<PAGE>
As filed with the Securities and Exchange Commission
on March 21, 2000
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. 43 [ X ]
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940[ X ]
Amendment No. 43 [ 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
Francine S. Hayes
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
(Munder Focus Growth Fund, Munder Growth Opportunities Fund and
Munder Framlington Global Financial Services Fund Class II Shares)
Part A
- ------
Item Heading
---- -------
1. Cover Page Front and Back Cover Pages
2. Synopsis Risk/Return Summary
3. Condensed Financial Information Fees and Expenses
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
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder Future Technology Fund
Class K 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 Fees and Expenses
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
- ------
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
Holders of Securities and 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 Financial Statements
<PAGE>
THE MUNDER FUNDS, INC.
The purposes of this Post-Effective Amendment filing are to add a new class
of shares, Class II Shares for the Munder Focus Growth Fund (formerly Munder
Equity Selection Fund) and Munder Growth Opportunities Fund and Class K Shares
for the Munder Future Technology Fund to the Company's Registration Statement.
The prospectuses for the Class A, Class B, Class C, Class K and Class Y
Shares for the Munder Focus Growth Fund and Munder Growth Opportunities Fund are
not included in this filing. The prospectuses for Class A, Class B, Class II and
Class Y Shares of the Munder Future Technology Fund are not included in this
filing. The prospectuses for 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 NetNet Fund, Munder Real Estate Equity Investment
Fund, Munder Small-Cap Value Fund, Munder Short Term Treasury Fund and Munder
Value Fund are not included in this filing.
<PAGE>
Class II Shares
[Munder Logo]
Prospectus
May 22, 2000
Munder Focus Growth Fund
(formerly Munder Equity Selection Fund)
Munder Growth Opportunities Fund
Munder Framlington Global Financial Services 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>
<C> <S>
2 Risk/Return Summary
9 Who May Want To Invest
10 Fees And Expenses
11 More About The Funds
12 Other Investment Strategies And Risks
15 Your Investment
15 How To Reach The Funds
15 Purchasing Shares
15 Exchanging Shares
16 Redeeming Shares
17 Additional Policies For Purchases, Exchanges And Redemptions
18 Shareholder Privileges
19 Distribution Arrangements
19 Share Class Selection
19 Cdsc
19 12b-1 Fees
20 Other Information
21 Pricing Of Fund Shares
21 Distributions
22 Federal Tax Considerations
22 Taxes On Distributions
22 Taxes On Sales
22 Other Considerations
23 Management
23 Investment Advisor and Sub-advisor
23 Portfolio Managers
</TABLE>
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."
Focus Growth Fund
(formerly 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 Russell 1000 Growth Index.
The Fund may also invest in foreign
securities.
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.
. Medium-Size Company Risk. 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.
. Foreign Securities Risk. Investments by the Fund in foreign securities
presents 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 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.
2
<PAGE>
Performance
The bar chart and table below give some indication of the risk of an investment
in the Fund. The bar chart shows the Fund's performance for each calendar year
since inception. The table shows 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. Because Class II shares do not have any performance history, the annual
returns in the bar chart, the best quarter and worst quarter returns and the
average annual total return chart are those of the Fund's Class Y Shares, which
are not offered in this prospectus. Class Y shares are not subject to a sales
charge (load). Class II shares are subject to a maximum sales charge (load) of
1% imposed on purchases and a contingent deferred sales charge of 1% imposed on
redemptions of Class II shares within 18 months of purchase. Please see the
section entitled "Fees and Expenses." Performance for Class II shares would
have substantially similar annual returns net of any sales charges (loads),
because the shares are invested in the same portfolio of securities and have
the same portfolio management. Because of different sales charges and fees and
expenses, performance of each class will differ.
Focus Growth Fund
Average Annual Total Return
Total Return (for the periods ended December 31,
(per calendar year) 1999)
<TABLE>
--------------------------------------
<S> <C> <C>
Since
Inception
1 Year (11/11/98)
--------------------------------------
Focus Growth Fund 16.74% 25.98%
S&P 500 Index* 21.03% 29.97%**
Russell 1000(R) Growth Index* 33.14% 46.57%**
</TABLE>
--------
*Standard & Poor's Composite 500
Index is an unmanaged index of
common stock prices. The Russell
1000(R) Growth Index is an index
which measures the performance of
those Russell 1000 companies with
higher price to book ratios and
higher forecasted growth values.
**Index returns from 10/31/98 for S&P
500 Index and Russell 1000 Growth
Index.
[BAR CHART]
1999
- ------
16.74%
- --------
Year-to-date through December 31, 1999: 16.74%
<TABLE>
<S> <C> <C>
Best Quarter: Q4 1999 13.18%
Worst Quarter: Q3 1999 (7.72%)
</TABLE>
3
<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&P MidCap 400 Index.
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 development affecting individual companies and/or
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 Fund invests in do not perform well.
. 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' stocks typically
are traded in a lower volume, and their issuers are subject to greater
degrees of changes in their earnings and prospects.
4
<PAGE>
Performance
The bar chart and table below give some indication of the risk of an investment
in the Fund. The bar chart shows the Fund's performance for each calendar year
since inception. The table shows 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. Because Class II shares do not have any performance history, the annual
returns in the bar chart, the best quarter and worst quarter returns and the
average annual total return chart are those of the Fund's Class Y Shares, which
are not offered in this prospectus. Class Y shares are not subject to a sales
charge (load). Class II shares are subject to a maximum sales charge (load) of
1% imposed on purchases and a contingent deferred sales charge of 1% imposed on
redemptions of Class II shares within 18 months of purchase. Please see the
section entitled "Fees and Expenses." Performance for Class II shares would
have substantially similar annual returns net of any sales charges (loads),
because the shares are invested in the same portfolio of securities and have
the same portfolio management. Because of different sales charges and fees and
expenses, performance of each class will differ.
Growth Opportunities Fund
Average Annual Total Return
Total Return (for the periods ended December 31,
(per calendar year) 1999)
<TABLE>
----------------------------------------
<CAPTION>
Since
Inception
1 Year (6/24/98)
----------------------------------------
<S> <C> <C>
Growth Opportunities Fund 31.62% 17.04%
S&P MidCap 400 Index* 14.71% 16.53%**
</TABLE>
--------
*Standard & Poor's MidCap 400 Index
is a capitalization-weighted index
of that measures the performance of
the mid-range sector of the U.S.
stock market where the median
market capitalization is
approximately $700 million.
**Index return from 6/30/98 for S&P
MidCap 400 Index.
[BAR CHART]
1999
- ------
31.62%
- --------
Year-to-date through December 31, 1999: 31.62%
<TABLE>
<S> <C> <C>
Best Quarter: Q4 1999 24.95%
Worst Quarter: Q1 1999 (7.77)%
</TABLE>
5
<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 companies are selected by the "bottom-up approach". This strategy is the
search for outstanding performance of individual companies before considering
the impact of economic trends. The sub-advisor evaluates companies, analyzing a
number of factors, including the growth prospects of a financial services
company relative to the price of its stock.
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.
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:
. Sector Risk. The Fund will invest primarily in companies which are
principally engaged in the financial services industry and companies
providing services primarily within the financial services industry. Adverse
economic, business or political developments affecting that industry sector
could have a major effect on the value of the Fund's investments.
. 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.
6
<PAGE>
. Medium-Size Company Risk. 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.
. Derivatives Risk. The Fund may suffer a loss from the Fund's use of 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.
. Foreign Securities Risk. 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.
. Currency Risk. A Fund that invests 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 the Fund's portfolio securities
denominated in those currencies.
7
<PAGE>
Performance
The bar chart and table below give some indication of the risk of an investment
in the Fund. The bar chart shows the Fund's performance for each calendar year
since inception. The table shows 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. Because Class II shares do not have any performance history, the annual
returns in the bar chart, the best quarter and worst quarter returns and the
average annual total return chart are those of the Fund's Class Y Shares, which
are not offered in this prospectus. Class Y shares are not subject to a sales
charge (load). Class II shares are subject to a maximum sales charge (load) of
1% imposed on purchases and a contingent deferred sales charge of 1% imposed on
redemptions of Class II shares within 18 months of purchase. Please see the
section entitled "Fees and Expenses." Performance for Class II shares would
have substantially similar annual returns net of any sales charges (loads),
because the shares are invested in the same portfolio of securities and have
the same portfolio management. Because of different sales charges and fees and
expenses, performance of each class will differ.
Framlington Global Financial Average Annual Total Return
Services Fund (for the periods ended December 31,
1999)
Total Return <TABLE>
(per calendar year) --------------------------------------
<S> <C> <C>
Since
Inception
1 Year (6/24/98)
--------------------------------------
Framlington Global Financial Services
Fund 4.52% 3.42%
MSCI World Finance Index* 8.57% N/A**
</TABLE>
--------
*The Morgan Stanley (MSCI) World
Finance Index is an unmanaged index
which follows 22 developed nations,
containing four sub-sectors
(Insurance, Financial Services,
Real Estate and Banking).
**Index did not exist until January
1999.
[BAR CHART]
1999
- -----
4.52%
- --------
Year-to-date through December 31, 1999: 4.52%
<TABLE>
<S> <C> <C>
Best Quarter: Q4 1999 7.35 %
Worst Quarter: Q3 1999 (2.52)%
</TABLE>
8
<PAGE>
Who May Want To Invest
The Funds may be appropriate for investors:
. Looking to invest over the long term.
. Able to ride out market swings.
The Funds alone cannot provide a balanced investment program.
9
<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 II
Shares
Shareholder Fees (fees paid directly from your investment) --------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering
price)............................................................... 1%
Maximum Deferred Sales Charge (Load) (as a % of the lesser of original
purchase price or
redemption proceeds................................................... 1%(a)
Sales Charge (Load) Imposed on Reinvested Dividends................... None
Redemption Fees....................................................... None
Exchange Fees......................................................... 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
- ----------------------------------------------------- -------------------------
Class
Class II II Class II
Shares Shares* Shares**
Focus Growth Fund -------- ------- --------
<S> <C> <C> <C> <C>
Management Fees............................. .75% 1 Year $ 416 $ 314
Distribution and/or Service (12b-1) Fees.... 1.00% 3 Years $ 759 $ 759
Other Expenses.............................. .37% 5 Years $1,231 $1,231
----
Total Annual Fund Operating Expenses........ 2.12% 10 Years $2,536 $2,536
====
<CAPTION>
Class
Class II II Class II
Shares Shares* Shares**
Growth Opportunities Fund -------- ------- --------
<S> <C> <C> <C> <C>
Management Fees............................. .75% 1 Year $ 469 $ 638
Distribution and/or Service (12b-1) Fees.... 1.00% 3 Years $ 921 $ 921
Other Expenses(1)........................... .91% 5 Years $1,501 $1,501
----
Total Annual Fund Operating Expenses(1)..... 2.66% 10 Years $3,074 $3,074
====
<CAPTION>
Class
Class II II Class II
Shares Shares* Shares**
Framlington Global Financial Services Fund -------- ------- --------
<S> <C> <C> <C> <C>
Management Fees............................. .75% 1 Year $ 547 $ 446
Distribution and/or Service (12b-1) Fees.... 1.00% 3 Years $1,153 $1,153
Other Expenses(1)........................... 1.70% 5 Years $1,883 $1,883
----
Total Annual Fund Operating Expenses(1)..... 3.45% 10 Years $3,806 $3,806
====
</TABLE>
- --------
(a) The contingent deferred sales charge (CDSC) is a one-time fee charged at
the time of redemption. The CDSC applies to redemptions of Class II shares
within eighteen months of purchase.
(1) The advisor has voluntarily agreed to reimburse the Growth Opportunities
Fund and Framlington Global Financial Services Fund for certain operating
expenses. As a result of the expense reimbursement, actual other operating
expenses and total annual fund operating expenses for the current fiscal
year, which have been restated to reflect an increase in general operating
expenses of the Funds, are expected to be .43% and 2.18%, respectively for
the Growth Opportunities Fund and .50% and 2.25%, respectively for the
Framlington Global Financial Services Fund. The advisor may eliminate all
or part of the expense reimbursement at any time.
* Assumes you sold your shares at the end of the time period.
** Assumes you stayed in the Fund.
10
<PAGE>
More About The Funds
- --------------------------------------------------------------------------------
This section further describes the Funds' principal investment strategies and
risks that are summarized above in the Risk/Return Summary. 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.
Equity Securities. The Funds invest in equity securities which 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.
Foreign Securities. 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. Framlington Global Financial Services Fund will invest
all or a substantial portion of its total assets in foreign securities.
Equity Selection Fund and Growth Opportunities Fund may invest up to 25% of
its 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.
11
<PAGE>
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.
Short-Term Trading. The 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.
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.
Other Investment Strategies And Risks
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 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 the interest income earned by the
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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.
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, 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.
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 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
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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.
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.
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 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.
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.
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.
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Your Investment
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This section describes how to do business with the Fund.
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 II shares of the Funds are sold at the net asset value per share (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.
Broker-dealers (other than the Funds' distributor) may charge you additional
fees for shares you purchase through them.
Policies for Purchasing Shares
Investment minimums
<TABLE>
<C> <S>
. Initial: $250
. Subsequent: $50
. Automatic Investment Plan: $50
</TABLE>
Timing of orders
Purchase orders must be received by the Funds' distributor, transfer agent or
authorized dealer before the close of regular trading on the New York Stock
Exchange (normally, 4:00 p.m. Eastern time). Purchase orders received after
that time will be accepted as of the next business day.
Methods for Purchasing Shares
Investors may purchase shares:
. By Broker. Any broker authorized by the 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. 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.
. 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.
. 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.
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<PAGE>
. You may exchange Class II shares for Class C shares of other Munder Funds
based on their relative net asset values.
. Class II 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 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 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:
. 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 paid by check.
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 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.
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<PAGE>
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 its 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 Fund to suspend
redemptions.
. If accepted by a Fund, investors may purchase shares of that 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 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 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 a Fund, 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. A Fund and its distributor reserve the
right to refuse any purchase or exchange request that could adversely affect
a 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.
17
<PAGE>
Additionally, in no event will the Funds 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 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 Funds. You or your broker must notify the
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
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 transfer agent.
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<PAGE>
Distribution Arrangements
- --------------------------------------------------------------------------------
Share Class Selection
Each Fund offers Class II shares. 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 II shares
. Front end sales charge.
. No CDSC, except for a CDSC for redemptions made within eighteen months after
investing.
. Shares do not convert to another class.
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 type of investors. Call (800) 438-5789 to obtain more
information about those classes.
Cdsc
You pay a CDSC when you redeem:
. Class II shares within eighteen months of buying them.
At the time of purchase of Class II shares, the distributor pays sales
commissions of 2.00% of the purchase price to brokers that initiate and are
responsible for purchases of such Class II shares of the Funds.
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 shares of a Fund 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;
. 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 CDSC waivers which apply
when you redeem shares acquired in an exchange of shares of another Munder Fund
purchased on or before June 27, 1995.
Rule 12b-1 Fees
The Funds have adopted Rule 12b-1 plans with respect to its Class II 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, each Fund
may pay up to .25% of the daily net assets of Class II shares to pay for
certain shareholder services provided by institutions that have agreements with
the Funds' distributor to provide such services. Each Fund may also pay up to
.75% of the daily net assets of the Class II 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 the Funds and may
cost a shareholder more than paying other types of sales charges.
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<PAGE>
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 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.
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Pricing Of Fund Shares
- --------------------------------------------------------------------------------
Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV for Class II 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 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 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.
The Funds pay dividends, if any, at least annually.
The 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. 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
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
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Investment Advisor And Sub-Advisor
Munder Capital Management ("MCM"), 480 Pierce Street, Birmingham, Michigan
48009 is the investment advisor of each Fund. As of December 31, 1999, the
advisor and its affiliates had approximately $56 billion in assets under
management, of which $36 billion were invested in equity securities, $7 billion
were invested in money market or other short-term instruments, $7 billion were
invested in other fixed income securities, and $6 billion in non-discretionary
assets.
Framlington Overseas Investment Management Limited ("Framlington"), an
affiliate of MCM, is the sub-advisor of the Framlington Global Financial
Services Fund.
The advisor provides overall investment management and provides all research
and credit analysis and is responsible for all purchases and sales of portfolio
securities for the Focus Growth Fund and Growth Opportunities Fund.
Framlington provides research and credit analysis for 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, the advisor was paid an advisory
fee at an annual rate of 0.75% of the average daily net assets of each Fund.
Portfolio Managers
Focus Growth Fund And Growth Opportunities Fund
A committee of professional portfolio managers employed by MCM makes investment
decisions for the Fund.
Framlington Global Financial Services Fund
A committee of professional managers employed by MCM or Framlington makes
decisions for the Fund.
23
<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 the Funds' annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during its last fiscal year. 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 1-202-942-8090) 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 Framlington Funds Trust
SEC file number: 811-7897
<PAGE>
[LOGO]
Investments for all seasons
CLASS K SHARES
Prospectus
MAY 22, 2000
THE MUNDER FUTURE TECHNOLOGY 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>
<C> <S>
2 Risk/Return Summary
2 Goal
2 Principal Investment Strategies
2 Principal Risks
3 Performance
3 Who May Want To Invest
4 Fees and Expenses
5 More About The Fund
5 Other Investment Strategies And Risks
7 Your Investment
7 How To Reach The Fund
7 Purchasing Shares
7 Redeeming Shares
7 Additional Policies For Purchases And Redemptions
8 Service Agents
9 Pricing of Fund Shares
9 Distributions
10 Federal Tax Considerations
10 Taxes On Distributions
10 Taxes On Sales
10 Other Considerations
11 Management
11 Investment Advisor
11 Portfolio Managers
</TABLE>
Back Cover For Additional Information
<PAGE>
Risk/Return Summary
- --------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goal and principal investment
strategies of the Munder Future Technology Fund and the principal risks of
investing in the Fund. For further information on these and the Fund's other
investment strategies and risks, please read the section entitled More About
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.
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 common
stocks of technology-related companies. Technology-related companies are
companies that develop, manufacture, or distribute technology, communications
and Internet-related products and services. The Fund may also invest in the
stocks of companies that should benefit commercially from technological
advances. The Fund invests in both established companies and in new or
unseasoned companies, including companies making initial public offerings.
The products and services provided by technology-related companies may include:
computer hardware and software, communications hardware and software,
semiconductors, business services, media and information services, and
Internet-related services.
In selecting stocks, the advisor will first identify attractive sectors within
the technology industry. The advisor will then focus on companies that it
believes are current industry leaders or leading companies in developing
sectors. Using fundamental analysis, the advisor will look for companies with:
. strong market share within their sector; and/or
. technologically superior products or services; and
. stable or improving revenue growth, earnings growth or order trends.
The Fund is "non-diversified" under the Investment Company Act of 1940, as
amended and may invest more of its assets in fewer issuers than a "diversified"
investment company.
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.
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 development affecting individual companies and/or
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 Fund invests in do not perform well.
. Sector Risk. The Fund will concentrate its investments in the technology
industry. Market or economic factors impacting that industry could have a
major effect on the value of the Fund's investments. The value of stocks of
technology companies is particularly vulnerable to rapid changes in
technology product cycles, government regulation and competition. Technology
stocks, especially those of smaller, less-seasoned companies, tend to be more
volatile than the overall market.
. Non-Diversified Risk. The Fund may invest more of its assets in fewer issuers
than many other funds do, may be more susceptible to adverse developments
affecting any single issuer, and may be more susceptible to greater losses
because of these developments.
2
<PAGE>
. 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 company stocks typically are
traded in lower volume, and their issuers are subject to greater degrees of
changes in their earnings and prospects. Investments in initial public
offerings may result in increased transaction costs and expenses and the
realization of short-term capital gains and distributions.
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.
Who May Want To Invest
The Fund may be appropriate for investors:
. Looking to invest over the long term.
. Able to tolerate market swings.
. Looking to invest in a stock portfolio focused on a particular stock market
segment.
The Fund alone cannot provide a balanced investment program.
3
<PAGE>
Fees and Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold Class K 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
Maximum Deferred Sales Charge (Load)....................................... None
Sales Charge (Load) Imposed on Reinvested Dividends........................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses (expenses that are paid from Fund assets) Class K
as a % of net assets Shares
- ------------------------------------------------------------------------ -------
<S> <C>
Management Fees......................................................... 1.00%
Other Expenses
Shareholder Servicing Fees............................................ .25%
Other Operating Expenses(1)........................................... .50%
-----
Total Other Expenses.................................................. .75%
-----
Total Annual Fund Operating Expenses(1)................................. 1.75%
=====
</TABLE>
- --------
(1) Other operating expenses are based on estimated amounts for the current
fiscal year. The advisor has voluntarily agreed to reimburse certain
operating expenses to keep the Fund's other expenses at a specified level.
As a result, it is estimated that the Fund's other expenses and total
annual fund operating expenses are expected to be .35% and 1.60%,
respectively. The advisor may eliminate all or part of the expense
reimbursement 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 example also
assumes that your investment has a 5% return each year, that the Fund's
operating expenses remain the same as shown in the table above and that all
dividends and distributions are reinvested. Although your actual cost may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$179 $556
</TABLE>
4
<PAGE>
More About The Fund
- --------------------------------------------------------------------------------
This section further describes the Fund's principal investment strategies and
risks that are summarized in the Risk/Return Summary. The Fund may 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.
Securities considered for purchase by the Fund may be listed or unlisted. 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.
Short-Term Trading. The Fund may engage in short-term trading, including
initial public offerings. 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.
Other Investment Strategies and Risks
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") which are U.S.
dollar-denominated receipts representing shares of foreign 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 taxes by foreign governments. Foreign investments may
also involve risks associated with changing 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 foreign
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.
Futures Contracts and Related Options. The Fund may enter into futures
contracts and options on future contracts, which are forms of derivatives.
Derivatives are financial contracts whose value is based on an underlying
security, a currency exchange rate, an interest rate or a market index. 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
5
<PAGE>
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, but is not required to, use futures and
options on futures for hedging purposes, for the purpose of remaining fully
invested or maintaining liquidity to meet potential shareholder
redemptions, to invest cash balances or dividends, or to minimize trading
costs. The Fund will not use futures and options on futures for speculative
purposes.
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 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.
Securities Lending. In order to generate additional income, the Fund may lend
portfolio securities on a short-term basis to qualified institutions. By
reinvesting any cash collateral it receives in these transactions, the Fund
could realize additional 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.
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 opportunity, each of which
may cause a loss to the Fund.
6
<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, 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. The 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 Fund's other
classes of shares.
Purchase Price of Shares
Class K 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.
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, transfer agent or
authorized dealer 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 the Fund through your bank or other financial
institution.
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 the 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 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.
. At any time, the Fund may change any of their purchase or redemption
procedures, and may suspend the sale of their 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.
7
<PAGE>
. To limit the Fund's expenses, we no longer 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;
. 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 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 Fund, the Fund's 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.
Service Agents
Class K shares of the Fund are sold through institutions that have entered into
shareholder servicing agreements with the Fund. These agreements are permitted
under the Fund's 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 the 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 Fund for providing shareholder services to its customers who own
shares of the Fund.
In addition, 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.
8
<PAGE>
Pricing Of Fund Shares
- --------------------------------------------------------------------------------
The Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV for Class K 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 their
calculation of NAV and transaction deadlines to that time.
The NAV of the 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
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, at least annually.
The 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.
The 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 Fund by calling (800) 438-5789.
9
<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 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 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 Fund will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
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
Fund must withhold a portion of your distributions and redemption proceeds to
pay federal income taxes.
10
<PAGE>
Management
- --------------------------------------------------------------------------------
Investment Advisor
Munder Capital Management, 480 Pierce Street, Birmingham, Michigan 48009 is the
investment advisor of each Fund. As of December 31, 1999, the advisor and its
affiliates had approximately $56 billion in assets under management, of which
$36 billion were invested in equity securities, $7 billion were invested in
money market or other short-term instruments, $7 billion were invested in other
fixed income securities, and $6 billion in non-discretionary assets.
The advisor provides overall investment management for the Fund, provides
research and credit analysis and is responsible for all purchases and sales of
portfolio securities.
The advisor is entitled to receive a fee equal to 1.00% annually 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.
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 the Fund's annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. 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).
The Munder Funds, Inc.
SEC file number: 811-7346
Investment Advisor: Munder Capital Management
Distributed by: Funds Distributor, Inc.
To Obtain Information:
- --------------------------------------------------------------------------------
By telephone
Call 1-800-438-5789
By mail
Write to:
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 1-202-942-8090) 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>
THE MUNDER FUNDS, INC., THE MUNDER FUNDS TRUST
AND THE MUNDER FRAMLINGTON FUNDS TRUST
<TABLE>
<CAPTION>
<S> <C>
Munder Balanced Fund Munder Framlington Healthcare Fund
Munder Focus Growth Fund
(formerly Munder Equity Selection Fund) Munder Framlington International Growth Fund
Munder Future Technology Fund Munder Bond Fund
Munder Index 500 Fund Munder Intermediate Bond Fund
Munder Growth Opportunities Fund Munder International Bond Fund
Munder Equity Income Fund (formerly 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
Munder Small-Cap Value Fund Fund)
Munder Small Company Growth Fund Munder Cash Investment Fund
Munder Value Fund Munder Money Market Fund
Munder Framlington Emerging Markets Fund Munder Tax-Free Money Market Fund
Munder Framlington Global Financial Services Fund Munder U.S. Treasury Money Market Fund
</TABLE>
(collectively, the "Funds")
STATEMENT OF ADDITIONAL INFORMATION
October 26, 1999
As Revised May 22, 2000
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, twelve
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 and May 22, 2000. 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
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<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.................................................. 23
Temporary Defensive Position............................................ 28
Management of the Fund.................................................. 28
Investment Advisory and Other Service Arrangements...................... 32
Code of Ethics.......................................................... 45
Portfolio Transactions.................................................. 45
Additional Purchase and Redemption Information.......................... 49
Net Asset Value......................................................... 51
Performance Information................................................. 52
Taxes................................................................... 61
Additional Information Concerning Shares................................ 67
Other Information....................................................... 69
Registration Statement.................................................. 88
Financial Statements.................................................... 89
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.
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<PAGE>
HISTORY AND GENERAL INFORMATION
The following Funds are described in this SAI:
The Munder Funds Trust
- ----------------------
Munder Balanced Fund ("Balanced Fund")
Munder Equity Income Fund ("Equity Income Fund") (formerly Munder 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 Focus Growth Fund ("Focus Growth Fund") (formerly Munder Equity Selection
Fund)
Munder Future Technology Fund ("Future Technology 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
- ----------------------------------
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, the Tax-Free Short-Intermediate
Bond Fund and the Future Technology 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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<PAGE>
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 ("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 Focus Growth Fund, Future Technology Fund,
Global Financial Services Fund, Equity 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
4
<PAGE>
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 Future Technology Fund,
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.
5
<PAGE>
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, 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.
6
<PAGE>
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 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
7
<PAGE>
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
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
8
<PAGE>
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 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 Equity 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 Equity 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.
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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. 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.
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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 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
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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 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
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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 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.
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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 (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
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(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, 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
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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 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.
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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 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
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Boards of Directors/Trustees, that the unrated and single rated securities are
of comparable quality to the appropriate rated securities.
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.
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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 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
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 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.
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.
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 portions of collections from the personal income tax, the
single business tax, use tax, sales tax and various other taxes.
The State's Constitution also 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, discussed below. The State may raise taxes in
excess of the limit in emergency situations, when deemed necessary by the
Governor and two-thirds of the members of each house of the Legislature.
In 1977, the State enacted legislation which created the Counter-Cyclical
Budget and Economic Stabilization Fund, commonly known as the Budget
Stabilization Fund ("BSF"), to accumulate balances during years of significant
economic growth for utilization in years when the State's economy experiences
cyclical downturns or unforeseen fiscal emergencies. Calculated on an accrual
basis, the unreserved ending accrued balance of the BSF on September 30, 1995
was $987.9 million, $614.5 million on September 30, 1996, $579.8 million on
September 30, 1997 and 1,000.5 million on September 30, 1998. The balance is net
of a reserve for future education funding of $539.1 million on September 30,
1996 and $572.6 million on September 30, 1997.
In 1999, legislation was passed completely phasing out the single business tax
("SBT"). Effective January 1, 1999, the SBT rate was reduced from 2.3% to 2.2%
and is to be reduced annually by 0.1% each January 1 until the tax is completely
eliminated. The annual reduction does not occur if the BSF balance for the prior
fiscal year is under $250 million. SBT rate reductions will cease until the BSF
fiscal year ending balance returns to $250 million or more. The same legislation
also provides single business tax relief for companies that spin off a portion
of their business pursuant to a restructuring, specifically defines the tax base
of foreign corporations for single business tax purposes and replaces the
capital acquisition deduction with an investment tax credit ("ITC"). The ITC
becomes effective on January 1, 2000 and was set at the revenue neutral rate of
0.85%, which will be reduced in proportion to the SBT rate cut.
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Property tax and school finance reform measures enacted in 1998
substantially cut local school property taxes and raised additional State
revenues to replace most of the property tax cut. A constitutional amendment
approved by the voters in March 1994, increased the State sales and use tax from
4% to 6%, limited the ability of local school districts to levy taxes, and
limited assessment increases for each parcel of property to the lesser of 5% or
the rate of inflation. When property is subsequently sold, its taxable value
will revert to the current assessment level of 50% of true cash value. Companion
legislation increased the cigarette tax $.25 to $.75 per pack and imposed an
additional tax of 16% of the wholesale price on certain other tobacco products,
imposed a State real estate transfer tax of 0.75% and a 6-mill State property
tax and cut the State's income tax rate from 4.6% to 4.4%. These measures shift
significant portions of the cost of local school operations from local school
districts to the State and raise 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.
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, tax collection, commerce and budgetary
reductions to school districts and governmental units and court funding. Relief
sought includes damages in tort cases generally, alleviation of prison
overcrowding, improvement of prison medical and mental health care and refund
claims under State taxes. The State is also a party to various legal proceedings
which, if resolved in the State's favor, would result in contingency gains to
the State's General Fund balance, but without material effect upon such fund
balance. Although the ultimate disposition and consequences of all of these
proceedings are not presently determinable, 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 such ultimate
dispositions and consequences of any single proceeding or all legal proceedings
collectively should not themselves, except as listed below, have a material
adverse effect on the security for such bonds; provided, however, that 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.
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
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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 each of the 1997-1998, 1998-1999 and 1999-2000
school years 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. On June
11, 1998, the Michigan Court of Appeals dismissed this suit on technical
grounds, without prejudice however, to the timely filing of a new complaint. On
September 29, 1998, the Michigan Supreme Court reversed the June 11, 1998 Order
of the Michigan Court of Appeals and remanded Durant II to the Michigan Court of
Appeals. The Michigan Supreme Court directed the Michigan Court of Appeals to
resolve expeditiously certain issues raised by the Durant II plaintiffs.
On October 30, 1998, the school districts moved to amend their complaint to
challenge the newly-enacted amendments to the State School Aid Act, 1998 PA 339,
to add claims for the 1999-2000 fiscal year and to add a new count for mandamus
against the State treasurer. On December 2, 1998, the Court of Appeals granted
the Durant II plaintiffs' motion to amend the complaint and established a
briefing schedule. On September 17, 1999, the Court of Appeals granted the
Durant II plaintiffs' motion to file a second amended complaint which, among
other provisions, added 125 additional school districts and at least 125
individuals as plaintiffs, bringing the entire class to approximately 500
plaintiffs. The case remains pending in the Court of Appeals and is expected to
proceed in an expedited fashion.
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 1998, this figure had fallen to 14.4%.
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.
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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, 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
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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;
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
24
<PAGE>
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);
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;
25
<PAGE>
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; (iv) provided that with respect to the Focus Growth 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; and (v) except that the Future
Technology Fund will invest more than 25% of its total assets in the
technology industry;
2. (For each Fund except the International Bond Fund and the Future
Technology 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;
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;
26
<PAGE>
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 Future
Technology, 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.
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
27
<PAGE>
4. Invest in other investment companies except as permitted under the 1940
Act.
In addition, the International Bond Fund and the Future Technology Fund may
not with respect to 50% of each Fund's assets, invest more than 5% of each
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:
<TABLE>
<CAPTION>
Positions with Trust, Company Principal Occupation
Name, Address and Age and 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 Directors Western Michigan University (since
Kalamazoo, MI 49008 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 Director, Disciplined Growth Investors
7 Wood Ridge Road (investment management firm since
Glen Arbor, MI 49636 December 1999); Partner, Financial &
Age: 66 Investment Management Group (April
1991 to December 1999).
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C>
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).
Lee P. Munder* Trustee/Director and President Chairman of the Advisor (February 1998
1029 N. Ocean Blvd. to December 1999); Chief Executive
Palm Beach, FL 33480 Officer of the Advisor (1995 to 1998);
Age: 54 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, 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).
Michael Monahan Vice President Chairman of the Advisor (January 2000 to present);
480 Pierce Street Vice President and Chief Executive
Suite 300 Officer of the Advisor (October 1999
Birmingham, MI 48009 to December 1999); President of Monahan
Age:61 Enterprises, LLC (consulting company)
(June 1999 to present); President of
Comerica Incorporated (1994 to June
1999); President of Comerica Bank
(1994 to June 1999).
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C>
Elyse G. Essick Vice President Vice President and Director of
480 Pierce Street Communications and Client Services of
Suite 300 the Advisor (since January 1995).
Birmingham, MI 48009
Age: 41
James C. Robinson Vice President Chief Executive Officer of the Advisor (January 2000 to
480 Pierce Street present); Executive Vice President of the Advisor
Suite 300 (February 1998-December 1999); and Chief
Birmingham, Street Investment Officer/Fixed Income of the
Age: 38 Advisor (since January 1995).
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 of
480 Pierce Street the Advisor (since July 1999); Global
Suite 300 Portfolio Client Associate of Invesco
Birmingham, MI 48009 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 of the Advisor (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 Associate, Miro Weiner & Kramer (law
Birmingham, MI 48009 firm) (1991 to 1997).
Age: 45
</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 $3,500 for
30
<PAGE>
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)
- ------------------------------------------------------------------------------------------------------------------------
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, 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 February 28, 2000, 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
Emerging Markets Fund in which Trustees and officers, as a group, owned 1.19% of
Class Y 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 the Future Technology Fund, the NetNet Fund, the Micro-Cap
Fund in which the Directors and officers, as a group, owned 3.80%, 4.78% and
1.15% of Class Y shares of those Funds, respectively.
James Robinson is administrator of a pension plan for employees of Munder
Capital Management, which as of February 28, 2000, owned 9,560 Class Y shares of
the Emerging Markets Fund, 17,214 Class Y shares of the International Growth
Fund, 5,563 Class Y shares of the Micro-Cap Fund, 50,775 Class Y shares of the
Multi-Season Growth Fund, 18,636 Class Y shares of the Real Estate Fund, 24,221
Class Y shares of the Value Fund, 145,395 Class Y shares of the Bond Fund,
46,906 Class Y shares of the Index 500 Fund, 45,237 Class Y shares of the
International Bond Fund, 12,782 Class Y shares of the International Equity Fund,
10,021 Class Y shares of the Small Company Growth Fund, which represented less
than 1% of the outstanding Class Y Shares of those Funds. As of the same date,
the pension plan owned 9,100 Class Y shares of the Healthcare Fund, 18,063 Class
Y shares of the Focus Growth Fund, 8,144 Class Y shares of the NetNet Fund and
13,206 Class Y shares of the Small-Cap Value Fund, which represented 1.76%,
2.05%, 2.46% and 4.08%, respectively of the outstanding Class Y shares of those
Funds.
As of February 28, 2000, the Advisor and its affiliates, through common
ownership, owned beneficially 4,275,092.140 of Class Y shares of the Money
Market Fund, which represented 10.10% of the outstanding Class Y shares of the
Fund.
31
<PAGE>
The initial sales charge on Class A shares of the Funds of the Company, the
Trust and Framlington will be waived for full-time employees and retired
employees of the Advisor and individuals with an investment account or
relationship with the Advisor.
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 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, 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") 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,
32
<PAGE>
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 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*
33
<PAGE>
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
. Future Technology Fund**
. Micro-Cap Fund**
. NetNet Fund**
.75% of average daily net assets
. Focus Growth Fund
. Global Financial Services Fund**
. Equity 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
. 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 Future Technology Fund, Growth Opportunities
Fund, Micro-Cap Fund, NetNet Fund, Short Term Treasury 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.
34
<PAGE>
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 Balanced Fund, $1,650,704 for the Equity 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 Equity
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 Focus Growth Fund) the Advisor
received fees after waivers, if any, of $417,501 for the Balanced Fund, $50,364
for the Focus Growth Fund, $1,851,765 for the Equity Income Fund, $19,294 for
the Growth Opportunities Fund $681,461 for the Index 500 Fund, $1,537,543 for
the International Equity Fund, $432,863 for the Micro-Cap Equity Fund,
$5,611,477 for the Multi-Season Fund, $8,434,195 for NetNet Fund, $652,005 for
the Real Estate Fund, $1,022,524 for the Small-Cap Value Fund, $2,558,572 for
the Small Company Growth Fund, $1,187,734 for the Value Fund, $1,323,141 for the
Bond Fund, $2,847,670 for the Intermediate Bond Fund, $270,236 for the
International Bond Fund, $345,389 for the Michigan Bond Fund, $101,140 for the
Short Term Treasury Fund, $971,168 for the Tax-Free Bond Fund, $1,511,012 for
the Tax-Free Short-Intermediate Bond
35
<PAGE>
Fund, $1,506,263 for the U.S. Income Fund, $4,450,033 for the Cash Investment
Fund, $514,285 for the Money Market Fund, $1,188,449 for the Tax-Free Money
Market Fund, $334,833 for the U.S. Treasury Money Market Fund, $626,144 for the
International Growth Fund, $538,218 for the Emerging Markets Fund, $192,182 for
the Healthcare Fund and $18,413 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 $12,414 for the
Growth Opportunities Fund, $1,778,650 for the Index 500 Fund, $50,658 for the
Micro-Cap Equity Fund, $1,250,000 for the Multi-Season Growth Fund, $118,477 for
the Emerging Markets Fund, $59,761 for the Healthcare Fund, $93,638 for the
International Growth Fund $0 for the NetNet Fund and $0 for the Short Term
Treasury 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 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, Class C and Class II
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 (except the Future Technology 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 Service and Distribution Plans for Class II Shares with respect to the
Future Technology Fund, Focus Growth Fund, Growth Opportunities Fund and Global
Financial Services Fund, the Distributor is paid an annual service fee of up to
0.25% of the value of average daily net assets of the Class II 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 II 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
36
<PAGE>
the Distributor of 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. With respect to Class II Class Shares of
the Future Technology Fund, Focus Growth Fund, Growth Opportunities Fund and
Global Financial Services Fund, the Distributor expects to pay sales commissions
to dealers authorized to sell the Funds' Class II 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.
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 $ 2,752
Bond Fund $ 2,203 $ 2,735 $ 5,031
Cash Investment Fund $ 0 $269,773 $318,257
Equity Income Fund $ 5,324 $ 14,520 $ 14,718
Index 500 Fund $ 48,763 $140,154 $668,669
Intermediate Bond Fund $ 13,919 $ 17,654 $ 22,016
International Equity Fund $ 13,505 $ 15,618 $ 16,677
Michigan Bond Fund $ 1,206 $ 2,067 $ 5,390
Small Company Growth Fund $ 17,843 $ 59,251 $ 52,064
Tax-Free Bond Fund $ 1,206 $ 7,966 $ 6,166
Tax-Free Short-Intermediate Bond
Fund $ 14,678 $ 17,556 $ 16,189
Tax-Free Money Market Fund $ 0 $154,996 $177,079
U.S. Income Fund $ 0 $ 6,581 $ 9,378
U.S. Treasury Money Market Fund $ 0 $ 18,269 $ 28,349
Funds of the Company
Focus Growth Fund N/A N/A $ 0****
Growth Opportunities Fund N/A $ 0** $ 0****
International Bond Fund $ 39* $ 400 $ 813
Micro -Cap Fund $ 79* $ 14,218 $ 19,674
Money Market Fund $ 1,198* $ 31,560 $ 45,127
Multi-Season Fund $ 30,811 $ 55,691 $100,839
NetNet Fund N/A $ 2,066 $839,394
Real Estate Fund $ 1,559 $ 6,769 $ 7,993
Short Term Treasury Fund N/A $ 11*** N/A
Small-Cap Value Fund $ 558* $ 10,714 $ 15,374
Value Fund $ 2,347 $ 10,919 $ 12,320
</TABLE>
37
<PAGE>
<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 Framlington
Emerging Markets Fund $ 285 $ 1,804 $ 1,134
Global Financial Services Fund N/A $ 0** $ 0****
Healthcare Fund $ 241 $ 7,066 $ 10,366
International Growth Fund $ 759 $ 3,287 $ 5,139
</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.
**** As of June 30, 1999, the Focus Growth Fund, Growth Opportunities Fund and
the Global Financial Services Fund had not commenced selling of Class A
Shares.
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 CDSCs 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 $ 9,120 $ 909
Bond Fund $ 5,482 $ 447.26 $ 6,329 $ 245 $ 15,696 $ 2,354
Equity Income Fund $ 3,519 $ 535.41 $ 10,447 $ 2,013 $ 24,950 $ 4,389
Index 500 Fund $153,426 $ 0.00 $421,479 $51,363 $1,928,910 $ 146,960
Intermediate Bond Fund $ 2,627 $ 0.00 $ 5,683 $ 1,556 $ 22,201 $ 9,978
International Equity Fund $ 10,398 $ 318.86 $ 11,221 $ 2,246 $ 9,592 $ 4,257
Michigan Bond Fund $ 2,779 $ 0.00 $ 4,234 $ 27 $ 6,916 $ 434
Small Company Growth Fund
$21, 679 $ 930.13 $107,506 $ 6,931 $ 107,763 $ 36,705
Tax-Free Bond Fund $ 566 $ 0.00 $ 3,552 $ 50 $ 7,353 $ 428
Tax-Free Short-Intermediate
Bond Fund $ 1,782 $ 0.00 $ 3,575 $ 0 $ 9,837 $ 652
U.S. Income Fund $ 13,452 $ 0.00 $ 12,408 $ 1 $ 35,222 $ 3,037
Funds of the Company
Focus Growth Fund N/A N/A N/A N/A $ 0**** $ 0
Growth Opportunities Fund N/A N/A $ 0*** $ 0 $ 0**** $ 0
International Bond Fund $ 11* $ 0.00 $ 401 $ 0 $ 1,342 $ 0
Micro-Cap Fund $ 513* $ 0.00 $ 81,387 $18,345 $ 127,395 $ 50,177
Money Market Fund $ 1,925 $ 711.20 $ 7,836 $ 2,888 $ 47,860 $ 77,825
Multi-Season Fund $ 27,446 $ 0.00 $942,437 $57,921 $ 948,914 $ 41,704
NetNet Fund N/A N/A $ 1,359** $ 0 $3,635,986 $1,584,021
Real Estate Fund $731,958 $26,020.64 $ 63,758 $ 6,409 $ 56,177 $ 22,385
Short Term Treasury Fund $ 116* $ 0.00 $ 1,848** $ 92 N/A N/A
Small-Cap Value Fund $ 648* $ 0.00 $ 15,054 $ 590 $ 28,749 $ 6,116
Value Fund $ 2,689 $ 0.00 $ 15,819 $ 129 $ 21,110 $ 8,889
</TABLE>
38
<PAGE>
<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 CDSCs FEES CDSCs FEES CDSCs
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Funds of Framlington
Emerging Markets Fund $ 95* $ 0.00 $ 4,169 $ 1,670 $ 4,912 $ 22,506
Global Financial Services
Fund N/A N/A $ 0*** $ 0 $ 0**** $ 0
Healthcare Fund $ 1,240* $ 0.00 $ 42,842 $ 7,556 $ 75,939 $ 43,628
International Growth Fund $ 175* $ 0.00 $ 2,170 $ 190 $ 5,792 $ 15,508
</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.
**** As of June 30, 1999, the Focus Growth Fund, the Growth Opportunities Fund
and the Global Financial Services Fund had not commenced selling of Class B
Shares.
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 CDSCs FEES CDSCs FEES CDSCs
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Funds of the Trust
Balanced Fund $ 337 $ 0.00 $ 880 $ 29 $ 1,491 $ 36
Bond Fund $ 787 $ 0.00 $ 1,545 $ 862 $ 2,689 $ 0
Equity Income Fund $ 2,683 $ 0.00 $ 7,781 $ 67 $ 9,852 $ 2,098
Index 500 Fund N/A* N/A N/A*** N/A N/A**** N/A
Intermediate Bond Fund $ 1,136 $ 0.00 $ 1,584 $ 7,747 $ 2,423 $ 436
International Equity Fund $18,452 $ 0.00 $ 23,594 $11,988 $ 17,822 $ 259
Michigan Bond Fund $ 568 $ 0.00 $ 747 $ 0 $ 2,242 $ 2,946
Small Company Growth Fund $13,938 $212.00 $ 51,322 $13,088 $ 47,642 $ 4,471
Tax-Free Bond Fund N/A* N/A $ 396 $ 0 $ 666 $ 10
Tax-Free
Short-Intermediate Bond
Fund N/A* N/A N/A*** N/A $ 316 $ 0
U.S. Income Fund $ 93 $ 0.00 $ 268 $ 35 $ 6,931 $ 0
Funds of the Company
Focus Growth Fund N/A N/A N/A N/A $ 0**** $ 0
Growth Opportunities Fund N/A N/A $ 0*** $ 0 $ 0**** $ 0
International Bond Fund N/A* N/A $ 2 $ 0 $ 491 $ 0
Micro-Cap Fund $ 48** $ 0.00 $ 42,988 $24,200 $ 57,284 $ 6,445
Money Market Fund $ 5,932 $ 0.00 $ 13,170 $ 3 $ 15,411 $ 11,034
Multi-Season Fund $73,808 $391.84 $112,333 $ 556 $ 125,706 $ 1,353
NetNet Fund N/A N/A N/A*** N/A $1,370,510 $235,208
Real Estate Fund $1, 829 $ 2.38 $ 10,810 $ 261 $ 12,460 $ 594
Short Term Treasury Fund N/A* N/A $ 159*** $ 10 N/A N/A
</TABLE>
39
<PAGE>
<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 CDSCs FEES CDSCs FEES CDSCs
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small-Cap Value Fund $ 223** $ 0.00 $ 9,109 $ 159 $ 17,721 $ 719
Value Fund $ 4,397 $ 0.00 $ 8,593 $ 23 $ 12,058 $ 795
Funds of Framlington
Emerging Markets Fund $ 49** $ 0.00 $ 448 $ 0 $ 3,029 $ 75
Global Financial Services
Fund $ 0*** $ 0 $ 0**** $ 0
Healthcare Fund $ 125** $ 0.00 $ 20,953 $ 474 $ 23,360 $ 446
International Growth Fund $ 63** $ 0.00 $ 1,303 $ 142 $ 1,744 $ 46
</TABLE>
___________________________________
* As of June 30, 1997, the following funds had not commenced selling Class C
Shares: Index 500 Fund, 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
Tax-Free Short-Intermediate Bond 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.
**** As of June 30, 1999, the Focus Growth Fund, the Growth Opportunities Fund,
the Global Financial Services Fund and the Index 500 Fund had not commenced
selling Class C Shares.
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 $0 $0 $0 $ 748 $0 $ 996
Bond Fund $0 $0 $0 $ 1,284 $0 $ 1,071
Equity Income Fund $0 $0 $0 $ 2,588 $0 $ 2,428
Index 500 Fund $0 $0 $0 $ 94,747 $0 $106,915
Intermediate Bond Fund $0 $0 $0 $ 2,168 $0 $ 1,075
International Equity
Fund $0 $0 $0 $ 1,970 $0 $ 126
Michigan Bond Fund $0 $0 $0 $ 917 $0 $ 560
Small Company Growth
Fund $0 $0 $0 $ 12,870 $0 $ 16,264
Tax-Free Bond Fund $0 $0 $0 $ 1,002 $0 $ 74
Tax-Free
Short-Intermediate
Bond Fund $0 $0 $0 $ 1,186 $0 $ 905
U.S. Income Fund $0 $0 $0 $ 4,955 $0 $ 1,196
Funds of the Company
Focus Growth Fund $0 $0 $0 $ 0 $0 $ 0
Growth Opportunities
Fund $0 $0 $0 $ 0 $0 $ 0
</TABLE>
40
<PAGE>
<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>
International Bond Fund $0 $0 $0 $ 80 $0 $ 224
Micro-Cap Fund $0 $0 $0 $ 6,651 $0 $ 27,021
Money Market Fund $0 $0 $0 $ 7,927 $0 $ (2,680)
Multi-Season Fund $0 $0 $0 $179,401 $0 $(34,486)
NetNet Fund $0 $0 $0 $ 6,407 $0 $566,975
Real Estate Fund $0 $0 $0 $ 7,973 $0 $ 6,229
Small-Cap Value Fund $0 $0 $0 $ 2,015 $0 $ 5,437
Value Fund $0 $0 $0 $ 2,635 $0 $ 1,581
Funds of Framlington
Emerging Markets Fund $0 $0 $0 $ 245 $0 $ 1,297
Global Financial
Services Fund $0 $0 $0 $ 0 $0 $ 0
Healthcare Fund $0 $0 $0 $ 5,306 $0 $ 13,807
International Growth
Fund $0 $0 $0 $ 448 $0 $ 871
</TABLE>
The following amounts were paid by each Fund under its Class C 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 $0 $0 $0 $ 585 $0 $ 2
Bond Fund $0 $0 $0 $ 233 $0 $ (48)
Equity Income Fund $0 $0 $0 $ 3,134 $0 $ (311)
Index 500 Fund $0 $0 $0 $ 0 $0 $ 0
Intermediate Bond Fund $0 $0 $0 $ 755 $0 $ 1,509
International Equity Fund $0 $0 $0 $14,810 $0 $ (550)
Michigan Bond Fund $0 $0 $0 $ 551 $0 $ 38
Small Company Growth Fund $0 $0 $0 $19,905 $0 $ 17
Tax-Free Bond Fund $0 $0 $0 $ 370 $0 $ (1)
Tax-Free
Short-Intermediate Bond
Fund $0 $0 $0 $ 59 $0 $ 1
U.S. Income Fund $0 $0 $0 $ 808 $0 $ (66)
Funds of the Company
Focus Growth Fund $0 $0 $0 $ 0 $0 $ 0
Growth Opportunities Fund $0 $0 $0 $ 0 $0 $ 0
International Bond Fund $0 $0 $0 $ 1 $0 $ 12
Micro-Cap Fund $0 $0 $0 $16,382 $0 $ 588
</TABLE>
41
<PAGE>
<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>
Money Market Fund $0 $0 $0 $12,594 $0 $ (229)
Multi-Season Fund $0 $0 $0 $86,990 $0 $(3,092)
NetNet Fund** $0 $0 $0 $ 3,086 $0 $46,927
Real Estate Equity
Investment Fund $0 $0 $0 $ 4,654 $0 $ 37
Small-Cap Value Fund $0 $0 $0 $ 2,791 $0 $ 569
Value Fund $0 $0 $0 $ 5,222 $0 $ (73)
Funds of Framlington
Emerging Markets Fund $0 $0 $0 $ 123 $0 $ 147
Global Financial Services $0 $0 $0 $ 0 $0 $ 0
Fund
Healthcare Fund $0 $0 $0 $10,522 $0 $ (137)
International Growth Fund $0 $0 $0 $ 581 $0 $ 1
</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.
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.
42
<PAGE>
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 4400 Computer Drive, Westborough,
Massachusetts 01581 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; Equity 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 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 Equity 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 Equity 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, $106,966 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: $68,581 for Balanced Fund, $282,194 for Bond Fund, $1,375,320 for
Cash Investment Fund, $262,917 for Equity Income Fund,
43
<PAGE>
$1,009,569 for Index 500 Fund, $606,823 for Intermediate Bond Fund, $218,250 for
International Equity Fund, $73,705 for Michigan Bond Fund, $363,930 for Small
Company Growth Fund, $206,804 for Tax-Free Bond Fund, $321,790 for Tax-Free
Short-Intermediate Bond Fund, $361,566 for Tax-Free Money Market Fund, $321,496
for U.S. Income Fund, $102,073 for U.S. Treasury Money Market Fund, $57,684 for
International Bond Fund, $46,203 for Micro-Cap Fund, $137,095 for Money Market
Fund, $796,216 for Multi-Season Fund, $895,909 for NetNet Fund, $94,060 for Real
Estate Fund, $43,186 for Short Term Treasury Fund, $145,544 for Small Cap Value
Fund, $171,327 for Value Fund, $2,743 for Growth Opportunities Fund, $66,652 for
International Growth Fund, $45,835 for Emerging Markets Fund, $20,469 for
Healthcare Fund, $2,479 for Global Financial Services Fund and $7,147 for Focus
Growth Fund.
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 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
44
<PAGE>
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.
CODE OF ETHICS
The Company, the Trust, Framlington, Advisor, World, Sub-Advisor and the
Distributor each have adopted a code of ethics as required by applicable law,
which is designed to prevent affiliated persons of the Company, the Trust,
Munder Framlington, Advisor, World, Sub-Advisor and the Distributor from
engaging in deceptive, manipulative or fraudulent activities in connection with
securities held or to be acquired by the Funds (which may also be held by
persons subject to a code of ethics). There can be no assurance that the codes
of ethics will be effective in preventing such activities. Each code of ethics,
filed as exhibits to this registration statement, may be examined at the office
of the SEC in Washington, D.C. or on the Internet from the SEC's website at
http://www.sec.gov.
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
45
<PAGE>
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."
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 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 Research $ Amount of Transactions
Commission Services Involving Research Services
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Fund $ 57,518 30.47% $ 17,526
Equity 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
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
% of Brokerage Commission
$ Amount Brokerage Representing Research $ Amount of Transactions
Commission Services Involving Research Services
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
Equity 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
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 $ 148,930 2.29% $ 3,404
Equity Income Fund $ 339,050 10.01% $33,930
Index 500 Fund $ 78,429 0.00% $ -
International Equity Fund $ 82,374 0.00% $ -
Small Company Growth Fund $ 867,597 0.54% $ 4,713
Micro-Cap Fund $ 157,816 2.47% $ 3,905
Multi-Season Fund $1,066,557 3.11% $33,221
NetNet Fund $ 407,329 6.63% $27,000
Real Estate Fund $ 102,511 0.00% $ -
Small Cap Value Fund $ 192,950 1.80% $ 3,481
Value Fund $ 656,504 1.45% $ 9,510
Growth Opportunities Fund $ 8,130 1.25% $ 102
International Growth Fund $ 257,980 0.00% $ -
Emerging Markets Fund $ 456,864 0.00% $ -
Healthcare Fund $ 20,634 0.00% $ -
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
$ Amount of
$ Amount Brokerage % of Brokerage Commission Transactions Investing
Commission Representing Research Services Research Services
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Financial Services Fund $ 6,873 0.00% $ -
Focus Growth Fund $ 32,160 0.01% $ 3
</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 Focus Growth Fund held securities of Chase Manhattan Corp. valued at
$190,575, Morgan Stanley, Dean Witter & Co. valued at $123,000, Suntrust Banks,
Inc. valued at $104,156; Framlington Global Financial Services held securities
of Chase Manhattan Corp. valued at $34,560, Morgan Stanley, Dean Witter & Co.
valued at $51,250, BankAmerica Corp. valued at $36,656; NetNet Fund held
securities of Charles Schwab & Co., Inc. valued at $44,477,400, Ameritrade
Holding Corp. valued at $45,908,600, E*Trade Group, Inc. valued at $36,950,175,
Donaldson, Lufkin, and Jenrette valued at $590,000; Balanced Fund held
securities of Chase Manhattan Corp. valued at $285,862; Index 500 Fund held
securities of BankAmerica Corp. valued at $14,449,820, Morgan Stanley, Dean
Witter & Co. valued at $6,610,122, Merrill Lynch & Co., Inc. valued at
$3,325,400, J.P. Morgan & Co., Inc. valued at $2,810,000, Lehman Brothers
Holding, Inc. valued at $834,150, Bear Stearns & Co., Inc. valued at $614,295,
Chase Manhattan Corp. valued at $8,287,240, Charles Schwab & Co., Inc. valued at
$5,070,731, Suntrust Capital Markets, Inc. valued at $2,250,581, Comerica
Securities valued at $1,037,184, Paine Webber Group, Inc. valued at $771,375;
Intermediate Bond Fund held securities of Chase Manhattan Corp. valued at
$3,360,000; International Equity Fund held securities of Deutsche Bank AG
valued at $1,201,203, ABN Amro Holding valued at $1,158,281, Canadian Imperial
Bank of Commerce valued at $381,600; Value Fund held securities of Chase
Manhattan Corp. valued at $4,279,275, Goldman Sachs valued at $5,014,150, Morgan
Stanley, Dean Witter & Co. valued at $1,629,750; Cash Investment Fund held
securities of Bank of Nova Scotia valued at $50,000,000, Deutsche Bank AG valued
at $20,000,000 and Money Market Fund held securities of Bank of Nova Scotia
valued at $10,000,000 and Deutsche Bank AG valued at $4,000,000.
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.
48
<PAGE>
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>
1st Year Since Purchase.............................................................................. 4.00%
2nd Year Since Purchase.............................................................................. 4.00%
3rd Year Since Purchase.............................................................................. 3.00%
4th Year Since Purchase.............................................................................. 3.00%
5th 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;
(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);
49
<PAGE>
(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 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.
50
<PAGE>
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 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
51
<PAGE>
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 Market, Tax-Free Money Market and U.S. Treasury Money Market
Funds for the seven-day period ended June 30, 1999.
52
<PAGE>
<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 4.30% 4.39% N/A N/A N/A N/A 4.40% 4.49% 4.55% 4.65%
- ---------------------------------------------------------------------------------------------------------------------------
Money Market
Fund 4.11% 4.19% 3.36% 3.41% 3.35% 3.41% N/A N/A 4.36% 4.46%
- ---------------------------------------------------------------------------------------------------------------------------
Tax-Free Money
Market Fund 2.52% 2.55% N/A N/A N/A N/A 2.62% 2.65% 2.77% 2.81%
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury
Money Market 3.81% 3.88% N/A N/A N/A N/A 3.91% 3.99% 4.06% 4.14%
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 3.66% (Class A), 3.80% (Class K) and 4.02% (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/M - 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 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
53
<PAGE>
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 5.27% N/A
Intermediate Bond Fund 5.03% N/A
U.S. Income Fund 5.51% N/A
International Bond Fund 1.68% N/A
Michigan Bond Fund 3.90% 5.99%
Tax-Free Bond Fund 3.89% 5.71%
Tax-Free Short-Intermediate Bond Fund 3.74% 5.51%
</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 4.74% N/A
Intermediate Bond Fund 4.49% N/A
U.S. Income Fund 4.99% N/A
International Bond Fund 0.96% N/A
Michigan Bond Fund 3.30% 5.07%
Tax-Free Bond Fund 3.30% 4.85%
Tax-Free Short-Intermediate Bond Fund 3.14% 4.62%
</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 4.74% N/A
Intermediate Bond Fund 4.49% N/A
U.S. Income Fund 5.00% N/A
International Bond Fund 0.97% N/A
Michigan Bond Fund 3.30% 5.07%
Tax-Free Bond Fund 3.27% 4.80%
Tax-Free Short-Intermediate Bond Fund 3.15% 4.64%
</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 5.49% N/A
Intermediate Bond Fund 5.24% N/A
U.S. Income Fund 5.75% N/A
International Bond Fund 1.73% N/A
Michigan Bond Fund 4.06% 6.24%
Tax-Free Bond Fund 4.05% 5.95%
Tax-Free Short-Intermediate Bond Fund 3.90% 5.74%
</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 4.80% N/A
</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 5.74% N/A
Intermediate Bond Fund 5.50% N/A
U.S. Income Fund 6.00% N/A
International Bond Fund 1.98% N/A
Short Term Treasury Fund 4.80% N/A
Michigan Bond Fund 4.31% 6.62%
Tax-Free Bond Fund 4.30% 6.32%
Tax-Free Short-Intermediate Bond Fund 4.15% 6.11%
</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:
55
<PAGE>
P (1 + T)/n/ = ERV
Where:
P = hypothetical initial payment of $1,000;
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.
56
<PAGE>
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>
<CAPTION>
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 10.76% 14.92% 11.37% 4.70% 13.62% 10.37%
Class B-6/21/94 9.96% 13.96% 13.55% 5.16% 13.72% 13.43%
Class C-1/24/96 10.11% N/A 12.92% 9.15% N/A 12.92%
Class K-4/16/93 10.83% 14.95% 11.13% 10.83% 14.95% 11.13%
Class Y-4/13/93 11.21% 15.25% 11.31% 11.21% 15.25% 11.31%
Equity Income Fund
Class A-8/8/94 6.96% N/A 18.77% 1.07% N/A 17.40%
Class B-8/9/94 6.18% N/A 17.91% 1.38% N/A 17.70%
Class C-12/5/95 6.18% N/A 16.78% 5.23% N/A 16.78%
Class K-7/5/94 6.95% N/A 18.63% 6.95% N/A 18.63%
Class Y-7/5/94 7.22% N/A 18.91% 7.22% N/A 18.91%
Index 500 Fund
Class A-12/9/92 22.12% 27.26% 21.21% 19.05% 26.62% 20.74%
Class B-10/31/95 21.71% N/A 27.64% 18.71% N/A 27.43%
Class C N/A N/A N/A N/A N/A N/A
Class K12/7/92 21.99% 27.13% 21.12% 21.99% 27.13% 21.12%
Class Y-12/1/91 22.30% 27.48% 20.99% 22.30% 27.48% 20.99%
International Equity Fund
Class A-11/30/92 10.80% 10.80% 11.05% 4.74% 9.55% 10.09%
Class B-3/9/94 10.08% 10.00% 7.92% 5.08% 9.73% 7.79%
Class C-9/29/95 10.07% N/A% 9.98% 9.07% N/A 9.98%
Class K-11/23/92 10.94% 10.83% 11.26% 10.94% 10.83% 11.26%
Class Y-12/1/91 11.30% 11.12% 10.63% 11.30% 11.12% 10.63%
Small Company Growth Fund
Class A-11/23/92 (10.92)% 16.62% 12.94% (15.81)% 15.31% 11.98%
Class B-4/28/94 (11.55)% 15.77% 13.45% (15.65)% 15.54% 13.33%
Class C-9/26/95 (11.58)% N/A 12.14% (12.40)% N/A 12.14%
Class K-11/23/92 (10.92)% 16.62% 12.94% (10.92)% 16.62% 12.94%
Class Y-12/1/91 (10.62)% 16.92% 14.57% (10.62)% 16.92% 14.57%
Bond Fund
Class A-12/9/92 1.72% 6.72% 6.21% (2.38)% 5.85% 5.55%
Class B-3/13/96 0.86% N/A 5.02% (3.95)% N/A 4.21%
Class C-3/25/96 0.95% N/A 4.97% (0.01)% N/A 4.97%
Class K-11/23/92 1.72% 6.72% 6.17% 1.72% 6.72% 6.17%
Class Y-12/1/91 1.97% 6.99% 6.11% 1.97% 6.99% 6.11%
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
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>
Intermediate Bond Fund
Class A-11/24/92 2.93% 5.97% 5.22% (1.22)% 5.11% 4.57%
Class B-10/25/94 2.06% N/A 5.56% (2.81)% N/A 5.20%
Class C-4/19/96 2.06% N/A 4.64% 1.08% N/A 4.64%
Class K-11/20/92 2.83% 5.92% 5.19% 2.83% 5.92% 5.19%
Class Y-12/1/91 3.08% 6.16% 5.75% 3.08% 6.16% 5.75%
US Income Fund
Class A-7/28/94 2.12% N/A 6.83% (1.95)% N/A 5.94%
Class B-9/6/95 1.36% N/A 5.05% (3.47)% N/A 4.38%
Class C-8/12/96 1.35% N/A 5.18% 0.39% N/A 5.18%
Class K-7/5/94 2.11% N/A 6.79% 2.11% N/A 6.79%
Class Y-7/5/94 2.37% N/A 7.05% 2.37% N/A 7.05%
Michigan Bond Fund
Class A-2/15/94 0.78% 5.98% 4.32% (3.26)% 5.12% 3.54%
Class B-7/5/94 0.34% N/A 5.30% (4.45)% N/A 4.97%
Class C-10/4/96 0.34% N/A 4.39% (0.62)% N/A 4.39%
Class K-1/3/94 0.99% 6.03% 4.18% 0.99% 6.03% 4.18%
Class Y-1/3/94 1.24% 6.29% 4.43% 1.24% 6.29% 4.43%
Tax-Free Bond Fund
Class A-10/9/95 0.83% N/A 4.88% (3.23)% N/A 3.73%
Class B-12/6/94 (0.02)% N/A 5.82% (4.69)% N/A 5.46%
Class C-7/7/98 (0.03)% N/A 3.14% (0.96)% N/A 3.14%
Class K-7/5/94 0.82% N/A 5.85% 0.82% N/A 5.85%
Class Y-7/21/94 1.08% N/A 6.02% 1.08% N/A 6.02%
Tax-Free Short-
Intermediate Bond Fund
Class A-11/30/92 2.27% 4.66% 4.31% (1.86)% 3.81% 3.66%
Class B-5/16/96 1.51% N/A 3.46% (3.37)% N/A 2.57%
Class C-7/8/98 N/A N/A 1.90% N/A N/A 0.91%
Class K-2/9/87+ 2.27% 4.66% 5.30% 2.27% 4.66% 5.30%
Class Y-12/17/92 2.42% 4.91% 4.51% 2.42% 4.91% 4.51%
Funds of Framlington
Emerging Markets Fund
Class A-1/14/97 30.03% N/A 7.14% 22.92% N/A 4.71%
Class B-2/25/97 28.16% N/A 2.47% 23.16% N/A 1.22%
Class C-3/3/97 28.01% N/A 3.14% 27.01% N/A 3.14%
Class K-1/10/97 29.03% N/A 7.29% 29.03% N/A 7.29%
Class Y-12/31/96 29.33% N/A 7.71% 29.33% N/A 7.71%
Global Financial
ServicesFund
Class Y-6/24/98 (1.29)% N/A 0.58% (1.29)% N/A 0.58%
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
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>
Healthcare Fund
Class A-2/14/97 (10.69)% N/A (2.83)% (15.62)% N/A (5.12)%
Class B-1/31/97 (11.40)% N/A (2.50)% (15.79)% N/A (3.72)%
Class C-1/13/97 (11.40)% N/A (0.13)% (12.28)% N/A (0.13)%
Class K-4/1/97 (10.70)% N/A 5.00% (10.70)% N/A 5.00%
Class Y-12/31/96 (10.42)% N/A 2.38% (10.42)% N/A 2.38%
International Growth Fund
Class A-2/20/97 7.36% N/A 10.81% 1.48% N/A 8.18%
Class B-3/19/97 6.23% N/A 11.43% 1.23% N/A 10.27%
Class C-2/13/97 6.13% N/A 10.19% 5.13% N/A 10.19%
Class K-1/10/97 7.02% N/A 11.19% 7.02% N/A 11.19%
Class Y-12/31/96 7.35% N/A 10.72% 7.35% N/A 10.72%
Funds of the Company
Focus Growth Fund
Class Y-11/11/98 N/A N/A 24.50% N/A N/A 24.50%
Growth Opportunities Fund
Class Y-6/24/98 8.44% N/A 8.49% 8.44% N/A 8.49%
International Bond Fund
Class A-10/17/96 3.93% N/A 1.44% (0.21)% N/A (0.10)%
Class B-6/9/97 3.15% N/A 1.54% (1.85)% N/A 0.12%
Class C-6/3/98 2.92% N/A 1.91% 1.92% N/A 0.99%
Class K-3/25/97 3.92% N/A 3.42% 3.92% N/A 3.42%
Class Y-10/2/96 4.21% N/A 1.60% 4.21% N/A 1.60%
Micro-Cap Fund
Class A-12/26/96 9.10% N/A 29.88% 3.10% N/A 27.00%
Class B-2/24/97 8.29% N/A 26.09% 3.29% N/A 25.15%
Class C-3/31/97 8.29% N/A 32.12% 7.29% N/A 32.12%
Class K-12/31/96 9.04% N/A 29.42% 9.04% N/A 29.42%
Class Y-12/26/96 9.43% N/A 30.19% 9.43% N/A 30.19%
Multi-Season Fund
Class A-8/4/93 11.34% 22.07% 18.23% 5.21% 20.69% 17.11%
Class B-4/29/93 10.66% 21.22% 16.89% 5.66% 21.03% 16.89%
Class C-9/20/93 10.70% 21.22% 17.78% 9.70% 21.22% 17.78%
Class K-6/23/95 11.40% N/A 22.11% 11.40% N/A 22.11%
Class Y-8/16/93 11.70% 22.43% 18.62% 11.70% 22.43% 18.62%
NetNet Fund
Class A-8/19/96 116.57% N/A 79.16% 104.67% N/A 75.67%
Class B-6/1/98 114.97% N/A 141.73% 109.97% N/A 138.30%
Class C-11/3/98 N/A N/A 133.26% N/A N/A 132.26%
Class Y-6/1/98 117.49% N/A 79.45% 117.49% N/A 79.45%
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
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>
Short Term Treasury Fund
Michigan Municipal 0.99% N/A 4.18% 0.99% N/A 4.18%
Shares++- 4/2/97
Class Y-1/29/97 4.63% N/A 5.28% 4.63% N/A 5.28%
Small-Cap Fund
Class A-1/10/97 (5.19)% N/A 14.37% (10.42)% N/A 11.80%
Class B-2/11/97 (5.85)% N/A 11.76% (10.44)% N/A 10.67%
Class C-1/13/97 (6.00)% N/A 13.64% (6.91)% N/A 13.64%
Class K-12/31/96 (5.33)% N/A 14.84% (5.33)% N/A 14.84%
Class Y-12/26/96 (5.01)% N/A 15.40% (5.01)% N/A 15.40%
Real Estate Fund
Class A-9/30/94 (6.66)% N/A 11.03% (11.79)% N/A 9.72%
Class B-10/3/94 (7.37)% N/A 10.21% (11.64)% N/A 9.92%
Class C-1/5/96 (7.34)% N/A 10.35% (8.19)% N/A 10.35%
Class K-10/3/96 (6.66)% N/A 8.53% (6.66)% N/A 8.53%
Class Y-10/3/94 (6.35)% N/A 11.34% (6.35)% N/A 11.34%
Value Fund
Class A-9/14/95 (0.23)% N/A 18.17% (5.71)% N/A 16.43%
Class B-9/19/95 (1.23)% N/A 17.27% (5.98)% N/A 16.76%
Class C-2/9/96 (1.23)% N/A 16.44% (2.18)% N/A 16.44%
Class K-11/30/95 (0.48)% N/A 17.94% (0.48)% N/A 17.94%
Class Y-8/18/95 (0.16)% N/A 19.25% (0.16)% N/A 19.25%
</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 5.48%.
As of June 30, 1999, the following Classes had not commenced operations:
Class A Shares of the Focus Growth Fund, Global Financial Services Fund and
Growth Opportunities Fund; Class B Shares of the Focus Growth 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 Focus Growth 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 Focus Growth 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
60
<PAGE>
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 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").
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.
61
<PAGE>
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 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.
62
<PAGE>
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 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.
63
<PAGE>
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.
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
64
<PAGE>
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.
Original Issue Discount. The Funds may purchase debt securities with
original issue discount. Original issue discount represents the difference
between the original price of the debt instrument and the stated redemption
price at maturity. Original issue discount is required to be accreted on a
daily basis and is considered interest income for tax purposes and, therefore,
such income would be subject to the distribution requirements applicable to
regulated investment companies.
Market Discount. The Funds may purchase debt securities at a discount in
excess of the original issue discount to the stated redemption price maturity
(for debt securities without original issue discount), and this discount is
called market discount. If market discount is be recognized at the time of
disposition of the debt security, accrued market discount is recognized to the
extent of gain on the disposition of the debt security.
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
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<PAGE>
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.
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 passive assets, or 75% or
more of its gross income passive 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.
66
<PAGE>
Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.
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, Equity 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 (except the Global Financial Services
Fund) are offered in five separate classes: Class A, Class B, Class C, Class K
and Class Y Shares. The shares of the Global Financial Services Fund are offered
in six separate classes: Class A, Class B, Class C, Class II, 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 Focus Growth Fund, Future Technology 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, Short Term Treasury Fund,
NetNet Fund, Future Technology Fund, Focus Growth Fund and Growth Opportunities
Fund) are offered in five separate
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<PAGE>
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 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 Future
Technology Fund offers only Class A, Class B, Class II, Class K and Class Y
Shares. The Focus Growth Fund and Growth Opportunities Fund offer only Class A,
Class B, Class C, Class II, Class K 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, only Class II Shares of a Fund will be entitled to vote on matters
submitted to a vote of shareholders pertaining to a Fund's Class II 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
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<PAGE>
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 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 Auditors. Ernst & Young LLP, 200 Clarendon Street, Boston,
Massachusetts 02116, serves as the Trust's, Framlington's and the Company's
independent auditors.
Control Persons and Principal Holders of Securities. As of February 28,
2000, Comerica Bank, One Detroit Center, 500 Woodward Ave., Detroit, Michigan
48226, held of record substantially all of the outstanding shares of the Funds
(except the NetNet Fund) 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 February 28, 2000, 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:
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<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Cash Investment Fund - Class A National Financial Services Corp. 74.496%
For the exclusive benefit of its customers
P.O. Box 3908 Church Street Station
New York, NY 10008-3908
Tax-Free Money Market Fund - Class A National Financial Services Corp. 98.076%
For the exclusive benefit of its customers
P.O. Box 3908 Church Street Station
New York, NY 10008-3908
U.S. Treasury Money Market Fund - Class A National Financial Services Corp. 79.146%
For the exclusive benefit of its customers
P.O. Box 3908 Church Street Station
New York, NY 10008-3908
Bear Stearns Securities Corp. 14.991%
FBO The sole benefit of its customers
1 Metrotech Center North
Brooklyn, NY 11201-3859
Small Company Growth Fund - Class A Merrill Lynch Pierce Fenner & Smith 17.274%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Bank of American, N.A. 9.499%
FBO Ramsis LP
P.O. Box 620922
Woodside, CA 94062
Faroah Investments LLC 8.292%
P.O. Box 620046
Woodside, CA 94062-0046
First Clearing Corporation 7.551%
Nelson Metal Products
UAW Hourly Emp. Pension Plan
2950 Prairie Street SW
Grandville, MI 49418-2072
Index 500 Fund - Class A Merrill Lynch Pierce Fenner & Smith 35.035%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
International Equity Fund - Class A Merrill Lynch Pierce Fenner & Smith 14.706%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Charles Schwab & Co., Inc. 13.436%
Special custody acct. for benefit of its
customers
101 Montgomery Street
San Francisco, CA 94104
National Financial Services Corp. 5.209%
Geneva Investments LLC
485 Madison Ave., Suite 2350
New York, NY 10022
National Financial Services Corp. 5.174%
Chamonix Capital LLC
485 Madison Ave., Suite 2350
New York, NY 10022
Intermediate Bond Fund - Class A Resources Trust Company 16.510%
For the exclusive benefit of various IMS
customers
P.O. Box 3865
Englewood, CO 80155-3865
Merrill Lynch Pierce Fenner & Smith 8.436%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
National Financial Services Corp. 6.613%
Windmill Partners
420 East 54th Street
New York, NY 10022
Bond Fund - Class A First Union Securities, Inc. 21.188%
Lewis P. Gallagher
111 East Kilbourn Avenue
Milwaukee, WI 53202
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Bond Fund - Class A National Financial Services Corp. 10.973%
S A Colah IRA
17197 N. Nunnely Road
Clinton Township, MI 48036
National Financial Services Corp. 9.089%
Robert E. Guenther TTEE
Robert E. Guenther Trust
1268 Port Austin Road
P.O. Box 59
Port Austin, MI 48467
Tax-Free Short-Intermediate Bond Fund - Class A Merrill Lynch Pierce Fenner & Smith 18.156%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
National Financial Services Corp. 5.595%
Jerome D Mills TTEE
Thomas J Mills Jr TTEE
Jacqueline S Mills Trust
737 Kensington Lane
Balanced Fund - Class A Investors Fiduciary Trust Company 16.773%
FBO Hydraulic Service
801 Pennsylvania Avenue
Kansas City, MO 64105
Trans-Industries Inc 13.180%
Employees 401K Profit Sharing Plan & Trust
2637 South Adams Road
Rochester Hills, MI 48309
National Financial Services Corp. 12.252%
S A Colah IRA
17197 N. Nunnely Road
Clinton Township, MI 48039
Merrill Lynch Pierce Fenner & Smith 5.892%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Michigan Bond Fund - Class A Resources Trust Company 10.581%
P.O. Box 3865
Englewood, CO 80155
Donaldson, Lufkin & Jenrette 9.434%
Securities Corp. Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
National Financial Services Corp. 8.999%
Jerome D Mills TTEE
Thomas J Mills Jr TTEE
Jacqueline S Mills Trust
737 Kensington Lane
National Financial Services Corp. 8.067%
William D. Pate
1835 Technology Drive
Troy, MI 48083
Merrill Lynch Pierce Fenner & Smith 7.495%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
McDonald Investments, Inc. 7.259%
Suite 2100
800 Superior Ave
Cleveland, OH 44114
Prudential Securities, Inc 6.532%
FBO Emendes LLC
2122 London Bridge Drive
Rochester Hills, MI 48307-4231
National Financial Securities Corp. 6.261%
Donald A Dick/Catherine L Dick
Deborah L Evans
15810 Stout Street
Detroit, MI 48223
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Michigan Bond Fund - Class A Charles Schwab & Co., Inc. 5.839%
FBO Susan A Rich
101 Montgomery Street
San Francisco, CA 94104
Tax-Free Bond Fund - Class A MIAZ & Co. 16.959%
C/O Marshall & Ilsley Trust Co
P.O. Box 2977
Milwaukee, WI 53201
Merrill Lynch Pierce Fenner & Smith 8.690%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Strafe & Co. 8.558%
F/A O J Teetzel Marital
P.O. Box 160
Westerville, OH 43066-0160
National Financial Services Corp. 7.196%
Marie S. Lane TTEE
Marie S. Lane Trust
33444 Jefferson
St. Clair Shores, MI 48082
Painewebber for the Benefit of 7.071%
Theodore C. Dye II
19110 Devonshire
Birmingham, MI 48025-3946
National Financial Services Corp. 5.281%
Timothy Lowell Westbay TTEE
Timothy Lowell Westbay Rev Living Trust
46502 Darwood Court
Plymouth, MI 48170
Strafe & Co. 5.062%
F/A OJ Teetzel Marital
P.O. Box 160
Westerville, OH 43066-0160
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Equity Income Fund - Class A Merrill Lynch Pierce Fenner & Smith 30.306%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
U.S. Income Fund - Class A Merrill Lynch Pierce Fenner & Smith 22.683%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Resources Trust Company 21.826%
P.O. Box 3865
Englewood, CO 80155
Salomon Smith Barney 9.642%
333 West 34th Street, 3rd Floor
New York, NY 10001
EAMCO 5.809%
c/o Riggs Bank NA
Mutual Funds Desk
P.O. Box 96211
Washington, DC 20090-6211
Multi-Season Fund - Class A Merrill Lynch Pierce Fenner & Smith 12.993%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Real Estate Fund - Class A Merrill Lynch Pierce Fenner & Smith 26.510%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Pierson & Co. 7.279%
C/O Trust Operations Mutual Funds
P.O. Box 9088
Farmington Hills, MI 48333-9088
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Real Estate Fund - Class A National Financial Services Corp. 5.447%
Gordon B. & Hilda B. Lowell TTEE
Lowell-Kangas & Assoc Of St. Louis P/S Trust
2055 North Ballas Road
St. Louis, MO 63131
Money Market Fund - Class A Bear Stearns Securities Corp. 7.246%
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. 6.446%
1 Metrotech Center North
Brooklyn, NY 11201-3859
Salomon Smith Barney 6.253%
333 West 34th Street, 3rd Floor
New York, NY 10001
Salomon Smith Barney 5.822%
333 West 34th Street, 3rd Floor
New York, NY 10001
First Albany Corp. 5.784%
Sharon M Duker
30 SO Pearl Street
Albany, NY 12207
Value Fund - Class A Merrill Lynch Pierce Fenner & Smith 32.408%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
U.S. Clearing Corp. 8.767%
26 Broadway
New York, NY 10004-1798
Painewebber for the benefit of 7.970%
James E. & Robert B. Decker TTEE
The John Christian Co. Inc.
21950 Hoover Road
Warren, MI 48089-2557
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Value Fund - Class A Pierson & Co. 7.920%
C/O Trust Operations Mutual Funds
P.O. Box 9088
Farmington Hills, MI 48333-9088
International Bond Fund - Class A Penson Financial Services, Inc. 42.617%
1700 Pacific Avenue
Suite 1400
Dallas, TX 75201
Raymond James & Assoc. 22.286%
Benjamin A. Heskett IRA
550 Hartford Street
Worthington, OH 43085-4120
Merrill Lynch Pierce Fenner & Smith 14.153%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Raymond James & Assoc. Cust 13.829%
Carolyn M. Llesket
880 Carillon Parkway
P.O.Box 12749
St. Petersburg, FL 33733-2749
NetNet Fund - Class A Merrill Lynch Pierce Fenner & Smith 19.919%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Micro-Cap Fund - Class A Merrill Lynch Pierce Fenner & Smith 25.865%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Small-Cap Value Fund - Class A Carn & Co 19.480%
FBO Kasle Steel Corp Savings Plan
P.O. Box 96211
Washington, DC 20090-6211
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Small-Cap Value Fund - Class A Merrill Lynch Pierce Fenner & Smith 15.646%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
First Union Securities, Inc. 8.939%
Lewis P. Gallagher Family Foundation
111 East Kilbourn Avenue
Milwaukee, WI 53202
Future Technology Fund - Class A Merrill Lynch Pierce Fenner & Smith 13.302%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
International Growth Fund - Class A J.C. Bradford & Co. 14.782%
Appel Leveraged Investors LP
330 Commerce Street
Nashville, TN 37201-1809
J.C. Bradford & Co. 12.386%
Appel Leveraged Investors LP
330 Commerce Street
Nashville, TN 37201-1809
National Financial Services Corp. 10.557%
Geneva Investments LLC
485 Madison Ave., Suite 2350
New York, NY 10022
National Financial Services Corp. 10.551%
Chamonix Capital LLC
485 Madison Ave., Suite 2350
New York, NY 10022
Resources Trust Company 9.219%
P.O. Box 3865
Englewood, CO 80155-3865
Trans-Industries Inc 6.195%
Employee 401K Profit Sharing Plan & Trust
2637 S. Adams Road
Rochester Hills, MI 48309
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
International Growth Fund - Class A J.C. Bradford & Co. 5.789%
Appel Leveraged Investors LP
330 Commerce Street
Nashville, TN 37201-1809
Emerging Markets Fund - Class A Merrill Lynch Pierce Fenner & Smith 23.061%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Charles Schwab & Co., Inc. 5.624%
For the benefit of the customer
101 Montgomery Street
San Francisco, CA 94104
Penson Financial Services, Inc. 5.311%
1700 Pacific Avenue, Suite 1400
Dallas, TX 75201
Healthcare Fund - Class A Merrill Lynch Pierce Fenner & Smith 23.630%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
FTC & Co. 6.901%
Attn: Datalynx #174
P.O. Box 173736
Denver, CO 80217-3736
Small Company Growth Fund - Class B Merrill Lynch Pierce Fenner & Smith 52.056%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Index 500 Fund - Class B Merrill Lynch Pierce Fenner & Smith 42.206%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
International Equity Fund - Class B Merrill Lynch Pierce Fenner & Smith 41.934%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Intermediate Bond Fund - Class B Merrill Lynch Pierce Fenner & Smith 58.149%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Bond Fund - Class B Merrill Lynch Pierce Fenner & Smith 43.826%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Jonathon Petak 19.367%
155 W. 68th Street
New York, NY 10023
PaineWebber 5.265%
FBO Sandra S. Cartwright-Brown
3131 Slate Mills Road
Sperrville, VA 22740-2417
Tax-Free Short-Intermediate Bond Fund - Class B Merrill Lynch Pierce Fenner & Smith 88.309%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Bank of America Securities LLC 6.046%
600 Montgomery Street
San Francisco, CA 94111
Balanced Fund - Class B Merrill Lynch Pierce Fenner & Smith 23.851%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
J.C. Bradford & Co. Cust FBO 7.084%
William W. Woodward
330 Commerce Street
Nashville, TN 37201
Michigan Bond Fund - Class B National Financial Securities Corp. 21.801%
Henry Oelkers
3004 Geneva
Dearborn, MI 48124
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Michigan Bond Fund - Class B National Financial Securities Corp. 20.647%
Martin G. Janower & Rena A. Janower
6216 Cromwell
West Bloomfield, MI 48322
Prudential Securities Inc. FBO 17.578%
Ms. Helen R. Nash TTEE
Helen R. Nash Living Trust
150 Lone Pine Road
Bloomfield, MI 48304-3537
Donaldson Lufkin Jenrette Securities 10.375%
P.O. Box 2052
Jersey City, NJ 07303
Tax-Free Bond Fund - Class B Merrill Lynch Pierce Fenner & Smith 80.112%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Equity Income Fund - Class B Merrill Lynch Pierce Fenner & Smith 34.644%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
U.S. Income Fund - Class B Merrill Lynch Pierce Fenner & Smith 76.050%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Multi-Season Fund - Class B Merrill Lynch Pierce Fenner & Smith 66.099%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Real Estate Fund - Class B Merrill Lynch Pierce Fenner & Smith 53.558%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Value Fund - Class B Merrill Lynch Pierce Fenner & Smith 71.432%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
International Bond Fund - Class B Merrill Lynch Pierce Fenner & Smith 77.125%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
First Clearing Corp. 6.313%
John A. Hynak & Elizabeth J. Hynak
RR 2 Box 2092
Moscow, PA 18444-9645
First Clearing Corp. 5.949%
Charles T. Cahill Jr - Roth IRA
716 Pecan Drive
Philadelphia, PA 19115-2818
NetNet Fund - Class B Merrill Lynch Pierce Fenner & Smith 33.101%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Micro-Cap Fund - Class B Merrill Lynch Pierce Fenner & Smith 50.744%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Small-Cap Value Fund - Class B Merrill Lynch Pierce Fenner & Smith 62.200%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Future Technology Fund - Class B Merrill Lynch Pierce Fenner & Smith 25.723%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
International Growth Fund - Class B Merrill Lynch Pierce Fenner & Smith 39.813%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Dolores L. Hudler 5.945%
2711 Golfview Drive
Troy, MI 48084
Emerging Markets Fund - Class B Merrill Lynch Pierce Fenner & Smith 43.093%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Healthcare Fund - Class B Merrill Lynch Pierce Fenner & Smith 27.803%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
State Street Bank & Trust Co. 9.544%
FBO Sandra A. Geutrs - IRA
1043 Marvelle Lane #A6
Green Bay, WI 54304
Short Term Treasury Fund - Michigan Michigan Municipal League 99.989%
Municipal Shares Attn: Dee Butterfireld
1675 Green Road
Ann Arbor, MI 48106
Small Company Growth Fund - Class C Merrill Lynch Pierce Fenner & Smith 75.760%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
International Equity Fund - Class C Merrill Lynch Pierce Fenner & Smith 78.696%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Intermediate Bond Fund - Class C Merrill Lynch Pierce Fenner & Smith 72.370%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
83
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Intermediate Bond Fund - Class C State Street Bank & Trust Co. FBO 8.173%
Thomas Casey R/O IRA
19 West Emerson Street
Melrose, MA 02176
Bond Fund - Class C Merrill Lynch Pierce Fenner & Smith 67.338%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
State Street Bank & Trust Co. FBO 13.619%
Thomas Casey R/O IRA
19 West Emerson Street
Melrose, MA 02176
Tax-Free Short-Intermediate Bond Fund - Class C Merrill Lynch Pierce Fenner & Smith 99.325%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Balanced Fund - Class C Merrill Lynch Pierce Fenner & Smith 51.520%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Linda A. Bramley - Separate Property 7.356%
8414 Mountain Pine Lane
Alpharetta, GA 30005
PaineWebber 5.637%
Melissa Surow
189 Park Street
Montclair, NJ 07042-3901
National Financial Securities Corp. 5.169%
FBO Carson Beadle
576 Laurel Road
Riva, MD 21140
Larry D. Clay & Patricia A. Clay 5.132%
8414 Mountain Pine Lane
Alpharetta, GA 30005
</TABLE>
84
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Michigan Bond Fund - Class C Merrill Lynch Pierce Fenner & Smith 99.799%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Tax-Free Bond Fund - Class C Merrill Lynch Pierce Fenner & Smith 46.611%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Hilda P. Willet 28.190%
Estate of James McKneely
901 Wakestone Court
Raleigh, NC 27609-6352
PaineWebber FBO 10.672%
Benjamin R. Beaver
8915 Mohawk Road
Leawood, KS 66206-1745
4400 Alafaya Trail
Orlando, FL 32826-2398
Thomas F. Casey 6.378%
19 West Emerson Street
Melrose, MA 02176
Mark Zurgable 5.662%
17237 Mountain View Road
Emmitsburg, MD 21727
Equity Income Fund - Class C Merrill Lynch Pierce Fenner & Smith 50.310%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Linda A. Bramley 11.111%
3604 Brookshire
Plano, TX 75075
U.S. Income Fund - Class C Merrill Lynch Pierce Fenner & Smith 45.527%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
U.S. Income Fund - Class C Robert W. Baird & Co. 31.877%
777 East Wisconsin Avenue
Milwaukee, WI 53202-5391
H Hutson Carspecken 12.406%
Retirement Plan
1820 Garraux Rd, NW
Atlanta, GA 30327-2504202
Multi-Season Fund - Class C Merrill Lynch Pierce Fenner & Smith 84.529%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Real Estate Fund - Class C Merrill Lynch Pierce Fenner & Smith 50.200%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Money Market Fund - Class C Salomon Smith Barney 5.468%
333 West 34th Street, 3rd Floor
New York, NY 10001
Value Fund - Class C Merrill Lynch Pierce Fenner & Smith 43.544%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Prudential Securities FBO 8.719%
David H. Gregg - IRA
1008 Essex Circle
Kalamazoo, MI 49008-2349
Prudential Securities FBO 8.707%
Marilyn A. Rhodes & Jeffrey J. Rhodes JT TEN
1117 Fennimore Drive
Marshall, MI 49068-9644
PaineWebber FBO 7.357%
Norman R. Bodine
P.O. Box 3321
Weehawken, NJ 07087-8154
</TABLE>
86
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
International Bond Fund - Class C Merrill Lynch Pierce Fenner & Smith 96.759%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
NetNet Fund - Class C Merrill Lynch Pierce Fenner & Smith 39.728%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Micro-Cap Fund - Class C Merrill Lynch Pierce Fenner & Smith 56.101%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Small Cap Value Fund - Class C Merrill Lynch Pierce Fenner & Smith 47.192%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
International Growth Fund - Class C PaineWebber 22.310%
FBO Keilley A. Hamm Trustee
P.O. Box 955
Branchville, NJ 07826-0955
PaineWebber 22.310%
FBO Keith Hamm Trustee
P.O. Box 955
Branchville, NJ 07826-0955
Merrill Lynch Pierce Fenner & Smith 15.354%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Donaldson, Lufkin & Jenrette Securities 8.057%
P.O. Box 2052
Jersey City, NJ 07303-9998
Emerging Markets Fund - Class C Merrill Lynch Pierce Fenner & Smith 48.299%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
87
<PAGE>
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------ ---------------- -----------
<S> <C> <C>
Healthcare Fund - Class C Merrill Lynch Pierce Fenner & Smith 27.204%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Future Technology Fund - Class II Merrill Lynch Pierce Fenner & Smith 17.312%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
As of February 28, 2000, Munder Capital Management, on behalf of their
clients owned 73.33% of the Michigan Tax-Free Bond Fund Class Y shares, 10.44%
of the International Equity Fund Class Y shares, 5.77% of the Index 500 Class Y
shares, 1.44% of the Small Company Growth Fund Class A shares, 15.76% of the
Small Company Growth Fund Class Y shares, 27.06% of the U.S. Treasury Money
Market Fund Class Y shares, 7.67% of the Tax-Free Bond Fund Class Y shares,
1.05% of the Real Estate Fund Class A shares, 40.74% of the Real Estate Fund
Class Y shares, 1.17% of the Tax-Free Short-Intermediate Bond Fund Class A
shares, 8.85% of the Tax-Free Short-Intermediate Bond Fund Class Y shares,
26.31% of the Value Fund Class A shares, 9.68% of the Value Fund Class Y shares,
3.67% of the Focus Growth Fund Class Y shares, 10.19% of the Growth
Opportunities Fund Class Y shares, 1.63% of the Multi-Season Growth Fund Class A
shares, 8.53% of the Multi-Season Growth Fund Class Y shares, 4.99% of the
International Growth Fund Class K shares, 16.86% of the International Growth
Fund Class Y shares, 23.89% of the Emerging Markets Fund Class Y shares, 4.52%
of the Healthcare Fund Class Y shares, 1.50% of the Micro-Cap Fund Class A
shares, 52.11% of the Micro-Cap Fund Class Y shares, 29.32% of the NetNet Fund
Class Y shares, 40.61% of the Future Technology Fund Class Y shares, 10.71% of
the Small-Cap Value Fund Class A shares, 19.12% of the Small-Cap Value Fund
Class Y shares, 19.28% of the Bond Fund Class Y shares, 22.82% of the
International Bond Fund Class Y shares, 2.18% of the Intermediate Bond Fund
Class A shares, 1.88% of the Intermediate Bond Fund Class Y shares, 3.12% of the
U.S. Government Income Fund Class A shares, 100.00% of the Short Term Treasury
Fund Class Y shares and 95.11% of the Money Market Fund Class Y 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.
88
<PAGE>
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.
89
<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 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
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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 Exhibit 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 to 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 Focus Growth Fund (formerly 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.
<PAGE>
(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.
(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 are incorporated herein by reference to Post-
Effective Amendment No. 33 to Registrant's Registration
Statement on Form N-1A filed with the Commission on May 22,
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.
(15) Articles Supplementary, dated November 15, 1999, relating
to Future Technology Fund are incorporated by reference to
Post-Effective Amendment No. 41 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on January 18, 2000.
(16) Articles Supplementary, dated March 1, 2000, with respect
to Munder International NetNet Fund and with respect to
Munder Focus Growth Fund (formerly Munder Equity Selection
Fund) and Munder Growth Opportunities Fund is filed herein.
(17) Articles Supplementary with respect to Munder Future
Technology Fund to be filed by amendment.
2
<PAGE>
(b) By-Laws are incorporated by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed with the
Commission on October 26, 1999.
(c) Not Applicable.
(d) (1) Investment Advisory Agreement, dated July 2, 1998, between
Registrant and Munder Capital Management with respect to the
Munder Focus Growth Fund (formerly 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 and the Munder Mid-Cap Growth
Fund is 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.
(3) Notice to Investment Advisory Agreement, dated February 14, 2000,
between Registrant and Munder Capital Management with respect to
the Munder International NetNet Fund is filed herein.
(4) Form of Investment Sub-Advisory Agreement between Registrant,
Munder Capital Management and Framlington Overseas Management
Investment Limited with respect to the Munder International
NetNet Fund to be filed by amendment.
(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) Notice, dated August 6, 1996, to Underwriting Agreement between
Registrant and Funds Distributor, Inc. with respect to the Munder
Value Fund and the Munder Mid-Cap Growth 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
3
<PAGE>
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 Focus Growth Fund (formerly
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 Registrant's Registration Statement on Form
N-1A filed with the Commission on August 25, 1999.
(10) Distribution Agreement, dated February 14, 2000 between
Registrant and Funds Distributor, Inc. with respect to the Munder
International NetNet Fund is filed herein.
(11) Notice, dated February 14, 2000, to the Underwriting Agreement,
between Registrant and Funds Distributor, Inc. with respect to
Munder Focus Growth Fund is filed herein.
(12) Notice, dated February 14, 2000, to the Distribution Agreement,
between Registrant and Funds Distributor, Inc. with respect to
Munder Growth Opportunities Fund is filed herein.
(13) Notice, dated November 11, 1999, to the Distribution Agreement,
between Registrant and Funds Distributor, Inc. with respect to
the Munder Future Technology Fund is filed herein.
(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
4
<PAGE>
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
Mid-Cap Growth 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 Registrant's Registration
Statement on Form N-1A filed with the Commission on August 25,
1999.
(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 Registrant's Registration
Statement on Form N-1A filed with the Commission on August 25,
1999.
(3) Form of Notice to Custodian Agreement between Registrant and
State Street Bank and Trust Company with respect to the Munder
International NetNet Fund is incorporated by reference to Post-
Effective Amendment No. 41 to Registrant's Registration Statement
on Form N-1A filed with the Commission on January 18, 2000.
(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
Mid-Cap Growth 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 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 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.
5
<PAGE>
(5) Notice to Administration Agreement between Registrant and State
Street Bank and Trust Company with respect to the Munder
International NetNet Fund is filed herein.
(6) 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.
(7) 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 and the Munder
Mid-Cap Growth 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.
(8) 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 herein 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.
(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 Small-Cap Value Fund, the
Munder Focus Growth Fund (formerly Munder Equity Selection Fund),
the Munder Micro-Cap Equity Fund and the NetNet Fund is
incorporated herein 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.
(10) 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.
(11) 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.
(12) 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.
6
<PAGE>
(13) 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.
(14) 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 incorporated by reference to
Exhibit (h)(13) to Post-Effective Amendment No. 38 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 25, 1999.
(15) 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.
(16) 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.
(17) Amendment, dated March 26, 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(19) to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on June 11, 1999.
(18) 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
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 25, 1999.
(19) Amendment, dated October 1, 1999, to the Transfer Agency and
Registrar Agreement between the Registrant and First Data
Investor Services Group, Inc. is incorporated by reference to
Post-Effective Amendment No. 41 to Registrant's Registration
Statement on Form N-1A filed with the Commission on January 18,
2000.
(20) Form of Notice to Transfer Agency and Registrar Agreement
between Registrant and First Data Investor Services Group, Inc.
with respect to the Munder International NetNet Fund is
incorporated by reference to Post-Effective Amendment No. 41 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on January 18, 2000.
(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.
7
<PAGE>
(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 is incorporated by reference to Post-Effective
Amendment No. 41 to Registrant's Registration Statement on Form
N-1A filed with the Commission on January 18, 2000.
(4) Opinion and Consent of Counsel with respect to the International
NetNet 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 are incorporated herein by reference to Post-
Effective Amendment No. 40 to Registrant's Registration Statement
on Form N-1A filed with the Commission on October 26, 1999.
(k) Not Applicable.
(l) Initial Capital Agreement is incorporated herein by reference to Post-
Effective Amendment No. 40 to Registrant's Registration Statement on
Form N-1A filed with the Commission on October 26, 1999.
(m) (1) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Multi-Season Growth Fund Class A Shares is incorporated
herein by reference to Post-Effective Amendment No. 40 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on October 26, 1999.
(2) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Multi-Season Growth Fund Class B Shares
is filed herein incorporated herein by reference to Post-
Effective Amendment No. 40 to Registrant's Registration Statement
on Form N-1A filed with the Commission on October 26, 1999.
(3) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Multi-Season Growth Fund Class C Shares
is incorporated herein by reference to Post-Effective Amendment
No. 40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(4) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Money Market Fund Class A Shares is filed herein
incorporated herein by
8
<PAGE>
reference to Post-Effective Amendment No. 40 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
October 26, 1999.
(5) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Money Market Fund Class B Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(6) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Money Market Fund Class C Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(7) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Real Estate Equity Investment Fund Class A Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(8) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Real Estate Equity Investment Fund Class
B Shares is incorporated herein by reference to Post-Effective
Amendment No. 40 to Registrant's Registration Statement on Form
N-1A filed with the Commission on October 26, 1999.
(9) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Real Estate Equity Investment Fund Class
C Shares is incorporated herein by reference to Post-Effective
Amendment No. 40 to Registrant's Registration Statement on Form
N-1A filed with the Commission on October 26, 1999.
(10) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Focus Growth Fund (formerly Munder Equity Selection Fund)
Class A Shares is incorporated herein by reference to Post-
Effective Amendment No. 40 to Registrant's Registration
Statement on Form N-1A filed with the Commission on October 26,
1999.
(11) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Focus Growth Fund (formerly Munder
Equity Selection Fund) Class B Shares is incorporated herein by
reference to Post-Effective Amendment No. 40 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
October 26, 1999.
(12) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Focus Growth Fund (formerly Munder
Equity Selection Fund) Class C Shares is incorporated herein by
reference to Post-Effective Amendment No. 40 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
October 26, 1999.
(13) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder International Bond Fund Class A Shares is incorporated
herein by reference to
9
<PAGE>
Post-Effective Amendment No. 40 to Registrant's Registration
Statement on Form N-1A filed with the Commission on October 26,
1999.
(14) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder International Bond Fund Class B Shares
is incorporated herein by reference to Post-Effective Amendment
No. 40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(15) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder International Bond Fund Class C Shares
is incorporated herein by reference to Post-Effective Amendment
No. 40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(16) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Micro-Cap Equity Fund Class A Shares is incorporated
herein by reference to Post-Effective Amendment No. 40 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on October 26, 1999.
(17) Amended and Restated Service Plan, dated August 3, 1999, for the
for the Munder Micro-Cap Equity Fund Class B Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(18) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Micro-Cap Equity Fund Class C Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(19) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Short Term Treasury Fund Class A Shares is incorporated
herein by reference to Post-Effective Amendment No. 40 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on October 26, 1999.
(20) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Short Term Treasury Fund Class B Shares
is incorporated herein by reference to Post-Effective Amendment
No. 40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(21) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Short Term Treasury Fund Class C Shares
is incorporated herein by reference to Post-Effective Amendment
No. 40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(22) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder All-Season Aggressive Fund (formerly the
Munder All-Season Accumulation Fund) Class A Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(23) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder All-Season Aggressive Fund (formerly the
Munder All-Season
10
<PAGE>
Accumulation Fund) Class B Shares is incorporated herein by
reference to Post-Effective Amendment No. 40 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
October 26, 1999.
(24) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder All-Season Conservative Fund (formerly
the Munder All-Season Maintenance Fund) Class A Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(25) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder All-Season Conservative Fund (formerly
the Munder All-Season Maintenance Fund) Class B Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(26) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder All-Season Moderate Fund (formerly the
Munder All-Season Development Fund) Class A Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(27) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder All-Season Moderate Fund (formerly the
Munder All-Season Development Fund) Class B Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(28) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Small-Cap Value Fund Class A Shares is incorporated
herein by reference to Post-Effective Amendment No. 40 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on October 26, 1999.
(29) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Small-Cap Value Fund Class B Shares
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(30) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Small-Cap Value Fund Class C Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(31) Amended and Restated Service Plan, dated August 3, 1999, for the
NetNet Fund is incorporated herein by reference to Post-
Effective Amendment No. 40 to Registrant's Registration
Statement on Form N-1A filed with the Commission on October 26,
1999.
(32) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Growth Opportunities Fund Class A Shares is incorporated
herein by reference to
11
<PAGE>
Post-Effective Amendment No. 40 to Registrant's Registration
Statement on Form N-1A filed with the Commission on October 26,
1999.
(33) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Growth Opportunities Fund is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(34) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Growth Opportunities Fund Class C Shares
is incorporated herein by reference to Post-Effective Amendment
No. 40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 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.incorporated herein by reference; material provisions of
this exhibit are substantially similar to those of the
corresponding exhibit to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 29, 1997.
(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) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder NetNet Fund Class B Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(38) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder NetNet Fund Class C Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(39) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Value Fund Class A Shares is incorporated herein by
reference to Post-Effective Amendment No. 40 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
October 26, 1999.
(40) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Value Fund Class B Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(41) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Value Fund Class C Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed
with the Commission on October 26, 1999.
(42) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Future Technology Fund Class A Shares is incorporated
herein by reference to
12
<PAGE>
Post-Effective Amendment No. 40 to Registrant's Registration
Statement on Form N-1A filed with the Commission on October 26,
1999.
(43) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Future Technology Fund Class B Shares is
incorporated herein by reference to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed with
the Commission on October 26, 1999.
(44) Service Plan Distribution for the Munder Future Technology
Fund Class II Shares is incorporated by reference to Post-
Effective Amendment No. 41 to Registrant's Registration Statement
on Form N-1A filed with the Commission on January 18, 2000.
(45) Service Plan, dated February 14, 2000, for the Munder
International NetNet Fund Class A Shares is filed herein.
(46) Service and Distribution Plan, dated February 14, 2000, for the
Munder International NetNet Fund Class B Shares is filed
herein.
(47) Service and Distribution Plan, dated February 14, 2000, for the
Munder International NetNet Fund Class II Shares is filed
herein.
(48) Service and Distribution Plan for the Munder Focus Growth Fund
(formerly Munder Equity Selection Fund) Class II Shares is filed
herein.
(49) Service and Distribution Plan for the Munder Growth Opportunities
Fund Class II Shares is filed herein.
(n) Not Applicable.
(o) Sixth Second Amended and Restated Multi-Class Plan is filed herein.
(p) (1) Fifth Amended and Restated Code of Ethics of Registrant is filed
herein.
(2) Code of Ethics of Funds Distributor, Inc. is filed herein.
(3) Code of Ethics of Munder Capital Management is filed herein.
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
13
<PAGE>
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 Advisor
----------------------------------------------------
Munder Capital Management
Name Position with Advisor
Old MCM, Inc. Partner
Munder Group LLC Partner
WAM Holdings, Inc. Partner
WAM Holdings II, Inc. Partner
Michael Monahan 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
14
<PAGE>
Name Position with Advisor
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
Chief Executive Officer and Chief Investment
Officer/Fixed Income
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
Name Position with Advisor
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. Schluchter, III Director, Domestic Investments
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, SEC File No. 801-55795.
Framlington Overseas Investment Management Limited
Name Position with Sub-Advisor
Warren J. Coleman Director
Gary C. Fitzgerald Director
Jean-Luc Schilling Director
Michael A. Vogel Director
Robert Jenkins Portfolio Manager
For further information relating to the Sub-Advisor's officers, reference
is made to Form ADV filed under the Investment Advisers Act of 1940 by
Framlington Overseas Investment Management Limited, SEC File No. 801-42074.
15
<PAGE>
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
CDC MPT + Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Global Funds, Inc.
Dresdner RCM Investment Funds Inc.
JP Morgan Institutional Funds
JP Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Merrimac Series
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
The Saratoga Advantage Trust
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.
16
<PAGE>
SoGen Funds, Inc.
SoGen Variable Funds, Inc.
St. Clair Funds, Inc.
TD Waterhouse Trust
The Skyline Funds
TD Waterhouse 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 Officer, Secretary and Clerk -Margaret W. Chambers
Director, Senior Vice President and Treasurer -Joseph F. Tower, III
Senior Vice President -Paula R. David
Senior Vice President -Gary S. MacDonald
Senior Vice President -Judith K. Benson
Chairman and Director -William J. Nutt
Vice President and Chief Financial Officer -William J. Stetter
</TABLE>
(c) Not Applicable.
Item 28. Location of Accounts and Records
--------------------------------
The account books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and the Rules thereunder will be maintained at the offices of:
(1) Munder Capital Management, 480 Pierce Street or 255 East Brown
Street, Birmingham, Michigan 48009 (records relating to its
function as investment advisor);
(2) First Data Investor Services Group, Inc., 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
(4) Funds Distributor, Inc., 60 State Street, Boston, Massachusetts
02109 (records relating to its function as distributor).
Item 29. Management Services
-------------------
None.
17
<PAGE>
Item 30. Undertakings
------------
Not Applicable.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended and
the Investment Company Act of 1940, as amended, the Registrant certifies that
this Post-Effective Amendment No. 43 to the Registration Statement meets the
requirements for effectiveness pursuant to Rule 485(a) of the Securities Act of
1933, as amended and the Registrant has duly caused this Post-Effective
Amendment No. 43 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 21st day of March, 2000.
THE MUNDER FUNDS, INC.
By: *
______________________
Lee P. Munder, President
* By: /s/ Francine S. Hayes
----------------------
Francine S. Hayes
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:
Signatures Title Date
- ---------- ----- ----
* Director and March 21, 2000
________________________
Lee P. Munder President
* Director March 21, 2000
________________________
Charles W. Elliott
* Director March 21, 2000
________________________
Joseph E. Champagne
* Director March 21, 2000
________________________
Thomas B. Bender
* Director March 21, 2000
________________________
Thomas D. Eckert
* Director March 21, 2000
________________________
John Rakolta, Jr.
* Director March 21, 2000
________________________
David J. Brophy
19
<PAGE>
* Vice President, March 21, 2000
________________________
Terry H. Gardner Treasurer, Secretary and
Chief Financial Officer
*By: /s/ Francine S. Hayes
----------------------
Francine S. Hayes
as Attorney-in-Fact
20
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
99(a) (16) Articles Supplementary
99(d) (3) Notice to Investment Advisory Agreement
99(e) (10) Notice to Underwriting Agreement
99(e) (11) Notice to Distribution Agreement
99(e) (12) Notice to Distribution Agreement
99(e) (13) Notice to Distribution Agreement
99(h) (5) Notice to Administration Agreement
99(m) (45) Service Plan for Class A Shares for Munder International
NetNet Fund
99(m) (46) Service and Distribution Plan for Class B Shares for Munder
International NetNet Fund
99(m) (47) Service and Distribution Plan for Class II shares for
Munder International NetNet Fund
99(m) (48) Service and Distribution Plan for Class II Shares for
Munder Focus Growth Fund
99(m)( 49) Service and Distribution Plan for Class II Shares for
Munder Growth Opportunities Fund
99(o) Sixth Amended and Restated Multi-Class Plan
99(p) (1) Fifth Amended and Restated Code of Ethics of Registrant
99(p) (2) Code of Ethics of Funds Distributor, Inc.
99(p) (3) Code of Ethics of Munder Capital Management
<PAGE>
Exhibit 99(a)(16)
THE MUNDER FUNDS, INC.
ARTICLES SUPPLEMENTARY
THE MUNDER FUNDS, INC., a Maryland corporation registered as an open-end
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and having its principal office in the State of Maryland in
Baltimore City, Maryland (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: In accordance with procedures established in the Corporation's
Charter, the Board of Directors of the Corporation, by resolution dated February
14, 2000 pursuant to Section 2-208 of Maryland General Corporate Law, duly
increased the total number of shares which the Corporation shall have the
authority to issue to four billion, three hundred million (4,300,000,000) shares
of Common Stock of the par value of $0.01 per share and of the aggregate par
value of forty three million dollars ($43,000,000); and duly classify
400,000,000 shares of the unissued, authorized capital stock of the Corporation
into the following additional series, designated as follows:
<TABLE>
<CAPTION>
Authorized Shares by Class (in millions)
----------------------------------------
Name of Series A B Y K II
- -------------- -- -- - -- --
<S> <C> <C> <C> <C> <C>
Munder International NetNet Fund 115 115 65 25 80
</TABLE>
and; duly classify 20,000,000 shares of the unissued, authorized capital stock
of the Corporation into the following series, designated as follows:
<TABLE>
<CAPTION>
Authorized Shares by Class
(in millions)
-----------
Name of Series II
- -------------- --
<S> <C>
Munder Growth Opportunities Fund 10
Munder Focus Growth Fund (formerly Munder Equity Selection Fund) 10
</TABLE>
; and further
SECOND: The shares of the Corporation authorized and classified pursuant
to Article First of these Articles Supplementary have been so authorized and
classified by the Board of Directors under the authority contained in the
Charter of the Corporation. The number of shares of capital stock of the
various classes that the Corporation has authority to issue has been established
by the Board of Directors in accordance with Section 2-105(c) of the Maryland
General Corporation Law.
THIRD: Immediately prior to the effectiveness of the Articles
Supplementary of the Corporation as hereinabove set forth, the Corporation had
the authority to issue three billion, three hundred million (3,300,000,000)
shares of Common Stock of the par value of $0.01 per share and having an
aggregate par value of thirty three million dollars ($33,000,000), of which the
Board of Directors has designated two billion, seven hundred and eighty million,
(2,780,000,000) (including 2,605,000,000 shares previously designated) shares
into Series and classified the shares of each Series as follows:
Previously Classified Shares
----------------------------
Authorized Shares
Name of Series (in millions)
- -------------- ------------
Munder Financial Services Fund 50
<PAGE>
<TABLE>
<CAPTION>
Authorized
Shares by Class (in millions)
-----------------------------
Name of Series A B Y C K
- -------------- - - - - -
<S> <C> <C> <C> <C> <C>
Munder Multi-Season Growth Fund 10 60 50 10 50
Munder Money Market Fund 105 70 600 45 300
Munder Real Estate Equity Investment Fund 10 50 10 10 10
Munder Equity Selection Fund 10 20 40 20 10
Munder International Bond Fund 20 40 20 10 10
Munder Value Fund 5 10 10 5 10
Munder Micro-Cap Equity Fund 10 15 10 10 10
Munder Small-Cap Value Fund 10 15 10 10 10
Munder All-Season Conservative Fund 12.5 12.5 25 N/A N/A
Munder All-Season Moderate Fund 12.5 12.5 25 N/A N/A
Munder All-Season Aggressive Fund 12.5 12.5 25 N/A N/A
Munder Growth Opportunities Fund 3.4 3.3 20 3.3 20
Munder Convertible Securities Fund 5 5 30 0 10
Munder NetNet Fund 115 115 65 80 N/A
</TABLE>
<TABLE>
<CAPTION>
Authorized
Shares by Class (in millions)
-----------------------------
Michigan Municipal
Name of Series A B Y C League (formerly "K")
- -------------- - - - - ---------------------
<S> <C> <C> <C> <C> <C>
Munder Short Term Treasury Fund 0 0 90 0 10
</TABLE>
Authorized
Shares by Class (in millions)
-----------------------------
Name of Series A B Y II
- -------------- - - - --
Munder Future Technology Fund 100 100 25 40
As amended hereby, the Corporation's Articles of Incorporation authorize
the issuance of four billion, three hundred million (4,300,000,000) shares of
Common Stock of the par value of $0.01 per share and having an aggregate par
value of forty three million dollars ($43,000,000), of which the Board of
Directors has designated three billion, two hundred million, (3,200,000,000)
(including 2,780,000,000 shares previously designated) shares into Series and
classified the shares of each Series as follows:
Current Classification of Shares
--------------------------------
Authorized Shares
Name of Series (in millions)
- -------------- ------------
Munder Financial Services Fund 50
<TABLE>
<CAPTION>
Authorized
Shares by Class (in millions)
-----------------------------
Michigan
Municipal
Name of Series A B Y C K League II
- -------------- - - - - -- ------ --
<S> <C> <C> <C> <C> <C> <C> <C>
Munder Multi-Season Growth Fund 10 60 50 10 50 N/A N/A
Munder Money Market Fund 105 70 600 45 300 N/A N/A
Munder Real Estate Equity Investment Fund 10 50 10 10 10 N/A N/A
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Authorized
Shares by Class (in millions)
-----------------------------
Michigan
Municipal
Name of Series A B Y C K League II
- -------------- - - - - -- ------ --
<S> <C> <C> <C> <C> <C> <C> <C>
Munder Focus Growth Fund (formerly 10 20 40 20 10 N/A 10
Munder Equity Selection Fund)
Munder International Bond Fund 20 40 20 10 10 N/A N/A
Munder Value Fund 5 10 10 5 10 N/A N/A
Munder Micro-Cap Equity Fund 10 15 10 10 10 N/A N/A
Munder Small-Cap Value Fund 10 15 10 10 10 N/A N/A
Munder All-Season Conservative Fund 12.5 12.5 25 N/A N/A N/A N/A
Munder All-Season Moderate Fund 12.5 12.5 25 N/A N/A N/A N/A
Munder All-Season Aggressive Fund 12.5 12.5 25 N/A N/A N/A N/A
Munder Growth Opportunities Fund 3.4 3.3 20 3.3 20 N/A 10
Munder Convertible Securities Fund 5 5 30 0 10 N/A N/A
Munder NetNet Fund 115 115 65 80 N/A N/A N/A
Munder Short Term Treasury Fund 0 0 90 0 N/A 10 N/A
Munder Future Technology Fund 100 100 25 N/A N/A N/A 40
Munder International NetNet Fund 115 115 65 N/A 25 N/A 80
</TABLE>
FOURTH: The preferences, rights, voting powers, restrictions, limitations
as to dividends, qualifications and terms and conditions of redemption of the
various classes of shares shall be as set forth in the Corporation's Articles of
Incorporation and shall be subject to all provisions of the Articles of
Incorporation relating to shares of the Corporation generally, and those set
forth as follows:
(a) The assets of each Class of a Series shall be invested in the same
investment portfolio of the Corporation.
(b) The dividends and distributions of investment income and capital gains
with respect to each class of shares shall be in such amount as may be
declared from time to time by the Board of Directors, and the dividends and
distributions of each class of shares may vary from the dividends and
distributions of the other classes of shares to reflect differing
allocations of the expenses of the Corporation among the holders of each
class and any resultant differences between the net asset value per share
of each class, to such extent and for such purposes as the Board of
Directors may deem appropriate. The allocation of investment income or
capital gains and expenses and liabilities of the Corporation among the
classes shall be determined by the Board of Directors in a manner it deems
appropriate.
(c) Class A shares of each Series and Class II shares of each Series
(including fractional shares) may be subject to an initial sales charge
pursuant to the terms of the issuance of such shares.
(d) The proceeds of the redemption of Class B shares, Class C shares and
Class II shares of each Series (including fractional shares) may be reduced
by the amount of any contingent deferred sales charge payable on such
redemption pursuant to the terms of the issuance of such shares.
(e) The holders of Class A shares, Class B shares, Class C shares and
Class II shares of each Series shall have (i) exclusive voting rights with
respect to provisions of any service plan or service and distribution plan
adopted by the Corporation pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (a "Plan") applicable to the respective class of the
respective Series and (ii) no voting rights with respect to the provisions
of any Plan applicable to any other class or Series of shares or with
regard to any other matter submitted to a vote of shareholders which does
not affect holders of that respective class of the respective Series of
share s.
3
<PAGE>
(f)(1) Each Class B share of each Series, other than a share purchased
through the automatic reinvestment of a dividend or a distribution with
respect to Class B shares, shall be converted automatically, and without
any action or choice on the part of the holder thereof, into Class A shares
of that Series on the date that is the first business day of the month in
which the sixth anniversary of the issuance of the Class B shares occurs
(the "Conversion Date"). With respect to Class B shares issued in an
exchange or series of exchanges for shares of capital stock of another
investment company or class or series thereof registered under the
Investment Company Act of 1940 pursuant to an exchange privilege granted by
the Corporation, the date of issuance of the Class B shares for purposes of
the immediately preceding sentence shall be the date of issuance of the
original shares of capital stock.
(2) Each Class B share of a Series purchased through the automatic
reinvestment of a dividend or a distribution with respect to Class B shares
shall be segregated in a separate sub-account. Each time any Class B
shares in a shareholder's Fund account (other than those in the sub-
account) convert to Class A shares, an equal pro rata portion of the Class
B shares then in the sub-account shall also convert automatically to Class
A shares without any action or choice on the part of the holder thereof.
The portion shall be determined by the ratio that the shareholder's Class B
shares of a Series converting to Class A shares bears to the shareholder's
total Class B shares of that Series not acquired through dividends and
distributions.
(3) The conversion of Class B shares to Class A shares is subject to
the continuing availability of an opinion of counsel or a ruling of the
Internal Revenue Service that payment of different dividends on Class A and
Class B shares does not result in the Corporation's dividends or
distributions constituting "preferential dividends" under the Internal
Revenue Code of 1986, as amended, and that the conversion of shares does
not constitute a taxable event under federal income tax law.
(4) The number of Class A shares of a Series into which a share of
Class B shares is converted pursuant to paragraphs (f)(1) and (f)(2) hereof
shall equal the number (including for this purpose fractions of shares)
obtained by dividing the net asset value per share of the Class B shares of
the Series (for purposes of sales and redemptions thereof on the Conversion
Date) by the net asset value per share of the Class A shares of the Series
(for purposes of sales and redemptions thereof on the Conversion Date).
(5) On the Conversion Date, the Class B shares of a Series converted
into Class A shares will cease to accrue dividends and will no longer be
deemed outstanding and the rights of the holders thereof (except the right
to receive (i) the number of Class A shares into which the Class B shares
have been converted and (ii) declared but unpaid dividends to the
Conversion Date) will cease. Certificates representing Class A shares
resulting from the conversion need not be issued until certificates
representing Class B shares converted, if issued, have been received by the
Corporation or its agent duly endorsed for transfer.
4
<PAGE>
IN WITNESS WHEREOF, The Munder Funds, Inc. has caused these Articles
Supplementary to be signed in its name on its behalf by its authorized officers
who acknowledge that these Articles Supplementary are the act of the
Corporation, that to the best of their knowledge, information and belief, all
matters and facts set forth herein relating to the authorization and approval of
these Articles Supplementary are true in all material respects and that this
statement is made under the penalties of perjury.
Date: March 1, 2000
THE MUNDER FUNDS, INC.
[CORPORATE SEAL]
By: /s/ Terry H. Gardner
--------------------
/S/ Terry H. Gardner
Vice President
Attest:
By: /s/ Libby E. Wilson
-------------------
Libby E. Wilson
Assistant Secretary
5
<PAGE>
Exhibit 99(d)(3)
Munder Capital Management
480 Pierce Street
Birmingham, Michigan 48009
Ladies and Gentlemen:
Reference is made to the Investment Advisory Agreement between us
dated as of July 2, 1998 (the "Agreement").
This letter is to provide notice of the creation of an additional
investment portfolio of The Munder Funds, Inc., namely the Munder International
NetNet Fund (the "New Portfolio").
In accordance with the Additional Portfolios provision of Section 1(b)
of the Agreement, we request that you act as Investment Advisor under the
Agreement with respect to the New Portfolio.
Please indicate your acceptance of 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:
Munder Capital Management
By: /s/ Terry H. Gardner
--------------------
Date: February 14, 2000
<PAGE>
Exhibit 99(e)(10)
DISTRIBUTION AGREEMENT
----------------------
This Distribution Agreement is made as of this 14/th/ day of February,
2000 by and between THE MUNDER FUNDS, INC., a Maryland Corporation (the "Fund"),
and FUNDS DISTRIBUTOR, INC., a Massachusetts corporation ("Funds Distributor").
WHEREAS, the Fund is an open-end management investment company and is
so registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund desires to retain Funds Distributor as Distributor
for the Fund's shares of common stock in Class A, Class B, Class II, Class K and
Class Y Shares representing interests in the Fund's portfolio, Munder
International NetNet Fund (the "Portfolio"), to provide for the sale and
distribution of shares of the Portfolio (the "Shares"), and Funds Distributor is
willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein and intending to be legally bound hereby, the parties hereto
agree as follows:
I. DELIVERY OF DOCUMENTS
---------------------
The Fund has delivered to Funds Distributor copies of each of the
following documents and will deliver to it all future amendments and supplements
thereto, if any:
(a) Resolutions of the Fund's Board of Directors authorizing the
execution and delivery of this Agreement;
(b) The Fund's Articles of Incorporation as filed with the State of
Maryland - Department of Assessments and Taxation on November 18,
1992;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission
("SEC");
(e) The Fund's Registration Statement on Form N-1A (the "Registration
Statement") under the Securities Act of 1933 (the "1933 Act") and
the 1940 Act, as filed with the SEC on November 18, 1992, and all
amendments thereto; and
(f) The Fund's most recent Prospectuses and Statement of Additional
Information and all amendments and supplements thereto
(collectively, the "Prospectuses").
II. DISTRIBUTION
------------
1. Appointment of Distributor. The Fund hereby appoints Funds
--------------------------
Distributor as Distributor of the Portfolio's Shares and Funds Distributor
hereby accepts such appointment and
<PAGE>
agrees to render the services and duties set forth in this Section II. In the
event that the Fund establishes one or more additional portfolios or classes of
shares other than the Portfolio and the Shares with respect to which it decides
to retain Funds Distributor to act as distributor hereunder, the Fund shall
notify Funds Distributor in writing. If Funds Distributor is willing to render
such services, it shall so notify the Fund in writing whereupon such portfolio
and such shares shall become a Portfolio and Shares hereunder and shall be
subject to the provisions of this Agreement, except to the extent that said
provision is modified with respect to such portfolio or shares in writing by the
Fund and Funds Distributor at the time.
2. Services and Duties.
-------------------
(a) The Fund agrees to sell through Funds Distributor, as agent, from
time to time during the term of this Agreement, Shares (whether authorized but
unissued or treasury shares, in the Fund's sole discretion) upon the terms and
at the current offering price as described in the applicable Prospectus. Funds
Distributor will act only in its own behalf as principal in making agreements
with selected dealers or others for the sale and redemption of Shares, and shall
sell Shares only at the offering price thereof as set forth in the applicable
Prospectus. Funds Distributor shall devote appropriate efforts to effect sales
of Shares of the Portfolio, but shall not be obligated to sell any certain
number of Shares.
(b) In all matters relating to the sale and redemption of Shares,
Funds Distributor will act in conformity with the Fund's Articles of
Incorporation, By-Laws and applicable Prospectuses and with the instructions and
directions of the Board of Directors of the Fund and will conform to and comply
with the requirements of the 1933 Act, the 1940 Act, the regulations of the
National Association of Securities Dealers, Inc. and all other applicable
Federal or state laws and regulations.
(c) Funds Distributor will bear the cost of printing and distributing
any Prospectus (including any supplement or amendment thereto), provided,
--------
however, that Funds Distributor shall not be obligated to bear the expenses
- -------
incurred by the Fund in connection with (i) the preparation and printing of any
supplement or amendment to a Registration Statement or Prospectus necessary for
the continued effective registration of the Shares under the 1933 Act or state
securities laws; and (ii) the printing and distribution of any Prospectus,
supplement or amendment thereto for existing shareholders of the class ("Class")
of Shares described therein.
(d) All Shares of the Portfolio offered for sale by Funds Distributor
shall be offered for sale to the public at a price per share (the "offering
price") equal to (i) their net asset value (determined in the manner set forth
in the applicable Prospectuses) plus, except to those classes of persons set
forth in the applicable Prospectuses, (ii) a sales charge which shall be the
percentage of the offering price of such Shares as set forth in the applicable
Prospectuses. The offering price, if not an exact multiple of one cent, shall
be adjusted to the nearest cent. Concessions paid by Funds Distributor to
broker-dealers and other persons shall be set forth in either the selling
agreements between Funds Distributor and such broker-dealers and persons or, if
such concessions are described in the applicable Prospectuses, shall be as so
set forth. No broker-dealer or other person who enters into a selling or
distribution and servicing agreement
2
<PAGE>
with Funds Distributor shall be authorized to act as agent for the Fund in
connection with the offering or sale of Shares to the public or otherwise.
(e) If any shares sold by Funds Distributor under the terms of this
Agreement are redeemed or repurchased by the Fund or by Funds Distributor as
agent or are tendered for redemption within seven business days after the date
of confirmation of the original purchase of said Shares, Funds Distributor shall
forfeit the amount above the net asset value received by it with respect to such
Shares, provided that the portion, if any, of such amount re-allowed by Funds
Distributor to broker-dealers or other persons shall be repayable to the Fund
only to the extent recovered by Funds Distributor from the broker-dealer or
other persons concerned. Funds Distributor shall include in the form of
agreement with such broker-dealers and other persons a corresponding provision
for the forfeiture by them of their concession with respect to Shares sold by
them or their principals and redeemed or repurchased by the Fund or by Funds
Distributor as agent (or tendered for redemption) within seven business days
after the date of confirmation of such initial purchases.
(f) Funds Distributor may be reimbursed for all or a portion of the
expenses described above to the extent permitted by one or more distribution
plans adopted by the Fund on behalf of a Portfolio pursuant to Rule 12b-1 under
the 1940 Act. No provision of this Agreement may be deemed to prohibit any
payments by a Portfolio to Funds Distributor or by a Portfolio or Funds
Distributor to investment dealers, banks or other financial institutions through
whom shares of the Fund are sold where such payments are made under a
distribution plan adopted by the Fund on behalf of such Portfolio pursuant to
Rule 12b-1 under the Act (the "Plan"). The Fund agrees that it shall provide
notice to Funds Distributor at least 30 days prior to the effective date of the
elimination of or the decrease in the amount of expenses reimbursable under such
a distribution plan.
(g) With respect to such classes of shares, if any, that are sold with
a contingent deferred sales charge ("CDSC"), Funds Distributor shall impose a
CDSC in connection with the redemption of the Shares of such classes, not to
exceed a specified percentage of the original purchase price of the Shares, as
from time to time set forth in the applicable Prospectuses. Funds Distributor
may retain (or receive from the Fund, as the case may be) all of any CDSC. Funds
Distributor may pay to broker-dealers or other persons through whom such Shares
are sold a commission or other payment to the extent consistent with the current
Prospectuses and applicable rules and regulations.
3. Sales and Redemptions.
---------------------
(a) The Fund shall pay all costs and expenses in connection with the
registration of the Shares under the 1933 Act, and all expenses in connection
with maintaining facilities for the issue and transfer of the Shares and for
supplying information, prices and other data to be furnished by the Fund
hereunder, and all expenses in connection with preparing, printing and
distributing the Prospectuses except as set forth in subsection 2(c) of Section
II hereof.
3
<PAGE>
(b) The Fund shall execute all documents, furnish all information and
otherwise take all actions which may be reasonably necessary in the discretion
of the Fund's officers in connection with the sale of the Shares in such states
as Funds Distributor may designate to the Fund and the Fund may approve, and the
Fund shall pay all filing fees which may be incurred in connection with such
sale. Funds Distributor shall pay all other expenses incurred by Funds
Distributor in connection with the sale of the Shares, except as otherwise
specifically provided in this Agreement.
(c) The Fund shall have the right to suspend the sale of Shares at any
time in response to conditions in the securities markets or otherwise, and to
suspend the redemption of Shares of any Portfolio at any time permitted by the
1940 Act or the rules of the SEC ("Rules").
(d) The Fund reserves the right to reject any order for Shares, but
will not do so arbitrarily or without reasonable cause.
III. LIMITATIONS OF LIABILITY
------------------------
Funds Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund or any Portfolio in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
IV. CONFIDENTIALITY
---------------
Funds Distributor will treat confidentially and as proprietary
information of the Fund all records and other information relative to the Fund,
to the Fund's prior or current shareholders and to those persons or entities who
respond to Funds Distributor's inquiries concerning investment in the Fund, and,
except as provided below, will not use such records and information for any
purpose other than the performance of its responsibilities and duties hereunder.
Any other use by Funds Distributor of the information and records referred to
above may be made only after prior notification to and approval in writing by
the Fund. Such approval shall not be unreasonably withheld and may not be
withheld where: (i) Funds Distributor may be exposed to civil or criminal
contempt proceedings for failure to divulge such information; (ii) Funds
Distributor is requested to divulge such information by duly constituted
authorities; or (iii) Funds Distributor is so requested by the Fund.
V. INDEMNIFICATION
---------------
1. Fund Representation. The Fund represents and warrants to Funds
-------------------
Distributor that at all times the Registration Statement and Prospectuses will
in all material respects conform to the applicable requirements of the 1933 Act
and the Rules thereunder and will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, except that no representation or warranty
in this subsection shall apply to
4
<PAGE>
statements or omissions made in reliance upon and in conformity with written
information furnished to the Fund by or on behalf of and with respect to Funds
Distributor expressly for use in the Registration Statement or Prospectuses.
2. Funds Distributor Representation. Funds Distributor represents
--------------------------------
and warrants to the Fund that it is duly organized as a Massachusetts
corporation and is and at all times will remain duly authorized and licensed to
carry out its services as contemplated herein.
3. Fund Indemnification. The Fund, on behalf of the Portfolio,
--------------------
agrees that the Portfolio will indemnify, defend and hold harmless Funds
Distributor, its several officers and directors, and any person who controls
Funds Distributor within the meaning of Section 15 of the 1933 Act, from and
against any losses, claims, damages or liabilities, joint or several, to which
any of them may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectuses or in any application or other document executed by or on behalf of
a Portfolio, or arise out of or based upon, information furnished by or on
behalf of a Portfolio, filed in any state in order to sell the Shares under the
securities or blue sky laws thereof ("Blue Sky Application"), or arise out of,
or are based upon, the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse Funds Distributor, its several officers and
directors, and any person who controls Funds Distributor within the meaning of
Section 15 of the 1933 Act, for any legal or other expenses reasonably incurred
by any of them in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that neither the Fund nor any
-------- -------
Portfolio shall be liable in any case to the extent that such loss, claim,
damage or liability arises out of, or is based upon, any untrue statement,
alleged untrue statement, or omission or alleged omission made in the
Registration Statement, the Prospectuses, any Blue Sky Application or any
application or other document executed by or on behalf of the Fund in reliance
upon and in conformity with written information furnished to the Fund by or on
behalf of Funds Distributor specifically for inclusion therein.
A Portfolio shall not indemnify any person pursuant to this subsection
3 unless the court or other body before which the proceeding was brought has
rendered a final decision on the merits that such person was not liable by
reason of his willful misfeasance, bad faith or gross negligence in the
performance of his duties, or his reckless disregard of his obligations and
duties, under this Agreement ("disabling conduct") or, in the absence of such a
decision, a reasonable determination (based upon a review of the facts) that
such person was not liable by reason of disabling conduct has been made by the
vote of a majority of a quorum of Directors of the Fund who are neither
"interested parties" of the Fund (as defined in the 1940 Act) nor parties to the
proceeding, or by an independent legal counsel in a written opinion.
The Portfolio shall advance attorneys' fees and other expenses
incurred by any person in defending any claim, demand, action or suit which is
the subject of a claim for indemnification pursuant to this subsection 3, so
long as: (i) such person shall undertake to repay all such advances unless it
is ultimately determined that he or she is entitled to indemnification
5
<PAGE>
hereunder; and (ii) such person shall provide security for such undertaking, or
the Portfolio shall be insured against losses arising by reason of any lawful
advances, or a majority of a quorum of the disinterested, non-party Directors of
the Fund (or an independent legal counsel in written opinion) shall determine
based on a review of readily available facts (as opposed to a full trial-type
inquiry) that there is reason to believe that such person ultimately will be
found entitled to indemnification hereunder.
The obligations of the Portfolio under this subsection 3 shall be the
several (and not joint or joint and several) obligation of the Portfolio.
4. Funds Distributor Indemnification. Funds Distributor will
---------------------------------
indemnify, defend and hold harmless the Fund, the Portfolio, the Fund's several
officers and Directors and any person who controls the Fund or the Portfolio
within the meaning of Section 15 of the 1933 Act, from and against any losses,
claims, damages or liabilities, joint or several, to which any of them may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect hereof) arise out
of, or are based upon, any breach of its representations, warranties and
agreements herein, or which arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectuses, any Blue Sky Application or any
application or other documents executed by or on behalf of the Fund or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, which
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Fund or any of its several officers and
Directors by or on behalf of Funds Distributor specifically for inclusion
therein, and will reimburse the Fund, the Portfolio, the Fund's several officers
and trustees, and any person who controls the Fund or the Portfolio within the
meaning of Section 15 of the 1933 Act, for any legal or other expenses
reasonably incurred by any of them in investigating, defending or preparing to
defend any such action, proceeding or claim.
5. General Indemnity Provision. No indemnifying party shall be
---------------------------
liable under its indemnity agreement contained in subsection 3 or 4 hereof with
respect to any claim made against such indemnifying party unless the indemnified
party shall have notified the indemnifying party in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the indemnified party (or after
the indemnified party shall have received notice of such service on any
designated agent), but failure to notify the indemnifying party of any such
claim shall not relieve it from any liability which it may otherwise have to the
indemnified party. The indemnifying party will be entitled to participate at
its own expense in the defense or, if it so elects, to assume the defense of any
suit brought to enforce any such liability, and if the indemnifying party elects
to assume the defense, such defense shall be conducted by counsel chosen by it
and reasonably satisfactory to the indemnified party. In the event the
indemnifying party elects to assume the defense of any such suit and retain such
counsel, the indemnified party shall bear the fees and expenses of any
additional counsel retained by the indemnified party.
6
<PAGE>
VI. DURATION AND TERMINATION
------------------------
This Agreement shall become effective as of the date first above
written, and, unless sooner terminated as provided herein, shall continue until
February 14, 2001. Thereafter, if not terminated, this Agreement shall continue
automatically for successive terms of one year, provided that such continuance
is specifically approved at least annually by a vote of the majority of the
Board of Directors of the Fund, including a majority of the Directors who are
not "interested persons" of the Fund and have no direct or indirect financial
interest in the operation of the Plan, this Agreement, or in any agreement
relating to the Plan (the "Plan Directors"), by vote cast in person at a meeting
called for the purpose of voting on such approval; provided, however, that this
-------- -------
Agreement may be terminated with respect to any Portfolio by the Fund at any
time, without the payment of any penalty, by vote of a majority of the Directors
or by a vote of a "majority of the outstanding voting securities" of such
Portfolio on 60 days' written notice to Funds Distributor, or by Funds
Distributor at any time, without the payment of any penalty, on 60 days' written
notice to the Fund. This Agreement will automatically and immediately terminate
in the event of its "assignment." (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meanings as such terms have in the 1940 Act.)
VII. AMENDMENT OF THIS AGREEMENT
---------------------------
No provision of this Agreement may be changed, waived, discharged or
terminated except by an instrument in writing signed by the party against which
an enforcement of the change, waiver, discharge or termination is sought.
VIII. NOTICE
------
Notices of any kind to be given to the Fund hereunder by Funds
Distributor shall be in writing and shall be duly given if mailed or delivered
to the Fund at 480 Pierce Street, Suite 300, Birmingham, Michigan 48009,
Attention: Secretary of the Fund, with a copy to Jane Kanter, Esq., Dechert
Price & Rhoads, 1775 Eye Street, Washington, D.C. 20006, or at such other
address or to such individual as shall be so specified by the Fund to Funds
Distributor. Notices of any kind to be given to Funds Distributor hereunder by
the Fund shall be in writing and shall be duly given if mailed or delivered to
Funds Distributor at 60 State Street, Suite 1300, Boston, Massachusetts 02109,
Attention: Marie Connolly or at such other address or to such individual as
shall be so specified by Funds Distributor to the Fund.
7
<PAGE>
IX. MISCELLANEOUS
-------------
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section VI hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by Maryland law; provided, however, that
-------- -------
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation of the SEC thereunder.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE MUNDER FUNDS, INC.
By:/s/ Terry H. Gardner
--------------------
Name: Terry H. Gardner
-----------------
Title:Vice President & Chief Financial Officer
----------------------------------------
Attest:_____________________
FUNDS DISTRIBUTOR, INC.
By: /s/ Margaret Chambers
---------------------
Name: Margaret Chambers
-----------------
Title: Senior Vice President
Attest:______________________
<PAGE>
Exhibit 99(e)(11)
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, MA 02109
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement between us dated as of
January 13, 1995 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the creation
of an additional class of shares, namely Class II Shares (the "New Class") for
the Munder Focus Growth Fund (formerly Munder Equity Selection Fund) of The
Munder Funds, Inc.
We request that you act as Underwriter under the Agreement with respect to
the New Class.
Please indicate your acceptance of the foregoing by executing two copies of
this Agreement, returning one copy to us and retaining one copy for your
records.
Very truly yours,
The Munder Funds, Inc.
By:/s/ Terry H. Gardner
--------------------
Accepted:
Funds Distributor, Inc.
By:/s/ Margaret Chambers
---------------------
Date: February 14, 2000
<PAGE>
Exhibit 99(e)(12)
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, MA 02109
Ladies and Gentlemen:
Reference is made to the Distribution Agreement between us dated as of
February 24, 1998 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the creation
of an additional class of shares, namely Class II Shares (the "New Class") for
the Munder Growth Opportunities Fund of The Munder Funds, Inc.
We request that you act as Distributor under the Agreement with respect to
the New Class.
Please indicate your acceptance of the foregoing by executing two copies of
this Agreement, returning one copy to us and retaining one copy for your
records.
Very truly yours,
The Munder Funds, Inc.
By:/s/ Terry H. Gardner
--------------------
Accepted:
Funds Distributor, Inc.
By:/s/ Margaret Chambers
---------------------
Date: February 14, 2000
<PAGE>
Exhibit 99(e)(13)
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, MA 02109
Ladies and Gentlemen:
Reference is made to the Distribution Agreement between us dated as of May
4, 1999 (the "Agreement").
Pursuant to the Agreement, this letter is to provide notice of the creation
of an additional class of shares, namely Class II Shares (the "New Class") for
the Munder Future Technology Fund of The Munder Funds, Inc.
We request that you act as Distributor under the Agreement with respect to
the New Class.
Please indicate your acceptance of the foregoing by executing two copies of
this Agreement, returning one copy to us and retaining one copy for your
records.
Very truly yours,
The Munder Funds, Inc.
By:/s/ Terry H. Gardner
--------------------
Accepted:
Funds Distributor, Inc.
By:/s/ Margaret Chambers
---------------------
Date: November 11, 1999
<PAGE>
Exhibit 99(h)(5)
State Street Bank and Trust Company
1776 Heritage Drive, AFB
North Quincy, MA 02171
Ladies and Gentlemen:
Reference is made to the Administration Agreement between us dated as of
October 31, 1997 (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 International NetNet Fund (the "New Portfolio").
In accordance with the Additional Portfolios provision of Section 1 of the
Agreement, we request that you act as Administrator with respect to the New
Portfolio.
Please indicate your acceptance of 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:
State Street Bank and Trust Company
By:/s/ William Beston
------------------
Date: February 14, 2000
<PAGE>
Exhibit 99(m)(45)
Service Plan
Class A Shares of
Munder International NetNet Fund
<PAGE>
SERVICE PLAN
WHEREAS, The Munder Funds, Inc. (the "Company") engages in business as
an open-end investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, shares of common stock of the Company are currently divided
into series of shares, one of which is designated as Munder International NetNet
Fund (the "Fund");
WHEREAS, shares of common stock of the Fund are divided into classes
of shares, one of which is designated Class A;
WHEREAS, the Company employs Funds Distributor, Inc. (the
"Distributor") as distributor of the securities of which it is the issuer;
WHEREAS, the Company and the Distributor have entered into a
Distribution Agreement pursuant to which the Company has employed the
Distributor in such capacity during the continuous offering of shares of the
Company; and
WHEREAS, the Company, on behalf of the Fund, intends to enter into
shareholder servicing agreements ("Agreements") with various service
organizations ("Service Organizations") either directly or through the
Distributor, pursuant to which the Service Organization will make available or
service Class A Shares; and
WHEREAS, this Service Plan (the "Plan") was adopted and approved by
the Company on February 14, 2000;
NOW, THEREFORE, the Company hereby adopts on behalf of the Fund with
respect to its Class A shares, and the Distributor hereby agrees to the terms of
the Plan in accordance with Rule 12b-1 under the Act on the following terms and
conditions:
1. The Fund is authorized to pay to the Distributor, as the
distributor of the Class A shares of the Fund, or pay directly to a Service
Organization a service fee at the rate of .25% on an annualized basis of the
average daily net assets of the Fund's Class A shares, provided that, at any
time such payments is made, whether or not this Plan continues in effect, the
making thereof will not cause the limitation upon such payments established by
this Plan to be exceeded. Such fee shall be calculated and accrued daily and
paid at such intervals as the Board of Directors shall determine, subject to any
applicable restriction imposed by rules of the National Association of
Securities Dealers, Inc.
2. The amount set forth in paragraph 1 of this Plan may be used by
the Distributor or paid directly to a Service Organization for any activity
intended to result in the servicing of shareholder accounts, including the
payment of a continuing fee which may accrue immediately after the sale of
shares.
1
<PAGE>
3. The Plan shall not take effect with respect to the Class A Shares
of the Fund until it has been approved by a vote of the then sole shareholder of
the Class A Shares of the Fund.
4. This Plan shall not take effect until it, with any related
agreements, has been approved by votes of a majority of both (a) the Directors
of the Company and (b) those Directors of the Company who are not "interested
persons" of the Company (as defined in the Act) and who have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
5. After approval as set forth in paragraphs 3 and 4, this Plan shall
take effect. The Plan shall continue in full force and effect as to the Class A
shares of the Fund for so long as such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in paragraph 4.
6. The Distributor shall provide to the Directors of the Company, and
the Directors shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made.
7. This Plan may be terminated as to the Fund at any time, without
payment of any penalty, by vote of the Directors of the Company, by vote of a
majority of the Rule 12b-1 Directors, or by a vote of a majority of the
outstanding voting securities of Class A shares of the Fund on not more than 30
days' written notice to any other party to the Plan.
8. This Plan may not be amended to increase materially the amount of
service fee provided for in paragraph 1 hereof unless such amendment is approved
in the manner provided for initial approval in paragraph 3 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided for approval and annual renewal in paragraph 4 hereof.
9. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Company
shall be committed to the discretion of the Directors who are not such
interested persons.
10. The Company shall preserve copies of this Plan and any related
agreements and all reports made to paragraph 6 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible place.
2
<PAGE>
IN WITNESS WHEREOF, the Company, on behalf of the Fund, and the
Distributor have executed this Service and Distribution Plan as of the 14/th/
day of February, 2000.
THE MUNDER FUNDS, INC.
By: /s/ Terry H. Gardner
--------------------
FUNDS DISTRIBUTOR, INC.
By: /s/ Margaret Chambers
---------------------
<PAGE>
Exhibit 99(m)(46)
Service and Distribution Plan
Class B Shares of
Munder International NetNet Fund
<PAGE>
SERVICE AND DISTRIBUTION PLAN
WHEREAS, The Munder Funds, Inc. (the "Company") engages in business as
an open-end investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, shares of common stock of the Company are currently divided
into series of shares, one of which is designated as Munder International NetNet
Fund (the "Fund");
WHEREAS, shares of common stock of the Fund are divided into classes
of shares, one of which is designated Class B;
WHEREAS, the Company employs Funds Distributor, Inc. (the
"Distributor") as distributor of the securities of which it is the issuer;
WHEREAS, the Company and the Distributor have entered into a
Distribution Agreement pursuant to which the Company has employed the
Distributor in such capacity during the continuous offering of shares of the
Company; and
WHEREAS, the Company, on behalf of the Fund, intends to enter into
Selected Dealer Agreements and other distribution or shareholder servicing
agreements ("Agreements") with various service organizations ("Service
Organizations") either directly or through the Distributor, pursuant to which
the Service Organization will make available or service Class B Shares or will
offer Class B Shares for sale to the public; and
WHEREAS, this Service and Distribution Plan (the "Plan") was adopted
and approved by the Company on February 14, 2000;
NOW, THEREFORE, the Company hereby adopts on behalf of the Fund with
respect to its Class B shares, and the Distributor hereby agrees to the terms
of, the Plan, in accordance with Rule 12b-1 under the Act on the following terms
and conditions:
1. A. The Fund is authorized to pay to the Distributor, as the
distributor of the Class B shares of the Fund, or pay directly to a Service
Organization, a fee for distribution of the shares at the rate of 0.75% on an
annualized basis of the average daily net assets of the Fund's Class B shares,
provided that, at any time such payments is made, whether or not this Plan
continues in effect, the making thereof will not cause the limitation upon such
payments established by this Plan to be exceeded. Such fee shall be calculated
and accrued daily and paid at such intervals as the Board of Directors shall
determine, subject to any applicable restriction imposed by rules of the
National Association of Securities Dealers, Inc.
B. In addition to the distribution fee distributed above, the Fund
shall pay to the Distributor, as the distributor of the Class B shares of the
Fund, or pay directly to a Service Organization a service fee at the rate of
.25% on an annualized basis of the average daily net asset of the Fund's Class B
shares, provided that, at any time such payment is made, whether or
1
<PAGE>
not this Plan continues in effect, the making thereof will not cause the
limitation upon such payments established by this Plan to be exceeded. Such fee
shall be calculated and accrued daily and paid at such intervals as the Board of
Directors shall determine, subject to any applicable restriction imposed by
rules of the National Securities Association of Dealers, Inc.
2. The amount set forth in paragraph 1.A. of this Plan may be used by
the Distributor or paid directly to a Service Organization for any activities or
expenses primarily intended to result in the sale of the Class B shares of the
Fund, including, but not limited to, payment of compensation, including
incentive compensation, to the Distributor or a Service Organization to obtain
various distribution related and/or administrative services for the Fund. These
services include, among other things, processing new shareholder account
applications, preparing and transmitting to the Fund's Transfer Agent computer
processable tapes of all transactions by customers and serving as the primary
source of information to customers in answering questions concerning the Fund
and their transactions with the Fund. Such amount may also be used to pay for
advertising, the preparation and distribution of sales literature and other
promotional activities on behalf of the Fund. In addition, this Plan hereby
authorizes payment by the Fund of the cost of preparing, printing and
distributing the Fund's Prospectuses and Statements of Additional Information to
prospective investors and of implementing and operating the Plan. Distribution
expenses also include an allocation of overhead of the Distributor and accruals
for interest on the amount of distribution expenses that exceed distribution
fees and contingent deferred sales charges received by the Distributor.
Payments under the Plan are not tied exclusively to actual distribution and
service expenses, and the payments may exceed distribution and service expenses
actually incurred.
The amount set forth in paragraph 1.B. of this Plan may be used by the
Distributor or paid directly to a Service Organization for any activity intended
to result in the servicing of shareholder accounts, including a continuing fee
which may accrue immediately after the sale of shares.
3. This Plan shall not take effect with respect to the Class B Shares
of the Fund until it has been approved by a vote of the then sole shareholder of
the Class B Shares of the Fund.
4. This Plan shall not take effect until it, with any related
agreements, has been approved by votes of a majority of both (a) the Directors
of the Company and (b) those Directors of the Company who are not "interested
persons" of the Company (as defined in the Act) and who have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
5. After approval as set forth in paragraphs 3 and 4, this Plan shall
take effect. The Plan shall continue in full force and effect as to the Class B
shares of the Fund for so long as such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in paragraph 4.
2
<PAGE>
6. The Distributor shall provide to the Directors of the Company, and
the Directors shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made.
7. This Plan may be terminated as to the Fund at any time, without
payment of any penalty, by vote of the Directors of the Company, by vote of a
majority of the Rule 12b-1 Directors, or by a vote of a majority of the
outstanding voting securities of Class B shares of the Fund on not more than 30
days' written notice to any other party to the Plan.
8. This Plan may not be amended to increase materially the amount of
distribution fee (including any service fee) provided for in paragraph 1 hereof
unless amendment is approved in the manner provided for initial approval in
paragraph 3 hereof, and no material amendment to the Plan shall be made unless
approved in the manner provided for approval and annual renewal in paragraph 4
hereof.
9. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Company
shall be committed to the discretion of the Directors who are not such
interested persons.
10. The Company shall preserve copies of this Plan and any related
agreements and all reports made to paragraph 6 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the Company, on behalf of the Fund, and the
Distributor have executed this Service and Distribution Plan as of the 14/th/
day of February, 2000.
THE MUNDER FUNDS, INC.
By: /s/ Terry H. Gardner
--------------------
FUNDS DISTRIBUTOR, INC.
By: /s/ Margaret Chambers
---------------------
3
<PAGE>
Exhibit 99(m)(47)
Service and Distribution Plan
Class II Shares of
Munder International NetNet Fund
<PAGE>
SERVICE AND DISTRIBUTION PLAN
WHEREAS, The Munder Funds, Inc. (the "Company") engages in business as
an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, shares of common stock of the Company are currently divided
into series of shares, one of which is designated as Munder International NetNet
Fund (the "Fund");
WHEREAS, shares of common stock of the Fund are divided into classes
of shares, one of which is designated Class II;
WHEREAS, the Company employs Funds Distributor, Inc. (the
"Distributor") as distributor of the securities of which it is the issuer;
WHEREAS, the Company and the Distributor have entered into a
Distribution Agreement pursuant to which the Company has employed the
Distributor in such capacity during the continuous offering of shares of the
Company; and
WHEREAS, the Company, on behalf of the Fund, intends to enter into
Selected Dealer Agreements and other distribution or shareholder servicing
agreements ("Agreements") with various service organizations ("Service
Organizations") either directly or through the Distributor, pursuant to which
the Service Organization will make available or service Class II Shares or will
offer Class II Shares for sale to the public; and
WHEREAS, this Service and Distribution Plan (the "Plan") was adopted
and approved by the Company on February 14, 2000;
NOW, THEREFORE, the Company hereby adopts on behalf of the Fund with
respect to its Class II shares, and the Distributor hereby agrees to the terms
of, the Plan, in accordance with Rule 12b-1 under the Act on the following terms
and conditions:
1. A. The Fund is authorized to pay to the Distributor, as the
distributor of the Class II shares of the Fund, or pay directly to a Service
Organization a fee for distribution of the shares at the rate of 0.75% on an
annualized basis of the average daily net assets of the Fund's Class II shares,
provided that, at any time such payments is made, whether or not this Plan
continues in effect, the making thereof will not cause the limitation upon such
payments established by this Plan to be exceeded. Such fee shall be calculated
and accrued daily and paid at such intervals as the Board of Directors shall
determine, subject to any applicable restriction imposed by rules of the
National Association of Securities Dealers, Inc.
B. In addition to the distribution fee distributed above, the Fund is
authorized to pay to the Distributor, as the distributor of the Class II shares
of the Fund, or pay directly to a Service Organization a service fee at the rate
of .25% on an annualized basis of the average daily net asset of the Fund's
Class II shares, provided that, at any time such payment is made, whether
1
<PAGE>
or not this Plan continues in effect, the making thereof will not cause the
limitation upon such payments established by this Plan to be exceeded. Such fee
shall be calculated and accrued daily and paid at such intervals as the Board of
Directors shall determine, subject to any applicable restriction imposed by
rules of the National Securities Association of Dealers, Inc.
2. The amount set forth in paragraph 1.A. of this Plan may be used by
the Distributor or paid directly to a Service Organization for any activities or
expenses primarily intended to result in the sale of the Class II shares of the
Fund, including, but not limited to, payment of compensation, including
incentive compensation, to the Distributor or a Service Organization to obtain
various distribution related and/or administrative services for the Fund. These
services include, among other things, processing new shareholder account
applications, preparing and transmitting to the Fund's Transfer Agent computer
processable tapes of all transactions by customers and serving as the primary
source of information to customers in answering questions concerning the Fund
and their transactions with the Fund. Such amount may also be used to pay for
advertising, the preparation and distribution of sales literature and other
promotional activities on behalf of the Fund. In addition, this Plan hereby
authorizes payment by the Fund of the cost of preparing, printing and
distributing the Fund's Prospectuses and Statements of Additional Information to
prospective investors and of implementing and operating the Plan. Distribution
expenses also include an allocation of overhead of the Distributor and accruals
for interest on the amount of distribution expenses that exceed distribution
fees and contingent deferred sales charges received by the Distributor.
Payments under the Plan are not tied exclusively to actual distribution and
service expenses, and the payments may exceed distribution and service expenses
actually incurred.
The amount set forth in paragraph 1.B. of this Plan may be used by the
Distributor or paid directly to a Service Organization for any activity intended
to result in the servicing of shareholder accounts, including a continuing fee
which may accrue immediately after the sale of shares.
3. This Plan shall not take effect with respect to the Class II
Shares of the Fund until it has been approved by a vote of the then sole
shareholder of the Class II Shares of the Fund.
4. This Plan shall not take effect until it, with any related
agreements, has been approved by votes of a majority of both (a) the Directors
of the Company and (b) those Directors of the Company who are not "interested
persons" of the Company (as defined in the Act) and who have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
5. After approval as set forth in paragraphs 3 and 4, this Plan shall
take effect. The Plan shall continue in full force and effect as to the Class
II shares of the Fund for so long as such continuance is specifically approved
at least annually in the manner provided for approval of this Plan in paragraph
4.
2
<PAGE>
6. The Distributor shall provide to the Directors of the Company, and
the Directors shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made.
7. This Plan may be terminated as to the Fund at any time, without
payment of any penalty, by vote of the Directors of the Company, by vote of a
majority of the Rule 12b-1 Directors, or by a vote of a majority of the
outstanding voting securities of Class II shares of the Fund on not more than 30
days' written notice to any other party to the Plan.
8. This Plan may not be amended to increase materially the amount of
distribution fee (including any service fee) provided for in paragraph 1 hereof
unless amendment is approved in the manner provided for initial approval in
paragraph 3 hereof, and no material amendment to the Plan shall be made unless
approved in the manner provided for approval and annual renewal in paragraph 4
hereof.
9. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Company
shall be committed to the discretion of the Directors who are not such
interested persons.
10. The Company shall preserve copies of this Plan and any related
agreements and all reports made to paragraph 6 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the Company, on behalf of the Fund, and the
Distributor have executed this Service and Distribution Plan as of the 14/th/
day of February, 2000.
THE MUNDER FUNDS, INC.
By: /s/ Terry H. Gardner
--------------------
FUNDS DISTRIBUTOR, INC.
By: /s/ Margaret Chambers
---------------------
3
<PAGE>
Exhibit 99(m)(48)
Service and Distribution Plan
Class II Shares of
Munder Growth Opportunities Fund
<PAGE>
SERVICE AND DISTRIBUTION PLAN
WHEREAS, The Munder Funds, Inc. (the "Company") engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, shares of common stock of the Company are currently divided into
series of shares, one of which is designated as Munder Growth Opportunities Fund
(the "Fund");
WHEREAS, shares of common stock of the Fund are divided into classes of
shares, one of which is designated Class II;
WHEREAS, the Company employs Funds Distributor, Inc. (the "Distributor") as
distributor of the securities of which it is the issuer;
WHEREAS, the Company and the Distributor have entered into a Distribution
Agreement pursuant to which the Company has employed the Distributor in such
capacity during the continuous offering of shares of the Company; and
WHEREAS, the Company, on behalf of the Fund, intends to enter into Selected
Dealer Agreements and other distribution or shareholder servicing agreements
("Agreements") with various service organizations ("Service Organizations")
either directly or through the Distributor, pursuant to which the Service
Organization will make available or service Class II Shares or will offer Class
II Shares for sale to the public; and
WHEREAS, this Service and Distribution Plan (the "Plan") was adopted and
approved by the Company on February 14, 2000;
NOW, THEREFORE, the Company hereby adopts on behalf of the Fund with
respect to its Class II shares, and the Distributor hereby agrees to the terms
of, the Plan, in accordance with Rule 12b-1 under the Act on the following terms
and conditions:
1. A. The Fund is authorized to pay to the Distributor, as the
distributor of the Class II shares of the Fund, or pay directly to a Service
Organization a fee for distribution of the shares at the rate of 0.75% on an
annualized basis of the average daily net assets of the Fund's Class II shares,
provided that, at any time such payments is made, whether or not this Plan
continues in effect, the making thereof will not cause the limitation upon such
payments established by this Plan to be exceeded. Such fee shall be calculated
and accrued daily and paid at such intervals as the Board of Directors shall
determine, subject to any applicable restriction imposed by rules of the
National Association of Securities Dealers, Inc.
B. In addition to the distribution fee distributed above, the Fund is
authorized to pay to the Distributor, as the distributor of the Class II shares
of the Fund, or pay directly to a Service Organization a service fee at the rate
of .25% on an annualized basis of the average daily net asset of the Fund's
Class II shares, provided that, at any time such payment is made, whether
1
<PAGE>
or not this Plan continues in effect, the making thereof will not cause the
limitation upon such payments established by this Plan to be exceeded. Such fee
shall be calculated and accrued daily and paid at such intervals as the Board of
Directors shall determine, subject to any applicable restriction imposed by
rules of the National Securities Association of Dealers, Inc.
2. The amount set forth in paragraph 1.A. of this Plan may be used by the
Distributor or paid directly to a Service Organization for any activities or
expenses primarily intended to result in the sale of the Class II shares of the
Fund, including, but not limited to, payment of compensation, including
incentive compensation, to the Distributor or a Service Organization to obtain
various distribution related and/or administrative services for the Fund. These
services include, among other things, processing new shareholder account
applications, preparing and transmitting to the Fund's Transfer Agent computer
processable tapes of all transactions by customers and serving as the primary
source of information to customers in answering questions concerning the Fund
and their transactions with the Fund. Such amount may also be used to pay for
advertising, the preparation and distribution of sales literature and other
promotional activities on behalf of the Fund. In addition, this Plan hereby
authorizes payment by the Fund of the cost of preparing, printing and
distributing the Fund's Prospectuses and Statements of Additional Information to
prospective investors and of implementing and operating the Plan. Distribution
expenses also include an allocation of overhead of the Distributor and accruals
for interest on the amount of distribution expenses that exceed distribution
fees and contingent deferred sales charges received by the Distributor.
Payments under the Plan are not tied exclusively to actual distribution and
service expenses, and the payments may exceed distribution and service expenses
actually incurred.
The amount set forth in paragraph 1.B. of this Plan may be used by the
Distributor or paid directly to a Service Organization for any activity intended
to result in the servicing of shareholder accounts, including a continuing fee
which may accrue immediately after the sale of shares.
3. This Plan shall not take effect with respect to the Class II Shares of
the Fund until it has been approved by a vote of the then sole shareholder of
the Class II Shares of the Fund.
4. This Plan shall not take effect until it, with any related agreements,
has been approved by votes of a majority of both (a) the Directors of the
Company and (b) those Directors of the Company who are not "interested persons"
of the Company (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or any agreements related to it
(the "Rule 12b-1 Directors"), cast in person at a meeting (or meetings) called
for the purpose of voting on this Plan and such related agreements.
5. After approval as set forth in paragraphs 3 and 4, this Plan shall take
effect. The Plan shall continue in full force and effect as to the Class II
shares of the Fund for so long as such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in paragraph 4.
2
<PAGE>
6. The Distributor shall provide to the Directors of the Company, and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
7. This Plan may be terminated as to the Fund at any time, without
payment of any penalty, by vote of the Directors of the Company, by vote of a
majority of the Rule 12b-1 Directors, or by a vote of a majority of the
outstanding voting securities of Class II shares of the Fund on not more than 30
days' written notice to any other party to the Plan.
8. This Plan may not be amended to increase materially the amount of
distribution fee (including any service fee) provided for in paragraph 1 hereof
unless amendment is approved in the manner provided for initial approval in
paragraph 3 hereof, and no material amendment to the Plan shall be made unless
approved in the manner provided for approval and annual renewal in paragraph 4
hereof.
9. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Company
shall be committed to the discretion of the Directors who are not such
interested persons.
10. The Company shall preserve copies of this Plan and any related
agreements and all reports made to paragraph 6 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the Company, on behalf of the Fund, and the Distributor
have executed this Service and Distribution Plan as of the 14/th/ day of
February, 2000.
THE MUNDER FUNDS, INC.
By: /s/ Terry H. Gardner
-------------------------------
FUNDS DISTRIBUTOR, INC.
By: /s/ Margaret Chambers
-------------------------------
3
<PAGE>
Exhibit 99(m)(49)
Service and Distribution Plan
Class II Shares of
Munder Focus Growth Fund
(formerly Munder Equity Selection Fund)
<PAGE>
SERVICE AND DISTRIBUTION PLAN
WHEREAS, The Munder Funds, Inc. (the "Company") engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, shares of common stock of the Company are currently divided into
series of shares, one of which is designated as Munder Focus Growth Fund (the
"Fund");
WHEREAS, shares of common stock of the Fund are divided into classes of
shares, one of which is designated Class II;
WHEREAS, the Company employs Funds Distributor, Inc. (the "Distributor") as
distributor of the securities of which it is the issuer;
WHEREAS, the Company and the Distributor have entered into a Distribution
Agreement pursuant to which the Company has employed the Distributor in such
capacity during the continuous offering of shares of the Company; and
WHEREAS, the Company, on behalf of the Fund, intends to enter into Selected
Dealer Agreements and other distribution or shareholder servicing agreements
("Agreements") with various service organizations ("Service Organizations")
either directly or through the Distributor, pursuant to which the Service
Organization will make available or service Class II Shares or will offer Class
II Shares for sale to the public; and
WHEREAS, this Service and Distribution Plan (the "Plan") was adopted and
approved by the Company on February 14, 2000;
NOW, THEREFORE, the Company hereby adopts on behalf of the Fund with
respect to its Class II shares, and the Distributor hereby agrees to the terms
of, the Plan, in accordance with Rule 12b-1 under the Act on the following terms
and conditions:
1. A. The Fund is authorized to pay to the Distributor, as the
distributor of the Class II shares of the Fund, or pay directly to a Service
Organization a fee for distribution of the shares at the rate of 0.75% on an
annualized basis of the average daily net assets of the Fund's Class II shares,
provided that, at any time such payments is made, whether or not this Plan
continues in effect, the making thereof will not cause the limitation upon such
payments established by this Plan to be exceeded. Such fee shall be calculated
and accrued daily and paid at such intervals as the Board of Directors shall
determine, subject to any applicable restriction imposed by rules of the
National Association of Securities Dealers, Inc.
B. In addition to the distribution fee distributed above, the Fund is
authorized to pay to the Distributor, as the distributor of the Class II shares
of the Fund, or pay directly to a Service Organization a service fee at the rate
of .25% on an annualized basis of the average daily net asset of the Fund's
Class II shares, provided that, at any time such payment is made, whether
1
<PAGE>
or not this Plan continues in effect, the making thereof will not cause the
limitation upon such payments established by this Plan to be exceeded. Such fee
shall be calculated and accrued daily and paid at such intervals as the Board of
Directors shall determine, subject to any applicable restriction imposed by
rules of the National Securities Association of Dealers, Inc.
2. The amount set forth in paragraph 1.A. of this Plan may be used by the
Distributor or paid directly to a Service Organization for any activities or
expenses primarily intended to result in the sale of the Class II shares of the
Fund, including, but not limited to, payment of compensation, including
incentive compensation, to the Distributor or a Service Organization to obtain
various distribution related and/or administrative services for the Fund. These
services include, among other things, processing new shareholder account
applications, preparing and transmitting to the Fund's Transfer Agent computer
processable tapes of all transactions by customers and serving as the primary
source of information to customers in answering questions concerning the Fund
and their transactions with the Fund. Such amount may also be used to pay for
advertising, the preparation and distribution of sales literature and other
promotional activities on behalf of the Fund. In addition, this Plan hereby
authorizes payment by the Fund of the cost of preparing, printing and
distributing the Fund's Prospectuses and Statements of Additional Information to
prospective investors and of implementing and operating the Plan. Distribution
expenses also include an allocation of overhead of the Distributor and accruals
for interest on the amount of distribution expenses that exceed distribution
fees and contingent deferred sales charges received by the Distributor. Payments
under the Plan are not tied exclusively to actual distribution and service
expenses, and the payments may exceed distribution and service expenses actually
incurred.
The amount set forth in paragraph 1.B. of this Plan may be used by the
Distributor or paid directly to a Service Organization for any activity intended
to result in the servicing of shareholder accounts, including a continuing fee
which may accrue immediately after the sale of shares.
3. This Plan shall not take effect with respect to the Class II Shares of
the Fund until it has been approved by a vote of the then sole shareholder of
the Class II Shares of the Fund.
4. This Plan shall not take effect until it, with any related agreements,
has been approved by votes of a majority of both (a) the Directors of the
Company and (b) those Directors of the Company who are not "interested persons"
of the Company (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or any agreements related to it
(the "Rule 12b-1 Directors"), cast in person at a meeting (or meetings) called
for the purpose of voting on this Plan and such related agreements.
5. After approval as set forth in paragraphs 3 and 4, this Plan shall take
effect. The Plan shall continue in full force and effect as to the Class II
shares of the Fund for so long as such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in paragraph 4.
2
<PAGE>
6. The Distributor shall provide to the Directors of the Company, and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
7. This Plan may be terminated as to the Fund at any time, without
payment of any penalty, by vote of the Directors of the Company, by vote of a
majority of the Rule 12b-1 Directors, or by a vote of a majority of the
outstanding voting securities of Class II shares of the Fund on not more than 30
days' written notice to any other party to the Plan.
8. This Plan may not be amended to increase materially the amount of
distribution fee (including any service fee) provided for in paragraph 1 hereof
unless amendment is approved in the manner provided for initial approval in
paragraph 3 hereof, and no material amendment to the Plan shall be made unless
approved in the manner provided for approval and annual renewal in paragraph 4
hereof.
9. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Company
shall be committed to the discretion of the Directors who are not such
interested persons.
10. The Company shall preserve copies of this Plan and any related
agreements and all reports made to paragraph 6 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the Company, on behalf of the Fund, and the Distributor
have executed this Service and Distribution Plan as of the 14/th/ day of
February, 2000.
THE MUNDER FUNDS, INC.
By: /s/ Terry H. Gardner
--------------------------------
FUNDS DISTRIBUTOR, INC.
By: /s/ Margaret Chambers
--------------------------------
3
<PAGE>
Exhibit 99(o)
THE MUNDER FUNDS, INC.
Sixth Amended and Restated Multi-Class Plan
-------------------------------------------
Introduction
------------
The purpose of this Plan is to specify the attributes of the classes of
shares offered by The Munder Funds, Inc. (the "Company"), including the sales
loads, expense allocations, conversion features and exchange features of each
class, as required by Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act").
Each of the Company's investment portfolios (each, a "Fund"), other than
the Munder All-Season Conservative Fund, the Munder All-Season Moderate Fund and
the Munder All-Season Aggressive Fund (together, the "Lifestyle Funds"), the
Munder Money Market Fund, the Munder NetNet Fund the Munder Short Term Treasury
Fund, the Munder Future Technology Fund, the Munder International NetNet Fund,
Munder Growth Opportunities Fund and Munder Equity Selection Fund issues its
shares of common stock in five classes: "Class A" Shares, "Class B" Shares,
"Class C" Shares, "Class K" Shares and "Class Y" Shares. The Munder Short Term
Treasury Fund issues its share of common stock in five classes: "Class A"
Shares, "Class B" Shares, "Class C" Shares, "Class Y" Shares and "Michigan
Municipal" Shares. The Money Market Fund issues its shares of common stock in
four classes: "Class A" Shares, "Class B" Shares, "Class C" Shares and "Class Y"
Shares. The Munder NetNet Fund issues shares of common stock in four classes:
"Class A" Shares, "Class B" Shares, "Class C" Shares and "Class Y" Shares. The
Munder Future Technology Fund issues its shares of common stock in four classes:
"Class A" Shares, "Class B" Shares, "Class II" Shares and "Class Y" Shares. The
Munder International NetNet Fund issues its shares of common stock in five
classes: "Class A" Shares, "Class B" Shares, "Class II" Shares, "Class K" Shares
and "Class Y" Shares. The Munder Growth Opportunities Fund and Munder Focus
Growth Fund (formerly Munder Equity Selection Fund) each issues its shares of
common stock in six classes: "Class A" Shares, "Class B" Shares, "Class C"
Shares, "Class II" Shares, "Class K" Shares and "Class Y" Shares. Each of the
Lifestyle Funds issues its shares of common stock in three classes: "Class A"
Shares, "Class B" Shares and "Class Y" Shares. Shares of each Class of a Fund
shall represent an equal pro rata interest in such Fund, and generally, shall
have identical voting, dividend, liquidation and other rights, preferences,
powers, restrictions, limitations, qualifications, and terms and conditions,
except that: (a) each Class shall have a different designation; (b) each Class
may have a different sales charge structure; (c) each Class of shares shall bear
any Class Expenses, as defined below; (d) each Class shall have exclusive voting
rights on any matter submitted to shareholders that relates solely to its
arrangement and each Class shall have separate voting rights on any matter
submitted to shareholders in which the interests of one Class differ from the
interests of any other Class; and (e) each Class may have different exchange
and/or conversion features as described below.
Allocation of Expenses
----------------------
To the extent practicable, certain expenses (other than Class Expenses as
defined below which shall be allocated more specifically), shall be subtracted
from the gross income allocated to each Class of a Fund on the basis of net
assets of each Class of the Fund. These expenses include:
(1) Expenses incurred by the Company (for example, fees of Directors,
auditors, and legal counsel) not attributable to a particular Fund or to a
particular Class of shares of a Fund ("Company Level Expenses"); and
<PAGE>
(2) Expenses incurred by a Fund not attributable to any particular Class of
the Fund's shares (for example, advisory fees, custodial fees, or other expenses
relating to the management of the Fund's assets) ("Fund Expenses").
Expenses attributable to a particular Class ("Class Expenses") shall be
limited to: (i) payments made pursuant to a Service Plan, Service and
Distribution Plan or Shareholder Servicing Plan; (ii) transfer agent fees
attributable to a specific Class; (iii) printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders of a specific Class; (iv) Blue Sky fees
incurred by a Class; (v) Securities and Exchange Commission registration fees
incurred by a Class; (vi) the expense of administrative personnel and services
to support the shareholders of a specific Class; (vii) litigation or other legal
expenses relating solely to one Class; and (viii) Directors' fees incurred as a
result of issues relating solely to one Class. Expenses in category (i) above
must be allocated to the Class for which such expenses are incurred. For all
other "Class Expenses" listed in categories (ii) - (viii) above, the President
and Chief Financial Officer shall determine, subject to Board approval or
ratification, which such categories of expenses will be treated as Class
Expenses, consistent with applicable legal principles under the Act and the
Internal Revenue Code of 1986, as amended, any private letter ruling with
respect to the Company issued by the Internal Revenue Service.
Therefore, expenses of a Fund shall be apportioned to each Class of shares
depending upon the nature of the expense item. Company Level Expenses and Fund
Expenses will be allocated among the Classes of shares based on their relative
net asset values. Approved Class Expenses shall be allocated to the particular
Class to which they are attributable. In addition, certain expenses may be
allocated differently if their method of imposition changes. Thus, if a Class
Expense can no longer be attributed to a Class, it shall be charged to a Fund
for allocation among Classes, as may be appropriate; however, any additional
Class Expenses not specifically identified above which are subsequently
identified and determined to be properly allocated to one Class of shares shall
not be so allocated until approved by the Board of Directors of the Company in
light of the requirements of the Act and the Internal Revenue Code of 1986, as
amended.
Class A Shares
--------------
Class A Shares of a Fund are offered at net asset value plus, for Funds
other than the Money Market Fund, an initial sales charge as set forth in the
then-current prospectus of the Fund. The initial sales charge may be waived or
reduced on certain types of purchases as set forth in a Fund's then-current
prospectus. A contingent deferred sales charge may apply to certain redemptions
made within a specified period as set forth in the Fund's then-current
prospectus. Class A Shares of a Fund may be exchanged for Class A Shares of
another fund of the Company, The Munder Framlington Funds Trust or The Munder
Funds Trust subject to any sales charge differential.
Class A Shares of the Funds pay a Rule 12b-1 service fee of up to 0.25%
(annualized) of the average daily net assets of a Fund's Class A Shares.
Distribution and support services provided by brokers, dealers and other
institutions may include forwarding sales literature and advertising materials
provided by the Company's distributor; processing purchase, exchange and
redemption requests from customers placing orders with the Company's transfer
agent; processing dividend and distribution payments from the Funds of the
Company on behalf of customers; providing information periodically to customers
showing their positions in Class A Shares; providing sub-accounting with respect
to Class A Shares beneficially owned by customers or the information necessary
for sub-accounting; responding to
2
<PAGE>
inquiries from customers concerning their investments in Class A Shares;
arranging for bank wires; and providing such other similar services as may
reasonably be requested.
Class B Shares
--------------
Class B Shares of the Funds are offered without an initial sales charge but
are subject to a contingent deferred sales charge payable upon certain
redemptions as set forth in the Fund's then-current prospectus. Class B Shares
of a Fund may be exchanged for Class B Shares of another fund of the Company,
The Munder Framlington Funds Trust or The Munder Funds Trust subject to any
sales charge differential.
Class B Shares of a Fund will automatically convert to Class A Shares of
the Fund on the first business day of the month on which the sixth anniversary
of the issuance of the Class B Shares occurs. The conversion will be effected
at the relative net asset values per share of the two classes.
Class B Shares pay a Rule 12b-1 service fee of up to 0.25% (annualized) and
a distribution fee of up to 0.75% (annualized) of the average daily net assets
of a Fund's Class B Shares. Brokers, dealers and other institutions may
maintain Class B shareholder accounts and provide personal service to Class B
shareholders. Services relating to the sale of Class B Shares may include, but
not be limited to, preparation, printing and distribution of prospectuses, sales
literature and advertising materials by the Company's distributor, or, as
applicable, brokers, dealer or other institutions; commissions, incentive
compensation or other compensation to, and expenses of, account executives or
other employees of the Company's distributor or brokers, dealers and other
institutions; overhead and other office expenses of the Company's distributor
attributable to distribution or sales support activities; and opportunity costs
related to the foregoing (which may be calculated as a carrying charge on the
Company's distributor unreimbursed expenses) incurred in connection with
distribution or sales support activities. The overhead and other office
expenses referenced above may include, without limitation, (a) the expenses of
operating the Company's distributor's offices in connection with the sale of the
Class B Shares of the Funds, including lease costs, the salaries and employee
benefit costs of administrative, operations and support personnel, utility
costs, communication costs and the costs of stationery and supplies, (b) the
costs of client sales seminars and travel related to distribution and sales
support activities, and (c) other expenses relating to distribution and sales
support activities.
Class C Shares
--------------
Class C Shares of the Funds are offered at net asset value. A contingent
deferred sales charge may apply to certain redemptions made within the first
year of investing as set forth in the relevant Fund's then-current prospectus.
Class C Shares of a Fund may be exchanged for Class C Shares of another fund of
the Company, The Munder Framlington Funds Trust and The Munder Funds Trust
subject to any sales charge differential.
Class C Shares pay a Rule 12b-1 service fee up to 0.25% (annualized) and a
distribution fee of up to 0.75% (annualized) of the average daily net assets of
a Fund's Class C Shares. Brokers, dealers and other institutions may maintain
Class C shareholder accounts and provide personal services to Class C
shareholders. Services relating to the sale of Class C Shares may include, but
not be limited to, preparation, printing and distribution of prospectuses, sales
literature and advertising materials by the Company's distributor, or, as
applicable, brokers, dealers or other institutions; commissions, incentive
compensation or other compensation to, and expenses of, account executives or
other employees of the Company's distributor or brokers, dealers and other
institutions; overhead and other office expenses of
3
<PAGE>
the Company's distributor attributable to distribution or sales support
activities; and opportunity costs related to the foregoing (which may be
calculated as a carrying charge on the Company's distributor unreimbursed
expenses) incurred in connection with distribution or sales support activities.
The overhead and other office expenses referenced above may include, without
limitation, (a) the expenses of operating the Company's distributor's offices in
connection with the sale of the Class C Shares of the Funds, including lease
costs, the salaries and employee benefit costs of administrative, operations and
support personnel, utility costs, communication costs and costs of stationery
and supplies; (b) the costs of client sales seminars and travel related to
distribution and sales support activities, and (c) other expenses relating to
distribution and sales support activities.
Class Y Shares
--------------
Class Y Shares of a Fund are offered at net asset value. Class Y Shares of
a Fund may be exchanged for Class Y Shares of another fund of the Company, The
Munder Framlington Funds Trust or The Munder Funds Trust without the imposition
of a sales charge.
Class K Shares
--------------
Class K Shares of a Fund are offered at net asset value. Class K Shares of
a Fund may be exchanged for Class K Shares of another fund of the Company, The
Munder Framlington Funds Trust or The Munder Funds Trust without the imposition
of a sales charge.
Class K Shares pay a service fee of up to 0.25% (annualized) of the average
daily net assets of a Fund's Class K Shares. Services provided by brokers,
dealers and other institutions for such service fees include: processing
purchase, exchange and redemption requests from customers and placing orders
with the Company's transfer agent; processing dividend and distribution payments
from the Funds on behalf of customers; providing information periodically to
customers showing their positions in Class K Shares; providing sub-accounting
with respect to Class K Shares beneficially owned by customers or the
information necessary for sub-accounting; responding to inquiries from customers
concerning their investment in Class K Shares; arranging for bank wires; and
providing such other similar services as may reasonably be requested.
Michigan Municipal Shares
-------------------------
Michigan Municipal Shares of the Short Term Treasury Fund are offered at
net asset value.
Class II Shares
---------------
Class II Shares of a Fund are offered at net asset value plus, an initial
sales charge as set forth in the then-current prospectus of the Fund. The
initial sales charge may be waived or reduced on certain types of purchases as
set forth in a Fund's then-current prospectus. A contingent deferred sales
charge may apply to certain redemptions made within a specified period as set
forth in a Fund's then-current prospectus. Class II Shares of a Fund may be
exchanged for Class II Shares or Class C Shares of another fund of the Company,
The Munder Framlington Funds Trust or The Munder Funds Trust subject to any
sales charge differential.
Class II Shares pay a Rule 12b-1 service fee up to 0.25% (annualized) and a
distribution fee of up to 0.75% (annualized) of the average daily net assets of
the Fund's Class II Shares. Brokers, dealers and other institutions may
maintain Class II shareholder accounts and provide personal services to Class
4
<PAGE>
II shareholders. Services relating to the sale of Class II Shares may include,
but not be limited to, preparation, printing and distribution of prospectuses,
sales literature and advertising materials by the Company's distributor, or, as
applicable, brokers, dealers or other institutions; commissions, incentive
compensation or other compensation to, and expenses of, account executives or
other employees of the Company's distributor or brokers, dealers and other
institutions; overhead and other office expenses of the Company's distributor
attributable to distribution or sales support activities; and opportunity costs
related to the foregoing (which may be calculated as a carrying charge on the
Company's distributor unreimbursed expenses) incurred in connection with
distribution or sales support activities. The overhead and other office expenses
referenced above may include, without limitation, (a) the expenses of operating
the Company's distributor's offices in connection with the sale of the Class II
Shares of a Fund, including lease costs, the salaries and employee benefit costs
of administrative, operations and support personnel, utility costs,
communication costs and costs of stationery and supplies; (b) the costs of
client sales seminars and travel related to distribution and sales support
activities, and (c) other expenses relating to distribution and sales support
activities.
5
<PAGE>
Exhibit 99(p)(1)
THE MUNDER FUNDS TRUST
THE MUNDER FUNDS, INC.
ST. CLAIR FUNDS, INC.
FIFTH AMENDED AND RESTATED CODE OF ETHICS
I. Introduction
------------
A. General Principles
------------------
This Code of Ethics ("Code") establishes rules of conduct for "Covered
Persons" (as defined herein) of The Munder Funds Trust (the "Trust"),
The Munder Funds, Inc. (the "Company") and St. Clair Funds, Inc. ("St.
Clair") (each, a "Fund", collectively the "Funds") and is designed to
(i) govern the personal securities activities of Covered Persons; (ii)
prevent Covered Persons from engaging in fraud; and (iii) require the
Funds to use reasonable diligence and institute procedures reasonably
necessary to prevent violations of the Code. In general, in connection
with personal securities transactions, Covered Persons should (1)
always place the interests of the Fund's shareholders first; (2)
ensure that all personal securities transactions are conducted
consistent with this Code and in such a manner as to avoid any actual
or potential conflict of interest or any abuse of a Covered Person's
position of trust and responsibility; and (3) not take inappropriate
advantage of their positions.
B. Applicability
-------------
1. For purposes of this Code, "Covered Persons" shall mean any:
a. Officer or employee of a Fund or of the investment adviser
or sub-adviser (or any company in a control relationship to
a Fund or to the investment adviser or sub-adviser) who, in
connection with his or her regular duties, makes,
participates in or obtains information regarding the
purchase or sale of securities by a Fund or whose functions
relate to the making of any recommendation to a Fund
regarding the purchase or sale of securities (an "Advisory
Person"), including the person or persons with the direct
responsibility and authority to make investment decisions
affecting a Fund (the "Portfolio Manager");
b. Natural person in a control relationship to a Fund who
obtains information concerning recommendations made to a
Fund with regard to the purchase or sale of a security;
c. Trustee/director of a Fund; and
d. Person designated by the Compliance Officer.
2. For purposes of this Code, a "Covered Person" does not include
any person who is subject to securities transaction reporting
requirements of a code of ethics
<PAGE>
adopted by a Fund's administrator, transfer agent or principal
underwriter which contains provisions that are substantially
similar to those in this Code and which is also in compliance
with Rule 17j-1 of the 1940 Act and Section 15(f) of the
Securities Exchange Act of 1934, as applicable.
3. For purposes of this Code, a person who normally assists in the
preparation of public reports or who receives public reports but
who receives no information about current recommendations or
trading or who obtains knowledge of current recommendations or
trading activity once or infrequently or inadvertently shall not
be deemed to be either an Advisory Person or a Covered Person.
4. For purposes of this Code, a "non-interested trustee/director"
shall include each trustee/director of a Fund who is not also a
director, trustee, officer, partner or employee or controlling
person of a Fund's investment adviser, sub-adviser,
administrator, custodian, transfer agent, or distributor.
5. A security is "held or to be acquired" if within the most recent
15 days it (a) is or has been held by a Fund, or (b) is being or
has been considered by the Fund or its investment adviser for
purchase by a Fund. A purchase or sale includes the writing or
purchasing of an option to purchase or sell a security. It also
includes any security convertible into or exchangeable for a
security.
6. To the extent this Code conflicts with any code of ethics or
other code or policy to which a Covered Person is also subject,
this Code shall control; except that if the other code of ethics
is more restrictive than this Code, such other code of ethics
shall control.
II. Restrictions on Activities
--------------------------
A. Blackout Periods
----------------
1. No Covered Person shall purchase or sell, directly or indirectly,
any security in which he or she has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership
(as defined in Attachment A to this Code) (a) on a day during
which a Fund has a pending "buy" or "sell" order in that same
security until that order is executed or withdrawn or (b) when
the "Designated Supervisory Person", a supervisory person
designated by a Fund or, in the case of a person employed by the
Fund's investment adviser, by such investment adviser, has been
advised by the Fund's investment adviser that the same security
is being considered for purchase or sale for any portfolio of the
Fund; and
2. No Portfolio Manager of a portfolio of the Fund shall purchase or
sell, directly or indirectly, any security in which he or she
has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership as defined in Attachment A to this
Code within seven (7) calendar days before or after the Fund
trades in that security.
2
<PAGE>
B. Interested Transactions
-----------------------
No Covered Person shall recommend any securities transactions by a
Fund without having disclosed his or her interest, if any, in such
securities or the issuer thereof, including without limitation:
1. any direct or indirect beneficial ownership (as defined in
Attachment A to this Code) of any securities of such issuer;
2. any contemplated transaction by such person in such securities;
3. any position with such issuer or its affiliates; and
4. any present or proposed business relationship between such issuer
or its affiliates and such person or any party in which such
person has a significant interest.
C. Initial Public Offering and Limited Offering
--------------------------------------------
No Advisory Person shall acquire directly or indirectly any securities
in an initial public offering for his or her personal account except
initial public offerings of open-end investment companies.
No Advisory Person shall acquire directly or indirectly securities in
a "limited offering" except after receiving pre-clearance, as
specified in Section IV. A hereof. In all such instances, the Advisory
Person shall provide the Designated Supervisory Person (as hereinafter
defined) with full details of the proposed transaction (including
written certification that the investment opportunity did not arise by
virtue of the Advisory Person's activities on behalf of a Fund). The
Designated Supervisory Person may not approve any such transaction
unless, after consultation with other investment advisory personnel of
a Fund, he or she determines that the Fund has no foreseeable interest
in purchasing such securities. A "limited offering" means an offering
that is exempt from registration under the Securities Act of 1933, as
amended, pursuant to Section 4(2) or 4(6) thereof, or pursuant to
Regulation D thereunder.
D. Short-Term Trading Profits
--------------------------
No Advisory Person shall profit from the purchase and sale, or sale
and purchase, of the same (or equivalent) securities of which such
Advisory Person has beneficial ownership within 30 calendar days.
Subject to Section VI below, any profit so realized shall, unless the
Fund's Board approves otherwise, be paid over to the Fund or to a
charitable organization of the Fund's choosing.
E. Gifts
-----
No Advisory Person shall receive any gift or other things of more than
de minimis value from any person or entity that does business with or
on behalf of the Funds.
3
<PAGE>
F. Service as a Director
---------------------
No Advisory Person shall serve on the board of directors of any
publicly traded company without prior authorization from a committee
comprised of the Designated Supervisory Person, the President and a
Vice President of a Fund's investment adviser (the "Compliance
Committee") based upon a determination that such board service would
be consistent with the interests of the Fund and its shareholders.
In instances in which such service is authorized by the Compliance
Committee, the Advisory Person will be isolated from making investment
decisions relating to such company through the implementation of
appropriate "Chinese Wall" procedures established by the Compliance
Committee.
G. The limitations and restrictions specified in subsections C through F
of this Section II may only be modified by the Compliance Officer on a
case by case basis. Each such modification shall be documented in
writing by the Compliance Officer, including in particular the basis
for the modification.
III. Exempt Transactions
-------------------
A. For purposes of this Code, the term "security" shall not include the
following:
1. securities issued or guaranteed as to principal or interest by
the Government of the United States or its instrumentalities;
2. bankers' acceptances;
3. bank certificates of deposit;
4. commercial paper and high quality short term debt instruments
(including repurchase agreements); and
5. shares of registered open-end investment companies.
B. The prohibitions described in paragraphs (A) and (D) of Article II
shall not apply to:
1. Purchases or sales effected in any account over which the Covered
Person has no direct or indirect influence or control;
2. Purchases or sales that are non-volitional on the part of the
Covered Person or a Fund;
3. Purchases that are part of an automatic dividend reinvestment
plan;
4. Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities, to
--- ----
the extent such rights were acquired from the issuer, and sales
of such rights so acquired; or
5. Purchases or sales that are considered by the Designated
Supervisory Person to have, at most, a remote potential to harm
the Fund because such purchases or sales would be unlikely to
affect a highly institutional market, or because, for example,
such purchases or sales are clearly not related economically to
the
4
<PAGE>
securities held, purchased or sold by a Fund. All such purchases
and sales require pre-approval by the Designated Supervisory
Person.
IV. Compliance Procedures
---------------------
A. Pre-clearance
-------------
1. Pre-clearance by Covered Persons of all personal securities
transactions is required, except for exempt transactions
specified in Section III A and III B 1 through 4.
2. A written authorization for each personal security transaction
will be prepared and retained by the Designated Supervisory
Person to memorialize any authorization that was granted.
3. Pre-clearance approval under paragraph (1) above will expire at
the close of business on the trading day on which authorization
is received, and the Covered Person is required to renew such
pre-clearance if the pre-cleared trade is not completed before
the authority expires.
4. Pre-clearance should not be construed as an assurance that a
personal securities transaction complies with all provisions of
this Code. All personal securities transactions are subject to
review by the Designated Compliance Person in connection with the
quarterly reporting process described below.
B. Quarterly Reporting
-------------------
1. Every Covered Person must, on a quarterly basis, report certain
information about each transaction by which the Covered Person
acquires any direct or indirect beneficial ownership (as defined
in Attachment A to this Code) of a security, including
transactions in securities accounts held by any broker, dealer or
bank for the benefit of a Covered Person, provided, however, that
-------- -------
a Covered Person shall not be required to make a report with
respect to any exempt transaction specified in Section III A and
III B 1 through 4 or which would duplicate information reported
to the Fund pursuant to Rules 204-2(a)(12) or 204-2(a)(13) under
the Investment Advisers Act of 1940, as amended.
2. A Covered Person must submit the report required by this Article
IV to the Designated Supervisory Person no later than 10 days
after the end of the calendar quarter in which the transaction to
which the report relates was effected. A report must contain the
following information:
a. The date of the transaction, the title, the interest rate
and the maturity date, if applicable, the number of shares,
and the principal amount of each security involved;
b. The nature of the transaction (i.e., purchase, sale or other
acquisition or disposition);
c. The price at which the transaction was effected;
5
<PAGE>
d. The name of the broker, dealer or bank with or through whom
the transaction was effected; and
e. The date that the report is submitted by the Covered Person
3. With respect to any account established by the Covered Person in
which any securities were held during the prior calendar quarter
for the direct or indirect beneficial ownership interest of the
Covered Person, the following information must be provided in a
report submitted by the Covered Person:
a. The name of the broker, dealer or bank with whom the Covered
Person established the account;
b. The date the account was established; and
c. The date that the report is submitted by the Covered Person.
4. The Designated Supervisory Person shall review quarterly reports
received and as appropriate compare the reports with the written
pre-clearance authorization provided.
5. Any report submitted to comply with the requirements of this
Article IV may contain a statement that the report shall not be
construed as an admission by the person making such report that
such person has any direct or indirect beneficial ownership (as
defined in Attachment A to this Code) in the securities to which
the report relates.
6. Each Covered Person shall provide or ensure that duplicate copies
of supporting documentation (e.g., brokerage statements,
confirmations or similar documents) of all personal securities
transactions required to be reported hereunder are provided to
the Designated Supervisory Person.
C. Disclosure of Personal Holdings
-------------------------------
1. No later than 10 days after becoming a Covered Person and no more
than 30 days after the end of each calendar year, each Covered
Person shall be required to submit a report with respect to each
security, other than securities exempted from this Code in
accordance with Section III hereof, in which such Covered Person
had any direct or indirect beneficial ownership at such time.
Each report shall include the following information:
a. The title, number of shares and principal amount of each
security;
b. The name of each broker, dealer or bank with whom the
Covered Person maintained an account in which such
securities were held; and
c. The date that the report is submitted by the Covered Person.
6
<PAGE>
2. A non-interested trustee/director, as defined below, who would be
required to make a report solely by reason of being a
trustee/director need not make an initial holdings report or
annual holdings report.
3. Covered Persons shall provide or ensure that reports or duplicate
copies of supporting documentation (e.g., brokerage statements or
similar documents) of securities holdings required to be reported
herein are provided to the Designated Supervisory Person.
D. Non-Interested Trustees/Directors
---------------------------------
Any person who is a Covered Person with respect to a Fund by virtue of
being a trustee/director of a Fund, but who is not an "interested
person" (as defined in the Investment Company Act of 1940, as amended)
of a Fund (a "non-interested trustee/director"), shall be required to
comply with paragraphs A. and B. above with respect to a personal
securities transaction only if such non-interested trustee/director,
at the time of that transaction, knew, or in the ordinary course of
fulfilling his or her official duties as a trustee/director of a Fund
should have known, that during the 15-day period immediately preceding
the date of the transaction by such person, the security such person
purchased or sold is or was purchased or sold by a Fund or was being
considered for purchase or sale by a Fund or its investment adviser.
E. Certification of Compliance
---------------------------
1. Each Covered Person is required to certify annually that he or
she has read and understood the Trust's Code and recognizes that
he or she is subject to such Code. Further, each Covered Person
is required to certify annually that he or she has complied with
all the requirements of the Code and that he or she has disclosed
or reported all personal securities transactions required to be
disclosed or reported pursuant to the requirements of the Code.
A form of certification is attached to this Code as Attachment B.
2. Before approving this Code for the Funds, the Funds' Board must
receive a certification from the Funds that it has adopted
procedures reasonably necessary to prevent Covered Persons from
violating the Code.
F. Reports to the Boards of Trustees/Directors by the Designated
-------------------------------------------------------------
Supervisory Person
------------------
1. Annual Reports. The Designated Supervisory Person shall prepare
---------------
an annual report for the Board of each Fund for the investment adviser
and any sub-adviser. At a minimum, the report shall: summarize the
existing Code procedures concerning personal investing and any changes
in the procedures made during the year; describe any issues arising
under the Code since the last report to the Board, including, but not
limited to, information about material violations of the Code or the
Procedures, and sanctions imposed in response to the material
violations; certify to the Boards that the Funds have adopted
procedures reasonably necessary to prevent Covered Persons from
violating the Code; and identify any recommended changes in existing
restrictions or procedures.
7
<PAGE>
2. Quarterly Reports. At each quarterly meeting of the Funds'
------------------
Boards, the investment adviser or any sub-adviser of a Fund shall
report to the Boards concerning:
a. Any transaction that appears to evidence a possible
violation of this Code;
b. Apparent violations of the reporting requirements of this
Code;
c. Any securities transactions that occurred during the prior
quarter that may have been inconsistent with the provisions
of the codes of ethics adopted by a Fund's investment
adviser, sub-adviser or principal underwriter; and
d. Any significant remedial action taken in response to such
violations described in paragraph c. above.
G. Maintenance of Reports
----------------------
The Designated Supervisory Person shall maintain such reports and such
other records as are required by this Code.
V. General Policy
--------------
It shall be a violation of this Code for any Covered Person or principal
underwriter for any Fund, or any affiliated person of an investment adviser
or sub-adviser to or the principal underwriter of any Fund in connection
with the purchase or sale, directly or indirectly, by such person of a
security held or to be acquired by any Fund to:
1. employ any device, scheme or artifice to defraud a Fund;
2. make to a Fund any untrue statement of a material fact or to
omit to state to a Fund a material fact necessary in order to
make the statements made, in light of the circumstances under
which they are made, not misleading;
3. engage in any act, practice or course of business that operates
or would operate as a fraud or deceit upon a Fund; or
4. engage in any manipulative practice with respect to a Fund.
8
<PAGE>
VI. Sanctions
---------
Upon discovering that a Covered Person has not complied with the
requirements of this Code, the Designated Supervisory Person shall submit
findings to the Compliance Committee. The Compliance Committee may impose
on that Covered Person whatever sanctions the Compliance Committee deems
appropriate, including, among other things, the unwinding of the
transaction and the disgorgement of profits, letter of censure, suspension
or termination of employment. Any significant sanction imposed shall be
reported to the Funds' Boards in accordance with Section IV.F. above.
Notwithstanding the above, the Designated Supervisory Person shall have
discretion to determine, on a case-by-case basis, that no material
violation shall be deemed to have occurred. The Designated Supervisory
Person may recommend that no action be taken, including waiving the
requirement to disgorge profits under Section II.D. of this Code. A
written memorandum for any such finding shall be filed with reports made
pursuant to this Code.
VII. Investment Adviser and Principal Underwriter Codes
--------------------------------------------------
Each Fund's investment adviser, sub-adviser and principal underwriter
shall adopt, maintain and enforce separate codes of ethics with respect to
their personnel in compliance with Rule 17j-1 and Rule 204-2(a)(12) of the
Investment Advisers Act of 1940 or Section 15(f) of the Securities
Exchange Act of 1934, as applicable, and shall forward to the Fund's
administrator and counsel to the Funds copies of such codes and all future
amendments and modifications thereto. The Funds' Boards, including a
majority of non-interested trustees/directors of the Boards, must approve
the Funds' Code and the code of any investment adviser, sub-adviser or
principal underwriter of a Fund.
VIII. Recordkeeping
-------------
This Code, the codes of the investment adviser, sub-adviser and principal
underwriter, a copy of each report by a Covered Person, any written report
by the investment adviser, sub-adviser or principal underwriter and lists
of all persons required to make reports shall be preserved with the Fund's
records for the period required by Rule 17j-1.
IX. Confidentiality
---------------
All information obtained from any Covered Person hereunder shall be kept
in strict confidence, except that reports of securities transactions
hereunder may be made available to the Securities and Exchange Commission
or any other regulatory or self-regulatory organization, and may otherwise
be disclosed to the extent required by law or regulation.
X. Other Laws, Rule and Statements of Policy
-----------------------------------------
Nothing contained in this Code shall be interpreted as relieving any
Covered Person from acting in accordance with the provisions of any
applicable law, rule, or regulation or any other statement of policy or
procedures governing the conduct of such person adopted by a Fund. No
9
<PAGE>
exception to a provision in the Code shall be granted where such exception
would result in a violation of Rule 17j-1.
XI. Further Information
-------------------
If any person has any questions with regard to the applicability of the
provisions of this Code generally or with regard to any securities
transaction or transactions, such person should consult with the
Designated Supervisory Person.
Dated: February 14, 2000.
As modified on August 6, 1996, May 6, 1997, February 22, 1999, August 3, 1999
and February 14, 2000.
10
<PAGE>
Attachment A
------------
The term "beneficial ownership" as used in the attached Code of Ethics (the
"Code") is to be interpreted by reference to Rule 16a-1(a)(2) under the
Securities Exchange Act of 1934 (the "Rule"), except that the determination of
direct or indirect beneficial ownership for purposes of this Code must be made
with respect to all securities that a Covered Person has or acquires. Under the
Rule, a person is generally deemed to have beneficial ownership of securities if
the person, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or indirect
pecuniary interest in the securities.
The term "pecuniary interest" in particular securities is generally defined
in the Rule to mean the opportunity, directly or indirectly, to profit or share
in any profit derived from a transaction in the securities. A person is
refutably deemed to have an "indirect pecuniary interest" within the meaning of
the Rule in any securities held by members of the person's immediate family
sharing the same household, the term "immediate family" including any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-
in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-
law, as well as adoptive relationships. Under the Rule, an indirect pecuniary
interest also includes, among other things: a general partner's proportionate
interest in the portfolio securities held by a general or limited partnership; a
performance-related fee, other than an asset-based fee, received by any broker,
dealer, bank, insurance company, investment company, investment adviser,
investment manager, trustee or person or entity performing a similar function; a
person's right to dividends that is separated or separable from the underlying
securities; a person's interest in securities held by certain trusts; and a
person's right to acquire equity securities through the exercise or conversion
of any derivative security, whether or not presently exercisable, the term
"derivative security" being generally defined as any option, warrant,
convertible security, stock appreciation right, or similar right with an
exercise or conversion privilege at a price related to an equity security, or
similar securities with, or value derived from, the value of an equity security.
For purposes of the Rule, a person who is a shareholder of a corporation or
similar entity is not deemed to have a pecuniary interest in portfolio
---
securities held by the corporation or entity, so long as the shareholder is not
a controlling shareholder of the corporation or the entity and does not have or
share investment control over the corporation's or the entity portfolio.
11
<PAGE>
Attachment B
------------
The Munder Funds Trust
The Munder Funds, Inc.
St. Clair Funds, Inc.
Annual Certificate
Pursuant to the requirements of the Amended and Restated Code of Ethics of
The Munder Funds Trust, The Munder Funds, Inc. and St. Clair Funds, Inc. (the
"Amended and Restated Code of Ethics"), the undersigned hereby certifies as
follows:
1. I have read the Amended and Restated Code of Ethics.
2. I understand the Amended and Restated Code of Ethics and acknowledge
that I am subject to it.
3. Since the date of the last Annual Certificate (if any) given pursuant
to the Amended and Restated Code of Ethics, I have reported all
personal securities transactions and holdings required to be reported
under the requirement of the Amended and Restated Code of Ethics.
Date: _____________________________
Signature
_____________________________
Print Name
12
<PAGE>
Exhibit 99(p)(2)
FUNDS DISTRIBUTOR, INC.
-----------------------
CODE OF ETHICS
--------------
October 1, 1996
I. Introduction
All employees are expected to help protect and enhance the assets and
reputation of Fund Distributor, Inc. (the "Company"). Every individual with whom
we come into contact must believe in our honesty, integrity and dependability.
In the rapidly evolving businesses in which we are engaged, each employee
is challenged by a complex environment often requiring fast responses under high
pressure. No written policy can definitively state for employees the appropriate
action for all business situations. Accordingly, this Code emphasizes a norm or
standard of conduct that must permeate all business dealings and relationships
rather than a set of specific rules.
In addition, this Code requires all employees to adhere to all Company
policies, including, without limitation, those governing insider trading, equal
employment opportunity, and sexual harassment.
II. Management Responsibility
Managers by virtue of their positions of authority play a particularly
important role in developing the commitment and ability of their associates to
make sound ethical judgments. This requires recognition of the ethical issues
often inherent in business decisions, analysis of the ethical aspects of very
complex situations, and knowing when to seek assistance in determining the
ethical course of action. Other aspects of ethical leadership include:
. Ensuring that your own conduct is above reproach.
. Communicating personal support for, and the seriousness of, ethical
conduct.
. Educating your associates in all aspects of ethical conduct.
. Creating an environment that encourages employees to voice ethical concerns
and supporting those who speak out for honesty and integrity.
. Avoiding creating pressures and circumstances which influence employees to
produce results which are not reasonable and which may inadvertently cloud
the judgment of otherwise ethical employees.
<PAGE>
. Ensuring that claims about our own products and services are valid and
honest while avoiding disparagement or unfair treatment of competitors.
III. Financial Records and Reporting
Each employee involved in the preparation of the Company's financial
statements, records and reports must do so in accordance with the letter and
spirit of generally accepted accounting standards and all other applicable laws,
regulations and standards. All records must accurately and completely reflect
the financial condition of the Company.
Federal and other laws require accurate recordkeeping and accounting and
impose civil and criminal penalties on individuals and companies that violate
these requirements. Any attempts to create false or misleading records are
forbidden. Both law and company policy require that no undisclosed funds or
accounts shall be established for any purpose. Moreover, Company policy
prohibits any employee from knowingly making a misleading, incomplete or false
statement to an accountant or an attorney in connection with an audit or any
filing with a governmental or regulatory agency.
IV. Conflicts of Interest
Every employee must avoid conduct that conflicts, or appears to conflict,
with his or her duty to the Company. All employees should conduct themselves
such that a reasonable observer, whether a client, supplier, fellow employee, or
regulator, would have no grounds for belief that a conflict of interest exists.
Employees are not permitted to self-deal or otherwise to use their
positions with the Company to further their own or any other related person's
business opportunities. A related person is any family member, any person
residing in the same household as the employee, any person with whom the
employee has a direct or indirect personal relationship, or any organization or
business activity in which the employee has an interest.
From time to time, situations will arise that are not clear-cut. If you are
uncertain about the propriety of your conduct or business relationships consult
your manager. If you determine that a conflict does exist please report it
immediately to the General Counsel of the Company. In either case, you can be
sure that any such discussion will be held in confidence.
Employees should be aware of the following specific guidelines regarding
conflicts of interest
A. No employee should use his or her position with the Company or information
acquired during employment in a manner that may create a conflict, or the
appearance of a conflict, between personal interests and those of the
Company. If
2
<PAGE>
a conflict or potential conflict arises, report it immediately to the
General Counsel of the Company.
For example, Company policy does not permit you to:
1. Accept, directly or indirectly, any money or object of value from any
person or enterprise which has or is seeking business with the Company
which may affect, or appear to influence, your business judgment. You
should not offer excessive gifts or entertainment to others whose business
the Company may be seeking. You may accept business-related meals,
entertainment, gifts or favors when the value involved is not significant
and clearly will not place you under any obligation to the donor.
2. Accept simultaneous employment with any concern that does business or
competes with the Company, or with any other concern if that employment
would interfere with your full-time and efficient service as an employee of
the Company. In addition, if a related person works for a company or firm
either in direct competition with or which does business with the Company
and occupies a position that can influence decisions affecting lines of
business of such other company or firm which compete with the Company's
businesses or which relate to the business such other company conducts with
the Company, you must disclose such related person's position on the
attached agreement.
B. Certain situations require approval before you become involved.
Specifically, you must submit a request to the General Counsel before you:
1. Serve as a director, general partner, or officer of any unaffiliated
business organization. This rule does not apply to charitable, civic,
religious, public, political, or social organizations, the activities of
which do not conflict with the interests of the Company and do not impose
excessive demands on your time.
2. Obtain an interest in any enterprise which has or is seeking to establish
business relations with the Company. However, employees may invest in stock
or other securities of publicly-owned companies.
C. From time to time situations also occur that must be disclosed to the
Company's General Counsel. Examples of such situations include:
1. Business opportunities, commissions or other financial arrangements that
are offered to related persons by persons or firms that are customers,
vendors, or business partners of the Company. The Company requires such
disclosure to make a determination of the appropriateness of such offers
beforehand and to prevent even the appearance that Company employees might
be improperly using their positions in the Company to promote the Dersona1
or financial interests of related persons.
2. Acquisitions of Company property or services on terms other than those
available to the general public or other than those established by Company
policy.
3
<PAGE>
These guidelines are intended to protect both you and the Company from
conflicts of interest, divided loyalties, and situations that create the
perception of impropriety. They will help to prevent you from compromising your
ability to act solely in the Company's interest and aid you in complying with
existing laws and regulations.
V. Proprietary Information and Trade Secrets
All persons who work for the Company learn, to a greater or lesser degree,
facts about the Company's business methods that are not known to the general
public or to competitors. For example, customer lists, the terms or fees offered
to a particular customer, or marketing or strategic plans, may give the Company
an advantage and must not be disclosed. In addition, such things as internal
processing arrangements or proprietary systems developments must not be
disclosed. These are just a few examples.
Because these trade practices or methods are developed by employees in the
course of their jobs for which the Company pays them a salary, these matters are
the property of the Company, and it is important to the continued success of the
Company that they remain known only to the Company.
Therefore, except as a duly authorized senior officer of the Company may
otherwise consent in writing, you shall not at any time disclose or use, either
during or subsequent to your employment by the Company, any information,
knowledge or data you receive or develop during your employment which is
considered proprietary by the Company. This includes, but is not limited to,
information stored for business purposes on any computer system (e.g.,
mainframes, individual terminals and personal computers) and software used by
the Company.
In addition, no employee shall disclose information which relates to the
Company's secrets as contained in business processes, methods, compositions,
improvements, inventions, discoveries or otherwise, or which the Company has
received in confidence from others. On the other hand, the Company will not ask
you to reveal, and no employee shall disclose to the Company, the proprietary
information or trade secrets of others.
VI. Insider Trading
The Company believes that it is inconsistent with its reputation for
integrity (as well as being illegal) for any employee to trade in securities on
the basis of material, nonpublic, or "inside," information about the issuer
obtained as a result of the employee's affiliation with the Company.
Employees should consult the Company's Policy on Insider Trading and Other
Misuse of Nonpublic Information for a more detailed discussion of this issue.
4
<PAGE>
VII. Compliance With Laws and Regulations
The policy of the Company is to comply in all respects with all applicable
SEC and NASD rules and regulations and with all applicable federal, state and
local laws and regulations in the United States and in any other countries in
which we operate. To this end, the Company has established and maintained
various practices and procedures (including assigning management oversight
responsibilities) which collectively comprise a corporate program intended to
promote ethical behavior of employees and agents and to prevent and detect
criminal conduct. These practices and procedures must be periodically reviewed
and compliance activities properly recorded in order to assure compliance with
the standards that have been established in the Guidelines for Sentencing of
Organizations promulgated by the U.S. Sentencing Commission. The Company has
established and will periodically augment an effective compliance program that
conforms to the standards established in the Sentencing Guidelines.
In addition, employees should be sensitive to the various equal employment
opportunity laws and to the Company's strong policy against sexual harassment.
The Company will exercise due diligence in attempting to detect and to
prevent criminal conduct by employees and agents. In this regard from time to
time the General Counsel may circulate specific laws and regulations because of
their high degree of relevance to your activities. However, all employees are
expected to be familiar with the laws and regulations that relate to the
performance of their jobs and, if in doubt, to seek advice from the General
Counsel as to what those laws and regulations are.
VIII. Administration
The Company's Code of Ethics calls for you to abide by the policies set
forth above. Exceptions to these policies may be granted only by the General
Counsel, who is responsible for the interpretation of the Code.
To the extent that the Company has adopted or in the future may adopt
specific policies pertaining to any of the matters covered in the Code of
Ethics, the Code also mandates your agreement to abide by the terms of such
policies. Neither this Code nor your agreement to abide it is meant to vary or
supersede the regular terms and conditions of your employment by the Company or
to constitute an employment contract.
All employees are required to review the Code of Ethics annually and to
complete, sign and return a statement acknowledging their agreement to abide by
the Code. The Company takes the matters discussed in this Code very seriously.
Violations of the Code may result in disciplinary actions up to and including
termination of employment.
5
<PAGE>
FUNDS DISTRIBUTOR, INC.CODE OF ETHICS AGREEMENT & DISCLOSURE
I acknowledge receipt of Funds Distributor's Code of Ethics dated October
1, 1996 and, in consideration of my employment with the Company, agree to abide
by the terms of the policies set forth therein. I understand that my obligations
under these policies may not be changed or modified, released, discharged,
abandoned or terminated, in whole or in part, except by an instrument in writing
signed by a duly authorized officer of the Company. I further understand that my
obligation to abide by these policies is ongoing (both during and after my
employment with the Company) and I agree to promptly disclose to the General
Counsel any exceptions to or potential conflicts with this agreement that exist
now or may arise in the future. I acknowledge that neither this agreement nor
the Code of Ethics is meant to vary or supersede the regular terms and
conditions of my employment with the Company or to constitute an employment
contract.
In the space below list any exceptions to the Code of Ethics or other
matters that you feel should be disclosed. Specifically, you should list any
existing or potential conflicts of interest and any directorships, partnerships,
officerships, or other positions held in unaffiliated business organizations.
You should list those positions even if you serve at the request of or with the
permission of the Company. Please also disclose the positions of any related
persons if so required by the Company's policy on conflicts of interests.
All necessary disclosures should be made on this form even if they have
been previously disclosed to the Company.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Employee Signature:_______________________________________Date:________________
Employee Name (please print or type):__________________________________________
Title:______________________________________ Phone extension:__________________
PLEASE COMPLETE, SIGN AND DATE THIS AGREEMENT, DETACH THIS PAGE AND SEND IT
UNDER CONFIDENTIAL COVER TO THE ATTENTION OF PATRICK W. MCKEON, V.P.-DIRECTOR OF
COMPLIANCE. YOU SHOULD RETAIN A COPY OF THIS AGREEMENT FOR YOUR OWN RECORDS.
6
<PAGE>
Exhibit 99(p)(3)
- -----------------------------------------------------------------------------
Title: Code of Conduct / Conflict of Interest Policy Number: C 5
- -----------------------------------------------------------------------------
Date: January, 2000 Page Number: 1 of 7
- -----------------------------------------------------------------------------
Munder Capital Management
Code of Conduct/Conflict of Interest
- ------------------------------------
Personal Transactions and Conflicts of Interest
- -----------------------------------------------
Personal trading by any Company employee shall not interfere with or take
precedence over Company business. All Company personnel must exercise extreme
care in handling personal investments, in order to avoid actual or perceived
conflicts with the execution of orders for customers.
Specific restrictions apply to Company employees actively involved in making
investment decisions, herein referred to as "Designated Employees." This
specifically includes:
. Senior officers and Managing Directors
. Trading personnel
. Portfolio managers
. Support personnel for the above (i.e. assistants, secretaries, etc.) who
may have access to information regarding investment decisions.
. Any other persons deemed required to report such transactions as determined
by the Compliance Officer.
A personal transaction is defined as a transaction for the Designated Employee's
own account, family accounts and accounts in which he or she has discretionary
investment control in terms of purchase or disposition. This could include but
is not limited to accounts of the employee's husband, wife, minor children or
other dependent relations, or a trust in which he or she is an income or
principal beneficiary. If the person also has discretionary investment control
over family-related accounts, the definition of personal transactions would also
include discretionary transactions for sisters, brothers, parents or parents-in-
law and brothers/sisters-in-law.
The following restrictions and procedures apply to all Company Designated
Employees:
Prohibition Against Use of Material Inside Information
- ------------------------------------------------------
Investment personnel often have access to proprietary and market sensitive
information, through contact with company management for example, that may be
deemed to be "material inside information". Strict standards of confidentiality
must be observed in order to prevent misuse of this information and to protect
the Company's professional reputation and integrity.
"Material inside information" can be defined as any information about a company
which has not been generally disclosed to the marketplace, the dissemination of
which is likely to significantly affect the market price of the company's
securities or to be considered important by reasonable investors in determining
whether to trade in such securities.
<PAGE>
Title: Code of Conduct / Conflict of Interest Policy Number: C 5
- --------------------------------------------------------------------------------
Date: January, 2000 Page Number: 2 of 7
- --------------------------------------------------------------------------------
Employees in possession of material inside information should communicate that
information to the Compliance Officer of the Company without otherwise
discussing the information with co-workers or others. The employee is prohibited
from trading on the information or from discussing the information inside or
outside the Company until the Compliance Officer determines the information
either is not material or has been made public. The use or disclosure of such
information may subject an employee, the Company, or persons outside of the
Company to whom the information is communicated to severe liabilities, both
civil and criminal, under federal and state securities laws. The Compliance
Officer will regularly review client and employee accounts and investigate for
patterns of heavy or inappropriate trading in particular securities.
Employees are prohibited from soliciting or accepting disclosure of inside
information from fellow employees or soliciting or accepting access to files
that contain inside information.
Fair Dealing vs. Self Dealing
- -----------------------------
All Company personnel must act in a manner consistent with the obligation to
deal fairly with all customers when disseminating information or taking
investment action. Self-dealing for personal benefit or the benefit of the
Company at the expense of clients will not be tolerated.
Front Running
- -------------
Employees are prohibited from "front running" an order or recommendation, even
if he or she is not handling either the order or recommendation. Front running
consists of executing a personal transaction in the same or underlying
securities, options, rights, warrants, convertible securities or other related
securities in advance of corporate transactions of a similar nature based on the
knowledge of the forthcoming transaction or recommendation. For purposes of this
restriction, personal transactions which are executed seven calendar days or
less prior to a client transaction, and where the employee directly handles such
client transactions, shall be considered front running and are expressly
prohibited. Notwithstanding the above time limit, care should be taken with any
personal transaction executed for securities that the Company recommends to
clients to avoid the appearance of front running or self dealing.
Restriction on Purchasing Initial Public Offerings
- --------------------------------------------------
No underwritten new or secondary issues, whether offered on a firm or best
efforts basis, may be purchased except in the open market after official
termination of the underwriting. The only exception is in the case of mutual
funds, which can be purchased on the initial offering.
<PAGE>
Title: Code of Conduct / Conflict of Interest Policy Number: C 5
- --------------------------------------------------------------------------------
Date: January, 2000 Page Number: 3 of 7
- --------------------------------------------------------------------------------
Private Placements
- ------------------
No Designated Employee may acquire, directly or indirectly, any securities in a
private placement without the prior approval of the Compliance Officer, who must
be provided with full details of the proposed transaction (including
certification that the investment opportunity did not arise by virtue of the
designated person's activities on behalf of any fund advised by the Company).
Trading
- -------
No trades may be done directly through the institutional trading desk of a
broker/dealer that also handles any of the Company's or its client's business;
only a normal retail relationship is permitted.
Short-term trading is prohibited. Short-term trading is defined to include any
combination of purchases and sales, or sales and purchases, where the securities
are held for less than 60 calendar days. You will be required to disgorge any
profits if you violate this short term trading rule. The prohibition on short-
term trading does not apply to mutual funds, including funds advised by the
Company.
Designated Employees are prohibited from executing transactions in securities
within seven days before and after a transaction for a client account for which
that person is responsible.
Designated Employees are prohibited from executing transactions in securities
for which a registered investment company advised by the Company has pending buy
or sell orders.
In order to assist employees in maintaining compliance with these provisions,
personal securities transactions MUST be pre-cleared with the compliance officer
or trading desk, with appropriate written documentation obtained. Any deviation
from these trading policies must be pre-cleared with the Compliance Officer or
General Counsel. An example of this form is located in the back of this handbook
(Exhibit B). If a securities transaction is not pre-cleared it will be
considered a violation.
Comerica Stock
- --------------
Comerica stock may be purchased by employees of Munder Capital, subject to the
normal procedures contained in this policy, and any procedures that may be
directed to MCM employees by Comerica compliance personnel. Should such
procedures be received from Comerica compliance personnel, Munder employees will
be notified of appropriate changes to these procedures.
<PAGE>
- -------------------------------------------------------------------------------
Title: Code of Conduct / Conflict of Interest Policy Number: C 5
- -------------------------------------------------------------------------------
Date: January, 2000 Page Number: 4 of 7
- -------------------------------------------------------------------------------
Commissions
- -----------
Commissions on personal transactions may be negotiated, but payment of a
commission rate which is lower than the rate available to retail customers
through similar negotiations is prohibited.
Appointment to Investment Advisory Position
- -------------------------------------------
Before taking on any position which involves giving investment advice or acting
in a fiduciary capacity, i.e., acting as an administrator, co-trustee, joining
the board of an endowment fund, etc., Designated Employees must obtain written
approval from the Compliance Officer or CEO of the Company. Annually, all
employees will be required to identify and confirm those organizations for which
they serve on Boards or with which they have other reportable relationships. An
example of this form is located in the back of this handbook. (Exhibit C)
Reporting Requirements
- ----------------------
Within 10 days following the end of the calendar quarter, each access person
defined above must submit to the Compliance Officer a statement of all
securities purchased and sold during the previous calendar quarter.
An example of this form is located in the back of this handbook. (Exhibit D)
Within 10 days of becoming an access person, and annually thereafter, you will
be required to report/confirm the accounts and securities over which you are
responsible under these guidelines. Appropriate forms and reports will be
disseminated at that time. An example of this form is located in the back of
this handbook. (Exhibit E)
Reporting of Personal Brokerage Accounts and Investments
- --------------------------------------------------------
Certain Designated Employees may be required to report all cash and margin
accounts and investments involving the beneficial ownership of securities to the
Compliance Officer of the Company. In addition, securities that are beneficially
owned but not held in any account must be reported to the Compliance Officer.
The Compliance Officer will determine those personnel required to submit copies
of supporting documentation (e.g., brokerage statements, confirmations, or
similar documents) on a timely basis.
Accounts to be reported could include, but are not limited to, joint accounts,
trust accounts, and investment partnerships or clubs in which the employee
participates that are eligible to trade in securities. A security could include
but is not limited to any note, stock, treasury stock, bond debenture or
evidence of indebtedness.
<PAGE>
- -------------------------------------------------------------------------------
Title: Code of Conduct / Conflict of Interest Policy Number: C 5
- -------------------------------------------------------------------------------
Date: January, 2000 Page Number: 5 of 7
- -------------------------------------------------------------------------------
Securities that you beneficially own include securities, whether or not
registered in your name, over which you can exert direct or indirect control in
terms of voting rights, purchase or disposition. This also includes securities
which you may not currently own but have the right to acquire, through the
exercise of an option, for example. Securities held in the name of other
individuals or in the name of an estate, trust or partnership, where you have
the power to directly control the purchase or sale of securities, such as the
authority to exercise voting rights or to indirectly influence such decisions,
are considered beneficially owned by you. Additionally, securities held by your
spouse, child or other relative sharing your home are considered beneficially
owned by you on the theory that, absent special circumstances, you are able to
exercise a controlling influence over the purchase, sale or voting of such
securities.
Compliance
- ----------
Monthly Reporting Requirements
- ------------------------------
For those persons designated by the Compliance Officer, duplicate monthly
account statement(s), confirmations, or similar documentation of each
transaction in all accounts over which you have beneficial ownership must be
submitted to the Compliance Officer directly from the broker/custodian. Have
all duplicate transaction confirmations and/or statements mailed directly to:
Compliance Officer
Munder Capital Management
PO Box 1840
Birmingham, MI 48012-1840
In the event a securities transaction is completed without the use of a
brokerage firm, you should immediately report the transaction directly to the
Compliance Officer.
Reporting of security holdings of family members over which you do not have
beneficial ownership (i.e. securities owned by your parents, in-laws, children
above minor age not living at home) is not required. However, this information
must be provided upon request of the Compliance Officer.
Each monthly statement must include all transaction activity conducted during
the month in each account, as well as all transfers in and out of the account.
Excluded Transactions
- ---------------------
Transactions that are specifically excluded from required reporting are:
. Transactions in securities that are direct obligations of the United
States Government.
. Any transaction involving a "non-security", i.e. savings account,
certificate of deposit, etc.
<PAGE>
- -------------------------------------------------------------------------------
Title: Code of Conduct / Conflict of Interest Policy Number: C 5
- -------------------------------------------------------------------------------
Date: January, 2000 Page Number: 6 of 7
- -------------------------------------------------------------------------------
. Transactions that are non-volitional, including, but not limited to
automatic reinvestments under dividend reinvestment plans, conversions of
stock under warrants, options or mergers.
. Transactions effected in any account over which the Designated Person has
no direct or indirect influence or control, including discretionary
accounts in which the Designated Person has no influence or control over
trades.
. Purchases or sales of options on indices.
. Transactions involving mutual funds and money market funds.
Role of Compliance
- ------------------
The Compliance Officer or his/her designee reviews the records of all personal
accounts and securities transactions to ensure that no abuse of these guidelines
and procedures has occurred. Information collected and maintained by the
Compliance Officer is kept in strict confidence. In addition, on a case-by-case
basis, the Compliance Officer may provide advance approval of purchases or sales
which would otherwise be prohibited by this Code of Conduct upon his or her
determination that such purchase or sale is only remotely potentially harmful to
clients of the Company because such purchase or sale would be unlikely to affect
a high institutional market, or because such purchase or sale is clearly not
related economically to the securities held, purchased or sold by clients of the
Company.
Risk of Non-Compliance
- ----------------------
Any violation of these guidelines can be grounds for the immediate termination
of your employment at the Company. In some cases, such as the use of material
inside information, a breach may violate federal and state civil and criminal
statutes and may subject you to fines, imprisonment and/or monetary damages. You
will be expected to conduct your activities in accordance with these guidelines,
and to reaffirm each year that you have thoroughly read and understand this Code
of Conduct by signing a statement of acknowledgment.
Notwithstanding the above, in order to underscore the importance of compliance
with these provisions, the following penalties will apply to violations of these
policies (in addition to the possible disgorging of any profits and other
sanctions noted in the above paragraph):
First violation: no monetary penalty
Second violation: $250 penalty
Any subsequent violation: appropriate disciplinary action, as determined by
the CEO and the Compliance Officer.
<PAGE>
- -------------------------------------------------------------------------------
Title Code of Conduct / Conflict of Interest Policy Number: C 5
- -------------------------------------------------------------------------------
Date: January, 2000 Page Number: 7 of 7
- -------------------------------------------------------------------------------
Summary
- -------
It is impossible to anticipate all possible conflict of interest situations that
may arise. In dealing with such situations, you should act according to the
guidelines outlined here as well as abide by legal and regulatory requirements.
When there is any doubt about the propriety of certain conduct, or if a
situation is unclear, you should seek the counsel of the Compliance Officer.
Acknowledgment
- --------------
It shall be the responsibility of each present employee to file with the
Compliance Officer of the Company a written statement certifying that the
employee has received and reviewed this policy. Signature constitutes agreement
to abide by such Code. New employees shall complete an Acknowledgment of Receipt
coincident with employment. Statements for all employees shall be filed at one-
year intervals. An example of this form is located in the back of this Handbook.
(Exhibit J)
<PAGE>
Exhibit B
----------------------------------------
[LOGO] PREAUTHORIZATION FORM FOR
PERSONAL SECURITIES TRANSACTIONS
----------------------------------------
PLEASE COMPLETE AND RETURN THIS FORM TO THE COMPLIANCE OFFICER
- ---------------------------------------------------------------------------
TRANSACTION
DATE OF TYPE NAME OF SECURITY SYMBOL
TRANSACTION (Buy, Sell, (If known)
(Trade Date) Exchg, Gift,
etc.)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Only one security per form*
- ---------------------------------------------------------------------------
- ----------------------------------------------------------------------------
DATE EMPLOYEE
SIGNATURE
- ----------------------------------------------------------------------------
PRINTED NAME
--------------------------------------
- ----------------------------------------------------------------------------
DATE TRADING ROOM
AUTHORIZATION
- ----------------------------------------------------------------------------
[_] NO OPEN ORDERS TIME STAMP
- ----------------------------------------------------------------------------
**Your trade must be placed immediately following authorization to avoid any
conflict with incoming orders on the trading desk. If the transaction is not
executed on the trade date listed, you must obtain a new pre-authorization prior
to execution.**
<PAGE>
Exhibit C
- --------------------------------------------------------------------------------
M E M O R A N D U M
- --------------------------------------------------------------------------------
Date:
To: All Personnel
From: Terry H. Gardner
RE: Compliance Questionnaire
In order to help us identify potential conflicts of interest, please complete
the following questionnaire.
Please list any organizations in which you serve as an officer, director,
partner, etc., whether for compensation or not (including charities, etc.), or
any public elected or appointed office.
To the best of your knowledge, do any of the organizations described above have
a material business relationship with either Munder Capital Management or
Comerica Incorporated or any subsidiaries of Comerica Incorporated?
____________________________ ___________________
Signature Date
____________________________
Print Name
<PAGE>
Exhibit D
Munder Capital Management
480 Pierce Street, Suite 300
Birmingham, MI 48009
QUARTERLY REPORT FOR PERIOD ENDING 3/31/2000
This form must be returned to the compliance officer no later than the 10th day
of the month following the quarter end noted above.
Dear Sir/Madam:
As required by Rule 204-2(a)(12) of the Investment Advisers Act of 1940, I
submit the following information concerning transactions during the most recent
calendar quarter in SECURITIES* in which I have or had direct or indirect
beneficial ownership, except transactions effected in an account over which
neither you nor I had any direct or indirect influence or control.
<TABLE>
<CAPTION>
Nature of
transaction
Date of (Purchase, Sale, Number of Principal Broker, Dealer
transaction Gift, etc.) Title of Security Shares Price/Share Amount** or Bank
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
New account(s) established in which any securities were held during the quarter
for my direct or indirect benefit:
Name of the broker, dealer or bank with whom the account was established:
Account Number:
Date the account was established:
*For purposes of reporting quarterly transactions, the term "Security" does not
include (1) securities issued or guaranteed as to principal or interest by the
U.S. Government or its instrumentalities; (2) bankers' acceptances; (3) bank
certificates of deposit; (4) commercial paper and high quality short-term debt
instruments (including repurchase agreements); and (5) shares of registered
open-end investment companies. For purposes of reporting new accounts
established during the quarter, there is no limitation on the term "security."
**Principal amount equals the amount paid or received excluding any commissions.
By signing this form, you are indicating that you have complied with the Firm's
Code of Conduct policy with respect to personal SECURITIES TRANSACTIONS, and
that all such transactions are listed above or attached. You are also indicating
that you have reported all reportable accounts established with a broker, dealer
or bank during the quarter.
Date: Signed:
----------------------- --------------------------------
Print Name:
----------------------------
<PAGE>
Exhibit E
Annual Report of Personal Brokerage Accounts and Investments
Name: ____________________________
Position: ___________________________
To comply with SEC regulations and the Munder Capital Management Code of
Conduct, all access persons are required to provide an annual holdings report
containing the following information (which information must be current as of a
date no more than 30 days before the report is submitted):
(i) The title, number of shares and principal amount of each reportable
security* in which you have any direct or indirect beneficial ownership;
and
(ii) The name of any broker, dealer, or bank with whom you maintain an
account in which any securities are held for your direct or indirect
benefit.
Please fill out the form below listing those broker, dealer and bank accounts
that meet the Code of Conduct reporting requirements. You must attach a list of
the reportable securities held in each account, including the information listed
in item (i) above. A copy of the most recent statement for each account may be
attached for this purpose if it is currently accurate and provides all the
required information.
Following is a listing of accounts which meet the Firm's reporting guidelines:*
<TABLE>
<CAPTION>
Account Owner Account Number Firm
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
By signing this form, you are indicating that you have complied with the Firm's
Code of Conduct policy and that all reportable accounts and securities are
listed above or attached.
Signed: _____________________________________ Date: _____________
*Please refer to the Code of Conduct provided in the Munder Capital Management
Employee Handbook for a description of reportable securities.
<PAGE>
Initial Report of Personal Brokerage Accounts and Investments
Name: _______________________________
Position: ___________________________
To comply with SEC regulations and the Munder Capital Management Code of
Conduct, all access persons are required to provide an initial holdings report
containing the following information:
(i) The title, number of shares and principal amount of each reportable
security* in which you had any direct or indirect beneficial ownership when
you became an access person; and
(ii) The name of any broker, dealer, or bank with whom you maintained an account
in which any securities were held for your direct or indirect benefit as of
the date you became an access person.
Please fill out the form below listing those broker, dealer and bank accounts
that meet the Code of Conduct reporting requirements. You must attach a list of
the reportable securities held in each account, including the information listed
in item (i) above. A copy of the most recent statement for each account may be
attached for this purpose if it is currently accurate and provides all the
required information.
Following is a listing of accounts which meet the Firm's reporting guidelines:*
<TABLE>
<CAPTION>
Account Owner Account Number Firm
- -------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
By signing this form, you are indicating that you have complied with the Firm's
Code of Conduct policy and that all reportable accounts and securities are
listed above or attached.
Signed: _____________________________________ Date: _____________
*Please refer to the Code of Conduct provided in the Munder Capital Management
Employee Handbook for a description of reportable securities.
