all tax-exempt interest in their Federal alternative minimum
taxable income. The Trust cannot predict what legislation, if any, may be
proposed in Congress in the future as regards the Federal income tax status of
interest on municipal obligations in general, or which proposals, if any, might
be enacted. Such proposals, if enacted, might materially adversely affect the
availability of municipal obligations for investment by the Tax-Free Bond Funds
and the Tax-Free Money Market Fund and the liquidity and
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value of such Funds. In such an event the Board of Trustees would reevaluate the
Fund's investment objective and policies and consider changes in its structure
or possible dissolution.
The Cash Investment Fund and the Money Market Fund each 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. Neither the Cash Investment Fund nor the Money Market Fund
expects to invest more than 5% of its net assets in such municipal obligations
during the current fiscal year.
Non-Domestic Bank Obligations. Non-domestic bank obligations include
Eurodollar Certificates of Deposit ("ECDs"), which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs"), which are U.S.
U.S. dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs"), which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank and held in
the United States; and Yankee Bankers' Acceptances ("Yankee BAs"), which are
U.S. dollar-denominated bankers' acceptances issued by a U.S. branch of a
foreign bank and held in the United States.
Options. The Underlying Funds may write covered call options, buy put
options, buy call options and write secured put options. For risks associated
with options on foreign currencies, see Appendix B of this SAI.
Real Estate Securities. The Real Estate Fund may invest without limit in
shares of real estate investment trusts ("REITs"). The Equity Funds and the
Balanced Fund may also invest in REITs. REITs pool investors' funds for
investment primarily in income producing real estate or real estate loans or
interests. A REIT is not taxed on income distributed to shareholders if it
complies with several requirements relating to its organization, ownership,
assets, and income and a requirement that it distribute to its shareholders at
least 95% of it taxable income (other than net capital gains) for each taxable
year. REITs can generally be classified as Equity REITs, Mortgage REITs and
Hybrid REITs. Equity REITs, which invest the majority of their assets directly
in real property, derive their income primarily from rents. Equity REITs can
also realize capital gains 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 Funds
will not invest in real estate directly, but only in securities issued by real
estate companies. However, the Funds 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, 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 "Internal Revenue 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.
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Repurchase Agreements. The Funds and the Underlying Funds may agree to
purchase securities from financial institutions such as member banks of the
Federal Reserve System, any foreign bank or any domestic or foreign
broker/dealer 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, World or the Sub-Advisor will
review and continuously monitor the creditworthiness of the seller under a
repurchase agreement, and will require the seller to maintain collateral 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 or
less.
The repurchase price under repurchase agreements 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).
Securities subject to repurchase agreements will be held, as applicable, by
the Trust's, Framlington's or the Company's 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.
Reverse Repurchase Agreements. Each Underlying 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 cash, U.S. Government securities or other liquid
high-grade securities designated on the books of the Underlying Fund's custodian
an amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement.
Rights and Warrants. 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.
Short Sales. The Global Financial Services Fund may make short sales of
securities. A short sale is a transaction in which the Underlying Fund sells a
security it does not own in anticipation that the market price of that security
will decline. When the Underlying Fund makes a short sale, it must borrow the
security sold short and deliver it to the broker-dealer through which it made
the short sale as collateral for its obligation to deliver the security upon
conclusion of the sale. The Underlying Fund may also sell securities that it
owns or has the right to acquire at no additional cost but does not intend to
deliver to the buyer, a practice known as selling short "against-the-box." The
Underlying Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.
The Underlying Fund's obligation to replace the borrowed security will be
secured by collateral deposited with the broker-dealers, usually cash, U.S.
Government securities or other highly liquid securities similar to those
borrowed. The Underlying Fund will also be required to deposit similar
collateral with its custodian or custodian to the extent necessary so that the
value of both collateral deposits in the aggregate is at all times equal to as
least 100% of the current market value of the security sold short. Depending on
arrangements made with the broker-dealer from which it borrowed the security
regarding payment over any received by the Underlying Fund on such security, the
Fund may not received any payments (including
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interest) on its collateral deposited with such broker-dealer. The Underlying
Fund will incur transaction costs, including interest expenses, in connection
with opening, maintaining, and closing short sales.
If the price of the security sold short increases between the time of the
short sale and the time the Underlying Fund replaces the borrowed security, the
Fund will incur a loss; conversely, if the price declines, the Fund will realize
a capital gain. Any gain is limited to the price at which it sold the security
short; its potential loss is theoretically unlimited.
Stand-by Commitments. The Cash Investment Fund and the Money Market 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 and the Trust 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.
The Cash Investment Fund and the Money Market Fund intend to enter into
stand-by commitments only with dealers, banks and broker/dealers which, in the
Advisor's opinion, present minimal credit risks. The acquisition of a stand-by
commitment will not affect the valuation of the underlying municipal obligation.
The actual stand-by commitment will be valued at zero in determining net asset
value. Accordingly, where an Underlying Fund pays directly or indirectly for a
stand-by commitment, its cost will be reflected as an unrealized loss for the
period during which the commitment is held by an Underlying Fund and will be
reflected in realized gain or loss when the commitment is exercised or expires.
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 and bond 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.
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, World or the Sub-Advisor expects general stock or bond
market prices to rise, it might purchase a stock index futures contract, or a
call option on that index, as a hedge against an increase in prices of
13
<PAGE>
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, World or the Sub-
Advisor, as the case may be, 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 or bond index 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 between 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.
Stripped Securities. Certain 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 principal 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 Company is not aware
of any binding legislative, judicial or administrative authority on this
issue.
Only instruments which are stripped by the issuing agency will be
considered U.S. Government obligations. Securities such as CATS and TIGRs which
are stripped by their holder do not qualify as U.S. Government obligations.
The Treasury Department has facilitated transfers of ownership of zero
coupon securities by accounting separately for the beneficial ownership of
particular interest coupon and principal payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, 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.
14
<PAGE>
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, 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 Boards of Directors/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, GNMA, 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 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, World or the Sub-Advisor, as the case may be, will
consider
15
<PAGE>
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, the Cash
Investment Fund and the Money Market 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 Boards of Directors/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.
When-Issued Purchases and Forward Commitments (Delayed-Delivery
Transactions). When-issued purchases and forward commitments (known as 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 Fund will designate cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the Underlying Fund will earmark portfolio securities to satisfy a
purchase commitment, and in such a case the Underlying Fund may be required
subsequently to designate additional assets 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 designates portfolio securities to
cover such purchase commitments than when it designates 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, World or the Sub-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.
16
<PAGE>
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 other (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 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. The Cash Investment Fund
and the Money Market Fund intend 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 rated in the highest rating category by an NRSRO 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, World or the Sub-Advisor, 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.
RISK FACTORS AND SPECIAL CONSIDERATIONS -- INDEX 500 FUND
Traditional methods of fund investment management typically involve
relatively frequent changes in a portfolio of securities on the basis of
economic, financial and market analysis. Index funds such as the Index 500 Fund
are not managed in this manner. Instead, with the aid of a computer program,
World purchases and sells securities for the Fund in an attempt to produce
investment results that substantially duplicate the performance of the common
stocks included in the S&P 500 Composite Stock Price Index ("S&P 500"), taking
into account redemptions, sales of additional Fund shares, and other adjustments
as described below.
17
<PAGE>
The Fund does not expect to hold, at any particular time, all of the stocks
included in the S&P 500. World believes, however, that through the application
of capitalization weighing and sector balancing techniques it will be able to
construct and maintain the Fund's investment portfolio so that it reasonably
tracks the performance of the S&P 500. World will compare the industry sector
diversification of the stocks the Fund would acquire solely on the basis of
their weighted capitalizations with the industry sector diversification of all
issuers included in the S&P 500. This comparison is made because World believes
that, unless the Fund holds all stocks included in the S&P 500, the selection of
stocks for purchase by the Fund solely on the basis of their weighted market
capitalizations would tend to place heavier concentration in certain industry
sectors that are dominated by the larger corporations, such as communications,
automobile, oil and energy. As a result, events disproportionately affecting
such industries could affect the performance of the Fund differently than the
performance of the S&P 500. Conversely, if smaller companies were not purchased
by the Fund, the representation of industries included in the S&P 500 that are
not dominated by the most heavily market-capitalized companies would be reduced
or eliminated.
For these reasons, World will identify the sectors which are (or, except
for sector balancing, would be) most underrepresented in the Fund's portfolio
and will purchase balancing securities in these sectors until the portfolio's
sector weightings closely match those of the S&P 500. This process continues
until the portfolio is fully invested (except for cash holdings).
Redemptions of a substantial number of shares of the Fund could reduce the
number of issuers represented in the Fund's investment portfolio, which could,
in turn, adversely affect the accuracy with which the Fund tracks the
performance of the S&P 500.
If an issuer drops in ranking, or is eliminated entirely from the S&P 500,
World may be required to sell some or all of the common stock of such issuer
then held by the Fund. Such sales of portfolio securities may be made at times
when, if World were not required to effect purchases and sales of portfolio
securities in accordance with the S&P 500, such securities might not be sold.
These sales may result in lower prices for such securities than may have been
realized or in losses that may not have been incurred if World were not required
to effect the purchases and sales. The failure of an issuer to declare or pay
dividends, the institution against an issuer of potentially materially adverse
legal proceedings, the existence or threat of defaults materially and adversely
affecting an issuer's future declaration and payment of dividends, or the
existence of other materially adverse credit factors will not necessarily be the
basis for the disposition of portfolio securities, unless such event causes the
issuer to be eliminated entirely from the S&P 500. However, although World does
not intend to screen securities for investment by the Fund by traditional
methods of financial and market analysis, World will monitor the Fund's
investment with a view towards removing stocks of companies which exhibit
extreme financial distress or which may impair for any reason the Fund's ability
to achieve its investment objective.
The Fund will invest primarily in the common stocks that constitute the S&P
500 in accordance with their relative capitalization and sector weightings as
described above. It is possible, however, that the Fund will from time to time
receive, as part of a "spin-off" or other corporate reorganization of an issuer
included in the S&P 500, securities that are themselves outside the S&P 500.
Such securities will be disposed of by the Fund in due course consistent with
the Fund's investment objective.
In addition, the Index 500 Fund may invest in Standard & Poor's Depository
Receipts ("SPDRs"). SPDRs are securities that represent ownership in the SPDR
Trust, a long-term unit investment trust which is intended to provide investment
results that generally correspond to the price and yield performance of the S&P
500. SPDR holders are paid a "Dividend Equivalent Amount" that corresponds to
the amount of cash dividends accruing to the securities in the SPDR Trust, net
of certain fees and expenses charged to the Trust. Because of these fees and
expenses, the dividend yield for SPDRs may be less than that of the S&P 500.
SPDRs are traded on the American Stock Exchange.
The Fund may also purchase put and call options on the S&P 500 and S&P 100
stock indices, which are traded on national securities exchanges. In addition,
the Fund may enter into transactions involving futures contracts (and futures
options) on these two stock indices and may purchase securities of other
investment companies that are structured to seek a similar correlation to the
S&P 500. These transactions are effected in an
18
<PAGE>
effort to have fuller exposure to price movements in the S&P 500 pending
investment of purchase orders or while maintaining liquidity to meet potential
shareholder redemptions. Transactions in option and stock index futures
contracts may be desirable to hedge against a price movement in the S&P 500 at
times when the Fund is not fully invested in stocks that are included in the S&P
500. For example, by purchasing a futures contract, the Fund may be able to
reduce the potential that cash inflows will disrupt its ability to track the S&P
500, since the futures contracts may serve as a temporary substitute for stocks
which may then be purchased in an orderly fashion. Similarly, because futures
contracts only require a small initial margin deposit, the Fund may be able, as
an effective matter, to be fully invested in the S&P 500 while keeping a cash
reserve to meet potential redemptions. See Appendix B to this SAI.
Disclaimer. The Index 500 Fund is not sponsored, endorsed, sold or
promoted by Standard & Poor's Ratings Service, a division of McGraw-Hill
Companies, Inc. ("S&P"). S&P makes no representation or warranty, express or
implied, to the owners of the Index 500 Fund or any member of the public
regarding the advisability of investing in securities generally or in the Index
500 Fund particularly or the ability of the S&P 500 Index to trace general stock
market performance. S&P's only relationship to the Trust is the licensing of
certain trademarks and trade names of S&P and of the S&P 500 Index which is
determined, composed and calculated by S&P without regard to the Trust or the
Index 500 Fund. S&P has no obligation to take the needs of the Trust or the
owners of the Index 500 Fund into consideration in determining, composing or
calculating the S&P 500 Index. S&P is not responsible for and has not
participated in the determination of the prices and amount of the Index 500 Fund
or the timing of the issuance or sale of the Index 500 Fund or in the
determination or calculation of the equation by which the Index 500 Fund is to
be converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of the Index 500 Fund.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500
Index or any data included therein and S&P shall have no liability for any
errors, omissions, or interruptions therein. S&P makes no warranty, express or
implied, as to results to be obtained by the Trust, owners of the Index 500
Fund, or any other person or entity from the use of the S&P 500 Index or any
data included therein. S&P makes no express or implied warranties, and
expressly disclaims all warranties of merchantability of fitness for a
particular purpose or use with respect to the S&P 500 Index or any data included
therein. Without limiting any of the foregoing, in no event shall S&P have any
liability for any special, punitive, indirect, or consequential damages
(including lost profits), even if notified of the possibility of such damages.
"Standard & Poor's", "S&P", "S&P 500", "Standard & Poor's 500", and "500"
are trademarks of McGraw-Hill, Inc. and have been licensed for use by the Trust.
The Index 500 Fund is not sponsored, endorsed, sold or promoted by S&P and S&P
makes no representation regarding the advisability of investing in the Index 500
Fund.
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;
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;
19
<PAGE>
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.
TEMPORARY DEFENSIVE POSITION
During periods of unusual economic or market conditions or for temporary
defensive purposes or liquidity, each Underlying Fund may invest without limit
in cash and in U.S. dollar-denominated high quality money market and other
short-term instruments. These investments may result in a lower yield than
would be available from investments with a lower quality or longer term.
MANAGEMENT OF THE FUNDS
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, and their business
addresses, ages and principal occupations during the past five years, are:
20
<PAGE>
<TABLE>
<CAPTION>
Positions Principal Occupation
Name, Address and Age With Company+ During Past Five Years
- --------------------- ------------- ----------------------
<S> <C> <C>
Charles W. Elliott Chairman of the Board of Senior Advisor to the President,
1024 Essex Circle Directors Western Michigan University (since
Kalamazoo, MI 49008 July 1995); Executive Vice
Age: 67 President, Administration & Chief
Financial Officer, Kellogg Company
(January 1987 through June 1995).
Board of Directors, Steelcase
Financial Corporation; Board of
Directors, Enesco Group.
John Rakolta, Jr. Director and Vice Chairman of the Chairman and Chief Executive
1876 Rathmor Board of Directors Officer, Walbridge Aldinger
Bloomfield Hills, MI 48304 Company (construction company).
Age: 52
Thomas B. Bender Director Partner, Financial & Investment
7 Wood Ridge Road Management Group.
Glen Arbor, MI 49636
Age: 66
David J. Brophy Director Professor, University of Michigan.
1025 Martin Place Director, River Place Financial
Ann Arbor, MI 48104 Corporation.
Age: 63
Dr. Joseph E. Champagne Director Dean, University Center, Macomb
319 East Snell Road College (since September 1997);
Rochester, MI 48306 Corporate and Executive Consultant
Age: 61 (since September 1993);
Chancellor, Lamar University
(September 1994 to September
1995); Chairman of Board of
Directors, Ross Controls of Troy,
Michigan.
Thomas D. Eckert Director President and Chief Executive
10726 Falls Pointe Drive Officer, Capital Automotive REIT
Great Falls, VA 22066 (real estate investment trust
Age: 51 specializing in retail automotive
properties) (since November 1997);
President, Mid-Atlantic Region of
Pulte Home Corporation (developer
of residential land and
construction of housing units)
(1983 to 1997). Director, Celotex
Corporation (a building products
manufacturer).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Positions Principal Occupation
Name, Address and Age With Company+ During Past Five Years
- --------------------- ------------- ----------------------
<S> <C> <C>
Lee P. Munder* Director and President Chairman of the Advisor (since
1029 N. Ocean Blvd. February 1998); Chief Executive
Palm Beach, FL 33480 Officer of the Advisor (1995 to
Age: 54 1998); Chief Executive Officer,
World Asset Management (January
1995 to December 1997); Chief
Executive Officer, Old MCM
(predecessor of Advisor) (since
February 1985); Director, LPM
Investment Services, Inc. ("LPM");
Director of Capital Automotive
REIT.
Terry H. Gardner Vice President, Vice President and Chief Financial
480 Pierce Street Chief Financial Officer, Officer of the Advisor (since
Suite 300 Treasurer and Secretary 1993), Vice President and Chief
Birmingham, MI 48009 Financial Officer, Old MCM (since
Age: 38 1993); Secretary, LPM (since June
1993).
Paul Tobias Vice President Chief Executive Officer of the
480 Pierce Street Advisor (since February 1998);
Suite 300 Chief Operating Officer of the
Birmingham, MI 48009 Advisor (since April 1995);
Age: 48 Executive Vice President of the
Advisor (April 1995 to February
1998); Executive Vice President,
Comerica, Inc. (October 1990 to
April 1995).
Gerald Seizert Vice President Chief Investment Officer/Equities
480 Pierce Street of the Advisor (since April
Suite 300 1995);Chief Executive Officer of
Birmingham, MI 48009 the Advisor (February 1998-August
Age: 47 1999); Executive Vice President
of the Advisor (April 1995 to
February 1998); Managing Director
(1991 to 1995), Director (1992 to
1995), and Vice President (1984 to
1991) of Loomis, Sayles and
Company, L.P. (investment
counselor).
Elyse G. Essick Vice President Vice President and Director of
480 Pierce Street Communications and Client Services
Suite 300 of the Advisor (since January
Birmingham, MI 48009 1995).
Age: 41
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Positions Principal Occupation
Name, Address and Age With Company+ During Past Five Years
- --------------------- ------------- ----------------------
<S> <C> <C>
James C. Robinson Vice President Executive Vice President and Chief
480 Pierce Street Investment Officer/Fixed Income of
Suite 300 the Advisor (since January 1995).
Birmingham, MI 48009
Age: 38
Leonard J. Barr Vice President Vice President and Director of
480 Pierce Street Core Equity Research of the
Suite 300 Advisor (since January 1995 );
Birmingham, MI 48009 Director and Senior Vice
Age: 55 President, Old MCM (since 1988);
Director of LPM.
Ann F. Putallaz Vice President Vice President and Director of
480 Pierce Street Retirement Services Group of the
Suite 300 Advisor (since January 1995).
Birmingham, MI 48009
Age: 54
Therese Hogan Assistant Secretary Director, State Regulation
101 Federal Street Department, First Data Investor
Boston, MA 02110 Services Group (since June 1994).
Age: 37
Libby Wilson Assistant Secretary Director of Mutual Fund Operations
480 Pierce Street of the Advisor (since July 1999);
Suite 300 Global Portfolio Client Associate of
Birmingham, MI 48009 Invesco Global Asset Management (investment
Age: advisor) (March 1999 to July 1999); Manager
of Mutual Funds Operations of the Advisor
(May 1996 to March 1999); Administrator
of Mutual Funds Operations (March 1993 to
May 1996).
Mary Ann Shumaker Assistant Secretary Associate General Counsel of the
480 Pierce Street Advisor (since July 1997);
Suite 300 Counsel, Miro, Weiner & Kramer
Birmingham, MI 48009 (law firm) (1991 to 1997).
Age: 34
</TABLE>
_______________________________
+ Individual holds same position with the Trust, Framlington and St. Clair
Funds, Inc. ("St. Clair").
* Director is an "Interested person" of the Company as defined in the 1940 Act.
Directors of the Company receive an aggregate fee from the Company, the
Trust, Framlington and St. Clair for service on those organizations respective
Boards comprised of an annual retainer fee of $35,000, and a fee of $3,500 for
each Board meeting attended; and are reimbursed for all out-of-pocket expenses
relating to attendance at meetings.
The following table summarizes the compensation paid by the Trust,
Framlington, the Company and St. Clair to their respective Directors/Trustees
for the year ended June 30, 1999.
23
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Charles W. Elliot John Rakolta, Jr. Thomas B. David J. Dr. Joseph E. Thomas D.
Chairman Vice Chairman Bender Brophy Champagne Eckert
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggregate Compensation
from the Company $ 8,908 $ 8,908 $ 8,908 $ 8,908 $ 8,908 $ 8,908
(comprised of 15 funds)
- ------------------------------------------------------------------------------------------------------------------------------
Aggregate Compensation
from the Trust $29,448 $29,448 $29,448 $29,448 $29,448 $29,448
(comprised of 14 funds)
- ------------------------------------------------------------------------------------------------------------------------------
Aggregate Compensation
from Framlington $713 $713 $713 $713 $713 $713
(comprised of 4 funds)
- ------------------------------------------------------------------------------------------------------------------------------
Aggregate Compensation
from St. Clair $931 $931 $931 $931 $931 $931
(comprised of 11 funds)
- ------------------------------------------------------------------------------------------------------------------------------
Pension Retirement
Benefits Accrued as
Part of Fund Expenses None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------
Estimated Annual
Benefits upon Retirement None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------
Total from the Fund
Complex $40,000 $40,000 $40,000 $40,000 $40,000 $40,000
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
No officer, director or employee of the Advisor, Comerica Incorporated
("Comerica"), the Custodian, the Distributor, the Administrator or the Transfer
Agent currently receives any compensation from the Company. As of September 26,
1999, the Directors and officers of the Company, as a group, owned less than 1%
of all classes of outstanding shares of the Funds of the Company except the
_________________in which the Directors and officers, as a group, owned
__________.
[Lee P. Munder and Terry H. Gardner are administrators of a pension plan
for employees of Munder Capital Management, which as of September 26, 1999,
owned _______ Class ____ shares of the _______ Fund which represented ____%,
respectively of the outstanding Class _____shares of the Fund.]
As of September 26, 1999, the Advisor and its affiliates, through common
ownership, owned beneficially __________ shares of the _______ Fund which
represented ______% of the outstanding Class _____ shares of the ______ Fund.
INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS
Investment Advisor. The Advisor of each Fund is Munder Capital Management,
a Delaware general partnership. The Advisor replaced Woodbridge Capital
Management, Inc. ("Woodbridge") as investment advisor to the investment
portfolios of the Company and replaced Munder Capital Management, Inc. as the
investment advisor to the investment portfolios of the Company on January 31,
1995, upon the closing agreement (the "Joint Venture Agreement") among Old MCM,
Comerica, Woodbridge and WAM, pursuant to which Old MCM contributed its
investment advisory business and Comerica contributed the investment advisor
business of its indirect subsidiaries, Woodbridge and World Asset Management, to
the Advisor. The principal partners of the Advisor are MCM, Munder Group, LLC,
WAM and WAM II. Old MCM was founded in February 1985 as a Delaware corporation
and was a registered investment advisor. WAM and WAM II are indirect, wholly-
owned subsidiaries of Comerica Incorporated which owns or controls approximately
88% of the partnership interests in the Advisor.
The Funds have entered into an Investment Advisory Agreement (the "Advisory
Agreement"), dated July 2, 1998, with the Advisor which have been approved by
the shareholders of the Funds.
24
<PAGE>
The Advisory Agreement will continue in effect for a period of two years
from its effective date. If not sooner terminated, the Advisory Agreement will
continue in effect for successive one year periods thereafter, provided that
each continuance is specifically approved annually by (a) the vote of a majority
of the Board of Directors who are not parties to the Advisory Agreement or
interested persons (as defined in the 1940 Act), cast in person at a meeting
called for the purpose of voting on approval, and (b) either (i) the vote of a
majority of the outstanding voting securities of the affected 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. Each 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
Board 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.
For the period of commencement of operations through June 30, 1998, the
Advisor received fees, after waivers, of $2,026 for the Conservative Fund,
$4,169 for the Moderate Fund and $177,410 for the Aggressive Fund. In addition,
for the period ended June 30, 1998, the Advisor reimbursed expenses of $108,993,
117,059 and $90,291, to the Conservative Fund, Moderate Fund and Aggressive
Fund, respectively.
For the fiscal year ended June 30, 1999, the Advisor received fees, after
waivers of $___ for the Conservative Fund, $____ for the Moderate Fund and $___
for the Aggressive Fund. In addition the Advisor reimbursed expenses of $___,
$___ and $___ to the Conservative Fund, Moderate Fund and Aggressive Fund,
respectively.
The Advisor serves as investment advisor to each of the Underlying Funds
(other than the Index 500 Fund and the International Equity Fund), 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 Company's and Framlington's current fiscal year with respect
to the Growth Opportunities Fund, the Micro-Cap Equity Fund, the NetNet Fund,
the Framlington Emerging Markets Fund, the Framlington Global Financial Services
Fund, the Framlington Healthcare Fund and the Framlington International Growth
Fund. The Advisor may discontinue such fee waivers and/or expense reimbursements
at any time, in its sole discretion. World, the investment advisor for the Index
500 Fund and the International Equity Fund, has agreed to a fee from each of
these Underlying Funds. See "Management" in the Prospectus for a description of
the advisory fees received by the Advisor from the Underlying Funds.
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" in the Prospectus for a description of the sub-advisory services
and fees received by the Sub-Advisor.
For the fiscal year ended June 30, 1999, the Advisor received fees, after
waivers, if any, at an effective rate of .75% of average daily net assets for
each of the Equity Selection Fund, the Framlington Global Financial Services
Fund, Growth & Income Fund, Growth Opportunities Fund, International Equity
Fund, Multi-Season Fund, Small-Cap Value Fund and Small Company Growth Fund;
.50% of average daily nets each of the Bond Fund, Intermediate Bond Fund,
International Bond Fund and U.S. Government Income Fund; 1.00% of average daily
net assets for each of the Micro-Cap Equity Fund, NetNet Fund, Framlington
International Growth Fund and Framlington Healthcare Fund; .74% of average daily
net assets for each of the Real Estate Fund and Value Fund; .40% of average
daily net assets of the Money Market Fund; .35% of average daily net assets of
each of the Cash Investment
25
<PAGE>
Fund and U.S. Treasury Money Market Fund; .20% of average daily net assets of
the Index 500 Fund; and 1.25% of average daily net assets of the Framlington
Emerging Markets Fund.
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 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 the terms of the Service and Distribution Plans (collectively,
the "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 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 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.
For the period from commencement of operations through June 30, 1997, the
following fees were paid to the Distributor pursuant to the Class A and Class B
Service and Distribution Plans.
<TABLE>
<CAPTION>
Class A Service and Class B Service and
Distribution Plan Distribution Plan **
----------------- -----------------
<S> <C> <C>
Conservative Fund $ 0* $0
Moderate Fund $98 $0
Aggressive Fund $ 0 $0
</TABLE>
26
<PAGE>
_____________________
* Prior to June 30, 1997, Class A of the Conservative Fund had not commenced
operations.
** Prior to June 30, 1997, Class B of the Funds had not commenced operations.
For the fiscal year ended June 30, 1998, the following fees were paid to
the Distributor pursuant to the Class A and Class B Service and Distribution
Plans.
<TABLE>
<CAPTION>
Class A Service and Class B Service and CDSC
Distribution Plan Distribution Plan Class B
----------------- ----------------- -------
<S> <C> <C> <C>
Conservative Fund $1* $ 945** $247
Moderate Fund $763 $ 595** $ 36
Aggressive Fund $227 $673*** $ 0
</TABLE>
* Commenced operations on March 13, 1998.
** Commenced operations on January 14, 1998.
*** Commenced operations on January 9, 1998.
For the fiscal year ended June 30, 1999, the following fees were paid to
the Distributor pursuant to the Class A and Class B Service and Distribution
Plans.
<TABLE>
<CAPTION>
Class A Service and Class B Service and CDSC
Distribution Plan Distribution Plan Class B
----------------- ----------------- -------
<S> <C> <C> <C>
Conservative Fund $ $ $
Moderate Fund $ $ $
Aggressive Fund $ $ $
</TABLE>
The following amounts were paid by each Fund under its Class A and Class B
Service and Distribution Plans during the period from commencement of operations
through June 30, 1999:
<TABLE>
<CAPTION>
Printing and
Mailing of Interest
Prospectuses to Carrying or
other than Compensation Compensation Other
Current Compensation to to Sales Financing
Advertising Shareholders to Underwriters Dealers Personnel Charges
----------- ------------- --------------- ------------ ------------ -------
Class Class Class Class Class Class Class Class Class None Class Class
A B A B A B A B A B A B
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Conservative Fund $ $ $ $ $ $ $ $ $ $ $ $
Moderate Fund $ $ $ $ $ $ $ $ $ $ $ $
Aggressive Fund $ $ $ $ $ $ $ $ $ $ $ $
</TABLE>
Administrator. State Street Bank and Trust Company ("State Street" or the
"Administrator"), whose principal business address is 225 Franklin Street,
Boston, Massachusetts, 02110, serves as administrator for the Company pursuant
to administration agreements (an "Administration Agreement"). State Street has
agreed to maintain office facilities for the Company; oversee 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. State
Street may enter into an agreement with one or more third parties pursuant to
which such third parties will provide administrative services on behalf of the
Funds.
The Administration Agreement provides that the Administrator performing
services thereunder shall not be liable under the Agreement except for its bad
faith, negligence or willful misconduct in the performance of its duties and
obligations thereunder.
27
<PAGE>
Prior to November 1, 1997, First Data Investor Services Group, Inc.
("Investor Services Group" or the "Transfer Agent") located at 4400 Computer
Drive, Westborough, MA 01581 served as administrator to the Funds.
For the period July 1, 1997 through October 31, 1997, administration fees
to Investor Services group accrued were: $10,110 - Conservative Fund, $10,110 -
Moderate Fund and $10,110 - Aggressive Fund.
For the period from commencement of operations through June 30, 1997,
administration fees of Investor Services Group accrued were $7,479 -Conservative
Fund, $7,480 - Moderate Fund and $7,479 - Aggressive Fund.
For the period November, 1997 through June 30, 1998, administration fees of
State Street accrued were: $17,901 - Conservative Fund, $17,901 - Moderate Fund
and $17,901 - Aggressive Fund.
For the fiscal year ended June 30, 1999, administration fees of State
Street were $____- Conservative Fund, $____- Moderate Fund and $____- Aggressive
Fund.
Custodian. State Street serves as the custodian (the "Custodian") to the
Funds pursuant to a custodian agreement ("Custodian Contract") among the Company
and State Street. State Street is also the custodian with respect to the custody
of foreign securities held by the Funds. State Street has in turn entered into
additional agreements with financial institutions located in foreign countries
with respect to the custody of such securities. Under the Custodian Contract,
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 Board of Directors
concerning the Funds' operations.
Transfer and Dividend Disbursing Agent. Investor Services Group serves as
the transfer and dividend disbursing agent for the Funds pursuant to transfer
agency agreements (the "Transfer Agency Agreement") with the Company, under
which Investor Services Group (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 Board of Directors concerning the operations of
each Fund.
Other Information pertaining to Administration, Custodian and Transfer
Agency Agreements. Except as noted in this SAI 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 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 determine to be fair and equitable. The
Advisor, Administrator, Custodian and Transfer Agent may voluntarily waive all
or a portion of their respective fees from time to time.
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.
28
<PAGE>
For the period from commencement of operations through June 30, 1997, the
Funds did not pay any brokerage commissions.
For the fiscal year ended June 30, 1998, the Funds did not pay any
brokerage commission.
For the fiscal year ended June 30, 1999, the Funds did [not] pay any
brokerage commission.
Over-the-counter issues, including corporate debt and government
securities, are normally traded through dealers on a "net" basis (i.e., without
commission), or directly with the issuer. 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. Each Fund's and each Underlying
Fund's portfolio turnover rate is included in its respective Prospectuses under
the section entitled "Financial Highlights." Purchases and sales are made for
each Fund and Underlying Fund whenever necessary, in management's opinion, to
meet such fund's investment objective. 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 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 Advisors (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
29
<PAGE>
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 while the Advisor or any affiliated
person (as defined in the 1940 Act) is a member of any underwriting or selling
group for such securities 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 parent
companies held by them as of the close of their most recent fiscal year. [As of
June 30, 1999, the Funds held no such securities.]
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. As described in the Prospectuses, shares of the Funds may be
purchased in a number of different ways. Such alternative sales arrangements
permit an investor to choose the method of purchasing shares that is more
beneficial depending on the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances. An
investor may place orders directly through the Transfer Agent or the Distributor
or through arrangements with his/her authorized broker.
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. The redemption price for Fund shares is the net asset value
next determined after receipt of the redemption request in proper order. The
redemption proceeds will be reduced by the amount of any applicable contingent
deferred sales charge ("CDSC").
Contingent Deferred Sales Charge - Class B Shares. Class B Shares redeemed
within six years of purchase are subject to a CDSC. The CDSC is based on the
original net asset value at the time of investment or the net asset value at the
time of redemption, whichever is lower.
Other Redemption Information. 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.
The Funds reserve the right to suspend or postpone redemptions during any
period when: (i) trading on the New York Stock Exchange (the "NYSE") is
restricted by applicable rules and regulations of the SEC; (ii) the NYSE is
closed other than for customary weekend and holiday closings; (iii) the SEC has
by order permitted such suspension or postponement for the protection of the
shareholders; or (iv) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of a Fund not
reasonably practicable.
The Funds may involuntarily redeem an investor's shares if the net asset
value of such shares is less than $250; 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
30
<PAGE>
sufficient additional shares are purchased to bring the aggregate account value
up to $250 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., Eastern time. The Funds, the
Distributor and the 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
[Securities traded on a national securities exchange or on NASDAQ for which
there were no sales on the date of valuation and securities traded on other
over-the-counter markets, including listed securities for which the primary
market is believed to be over-the-counter, are valued at the mean between the
most recently quoted bid and asked prices. Options will be valued at market
value or fair value if no market exists. Futures contracts will be valued in
like manner, except that open futures contract sales will be valued using the
closing settlement price or, in the absence of such a price, the most recently
quoted asked price. Restricted securities and securities and assets for which
market quotations are not readily available are valued at fair value by the
Advisor under the supervision of the Board of Directors. Debt securities with
remaining maturities of 60 days or less are valued at amortized cost, unless the
Board of Directors determines that such valuation does not constitute fair value
at that time. Under this method, such securities are valued initially at cost on
the date of purchase (or the 61st day before maturity).]
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.
PERFORMANCE INFORMATION
Yield and Performance of the Funds
Yield. 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 and waivers)
c = average daily number of shares outstanding during the period entitled
to receive dividends
d = maximum offering price per share on the last day of the period
31
<PAGE>
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 that have a current market discount is calculated by using
the coupon rate of interest instead of the yield to maturity. In the case of
tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original issue discount (market discount), the yield to maturity
is the imputed rate based on the original issue discount calculation. On the
other hand, in the case of tax-exempt obligations that are issued with original
issue discount but which have the discounts based on current market value that
are less than the then-remaining portion of the original issue discount (market
premium), the yield to maturity is based on the market value.
With respect to mortgage- or other receivables-backed debt obligations
purchased at a discount or premium, the formula generally calls for amortization
of the discount or premium. The amortization schedule will be adjusted monthly
to reflect changes in the market value of such debt obligations. Expenses
accrued for the period (variable "b" in the formula) include all recurring fees
charged by 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
Total Return. 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:
P = hypothetical initial payment of $1,000;
T = average annual total return;
n = period covered by the computation, expressed in years;
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).
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
32
<PAGE>
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.
Based on the foregoing calculation, set forth below are the aggregate total
return figures for the Class A, Class B and Class Y Shares of each of the Funds
for the period from commencement of operations through June 30, 1999:
<TABLE>
<CAPTION>
12 month period Inception through
Fund-Inception Date ended June 30, 1999 June 30,1999
------------------- ------------------- ------------
with load w/o load w/ load w/o load
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Conservative Fund
-----------------
Class A - 3/13/98% % % % %
Class B - 1/14/98% % % % %
Class Y - 4/3/97% % % % %
Moderate Fund
-------------
Class A - 4/4/97% % % % %
Class B - 1/14/98% % % % %
Class Y - 4/3/97% % % % %
Aggressive Fund
---------------
Class A - 10/8/97% % % % %
Class B - 1/9/98% % % % %
Class Y - 4/3/97% % % % %
</TABLE>
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 or compared to stock or other
relevant indices. 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 Federal income 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. This discussion is based upon present provisions of
the Internal Revenue Code, the regulations promulgated thereunder, and judicial
and administrative ruling authorities, all of which are subject to change, which
change may be retroactive. Prospective investors should consult their own tax
advisors with regard to the federal tax consequences of the purchase, ownership
and disposition of Fund shares, as well as the tax consequences arising under
the laws of any state, foreign country, or other taxing jurisdiction.
General. Each Fund intends to elect and qualify to be taxed separately as
a regulated investment company under Subchapter M of the Internal Revenue 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 Internal Revenue Code that are described
below. Distributions of investment company taxable income and net tax-exempt
interest income made during the taxable
33
<PAGE>
year or, under specified circumstances, within twelve months after the close of
the taxable year will satisfy the Distribution Requirement.
In addition to satisfying 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"). Interest
(including original issue discount and accrued market discount) received by a
Fund at maturity or on disposition of a security held for less than three months
will not be treated (in contrast to other income which is attributable to
realized market appreciation) as gross income from the sale or other disposition
of securities held for less than three months for this purpose.
In addition to the foregoing requirements, at the close of each quarter of
its taxable year, at least 50% of the value of 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.
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 gain from the sale or exchange of a capital asset
held for more than one year, regardless of the length of time a shareholder has
held his or her Fund shares and regardless of whether the distribution is paid
in cash or reinvested in additional Fund shares. The Funds expect that capital
gain dividends will be taxable to shareholders as long-term capital gain.
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 Internal Revenue Code imposes a non-deductible 4% excise tax on
regulated investment companies that fail to distribute in each calendar year 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.
34
<PAGE>
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 Company that he is not
subject to backup withholding or that he is an "exempt recipient."
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 and treated
as long-term capital gain. Furthermore, a loss realized by a shareholder on the
redemption, sale or exchange of shares of a Fund with respect to which exempt-
interest dividends have been paid will, to the extent of such exempt-interest
dividends, be disallowed if such shares have been held by the shareholder for
six months or less.
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 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.
35
<PAGE>
Taxation of the Underlying Funds. Each Underlying Fund intends to elect
and qualify to be taxed as a regulated investment company under the Internal
Revenue 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," should be taxable as mid-term or 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.
Market Discount. If a Fund purchases a debt security at a price lower than
the stated redemption price of such debt security, the excess of the stated
redemption price over the purchase price is "market discount". If the amount of
market discount is more than a de minimis amount, a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which the Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that principal payment first to the portion of the market discount on
the debt security that has accrued but has not previously been includable in
income. In general, the amount of market discount that must be included for
each period is equal to the lesser of (i) the amount of market discount accruing
during such period (plus any accrued market discount for prior periods not
previously taken into account) or (ii) the amount of the principal payment with
respect to such period. Generally, market discount accrues on a daily basis for
each day the debt security is held by a Fund at a constant rate over the time
remaining to the debt security's maturity or, at the election of the Fund, at a
constant yield to maturity which takes into account the semi-annual compounding
of interest. Gain realized on the disposition of a market discount obligation
must be recognized as ordinary interest income (not capital gain) to the extent
of the "accrued market discount."
Original Issue Discount. Certain debt securities acquired by the Funds may
be treated as debt securities that were originally issued at a discount. Very
generally, original issue discount is defined as the difference between the
price at which a security was issued and its stated redemption price at
maturity. Although no cash income on account of such discount is actually
received by a Fund, original issue discount that accrues on a debt security in a
given year generally is treated for federal income tax purposes as interest and,
therefore, such income would be subject to the distribution requirements
applicable to regulated investment companies.
Some debt securities may be purchased by the Funds, at a discount that
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes
(see above).
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 Funds and
distributions of Fund shares 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). Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
36
<PAGE>
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, Growth Opportunities Fund, Micro-Cap Equity Fund, Multi-
Season Fund, Real Estate Fund, Small-Cap Value Fund, Value Fund, International
Bond Fund, Short Term Treasury Fund, Money Market Fund, NetNet Fund,
Conservative Fund, Moderate Fund and Aggressive Fund, respectively. The Munder
Lifestyle Funds are offered in three separate classes: Class A, Class B and
Class Y shares.
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.
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.
37
<PAGE>
OTHER INFORMATION
Counsel. The law firm of Dechert Price & Rhoads, 1775 Eye Street, N.W.,
Washington, D.C. 20006, has passed upon certain legal matters in connection with
the shares offered by the Funds and serves as counsel to the Company.
Independent Accountants. Ernst & Young LLP, 200 Clarendon Street, Boston,
MA 02116, serves as the Company's independent accountants.
Control Persons and Principal Holders of Securities. [As of September 26,
1999, the following persons were beneficial owners of 5% of more of the
outstanding shares of the Fund because they possessed voting or investment power
with respect to such shares:]
Percent of
Total Shares
Name of Fund - Class Name and Address Outstanding
- -------------------- ---------------- -----------
[As of September 26, 1999, Munder Capital Management on behalf of its
clients owned _____% of the _______Fund Class ______ shares and _____% of the
Fund Class ___ shares.]
Banking Laws. Banking laws and regulations currently prohibit a bank
holding company registered under the Federal Bank Holding Company Act of 1956 or
any bank or non-bank affiliate thereof from sponsoring, organizing, controlling
or distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from underwriting securities, but such banking laws and regulations do not
prohibit such a holding company or affiliate or banks generally from acting as
investment advisor, administrator, transfer agent or custodian to such an
investment company, or from purchasing shares of such a company as agent for and
upon the order of customers. The Advisor and [the Custodian]are subject to such
banking laws and regulations.
The Advisor and [the Custodian] believe they may perform the services for
the Company contemplated by their respective agreements with the Company without
violation of applicable banking laws or regulations. It should be noted,
however, that there have been no cases deciding whether bank and non-bank
subsidiaries of a registered bank holding company may perform services
comparable to those that are to be performed by these companies, and future
changes in either Federal or state statutes and regulations relating to
permissible activities of banks and their subsidiaries or affiliates, as well as
future judicial or administrative decisions or interpretations of current and
future statutes and regulations, could prevent these companies from continuing
to perform such service for the Company.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of such companies in connection with the provision of
services on behalf of the Company, the Company might be required to alter
materially or discontinue its arrangements with such companies and change its
method of operations. It is not anticipated, however, that any change in the
Company's method of operations would affect the net asset value per share of any
Fund or result in a financial loss to any shareholder of a Fund.
Shareholder Approvals. As used in this SAI, 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.
38
<PAGE>
REGISTRATION STATEMENT
This SAI 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. Text-only versions of fund
documents can be viewed online or downloaded from the SEC at
http:/www.sec.gov.
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.
FINANCIAL STATEMENTS
[The financial statements of the Munder Lifestyle Funds, including the
notes thereto, dated June 30, 1999 have been audited by Ernst & Young LLP and
are incorporated by reference into this SAI from the Annual Report of the Funds
dated as of June 30, 1999. Such financial statements are included or
incorporated by reference herein in reliance upon Ernst & Young LLP's report
given upon the authority of such firm as experts in accounting and
auditing.]
39
<PAGE>
APPENDIX A
----------
- - Rated Investments -
Corporate Bonds
- ---------------
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 edged." 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 appear 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 well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
"B":
Bonds that are rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
"Caa":
Bonds that are rated "Caa" are of poor standing. These issues may be
in default or present elements of danger may exist with respect to
principal or interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated "Aa" through "B". The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
A-1
<PAGE>
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 issuers (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Instruments rated "Prime-2" are offered by issuers (or related supporting
institutions) which 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 suspectible to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted "A-1+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1."
A-2
<PAGE>
APPENDIX B
As stated in the Prospectus, the Underlying Funds may enter into certain
futures transactions and options for hedging purposes. The Underlying Funds may
also write covered call options, buy put options, buy call options and write
secured put options. 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.
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.
B-1
<PAGE>
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 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.
B-2
<PAGE>
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.
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 Securities
Buying 1 Index Futures at 125
Value of Futures = $62,500/Contract
-Day Hedge is Lifted-
Buy Equity Securities with Actual Cost = $65,000
B-3
<PAGE>
Increase in Purchase Price = $2,500
Sell 1 Index Futures at 130
Value of Futures = $65,000/Contract
Gain on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future Hedge Objective: Protect Against
Declining Value of the Portfolio
Factors:
- --------
Value of Stock Portfolio = $1,000,000
Value of Futures Contract - 125 X $500 =$62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
- -----------------
-Day Hedge is Placed-
Anticipate Selling $1,000,000 in Equity Securities
Sell 16 Index Futures at 125
Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Securities - Own Stock
Loss in Portfolio Value = $40,000
Buy 16 Index Futures at 120 with Value
= $960,000
Value of Futures = $960,000
Gain on Futures = $40,000
III. Margin Payments
---------------
Unlike the purchase or sale 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 securities 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 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
------------------------------------------
B-4
<PAGE>
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 futures and movements in the price
of the instruments which are the subject of the hedge. The price of futures may
move more than or less than the price of the instruments being hedged. If the
price of 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 sells 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 occurrs, 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 securities 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 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. When there is no liquid market, 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
B-5
<PAGE>
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 commodities 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 it may be disadvantageous to do so.
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 from (call) or sell to (put) 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
B-6
<PAGE>
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
SAI. The Fund may enter into currency transactions with counterparties which
have received (or the guarantors of the obligations which have received) a
credit rating of A-1 or P-1 by S&P or Moody's, respectively, or that have an
equivalent rating from a NRSRO or are determined to be of equivalent credit
quality by the Advisor.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure to an
extent greater after netting all transactions intended wholly or partially to
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally 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. 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 mark (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. U.S. dollar, the Advisor
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the
Fund if the currency being hedged fluctuates in value to a degree or in a
direction that is not anticipated. Further, there is the risk that the
perceived correlation between various currencies may not be present or may not
be present during the particular time that the Fund is engaging in proxy
hedging. If a Fund enters into a currency hedging transaction, the Fund will
comply with the asset segregation requirements. Under such requirements, the
Fund will segregate liquid, high grade assets with the custodian to the extent
the Fund's obligations are not otherwise "covered" through ownership of the
underlying currency.
Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Buyers and sellers of currency futures are subject to the same risks
that apply to the use of futures generally. Further, settlement of a currency
futures contract for the purchase of most currencies must occur at a bank based
in the issuing nation. Trading options on currency futures is relatively new,
and the ability to establish and close to positions on such options is subject
to the maintenance of a liquid market which may not always be available.
Currency exchange rates may fluctuate based on factors extrinsic to that
country's economy.
VII. Options.
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B-7
<PAGE>
The Underlying Funds may write covered call options, buy put options, buy
call options and write secured put options. 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 currencies transactions above.
A call option for a particular security gives the purchaser of the option
the right to buy, and the writer of the option 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, and the writer of the option the obligation to buy,
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 wishes 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 in any instance 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 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 Underlying 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.
In the case of writing 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 liquid
securities in such amount as are earmarked on the books of the Underlying Fund
or the Underlying Fund's 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 liquid securities 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)
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<PAGE>
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 in cash or
liquid securities is earmarked on the books of the Underlying Fund or the
Underlying Fund's custodian. Each of the Underlying Funds will limit its
investment in uncovered call options purchased or written by the Fund to 33 1/3%
of the Fund's total assets. The Underlying Funds will write put options only if
they are "secured" by cash or liquid securities earmarked on the books of the
Underlying Fund or the Underlying Fund's custodian in an amount not less than
the exercise price of the option at all times during the option period.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the relevant Underlying Fund's gain will be
limited to the premium received. If the market price of the underlying security
declines or otherwise is below the exercise price, the 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 earmarked securities (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.
In addition, a liquid secondary market for particular options, whether
traded over-the-counter or on a national securities exchange ( an "Exchange")
may be absent for reasons which include the following: there may be
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<PAGE>
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 volume; 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 the issuing country's
economy.
VIII. Other Matters
-------------
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
B-10
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
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(a) (1) Articles of Incorporation, dated November 18, 1992, are
incorporated herein by reference to Exihibit 1(a) to Post-
Effective Amendment No. 18 to Registrant's Registration Statement
on Form N-1A filed with the Commission on August 14, 1996.
(2) Articles of Amendment, dated February 12, 1993, are incorporated
herein by reference to Exhibit 1(b) to Post-Effective Amendment
No. 18 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 14, 1996.
(3) Articles Supplementary, dated July 20, 1993, August 9, 1994,
April 26, 1995, June 27, 1995 and May 6, 1996, are incorporated
herein by reference to Exhibit 1(c) Post-Effective Amendment No.
18 to Registrant's Registration Statement on Form N-1A filed with
the Commission on August 14, 1996.
(4) Articles Supplementary, dated August 6, 1996, are incorporated
herein by reference toe Exhibit 1(d) to Post-Effective Amendment
No. 20 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 28, 1996 relating to the Munder
Small-Cap Value Fund, the Munder Equity Selection Fund, the
Munder Micro-Cap Equity Fund, and the NetNet Fund.
(5) Articles Supplementary, dated November 6, 1996, are incorporated
herein by reference to Exhibit 1(e) to Post-Effective Amendment
No. 21 to Registrant's Registration Statement on Form N-1A filed
with the Commission on December 13, 1996 relating to the Munder
Short Term Treasury Fund.
(6) Articles Supplementary, dated February 4, 1997, are incorporated
herein by reference toe Exhibit 1(f) to Post-Effective Amendment
No. 23 to Registrant's Registration Statement on Form N-1A filed
with the Commission on February 18, 1997 relating to the Munder
All-Season Conservative Fund, the Munder All-Season Moderate Fund
and the Munder All-Season Aggressive Fund.
(7) Articles Supplementary, dated March 12, 1997, are incorporated
herein by reference to Exhibit 1(i) to Post-Effective Amendment
No. 25 to Registrant's Registration Statement on Form N-1A filed
with the Commission on May 14, 1997 relating to the name changes
of the Munder All-Season Conservative Fund, the Munder All-Season
Moderate Fund and the Munder All-Season Aggressive Fund to the
Munder All-Season Maintenance Fund, the Munder All-Season
Development Fund and the Munder All-Season Accumulation Fund.
(8) Articles Supplementary, dated May 6, 1997, are incorporated
herein by reference to Exhibit 1(h) to Post-Effective Amendment
No. 28 to Registrant's Registration Statement on Form N-1A filed
with the Commission on July 28, 1997 relating to the Munder
Financial Services Fund.
(9) Articles Supplementary, dated February 24, 1998, are incorporated
herein by reference to Exhibit 1(j) to Post-Effective Amendment
No. 32 to Registrant's Registration Statement on Form N-1A filed
with the Commission on March 20, 1998 relating to the Munder
Growth Opportunities Fund.
<PAGE>
(10) Articles Supplementary, dated June 1, 1998, are incorporated
herein by reference to Exhibit 1(k) to Post-Effective Amendment
No. 35 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 28, 1998 relating to the Munder
Convertible Securities Fund, Munder NetNet Fund and the Munder
Short-Term Treasury Fund.
(11) Articles Supplementary, dated July 1, 1998, are incorporated
herein by reference to Exhibit 1(l) to Post-Effective Amendment
No. 35 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 28, 1998 relating to the name
changes of the Munder All-Season Maintenance Fund, the Munder
All-Season Development Fund and the Munder All-Season
Accumulation Fund to the Munder All-Season Conservative Fund, the
Munder All-Season Moderate Fund and the Munder All-Season
Aggressive Fund.
(12) Articles Supplementary, dated December 1, 1998, are incorporated
herein by reference to Exhibit (a)(12) to Post-Effective
Amendment No. 37 to Registrant's Registration Statement on Form
N-1A filed with the commission on June 11, 1999 relating to the
Munder Mid-Cap Growth Fund and Munder NetNet Fund.
(13) Articles Supplementary, dated April 16, 1999, are incorporated
herein by reference to Exhibit (a)(13) to Post-Effective
Amendment No. 37 to Registrant's Registration Statement on Form
N-1A filed with the Commission on June 11, 1999 relating to the
Munder NetNet Fund and Munder Money Market Fund.
(14) Articles Supplementary, dated August 17, 1999, relating to the
Munder Future Technology Fund are incorporated by reference to
Post-Effective Amendment No. 38 to Registrant's Registration
Statement on Form N-1A filed with the Commission on August 25,
1999.
(b) By-Laws are incorporated herein by reference to Registrant's initial
Registration Statement on Form N-1A, filed on November 18, 1992.
(c) Not Applicable.
(d) (1) Investment Advisory Agreement, dated July 2, 1998, between
Registrant and Munder Capital Management with respect to the
Munder Equity Selection Fund, Munder Financial Services Fund,
Munder Micro-Cap Equity Fund, Munder Multi-Season Growth Fund,
Munder Growth Opportunities Fund, NetNet Fund, Munder Real Estate
Equity Investment Fund, Munder Small-Cap Value Fund, Munder Value
Fund, Munder International Bond Fund, Munder Short Term Treasury
Fund, Munder Money Market Fund, Munder All-Season Conservative
Fund, Munder All-Season Moderate Fund and Munder All-Season
Aggressive Fund is incorporated herein by reference to Exhibit
5(a) to Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
August 28, 1998.
(2) Notice, dated May 4, 1999, to Investment Advisory Agreement
between Registrant and Munder Capital Management with respect to
the Munder Future Technology Fund is incorporated by reference to
Post-Effective Amendment No. 38 to Registrant's Registration
Statement on Form N-1A filed with the Commission on August 25,
1999.
(e) (1) Underwriting Agreement, dated January 13, 1995, between
Registrant and Funds Distributor, Inc. is incorporated herein by
reference to Exhibit 6(a) to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on June 25, 1996.
2
<PAGE>
(2) Notice, dated August 6, 1996, to Underwriting Agreement between
Registrant and Funds Distributor, Inc. with respect to the Munder
Value Fund is incorporated herein by reference to Exhibit 6(b) to
Post-Effective Amendment No. 16 to Registrant's Registration
Statement on Form N-1A filed with the Commission on June 25,
1996.
(3) Notice, dated August 6, 1996, to Underwriting Agreement between
Registrant and Funds Distributor, Inc. with respect to the Munder
International Bond Fund is incorporated herein by reference to
Exhibit 6(c) to Post-Effective Amendment No. 16 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
June 25, 1996.
(4) Notice, dated August 6, 1996, to Underwriting Agreement between
Registrant and Funds Distributor, Inc. with respect to the Munder
Small-Cap Value Fund, the Munder Equity Selection Fund, the
Munder Micro-Cap Equity Fund, and the NetNet Fund is incorporated
herein by reference to Exhibit 6(d) to Post-Effective Amendment
No. 18 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 14, 1996.
(5) Notice, dated November 7, 1996, to Underwriting Agreement,
between Registrant and Funds Distributor, Inc. with respect to
the Munder Short Term Treasury Fund is incorporated herein by
reference to Exhibit 6(e) to Post-Effective Amendment No. 36 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on October 27, 1998.
(6) Distribution Agreement, dated February 4, 1997, between
Registrant and Funds Distributor, Inc. with respect to the Munder
All-Season Conservative Fund, the Munder All-Season Moderate Fund
and the Munder All-Season Aggressive Fund is incorporated herein
by reference to Exhibit 6(f) to Post-Effective Amendment No. 35
to Registrant's Registration Statement on Form N-1A filed with
the Commission on August 28, 1998.
(7) Distribution Agreement, dated May 6, 1997, between Registrant and
Funds Distributor, Inc. with respect to the Munder Financial
Services Fund is incorporated herein by reference to Exhibit 6(g)
to Post-Effective Amendment No. 36 to Registrant's Registration
Statement on Form N-1A filed with the Commission on October 27,
1998.
(8) Distribution Agreement, dated February 24, 1998, between
Registrant and Funds Distributor, Inc. with respect to the Munder
Growth Opportunities Fund is incorporated herein by reference to
Exhibit 6(h) to Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
June 11, 1999.
(9) Distribution Agreement, dated May 4, 1999, between Registrant and
Funds Distributor, Inc. with respect to the Munder Future
Technology Fund is incorporated by reference to Post-Effective
Amendment No. 38 to Regisrant's Registration Statement on Form
N-1A filed with the Commission on August 25, 1999.
(f) Not Applicable.
(g) (1) Custodian Agreement, dated May 4, 1999, between Registrant and
State Street Bank and Trust Company with respect to the Munder
All-Season Aggressive Fund, Munder All-Season Conservative Fund,
Munder All-Season Moderate Fund, Munder Growth Opportunities
Fund, Munder International Bond Fund, Munder Micro-Cap Equity
Fund, Munder Money Market Fund, Munder Multi-Season Growth Fund,
Munder NetNet Fund, Munder Real Estate Equity Investment Fund,
Munder Small-Cap Value Fund, Munder Short Term Treasury Fund,
and Munder Value Fund is incorporated by reference to
Post-Effective Amendment No. 38 to Regisrant's Registration
Statement on Form N-1A filed with the Commission on August 25,
1999.
3
<PAGE>
(2) Notice, dated August 4, 1999, to Custodian Agreement between
Registrant and State Street Bank and Trust Company with respect
to the Munder Future Technology Fund is incorporated by reference
to Post-Effective Amendment No. 38 to Regisrant's Registration
Statement on Form N-1A filed with the Commission on August 25,
1999.
(h) (1) Administration Agreement, dated October 31, 1997, between
Registrant and State Street Bank and Trust Company with respect
to the Munder All-Season Aggressive Fund, Munder All-Season
Conservative Fund, Munder All-Season Moderate Fund, Munder
International Bond Fund, Munder Micro-Cap Equity Fund, Munder
Money Market Fund, Munder Multi-Season Growth Fund, Munder Real
Estate Equity Investment Fund, Munder Small-Cap Value Fund,
Munder Short Term Treasury Fund, Munder Value Fund and NetNet
Fund is incorporated herein by reference to Exhibit 9(n) to Post-
Effective Amendment No. 32 to Registrant's Registration Statement
on Form N-1A filed with the Commission on March 20, 1998.
(2) Notice, dated October 31, 1997, to Administration Agreement
between Registrant and State Street Bank and Trust Company with
respect to the Munder Equity Selection Fund is incorporated
herein by reference to Exhibit 9(p) to Post-Effective Amendment
No. 37 to Registrant's Registration Statement on Form N-1A filed
with the Commission on June 11, 1999.
(3) Notice, dated February 24, 1998, to Administration Agreement
between Registrant and State Street Bank and Trust Company with
respect to the Munder Growth Opportunities Fund is incorporated
herein by reference to Exhibit 9(o) to Post-Effective Amendment
No. 35 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 28, 1998.
(4) Notice, dated May 4, 1999, to Administration Agreement between
Registrant and State Street Bank and Trust Company with respect
to the Munder Tech Leadership Fund is filed herein.
(5) Transfer Agency and Registrar Agreement, dated June 19, 1995,
between Registrant and First Data Investor Services Group, Inc.
is incorporated herein by reference to Exhibit 9(a) to Post-
Effective Amendment No. 16 to Registrant's Registration Statement
on Form N-1A filed with the Commission on June 25, 1996.
(6) Notice, dated July 20, 1995, to Transfer Agency and Registrar
Agreement between Registrant and First Data Investor Services
Group, Inc. with respect to the Munder Value Fund is incorporated
herein by reference to Exhibit 9(b) to Post-Effective Amendment
No. 16 to Registrant's Registration Statement on Form N-1A filed
with the Commission on June 25, 1996.
(7) Notice, dated May 6, 1996, to Transfer Agency and Registrar
Agreement between Registrant and First Data Investor Services
Group, Inc. with respect to the Munder International Bond Fund is
incorporated by reference to Exhibit 9(c) to Post-Effective
Amendment No. 16 to Registrant's Registration Statement on
Form N-1A filed with the Commission on June 25, 1996.
(8) Notice, dated August 6, 1996, to Transfer Agency and Registrar
Agreement between Registrant and First Data Investor Services
Group, Inc. with respect to the Munder Small-Cap Value Fund, the
Munder Equity Selection Fund, the Munder Micro-Cap Equity Fund
and the NetNet Fund is incorporated by reference to Exhibit 9(d)
to Post-Effective Amendment No. 18 to Registrant's Registration
Statement on Form N-1A filed with the Commission on August 14,
1996.
4
<PAGE>
(9) Notice, dated August 6, 1996, to Transfer Agency and Registrar
Agreement between Registrant and First Data Investor Services
Group, Inc. with respect to the Munder Short Term Treasury Fund
is incorporated herein by reference to Exhibit 9(e) to Post-
Effective Amendment No. 21 to Registrant's Registration Statement
on Form N-1A filed with the Commission on December 13, 1996.
(10) Form of Amendment to the Transfer Agency and Registrar Agreement
between Registrant and First Data Investor Services Group, Inc.
with respect to the Munder All-Season Conservative Fund, the
Munder All-Season Moderate Fund and the Munder All-Season
Aggressive Fund is incorporated herein by reference to Exhibit
9(f) to Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
February 18, 1997.
(11) Form of Notice to the Transfer Agency and Registrar Agreement
between Registrant and First Data Investor Services Group, Inc.
with respect to the Munder Financial Services Fund is
incorporated herein by reference to Exhibit 9(g) to Post-
Effective Amendment No. 28 to Registrant's Registration Statement
on Form N-1A filed with the Commission on July 28, 1997.
(12) Form of Amendment to the Transfer Agency and Registrar Agreement
between Registrant and First Data Investor Services Group, Inc.
with respect to the Munder Financial Services Fund is
incorporated herein by reference to Exhibit 9(h) to Post-
Effective Amendment No. 28 to Registrant's Registration Statement
on Form N-1A filed with the Commission on July 28, 1997.
(13) Notice, dated February 24, 1998, to the Transfer Agency and
Registrar Agreement between Registrant and First Data Investor
Services Group, Inc. with respect to the Munder Growth
Opportunities Fund is filed herein.
(14) Amendment, dated June 1, 1998, to the Transfer Agency and
Registrar Agreement between Registrant and First Data Investor
Services Group, Inc. is incorporated herein by reference to
Exhibit 9(k) to Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
August 28, 1998.
(15) Amendment, dated June 1, 1998, to the Transfer Agency and
Registrar Agreement between Registrant and First Data Investor
Services Group, Inc. is incorporated herein by reference to
Exhibit 9(l) to Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
August 28, 1998.
(16) Amendment, dated June 1, 1998, to the Transfer Agency and
Registrar Agreement between Registrant and First Data Investor
Services Group, Inc. is incorporated herein by reference to
Exhibit 9(m) to Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
August 28, 1998.
(17) Amendment, dated January 2, 1997, to the Transfer Agency and
Registrar Agreement between the Registrant and First Data
Investor Services Group, Inc. is incorporated herein by reference
to Exhibit 9(n) to Post-Effective Amendment No. 36 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on October 27, 1998.
(18) Amendment, dated March 16, 1999, to the Transfer Agency and
Registrar Agreement between the Registrant and First Data
Investor Services Group, Inc. is incorporated herein by reference
to Exhibit h(18) to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on June 11, 1999.
5
<PAGE>
(19) Amendment, dated March 26, 1999, to the Transfer Agency and
Registrar Agreement between the Registrant and First Data
Investor Services Group, Inc. is incorporated by reference to
Exhibit h(19) to Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
June 11, 1999.
(20) Notice, dated May 4, 1999, to Transfer Agency and Registrar
Agreement between Registrant and First Data Investor Services
Group, Inc. with respect to the Munder Future Technology Fund is
incorporated by reference to Post-Effective Amendment No. 38 to
Regisrant's Registration Statement on Form N-1A filed with the
Commission on August 25, 1999.
(i) (1) Opinion and Consent of Counsel is incorporated by reference to
the Rule 24f-2 Notice filed on August 28, 1997, Accession Number
0000927405-97-000309.
(2) Opinion and Consent of Counsel with respect to the Munder Growth
Opportunities Fund is incorporated herein by reference to Exhibit
10(b) to Post-Effective Amendment No. 36 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
October 27, 1998.
(3) Opinion and Consent of Counsel with respect to the Munder Future
Technology Fund to be filed by amendment.
(j) (1) Consent of Arthur Andersen LLP is incorporated herein by
reference to Exhibit 11(b) to Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 29, 1995.
(2) Letter of Arthur Andersen LLP regarding change in independent
auditor required by Item 304 of Regulation S-K is incorporated
herein by reference to Exhibit 11(c) to Post-Effective Amendment
No. 12 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 29, 1995.
(3) Powers of Attorney, dated February 24, 1998, are incorporated
herein by reference to Exhibit 11(d) to Post-Effective Amendment
No. 32 to Registrant's Registration Statement on Form N-1A filed
with the Commission on March 20, 1998.
(4) Certified Resolution of Board, dated February 24, 1998,
authorizing signature on behalf of Registrant pursuant to power
of attorney is incorporated herein by reference to Exhibit 11(e)
to Post-Effective Amendment No. 32 to Registrant's Registration
Statement on Form N-1A filed with the Commission on March 20,
1998.
(k) Not Applicable.
(l) Initial Capital Agreement is incorporated herein by reference to
Exhibit 13 to Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
February 26, 1993.
(m) (1) Service Plan, dated January 13, 1995, for the Munder Multi-Season
Growth Fund Class A Shares is incorporated herein by reference to
Exhibit 15(a) to Post-Effective Amendment No. 8 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
February 28, 1995.
(2) Service and Distribution Plan, dated January 13, 1995, for the
Munder Multi-Season Growth Fund Class B Shares is incorporated
herein by reference to Exhibit 15(b) to Post-Effective Amendment
No. 8 to Registrant's Registration Statement on Form N-1A filed
with the Commission on February 28, 1995.
6
<PAGE>
(3) Amended and Restated Service and Distribution Plan, dated May 6,
1997, for the Munder Multi-Season Growth Fund Class C Shares is
incorporated herein by reference to Exhibit 15(c) to Post-
Effective Amendment No. 35 to Registrant's Registration Statement
on Form N-1A filed with the Commission on August 28, 1998.
(4) Service Plan, dated January 13, 1995, for the Munder Money Market
Fund Class A Shares is incorporated herein by reference to
Exhibit 15(d) to Post-Effective Amendment No. 8 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
February 28, 1995.
(5) Service and Distribution Plan, dated January 13, 1995, for the
Munder Money Market Fund Class B Shares is incorporated herein by
reference to Exhibit 15(e) to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on February 28, 1995.
(6) Amended and Restated Service and Distribution Plan, dated May 6,
1997, for the Munder Money Market Fund Class C Shares is
incorporated herein by reference to Exhibit 15(f) to Post-
Effective Amendment No. 35 to Registrant's Registration Statement
on Form N-1A filed with the Commission on August 28, 1998.
(7) Service Plan, dated January 13, 1995, for the Munder Real Estate
Equity Investment Fund Class A Shares is incorporated herein by
reference to Exhibit 15(g) to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on February 28, 1995.
(8) Service and Distribution Plan, dated January 13, 1995, for the
Munder Real Estate Equity Investment Fund Class B Shares is
incorporated herein by reference to Exhibit 15(h) to Post-
Effective Amendment No. 8 to Registrant's Registration Statement
on Form N-1A filed with the Commission on February 28, 1995.
(9) Amended and Restated Service and Distribution Plan, dated May 6,
1997, for the Munder Real Estate Equity Investment Fund Class C
Shares is incorporated herein by reference to Exhibit 15(i) to
Post-Effective Amendment No. 35 to Registrant's Registration
Statement on Form N-1A filed with the Commission on August 28,
1998.
(10) Service Plan, dated August 6, 1996, for the Munder Equity
Selection Fund Class A Shares is incorporated herein by reference
to Exhibit 15(j) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(11) Service and Distribution Plan, dated August 6, 1996, for the
Munder Equity Selection Fund Class B Shares is incorporated
herein by reference to Exhibit 15(k) to Post-Effective Amendment
No. 35 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 28, 1998.
(12) Service and Distribution Plan, dated August 6, 1996, for the
Munder Equity Selection Fund Class C Shares is incorporated
herein by reference to Exhibit 15(l) to Post-Effective Amendment
No. 35 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 28, 1998.
(13) Service Plan, dated May 6, 1996, for the Munder International
Bond Fund Class A Shares is incorporated herein by reference to
Exhibit 15(m) to Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
August 28, 1998.
7
<PAGE>
(14) Service and Distribution Plan, dated May 6, 1996, for the Munder
International Bond Fund Class B Shares is incorporated herein by
reference to Exhibit 15(n) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(15) Service and Distribution Plan, dated May 6, 1996, for the Munder
International Bond Fund Class C Shares is incorporated herein by
reference to Exhibit 15(o) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(16) Service Plan, dated August 6, 1996, for the Munder Micro-Cap
Equity Fund Class A Shares is incorporated herein by reference to
Exhibit 15(p) to Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
August 28, 1998.
(17) Service and Distribution Plan, dated August 6, 1996, for the
Munder Micro-Cap Equity Fund Class B Shares is incorporated
herein by reference to Exhibit 15(q) to Post-Effective Amendment
No. 35 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 28, 1998.
(18) Service and Distribution Plan, dated August 6, 1996, for the
Munder Micro-Cap Equity Fund Class C Shares is incorporated
herein by reference to Exhibit 15(r) to Post-Effective Amendment
No. 35 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 28, 1998.
(19) Service Plan, dated November 7, 1996, for the Munder Short Term
Treasury Fund Class A Shares is incorporated herein by reference
to Exhibit 15(s) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(20) Service and Distribution Plan, dated November 7, 1996, for the
Munder Short Term Treasury Fund Class B Shares is incorporated
herein by reference to Exhibit 15(t) to Post-Effective Amendment
No. 35 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 28, 1998.
(21) Service and Distribution Plan, dated November 7, 1996, for the
Munder Short Term Treasury Fund Class C Shares is incorporated
herein by reference to Exhibit 15(u) to Post-Effective Amendment
No. 35 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 28, 1998.
(22) Service and Distribution Plan, dated February 4, 1997, for the
Munder All-Season Aggressive Fund (formerly the Munder All-Season
Accumulation Fund) Class A Shares is incorporated herein by
reference to Exhibit 15(v) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(23) Service and Distribution Plan, dated February 4, 1997, for the
Munder All-Season Aggressive Fund (formerly the Munder All-Season
Accumulation Fund) Class B Shares is incorporated herein by
reference to Exhibit 15(w) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
8
<PAGE>
(24) Service and Distribution Plan, dated February 4, 1997, for the
Munder All-Season Conservative Fund (formerly the Munder All-
Season Maintenance Fund) Class A Shares is incorporated herein by
reference to Exhibit 15(x) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(25) Service and Distribution Plan, dated February 4, 1997, for the
Munder All-Season Conservative Fund (formerly the Munder All-
Season Maintenance Fund) Class B Shares is incorporated herein by
reference to Exhibit 15(y) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(26) Service and Distribution Plan, dated February 4, 1997, for the
Munder All-Season Moderate Fund (formerly the Munder All-Season
Development Fund) Class A Shares is incorporated herein by
reference to Exhibit 15(z) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(27) Service and Distribution Plan, dated February 4, 1997, for the
Munder All-Season Moderate Fund (formerly the Munder All-Season
Development Fund) Class B Shares is incorporated herein by
reference to Exhibit 15(aa) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(28) Service Plan, dated August 6, 1996, for the Munder Small-Cap
Value Fund Class A Shares is incorporated herein by reference to
Exhibit 15(bb) to Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
August 28, 1998.
(29) Service and Distribution Plan, dated August 6, 1996, for the
Munder Small-Cap Value Fund Class B Shares is incorporated herein
by reference to Exhibit 15(cc) to Post-Effective Amendment No. 35
to Registrant's Registration Statement on Form N-1A filed with
the Commission on August 28, 1998.
(30) Service and Distribution Plan, dated August 6, 1996, for the
Munder Small-Cap Value Fund Class C Shares is incorporated herein
by reference to Exhibit 15(dd) to Post-Effective Amendment No.
35 to Registrant's Registration Statement on Form N-1A filed with
the Commission on August 28, 1998.
(31) Service and Distribution Plan dated August 6, 1996 for the NetNet
Fund is incorporated herein by reference to Exhibit 15(ii) to
Post-Effective Amendment No. 35 to Registrant's Registration
Statement on Form N-1A filed with the Commission on August 28,
1998.
(32) Service Plan, dated February 24, 1998, for the Munder Growth
Opportunities Fund Class A Shares is incorporated herein by
refere to Exhibit 15(jj) nce to Post-Effective Amendment No. 37
to Registrant's Registration Statement on Form N-1A filed with
the Commission on June 11, 1999.
(33) Service and Distribution Plan, dated February 24, 1998, for the
Munder Growth Opportunities Fund is incorporated herein by
reference to Exhibit 15(kk) to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on June 11, 1999.
9
<PAGE>
(34) Service and Distribution Plan, dated February 24, 1998, for the
Munder Growth Opportunities Fund Class C Shares is incorporated
herein by reference to Exhibit 15(ll) to Post-Effective Amendment
No. 37 to Registrant's Registration Statement on Form N-1A filed
with the Commission on June 11, 1999.
(35) Service Plan for the Munder Growth Opportunities Fund Class K
Shares is incorporated herein by reference to Exhibit 15(mm) to
Post-Effective Amendment No. 35 to Registrant's Registration
Statement on Form N-1A filed with the Commission on August 28,
1998.
(36) Amendment to Service and Distribution Plan, dated May 4, 1998,
for the Munder NetNet Fund is incorporated herein by reference to
Exhibit m(36) to Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
June 11, 1999.
(37) Service and Distribution Plan, dated May 4, 1998, for the Munder
NetNet Fund Class B Shares is incorporated herein by reference to
Exhibit m(37) to Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
June 11, 1999.
(38) Service and Distribution Plan, dated May 4, 1998, for the Munder
NetNet Fund Class C Shares is incorporated herein by reference to
Exhibit m(38) to Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
June 11, 1999.
(39) Service Plan, dated July 31, 1995, for the Munder Value Fund
Class A Shares is incorporated herein by reference to Exhibit
15(qq) to Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
August 28, 1998.
(40) Service and Distribution Plan, dated July 31, 1995, for the
Munder Value Fund Class B Shares is incorporated herein by
reference to Exhibit 15(rr) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(41) Service and Distribution Plan, dated July 31, 1995, for the
Munder Value Fund Class C Shares is incorporated herein by
reference to Exhibit 15(ss) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(42) Service Plan, dated May 4, 1999, for the Munder Future Technology
Fund Class A Shares is incorporated by reference to Post-
Effective Amendment No. 38 to Registrant's Registration Statement
on Form N-1A filed with the Commission on August 25, 1999.
(43) Service and Distribution Plan, dated May 4, 1999, for the Munder
Future Technology Fund Class B Shares is incorporated by
reference to Post-Effective Amendment No. 38 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
August 25, 1999.
(44) Service and Distribution Plan, dated May 4, 1999, for the Munder
Future Technology Fund Class II Shares is incorporated by
reference to Post-Effective Amendment No. 38 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
August 25, 1999.
10
<PAGE>
(n) Not Applicable.
(o) Fourth Amended and Restated Multi-Class Plan with respect to the
Registrant is incorporated herein by reference to Post-Effective
Amendment No. 37 to Registrant's Registration Statement on Form N-1A
filed with the Commission on June 11, 1999.
Item 24. Persons Controlled by or under Common Control with Registrant.
--------------------------------------------------------------
Not Applicable.
Item 25. Indemnification
---------------
Article VII, Section 7.6 of the Registrant's Articles of Incorporation
("Section 7.6") provides that the Registrant, including its successors and
assigns, shall indemnify its directors and officers and make advance
payment of related expenses to the fullest extent permitted, and in
accordance with the procedures required, by the General Laws of the State
of Maryland and the Investment Company Act of 1940. Such indemnification
shall be in addition to any other right or claim to which any director,
officer, employee or agent may otherwise be entitled. In addition, Article
VI of the Registrant's By-laws provides that the Registrant shall indemnify
its employees and/or agents in any manner as shall be authorized by the
Board of Directors and within such limits as permitted by applicable law.
The Board of Directors may take such action as is necessary to carry out
these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such resolutions or contracts
implementing such provisions or such further indemnification arrangements
as permitted by law. The Registrant may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the Registrant or is serving at the request of the Registrant as a
director, officer, partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other
enterprise or employee benefit plan, against any liability asserted against
and incurred by such person in any such capacity or arising out of such
person's position, whether or not the Registrant would have had the power
to indemnify against such liability. The rights provided by Section 7.6
shall be enforceable against the Registrant by such person who shall be
presumed to have relied upon such rights in serving or continuing to serve
in the capacities indicated therein.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrant by the Registrant pursuant to the
Fund's Articles of Incorporation, its By-Laws or otherwise, the Registrant
is aware that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and,
therefore, is unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by directors, officers or controlling persons of
the Registrant in connection with the successful defense of any act, suit
or proceeding) is asserted by such directors, officers or controlling
persons in connection with shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 26. Business and Other Connections of Investment Advisors
-----------------------------------------------------
Munder Capital Management
<TABLE>
<CAPTION>
Name Position with Advisor
<S> <C>
Old MCM, Inc. Partner
Munder Group LLC Partner
WAM Holdings, Inc. Partner
WAM Holdings II, Inc. Partner
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Name Position with Advisor
<S> <C>
Lee P. Munder Chairman
Leonard J. Barr, II Senior Vice President and Director of Research
Clark Durant Vice President and Director of The Private Management Group
Terry H. Gardner Vice President and Chief Financial Officer
Elyse G. Essick Vice President and Director of Communications and Client Services
Sharon E. Fayolle Vice President and Director of Money Market Trading
Otto G. Hinzmann Vice President and Director of Equity Portfolio Management
Anne K. Kennedy Vice President and Director of Corporate Bond Trading
Richard R. Mullaney Senior Vice President of The Private Management Group
Ann F. Putallaz Vice President and Director of Retirement Services Group
Peter G. Root Vice President and Director of Government Securities Trading
James C. Robinson Executive Vice President and Chief Investment Officer/Fixed Income
Gerald L. Seizert Chief Investment Officer-Equities
Paul D. Tobias Chief Executive Officer
</TABLE>
For further information relating to the Investment Advisor's officers,
reference is made to Form ADV filed under the Investment Advisers Act of
1940 by Munder Capital Management. See File No. 801-48394.
World Asset Management, L.L.C.
- ------------------------------
<TABLE>
<CAPTION>
Name Position with Advisor
- ---- ---------------------
<S> <C>
Terry H. Gardner Chief Financial Officer
Todd B. Johnson President, Chief Investment Officer and Chief Executive Officer
Robert J. Kay Director, Client Services
Theodore D. Miller Director, International Investments
Kenneth A. Schlucther, III Director, Domestic Investments
</TABLE>
For further information relating to the Advisor's officers, reference is made to
Form ADV filed under the Investment Advisers Act of 1940 by World Asset
Management, L.L.C., SEC File No. 801-55795.
Item 27. Principal Underwriters.
-----------------------
(a) Funds Distributor, Inc. ("FDI"), located at 60 State Street, Suite
1300, Boston, Massachusetts 02109. FDI is an indirectly wholly-owned
subsidiary of Boston Institutional Group, Inc. a holding company, all
of whose outstanding shares are owned by key employees. FDI is
registered with the Securities and Exchange Commission as a broker-
dealer and is a member of the National Association of Securities
Dealers. FDI acts as principal underwriter of the following investment
companies other than the Registrant:
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Global Funds, Inc.
Dresdner RCM Investment Funds, Inc.
Founders Funds, Inc.
JP Morgan Institutional Funds
JP Morgan Funds
JPM Series Trust
JPM Series Trust II
Kobrick Investment Trust
LaSalle Partners Funds, Inc.
Merrimac Series
12
<PAGE>
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
National Investors Cash Management Fund, Inc.
Nomura Pacific Basin Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income & Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Fund, Inc.
SoGen Funds, Inc.
SoGen Variable Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
(b) The following is a list of the executive officers, directors and
partners of Funds Distributor, Inc.
<TABLE>
<CAPTION>
<S> <C>
Director, President and Chief Executive Officer -Marie E. Connolly
Executive Vice President -George A. Rio
Executive Vice President -Donald R. Roberson
Executive Vice President -William S. Nichols
Senior Vice President, General Counsel, Chief Compliance -Margaret W. Chambers
Officer, Secretary and Clerk
Director, Senior Vice President, Treasurer and -Joseph F. Tower, III
Chief Financial Officer
Senior Vice President -Paula R. David
Senior Vice President -Gary S. MacDonald
Senior Vice President -Judith K. Benson
Chairman and Director -William J. Nutt
</TABLE>
<TABLE>
<CAPTION>
(c) Not Applicable.
<S> <C>
Item 28. Location of Accounts and Records
--------------------------------
</TABLE>
The account books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and the Rules thereunder will be maintained at the offices of:
(1) Munder Capital Management, 480 Pierce Street or 255 East Brown
Street, Birmingham, Michigan 48009 (records relating to its
function as investment advisor);
(2) First Data Investor Services Group, Inc., 100 Federal Street,
Boston, Massachusetts 02110 or 4400 Computer Drive, Westborough,
Massachusetts 01581 (records relating to its functions transfer
agent);
(3) State Street Bank and Trust Company, 225 Franklin Street, Boston,
MA 02110 (records relating to its function as administrator and
custodian); and
13
<PAGE>
(4) Funds Distributor, Inc., 60 State Street, Boston, Massachusetts
02109 (records relating to its function as distributor).
Item 29. Management Services
-------------------
None.
Item 30. Undertakings
---------------
Not Applicable.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this Post-Effective Amendment No. 39 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston and The Commonwealth of Massachusetts, on the 27th day of August, 1999.
THE MUNDER FUNDS, INC.
By: *
---------------------------
Lee P. Munder, President
* By: /s/ Cynthia Surprise
----------------------------
Cynthia Surprise
as Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------------------- ------------ ---------------
<S> <C> <C>
* Director and August 27, 1999
-------------------- President
Lee P. Munder
* Director August 27, 1999
--------------------
Charles W. Elliott
* Director August 27, 1999
--------------------
Joseph E. Champagne
* Director August 27, 1999
--------------------
Thomas B. Bender
* Director August 27, 1999
--------------------
Thomas D. Eckert
* Director August 27, 1999
--------------------
John Rakolta, Jr.
* Director August 27, 1999
--------------------
David J. Brophy
</TABLE>
15
<PAGE>
* Vice President, August 27, 1999
------------------------- Treasurer, Secretary and
Terry H. Gardner Chief Financial Officer
*By: /s/ Cynthia Surprise
--------------------
Cynthia Surprise
as Attorney-in-Fact
16
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<C> <S>
99(h)(13) Notice to the Transfer Agency and Registrar Agreement
between Registrant and First Data Invester Services
Group, Inc. with respect to Munder Growth Opportunities
Fund
</TABLE>
17
<PAGE>
Exhibit 99(h)(13)
First Data Investor Services Group, Inc.
One Exchange Place
Boston, MA 02109
Ladies and Gentlemen:
Reference is made to the Transfer Agent and Registrar Agreement between us
dated as of June 19, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the creation
of an additional investment portfolio of The Munder Funds, Inc., namely the
Munder Growth Opportunities Fund (the "New Portfolio").
We request that you act as Transfer Agent under the Agreement with respect
to the New Portfolio.
Please indicate your acceptance for the foregoing by executing two copies
of this Agreement, returning one to the Fund and retaining one copy for your
records.
Very truly yours,
The Munder Funds, Inc.
By: /s/ Terry H. Gardner
------------------------
Accepted:
First Data Investor Services Group, Inc.
By: /s/ Debelee Golberg
------------------------
Date: February 24, 1998
