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Michigan Municipal Shares
[Munder Logo]
Prospectus
OCTOBER 27, 1998
As Revised
March 12, 1999
Short Term Treasury Fund
Prospectus begins on next page
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PROSPECTUS
Munder Short Term Treasury Fund
Michigan Municipal Shares
The Munder Short Term Treasury Fund (the "Fund") is a mutual fund that seeks
to provide an enhanced money market return consistent with the preservation of
capital. The Fund is a portfolio of The Munder Funds, Inc. (the "Company"), an
open-end investment company.
Munder Capital Management (the "Advisor") serves as investment advisor of
the Fund.
This Prospectus explains the objective, policies, risks and fees of the
Fund. You should read this Prospectus carefully before investing and retain it
for future reference. A Statement of Additional Information ("SAI") describing
the Fund has been filed with the Securities and Exchange Commission (the
"SEC") and is incorporated by reference into this Prospectus. You may obtain
the SAI free of charge by calling the Fund at (800) 438-5789. In addition, the
SEC maintains a Web site (http://www.sec.gov) that contains the SAI and other
information regarding the Fund.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
An investment in the Fund involves investment risks, including the possible
loss of the principal amount invested.
SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Call Toll-Free for Shareholder Services:
(800) 438-5789
The date of this Prospectus is October 27, 1998
As Revised
March 12, 1999
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TABLE OF CONTENTS
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Page
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Fund Highlights
What are the key facts regarding the Fund?............................... 3
Financial Information...................................................... 4
Fund Information
Who may want to invest in the Fund?...................................... 6
What are the Fund's investments and investment practices?................ 6
What are the risks of investing in the Fund?............................. 7
Performance
How is the Fund's performance calculated?................................ 7
Where can I obtain performance data?..................................... 8
Purchases of Shares
What price do I pay for shares?.......................................... 8
When can I purchase shares?.............................................. 8
How can I purchase shares?............................................... 8
Redemption of Shares
What price do I receive for redeemed shares?............................. 9
When can I redeem shares?................................................ 9
How can I redeem shares?................................................. 9
When will I receive redemption amounts?.................................. 10
Structure and Management of the Fund
How is the Fund structured?.............................................. 10
Who manages and services the Fund?....................................... 10
What are my rights as a shareholder?..................................... 12
Dividends, Distributions and Taxes
When will I receive distributions from the Fund?......................... 12
How will distributions be made?.......................................... 12
Are there tax implications of my investments in the Fund?................ 12
Additional Information..................................................... 13
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FUND HIGHLIGHTS
What Are the Key Facts Regarding the Fund?
Q: What is the Fund's goal?
A: The Fund seeks to provide an enhanced money market return consistent with
the preservation of capital.
Q: What is the Fund's strategy?
A: The Fund invests only in U.S. Treasury securities and repurchase agreements
relating to U.S. Treasury securities.
Q: What are the Fund's risks?
A: The Fund's net asset value, which is determined on every business day, will
change daily. The net asset value changes are due to changes in the price of
securities owned by the Fund as a result of rises and falls in the bond market
in general, in the price of U.S. Treasury securities and in interest rates.
You should note that you could lose a portion of the amount you invest in the
Fund.
Q: What are the options for investment in the Fund?
A: The Fund offers two classes of shares: Michigan Municipal Shares and Class
Y Shares. Class Y Shares are described in a separate prospectus.
Q: How do I buy and sell shares of the Fund?
A: 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. You may purchase shares from the
Fund's Transfer Agent, First Data Investor Services Group, Inc. (the "Transfer
Agent") by mailing an Account Application Form with a check to the Transfer
Agent.
Shares may be redeemed (sold back to the Fund) through the Transfer Agent by
mail or by telephone.
Q: When and how are distributions made?
A: Dividend distributions are made from the dividends and interest earned on
investments after expenses. The Fund pays dividends monthly and distributes
capital gains, if any, at least annually. Unless you elect to receive
distributions in cash, all dividends and capital gains distributions of the
Fund will be automatically used to purchase additional shares of the Fund.
Q: Who manages the Fund's assets?
A: Munder Capital Management is the Fund's investment advisor. The Advisor is
responsible for all purchases and sales of the securities held by the Fund.
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FINANCIAL INFORMATION
SHAREHOLDER TRANSACTION EXPENSES (1)
The purpose of this table is to assist you in understanding the expenses a
shareholder in the Fund will bear directly.
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Maximum Sales Charge on Purchase (as a % of Offering Price)................ None
Sales Charge Imposed on Reinvested Dividends............................... None
Maximum Deferred Sales Charge.............................................. None
Redemption Fees (2)........................................................ None
Exchange Fees.............................................................. None
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Notes:
(1) Does not include fees which institutions may charge for services they
provide to you.
(2) The Fund's transfer agent may charge a fee of $7.50 for wire redemptions
under $5,000.
FUND OPERATING EXPENSES
The purpose of this table is to assist you in understanding the expenses
charged directly to the Fund, which investors in the Fund will bear indirectly
for the current fiscal year. Such expenses include payments to Directors,
auditors, legal counsel and service providers (such as the Advisor) and
registration fees. The expenses shown below are based on expenses for the
Funds' past fiscal year except that (i) the expenses have been restated to
reflect anticipated voluntary expense reimbursements for the current fiscal
year and (ii) the expenses have been restated to reflect the termination of
shareholder servicing fees effective as of the date of this Prospectus. The
Advisor may discontinue such voluntary expense reimbursements at any time in
its sole discretion.
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Annual Fund
Operating Expenses
(as a % of average net assets)
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Advisory Fees............................................................ .25%
Shareholder Servicing Fees............................................... None
Other Expenses........................................................... .27%+
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Total Fund Operating Expenses............................................ .52%
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+ The Advisor expects to voluntarily reimburse the Fund for certain operating
expenses. In the absence of expense reimbursements, the total fund
operating expenses would be 0.63%.
Example
This example shows the amount of expenses you would pay (directly or
indirectly) on a $1,000 investment in the Fund assuming (1) a 5% annual return
and (2) redemption at the end of the following time periods. This example is
not a representation of past or future performance or operating expenses;
actual performance or operating expenses may be larger or smaller than those
shown.
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1 3 5 10
Year Years Years Years
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$5 $17 $29 $65
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FINANCIAL HIGHLIGHTS
The following financial highlights for the fiscal period ended June 30, 1998
have been audited by Ernst & Young LLP, independent auditors. This information
is part of the Fund's audited financial statements which are included in the
Fund's Annual Report, which is incorporated by reference into the SAI. This
information should be read in conjunction with the financial statements and
notes thereto. You may obtain the Annual Report without charge by calling
(800) 438-5789.
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Short Term
Treasury Fund(a)
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Period
Year Ended Ended
6/30/98(d) 6/30/97(d)
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Net asset value, beginning of period................... $10.01 $ 9.96
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Income from investment operations:
Net investment income................................. 0.50 0.12
Net realized and unrealized gain on investments....... 0.03 0.06
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Total from investment operations...................... 0.53 0.18
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Less distributions:
Dividends from net investment income.................. (0.50) (0.13)
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Total distributions................................... (0.50) (0.13)
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Net asset value, end of period......................... $10.04 $10.01
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Total return(b)....................................... 5.47% 1.78%
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Ratio to average net assets/supplemental data:
Net assets, end of period (in 000's).................. $ 648 $1,426
Ratio of operating expenses to average net assets..... 0.77% 0.77%(c)
Ratio of net investment income to average net assets.. 4.99% 5.01%(c)
Portfolio turnover rate............................... 104% 40%
Ratio of operating expenses to average net assets
without expenses reimbursed.......................... 0.89% 0.80%(c)
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(a) The Michigan Municipal Shares (formerly called the Class K Shares) of the
Munder Short Term Treasury Fund commenced operations on April 2, 1997.
(b) Total return represents aggregate total return for the period indicated.
(c) Annualized.
(d) Per share numbers have been calculated using the average shares method.
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FUND INFORMATION
This Prospectus offers Michigan Municipal Shares of the Fund. This section
summarizes the Fund's principal investments. The sections entitled "What are
the Fund's Investments and Investment Practices?" and "What are the Risks of
Investing in the Fund?" and the SAI give more information about the Fund's
investment techniques and risks.
GOAL AND PRINCIPAL INVESTMENTS. The Fund's goal is to provide investors with
an enhanced money market return consistent with capital preservation. Under
normal conditions, the Fund invests all of its assets in U.S. Treasury
securities and 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 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.
PORTFOLIO MANAGEMENT. Sharon E. Fayolle, Vice President and Director of
Money Market Trading for the Advisor, has managed the Fund since commencement
of operations. Prior to joining the Advisor in 1996, she was a European
Portfolio Manager for Ford Motor Company.
Who May Want to Invest in the Fund?
The Fund is designed for investors who desire a high level of income and
liquidity.
What are the Fund's Investments and Investment Practices?
The Fund may enter into Repurchase Agreements. Under a repurchase agreement,
the Fund purchases securities from a seller and the seller agrees to
repurchase the securities at a later time, typically within seven days, at a
set price. The seller agrees to set aside collateral at least equal to the
repurchase price. This ensures that the Fund will receive the purchase price
at the time it is due, unless the seller defaults or declares bankruptcy, in
which event the Fund will bear the risk of possible loss due to adverse market
action or delays in liquidating the underlying obligation.
The Fund may purchase U.S. Treasury Securities, which are direct obligations
of the U.S. Treasury and are guaranteed by the full faith and credit of the
U.S. government. Such securities include U.S. Treasury bills, which have
initial maturities of one year or less, U.S. Treasury notes, which have
initial maturities of one to ten years, U.S. Treasury bonds, which generally
have initial maturities of greater than ten years.
The Fund may purchase Zero Coupon Treasury Securities, which are U.S.
Treasury notes and bonds which have been stripped of their unmatured interest
coupons and receipts or which are certificates representing interests in such
securities. These securities are purchased at a discount from their face
amount, giving the purchaser the right to receive their full value at
maturity. A zero coupon security pays no interest to its holder during its
life. The Fund will only purchase zero coupon Treasury securities which have
been stripped by the Federal Reserve Bank.
The Fund may purchase securities on a "when-issued" basis and may purchase
securities on a "forward commitment" basis. Although the price to be paid by
the Fund is set at the time of the agreement, the Fund usually does not pay
for the securities until they are received. The value of securities may change
between the time the price is set and payment. When the Fund purchases
securities for future delivery, the Fund's custodian will set aside cash or
liquid securities to "cover" the Fund's position. The Fund does not intend to
purchase securities for future delivery for speculative purposes.
The Fund may Lend Securities to broker-dealers and other financially sound
institutional investors who will pay the Fund for the use of the securities,
thus potentially increasing the Fund's returns. The borrower must
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set aside cash or liquid securities equal to the value of the securities
borrowed at all times during the terms of the loan. Loans may not exceed 33
1/3% of the value of the Fund's total assets. Risks involved in such
transactions include possible delay in recovering the loaned securities and
possible loss of the securities or the collateral if the borrower fails
financially.
The Fund may Borrow Money in an amount up to 5% of its assets for temporary
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.
The Fund is classified as a "diversified fund" which means with respect to
75% of its assets, the Fund cannot invest more than 5% of its assets in one
issuer (other than the U.S. Government and its agencies and
instrumentalities). In addition, the Fund cannot invest more than 25% of its
assets in a single issuer.
What are the Risks of Investing in the Fund?
Consistent with a long-term investment approach, investors in the Fund
should be prepared and able to maintain their investments during periods of
adverse market conditions. By itself, no Fund is a balanced investment program
and there is no guarantee that any Fund will achieve its investment objective
since there is uncertainty in every investment.
The value of the Fund's shares, like the value of most securities will rise
and fall in response to changes in economic conditions, interest rates and the
market's perception of the underlying securities held by the Fund. Investing
in the Fund may be less risky than investing in individual U.S. Treasury
Securities due to the diversification of investing in a portfolio containing
many different U.S. Treasury Securities; however, such diversity does not
eliminate all risks. The Fund invests mostly in U.S. Treasury Securities,
whose values typically rise when interest rates fall and fall when interest
rates rise. U.S. Treasury Securities with shorter maturities (time period
until repayment) tend to be less affected by interest rate changes, but
generally offer lower yields than securities with longer maturities. Current
yield levels should not be considered representative of yields for any future
time. Securities with variable interest rates may exhibit greater price
variations than ordinary securities. Zero coupon bonds are subject to greater
market fluctuations from changing interest rates than debt obligations of
comparable maturities which make current distributions of interest.
The risks of various investment techniques the Fund uses are described in
more detail in the SAI.
PERFORMANCE
How is the Fund's Performance Calculated?
There are various ways in which the Fund may calculate and report its
performance. Performance is calculated separately for each class of shares.
One method is to show the Fund's total return. Cumulative total return is
the percentage change in the value of an amount invested in a class of shares
of the Fund over a stated period of time and takes into account reinvested
dividends. Cumulative total return most closely reflects the actual
performance of the Fund.
Average annual total return refers to the average annual compounded rates of
return over a specified period on an investment in shares of the Fund
determined by comparing the initial amount invested to the ending redeemable
value of the amount, taking into account reinvested dividends.
The Fund may also publish its current yield. Yield is the net investment
income generated by a share of the Fund during a 30-day period divided by the
maximum offering price per share on the 30th day.
You should be aware that (i) past performance does not indicate how the Fund
will perform in the future; and (ii) the Fund's return and net asset value
will fluctuate, so you cannot use the Fund's performance data to
7
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compare it to investments in certificates of deposit, savings accounts or
other investments that provide a fixed or guaranteed yield.
The Fund may compare its performance to that of other mutual funds, such as
the performance of similar funds reported by Lipper Analytical Services, Inc.
or information reported in national financial publications (such as Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times) or
in local or regional publications. The Fund may also compare its total return
to broad-based indices. These indices show the value of selected portfolios of
securities (assuming reinvestment of interest and dividends) which are not
managed by a portfolio manager. The Fund may report how they are performing in
comparison to the Consumer Price Index, an indication of inflation reported by
the U.S. Government.
Where Can I Obtain Performance Data?
The Wall Street Journal and certain local newspapers report information on
the performance of mutual funds. In addition, performance information is
contained in the Fund's annual report dated June 30 of each year and semi-
annual report dated December 31 of each year, which will automatically be
mailed to shareholders. To obtain copies of financial reports or performance
information, call (800) 438-5789.
PURCHASES OF SHARES
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. Call (800) 438-5789 to obtain more information concerning the Fund's
Class Y Shares.
What Price Do I Pay For Shares?
The purchase price for Michigan Municipal Shares is the net asset value
("NAV") next determined after we receive your order in proper form. Except in
certain limited circumstances, the Fund determines its NAV on each day the New
York Stock Exchange ("NYSE") is open for trading (a "Business Day") at the
close of such trading on the NYSE (normally 4:00 p.m. Eastern time). The Fund
calculates NAV separately for each class of shares. NAV is calculated by
totaling the value of all of the assets of the Fund allocated to a particular
class of shares, subtracting the Fund's liabilities and expenses charged to
that class and dividing the result by the number of shares of the class
outstanding.
When Can I Purchase Shares?
Shares of the Fund are sold on a continuous basis and can be purchased on
any Business Day.
How Can I Purchase Shares?
You can purchase shares in a number of different ways. You may place
purchase orders directly through the 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 the guidelines or policies.
Please contact 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 the
attached 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 for $50 or more to the address listed above.
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. 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 Transfer Agent at the address provided
above. Wire instructions must state the name of the Fund, 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.
The Transfer Agent will send 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. We do not issue share
certificates. We reserve the right to (i) reject any purchase order if, in our
opinion, it is in the Fund's best interest to do so, (ii) if we have not
received and reviewed your investment policies or guidelines of if the Fund is
not a permissible investment under such guidelines or policies and (iii)
suspend the offering of Michigan Municipal Shares for any period of time.
See the SAI for further information regarding purchases of the Fund's
shares.
REDEMPTIONS OF SHARES
What Price Do I Receive for Redeemed Shares?
The redemption price is the NAV next determined after we receive the
redemption request in proper form.
When Can I Redeem Shares?
You can redeem shares on any Business Day, provided all required documents
have been received by the Transfer Agent. The Fund may temporarily stop
redeeming shares when the NYSE is closed or trading on the NYSE is restricted,
when an emergency exists and the Fund cannot sell its assets or accurately
determine the value of its assets or if the SEC orders the Fund to suspend
redemptions.
How Can I Redeem 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.
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 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 Funds 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.
. By Telephone. You can redeem your shares by calling your broker or the
Fund at (800) 438-5789. There is no minimum requirement for telephone
redemptions paid by check. The Transfer Agent may deduct a wire fee
(currently $7.50) for wire redemptions under $5,000.
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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.
We record all telephone calls for your protection and take measures to
identify the caller. If the Transfer Agent properly acts on telephone
instructions and follows reasonable procedures to ensure against
unauthorized transactions, neither the Company, Funds Distributor, Inc.
(the "Distributor") nor the Transfer Agent will be responsible for any
losses. If these procedures are not followed, the Transfer Agent may be
liable to you for losses resulting from unauthorized instructions.
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.
. Involuntary Redemption. 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.
When Will I Receive Redemption Amounts?
If we receive a redemption order for the Fund before 4:00 p.m. (Eastern
time) on a Business Day, we will normally wire payment to the redeeming
institution on the next Business Day. We may delay wiring redemption proceeds
for up to seven days if we feel an earlier payment would have a negative
impact on the Fund.
STRUCTURE AND MANAGEMENT OF THE FUND
How is the Fund Structured?
The Company is an open-end management investment company, which is a mutual
fund that sells and redeems shares every day that it is open for business. It
is managed under the direction of its governing Board of Directors, which is
responsible for the overall management of the Company and supervises the
Fund's service providers. The Company is a Maryland corporation.
Who Manages and Services the Fund?
Investment Advisor. The Fund's investment advisor is Munder Capital
Management, a Delaware general partnership with its principal offices at 480
Pierce Street, Birmingham, Michigan 48009. The principal partners of the
Advisor are MCM, Munder Group LLC, WAM Holdings, Inc. ("WAM") and WAM Holdings
II, Inc. ("WAM II"). MCM was founded in April, 1985 as a Delaware corporation
and was a registered investment advisor. WAM and WAM II are Delaware
corporations and are indirect, wholly-owned subsidiaries of Comerica
Incorporated, a Michigan banking corporation, which owns or controls
approximately 88% of the partnership interests in the Advisor. As of June 30,
1998, the Advisor and its affiliates had approximately $48.2 billion in assets
under management, of which $25.4 billion were invested in equity securities,
$8.1 billion were invested in money market or other short-term instruments,
$9.2 billion were invested in other fixed income securities, and $5.5 billion
in non-discretionary assets.
The Advisor provides overall investment management and research and credit
analysis for the Fund and is responsible for all purchases and sales of
portfolio securities for the Fund.
The Advisor is entitled to receive a fee at an annual rate equal to 0.25% of
the average daily net assets of the Fund.
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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 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 Fund or its shareholders.
The Advisor selects broker-dealers to execute portfolio transactions for the
Fund based on best price and execution terms. The Advisor may consider as a
factor the number of shares sold by the broker-dealer.
Transfer Agent. First Data Investor Services Group, Inc. is the Fund's
transfer agent. The Transfer Agent is a wholly-owned subsidiary of First Data
Corporation and is located at 4400 Computer Drive, Westborough, Massachusetts,
01581-5120.
Administrator. State Street Bank and Trust Company ("State Street" or the
"Administrator") is the Fund's administrator. The Administrator is located at
225 Franklin Street, Boston, Massachusetts 02110. The Administrator generally
assists the Company in all aspects of its administration and operations
including overseeing the maintenance of financial records and fund accounting.
As compensation for its services, State Street is entitled to receive fees,
based on the aggregate daily net assets of the Fund and certain other
investment portfolios that are advised by the Advisor for which it provides
services, computed daily and payable monthly at the annual rate of 0.113% on
the first $2.8 billion of net assets, plus 0.103% on the next $2.2 billion of
net assets, plus 0.101% on the next $2.5 billion of net assets, plus 0.095% on
the next $2.5 billion of net assets, plus 0.080% on the next $2.5 billion of
net assets, plus 0.070% on all net assets in excess of $12.5 billion (with a
$75,000 minimum fee per annum in the aggregate for all portfolios with respect
to the Administrator).
State Street has entered into a Sub-Administration Agreement with the
Distributor under which the Distributor provides certain administrative
services with respect to the Fund. State Street pays the Distributor a fee for
these services out of its own resources at no cost to the Fund.
Custodian and Sub-Custodian. Comerica Bank (the "Comerica" or the
"Custodian") whose principal business address is One Detroit Center, 500
Woodward Avenue, Detroit, Michigan 48226, is the Fund's custodian. No
compensation is paid to the Custodian for its custodial services. Comerica
receives a fee of 0.01% of the aggregate average daily net assets of the Fund
beneficially owned by Comerica and its customers for certain shareholder
services provided by Comerica to the Fund. State Street serves as the Fund's
sub-custodian.
Distributor. Funds Distributor, Inc. is the distributor of the Fund's shares
and is located at 60 State Street, Boston, Massachusetts 02109. It markets and
sells the Fund's shares.
The Distributor has entered into a licensing agreement with the Michigan
Municipal League to permit the Fund to use the Michigan Municipal League's
name with respect to the Michigan Municipal Shares. In exchange for the
ability to use the name of the Michigan Municipal League, the Distributor pays
the Michigan Municipal League a fee based on the net assets of the Michigan
Municipal Shares.
For an additional description of the services performed by the
Administrator, the Transfer Agent, the Custodian, the Sub-Custodian and the
Distributor, see the SAI.
Year 2000. The Fund's operations depend on the seamless functioning of
computer systems in the financial service industry, including those of its
service providers. Many computer software systems in use today cannot properly
process date-related information after December 31, 1999 because of the method
by which dates are encoded and calculated. This failure, commonly referred to
as the "Year 2000 Issue," could adversely affect the handling of securities
trades, pricing and account servicing for the Fund. The Fund has been informed
that their major service providers have made compliance with the Year 2000
Issue a high priority and are taking steps that they believe are reasonably
designed to address the Year 2000 Issue with respect to their computer
systems. There can be, however, no assurance that these steps will be
successful, or that interaction with other non-complying computer systems will
not impair their services at that time.
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What are My Rights as a Shareholder?
All shareholders have equal voting, liquidation and other rights. You are
entitled to one vote for each share you hold and a fractional vote for each
fraction of a share you hold. You will be asked to vote on matters affecting
the Company as a whole and affecting the Fund. You will not vote by class
unless expressly required by law or when the Directors determine that the
matter to be voted on affects only the interests of the holders of a
particular class of shares. The Company will not hold annual shareholder
meetings, but special meetings may be held at the written request of
shareholders owning more than 10% of outstanding shares for the purpose of
removing a Director. The SAI contains more information regarding voting
rights.
DIVIDENDS, DISTRIBUTIONS AND TAXES
When Will I Receive Distributions from the Fund?
As a shareholder, you are entitled to your share of net income and capital
gains, if any, on the Fund's investments. The Fund passes its earnings along
to its investors in the form of dividends. Dividend distributions are the
dividends or interest earned on investments after expenses. The Fund pays
dividends monthly. The Fund's net realized capital gains (including net short-
term capital gains), if any, are distributed at least annually.
It is possible that the Fund may make a distribution in excess of the Fund's
current and accumulated 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. To the extent that the amount of any such distribution
exceeds your basis in your shares, you will treat the excess as gain from a
sale or exchange of the shares.
How Will Distributions Be Made?
The Fund will pay dividend and capital gains distributions in additional
shares of the same class of the Fund. If you wish to receive distributions in
cash, either indicate this request on your Account Application Form or notify
the Fund at (800) 438-5789.
Are There Tax Implications of My Investments in the Fund?
This section contains a brief summary of the tax implications of ownership
in the Funds' shares. 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 SAI. You should
consult your tax advisor regarding the impact of owning the Funds' shares on
your own personal tax situation including the applicability of any state and
local taxes.
In general, as long as the Fund meets the requirements to qualify as a
regulated investment company ("RIC") under Federal tax laws, it will not be
subject to Federal income tax on its income and capital gains that it
distributes in a timely manner to its shareholders. The Fund intends to
qualify annually as a RIC. Even if it qualifies as a RIC, the Fund may still
be liable for any excise tax on income that is not distributed in accordance
with a calendar year requirement; the Fund intends to avoid the excise tax by
making timely distributions.
Generally, you will owe tax on the amounts distributed to you, regardless of
whether you receive these amounts in cash or reinvest them in additional Fund
shares. Shareholders not subject to tax on their income generally will not be
required to pay any tax on amounts distributed to them. Federal income tax on
distributions to an IRA or to a qualified retirement plan will generally be
deferred.
Capital gains derived from sales of portfolio securities held by the Fund
will generally be designated as long-term or short-term. Distributions from
the Fund's long-term capital gains are generally taxed at the long-term
capital gains rates, regardless of how long you have owned shares in the Fund.
Dividends derived from other sources are generally taxed as ordinary income.
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Dividends and capital gain distributions are generally taxable when you
receive them; however, if a distribution is declared in October, November or
December, but not paid until January of the following year, it will be
considered to be paid on December 31 in the year in which it was declared.
Shortly after the end of each year, you will receive from the Fund a statement
of the amount and nature of the distributions made to you during the year.
If you redeem, transfer or exchange Fund shares, you may have taxable gain
or a loss. If you hold Fund shares for six months or less, and during that
time you receive a capital gain dividend, any loss you realize on the sale of
these Fund shares will be treated as a long-term loss to the extent of the
earlier distribution.
ADDITIONAL INFORMATION
Shareholder Communications. 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.
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 in Ann Arbor, Michigan, at 1675 Green Road. 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.
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