<PAGE>
As filed with the Securities and Exchange Commission
on June 29, 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. 48 [ X ]
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 48 [ 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:
James Robinson Patrick W. D. Turley, 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 immediately upon
filing pursuant to paragraph (b) of Rule 485.
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for
Munder Fund of Funds (formerly Munder All-Season Aggressive Fund)
(Class A and B Shares)
<TABLE>
<CAPTION>
Part A
---------
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; Financial Highlights
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)
Prospectus for Munder Fund of Funds
(formerly Munder All-Season Aggressive Fund) (Class Y Shares)
<TABLE>
<CAPTION>
Part A
------
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; Financial Highlights
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 ArrangementS
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for
Munder All-Season Conservative Fund
and Munder All-Season Moderate Fund
(Class A and B Shares)
<TABLE>
<CAPTION>
Part A
------
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; Financial Highlights
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Funds Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Pricing of
Fund Shares; Distributions; Federal Tax
Considerations
7. Purchase of Securities Being Offered Your Investment; Pricing of Fund Shares
8. Redemption or Repurchase Your Investment
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Prospectus for The Munder All-Season Conservative Fund
and The Munder All-Season Moderate Fund
(Class Y Shares)
<TABLE>
<CAPTION>
Part A
------
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; Financial Highlights
4. General Description of Registrant Front and Back Pages; Risk/Return Summary;
More About the Funds; Management
5. Management of the Funds Management; Distributions; Federal Tax
Considerations
6. Capital Stock and Other Securities Management; Your Investment; Pricing of
Fund Shares; Distributions; Federal Tax
Considerations
7. Purchase of Securities Being Offered Your Investment; Pricing of Fund Shares
8. Redemption or Repurchase Your Investment
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Statement of Additional Information
Munder Fund of Funds (formerly Munder All-Season Aggressive Fund)
<TABLE>
<CAPTION>
Part B
------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History See Prospectus --"Management;" History and
General Information; Management of the Fund
13. Investment Objectives and Policies Fund Investments; Investment Limitations;
Portfolio Transactions
14. Management of the Fund Management of the Fund; Other Information
15. Control Persons and Principal Other Information; Control Persons and
Holders of Securities Principal Holders of Securities
16. Investment Advisory Services and Investment Advisory and Other Service
Other Services Arrangements; See Prospectus --"Management"
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Additional Information Concerning Shares
19. Purchase, Redemption and Pricing of Additional Purchase and Redemption
Securities Being Offered Information; Net Asset Value; Additional
Information Concerning Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and Other Service
Arrangements
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
Statement of Additional Information
Munder All-Season Conservative Fund
Munder All-Season Moderate Fund
<TABLE>
<CAPTION>
Part B
------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History See Prospectus --"Management;" History and
General Information; Management of the Fund
13. Investment Objectives and Policies Fund Investments; Investment Limitations;
Portfolio Transactions
14. Management of the Funds Management of the Funds; Other Information
15. Control Persons and Principal Other Information; Control Persons and
Holders of Securities Principal Holders of Securities
16. Investment Advisory Services and Investment Advisory and Other Service
Other Services Arrangements; See Prospectus --"Management"
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Additional Information Concerning Shares
19. Purchase, Redemption and Pricing of Additional Purchase and Redemption
Securities Being Offered Information; Net Asset Value; Additional
Information Concerning Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and Other Service
Arrangements
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
THE MUNDER FUNDS, INC.
The purposes of this Post-Effective Amendment filing are (i) to change the
name of the Munder All-Season Aggressive Fund to Munder Fund of Funds; (ii) to
separate into its own prospectuses and statement of additional information the
Munder Fund of Funds and (iii) to separate into its own prospectuses and
statement of additional information the Munder All-Season Conservative Fund and
Munder All-Season Moderate Fund.
The Prospectuses and Statements of Additional Information for the Munder
Focus Growth Fund (formerly Munder Equity Selection Fund), Munder Future
Technology Fund, Munder Growth Opportunities Fund, Munder International Bond
Fund, Munder International NetNet Fund, Munder Micro-Cap Equity Fund, Munder
Money Market Fund, Munder Multi-Season Growth Fund, Munder NetNet Fund, Munder
Real Estate Equity Investment Fund and Munder Small-Cap Value Fund are not
included in this filing.
<PAGE>
CLASS A AND B SHARES
[MUNDER LOGO]
Prospectus
JUNE 29, 2000
MUNDER FUND OF FUNDS
(formerly Munder All-Season Aggressive Fund)
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved these securities nor passed upon the
accuracy or adequacy of this prospectus. It is a
criminal offense to state otherwise.
<PAGE>
Table Of Contents
<TABLE>
<C> <S>
2 Risk/Return Summary
3 Who May Want To Invest
5 Fees And Expenses
6 More About The Fund
6 Glossary
7 Asset Allocation Chart
8 Description Of The Underlying Funds
10 Principal Investment Strategies And Risks
11 Other Investment Strategies And Risks Of The Fund And Underlying Funds
14 Disclaimers
15 Your Investment
15 How To Reach The Fund
15 Purchasing Shares
16 Exchanging Shares
16 Redeeming Shares
17 Additional Policies For Purchases, Exchanges And Redemptions
18 Shareholder Privileges
19 Distribution Arrangements
19 Share Class Selection
19 Applicable Sales Charge
21 CDSC
22 12b-1 Fees
22 Other Information
23 Pricing of Fund Shares
23 Distributions
24 Federal Tax Considerations
24 Taxes On Distributions
24 Taxes On Sales Or Exchanges
24 Other Considerations
25 Management
25 Investment Advisor
25 Portfolio Managers
26 Financial Highlights
</TABLE>
Back Cover For Additional Information
<PAGE>
Risk/Return Summary
--------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goals and principal investment
strategies of the Munder Fund of Funds (formerly Munder All-Season Aggressive
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." Certain terms used in this prospectus
are defined in the Glossary.
Fund of Funds
The Fund is a fund of funds, which
means that it invests almost all
of its assets in other mutual
funds, rather than in individual
securities. The Fund invests its
assets in a variety of other
Munder Funds, referred to as
"underlying funds."
The risks of investing in the Fund
are dependent on which underlying
funds the Funds invest in, and to
what extent. In addition, the
investment performance of the Fund
is directly related to the
performance of the underlying
funds in which it invests.
Investment Approach of the Underlying Funds
. The underlying equity funds
represented in the Fund vary
from growth to value styles of
investing, from larger to
smaller company stocks and from
domestic to international
equities.
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in equity securities.
The Fund may also invest a portion of its assets in underlying funds that
invest primarily in money market instruments.
The advisor may periodically adjust the Fund's asset allocation among
underlying funds in response to changing economic and market conditions. The
typical allocation is expected to be: 95% Equity Funds and 5% Money Market
Funds.
The Fund's indirect, stock holdings will be a combination of large-cap, mid-cap
and small-cap U.S. stocks as well as foreign stocks.
In the "More About the Fund" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
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.
2
<PAGE>
Among the principal risks of investing in the Fund are:
. Stock Market Risk. The value of the securities in which the Fund invests may
decline in response to developments affecting particular 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 the Fund's investments
may decline if the particular companies the Fund invests in do not perform
well.
. Foreign Securities Risk. Investments by an underlying fund in foreign
securities may experience greater and more rapid changes in value than U.S.
securities. Foreign securities are generally more volatile and less liquid
than U.S. securities, in part because of greater political and economic risks
and because there is less public information available about foreign
companies. Issuers of foreign securities are generally not subject to the
same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards.
. Currency Risk. A decline in the value of foreign currencies relative to the
U.S. dollar will reduce the value of an underlying fund's portfolio
securities denominated in those currencies.
. Smaller Company Stock Risk. The stocks of small or medium-size companies may
have more risks than those of larger companies. Small or medium-size
companies often have narrower markets and more limited managerial and
financial resources than larger, more established companies. As a result,
they may be more sensitive to changing economic conditions, which could
increase the volatility of an underlying fund's portfolio. In addition, small
company stocks typically are traded in lower volume making them more
difficult to sell.
. Sector Risk. Certain underlying funds may concentrate its investments in a
particular industry sector. Adverse economic, business or political
developments affecting that industry sector could have a major effect on the
value of the underlying fund's investments.
Who May Want to Invest
The Fund may be appropriate for investors who:
. Seek long-term growth of capital.
. Can tolerate short-term fluctuations in the financial markets.
3
<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.
The annual returns in the bar chart Average Annual Total Returns
are for the Fund's Class A Shares
and do not reflect sales loads. If (for the periods ended December 31,
sales loads were reflected, returns 1999)
would be less than those shown.
<TABLE>
----------------------------------------
<CAPTION>
Since
1 Year Inception*
----------------------------------------
<S> <C> <C>
Class A 15.88% 5.57%
Class B 17.37% 13.46%
Wilshire 5000 Index** 23.56% 21.73%***
Class B 11.37%***
</TABLE>
--------
* The inception dates for the Class
A shares and Class B shares are
10/7/97 and 1/14/98,
respectively.
** The Wilshire 5000 Equity Index
measures the performance of all
U.S. headquartered equity
securities with readily available
price data. Over 7,000
capitalization weighted security
returns are used to adjust the
index.
***Index return from 9/31/97 for
Class A shares and 1/31/98 for
Class B shares.
The average annual total returns
reflect imposition of the maximum
front-end or contingent deferred
sales charge and conversion of Class
B shares to Class A shares after the
applicable period.
Total Return
(per calendr year)
[BAR CHART]
1998 3.56%
1999 22.59%
[BAR CHART]
Year-to-date through March 31, 2000:
11.86%
<TABLE>
<S> <C> <C>
Best Quarter: Q 4 1999 20.83%
Worst Quarter: Q 3 1998 (16.27)%
</TABLE>
4
<PAGE>
Fees And Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold shares the Funds. Please note that the following information does not
include fees that institutions may charge for services they provide to you.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
Shareholder Fees (fees paid directly from your investment) ------- -------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)............................................ 5.5%(a) None
Maximum Deferred Sales Charge (Load)(as a % of the lesser of
original purchase price or redemption proceeds)............ None(b) 5%(c)
Sales Charge (Load) Imposed on Reinvested Dividends......... None None
Redemption Fees............................................. None None
Exchange Fees............................................... None None
</TABLE>
Annual Fund Operating Expenses (expenses that are paid from Fund assets) as a %
of net assets
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
------- -------
<S> <C> <C>
Management Fees................................................. None None
Distribution and/or Service (12b-1) Fees........................ 0.30% 1.00%
Other Expenses.................................................. 0.25% 0.25%
---- ----
Total Annual Fund Operating Expenses(1)......................... 0.55% 1.25%
==== ====
</TABLE>
--------
(a) The sales charge declines as the amount invested increases.
(b) A contingent deferred sales charge (CDSC) is a one-time fee charged at the
time of redemption. A 1% CDSC applies to redemptions of Class A shares
within one year of investment that were purchased with no initial sales
charge as part of an investment of $1,000,000 or more.
(c) The CDSC payable upon redemption of Class B shares declines over time.
In addition to the expenses shown above, shareholders of the Fund will
indirectly bear their pro rata shares of the annual operating expenses of the
underlying funds. As a result, the investment returns of the Fund will be net
of the expenses of the Underlying Fund. Since the Fund invests in other Munder
Funds, as a shareholder you will pay a higher expense ratio than if you had
purchased shares of an underlying fund directly. The underlying funds' total
annual fund operating expense ratios for the fiscal year ended June 30, 1999
ranged from .37% to 2.45%.
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 and that all dividends and distributions are
reinvested. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
Class A Class B Class B
Shares Shares* Shares**
------- ------- --------
<S> <C> <C> <C>
1 Year............................................. $ 644 $ 647 $ 128
3 Years............................................ $ 717 $ 733 $ 398
5 Years............................................ $ 841 $ 929 $ 688
10 Years........................................... $1,204 $1,143*** $1,143***
</TABLE>
--------
* Assumes you sold your shares at the end of the time period.
** Assumes you stayed in the Fund.
*** Reflects conversion of Class B shares to Class A shares (which pay lower
ongoing expenses) approximately six years after the date of original
purchase.
5
<PAGE>
More About The Fund
--------------------------------------------------------------------------------
This section describes the underlying funds in which the Fund may invest. It
also discusses the risks of investing in the Fund, which are dependent upon
which underlying funds the Fund invests in, and to what extent. Further,
included in this section is a chart that shows the maximum percentage of its
assets that the Fund may invest in each underlying fund. Please note that the
underlying funds may also invest in securities and are subject to restrictions
and additional risks which are described in the Statement of Additional
Information.
The Glossary below explains certain terms used throughout this prospectus.
Glossary
Types Of Securities
Equity securities include common stocks, preferred stocks, securities
convertible into common stocks, and rights and warrants to subscribe for the
purchase of common stocks. Equity securities may be listed on a stock exchange
or NASDAQ National Market System or unlisted. Warrants are rights to purchase
securities at a specified time at a specified price.
Convertible Securities. A convertible security is a bond or preferred stock
that may be converted (exchanged) into the common stock of the issuing company
within a specified time period for a specified number of shares. Convertible
securities offer the underlying funds a way to participate in the capital
appreciation of the common stock into which the securities are convertible,
while earning higher current income than is available from the common stock.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit
of banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Rating Agencies and Indices
S&P is Standard & Poor's Rating Services.
S&P 500 is S&P's 500 Composite Stock Price Index, a widely recognized unmanaged
index of U.S. stock market activity.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Internal Revenue Code is the Internal Revenue Code of 1986, as amended.
NAV is the net asset value per share of the Fund. NAV is the value of a single
share of the Fund. The Fund calculates NAV separately for each class. NAV is
calculated by (1) taking the current value of the Fund's total assets allocated
to a particular class of shares, (2) subtracting the liabilities and expenses
charged to that class (3) dividing that amount by the total number of shares of
that class outstanding.
6
<PAGE>
Asset Allocation Chart
The following chart shows the Fund's maximum investment (expressed as a
percentage of each Fund's assets) that the Fund may make in the underlying
funds.
<TABLE>
<S> <C>
Equity Funds
Equity Income Fund.................................................... 20%
Focus Growth Fund..................................................... 30%
Future Technology Fund................................................ 15%
Growth Opportunities Fund............................................. 20%
Institutional S&P 500 Index Equity Fund............................... 40%
International Equity Fund............................................. 15%
International Net Net Fund............................................ 10%
Micro-Cap Equity Fund................................................. 10%
Multi-Season Growth Fund.............................................. 30%
NetNet Fund........................................................... 10%
Real Estate Equity Investment Fund.................................... 25%
Small-Cap Value Fund.................................................. 35%
Small Company Growth Fund............................................. 35%
Framlington Emerging Markets Fund..................................... 15%
Framlington Global Financial Services Fund............................ 15%
Framlington Healthcare Fund........................................... 10%
Framlington International Growth Fund................................. 15%
Other Munder Equity Funds............................................. 20%
Money Market Funds
Cash Investment Fund.................................................. 15%
Money Market Fund..................................................... 10%
U.S. Treasury Money Market Fund....................................... 10%
</TABLE>
7
<PAGE>
Description of Underlying Funds
Equity Funds
Equity Income Fund
The Fund's goal is to provide capital appreciation and current income. The Fund
pursues its goal by investing primarily in dividend-paying equity securities
and fixed income securities which are convertible into or exchangeable for
common stock. The advisor generally selects large, well-known companies that it
believes have favorable prospects for dividend growth and capital appreciation.
The Fund will seek to produce a current yield greater than the S&P 500.
Focus Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities 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.
Future Technology Fund
The Fund's goal is to provide capital appreciation. 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.
Growth Opportunities Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in the equity securities of
companies with market capitalizations between $500 million and $10 billion. Its
style, which focuses on both growth prospects and valuation, is known as GARP
(Growth at a Reasonable Price) and seeks to produce attractive returns during
various market environments.
Institutional S&P 500 Index Equity Fund
The Fund's goal is to provide performance and income that is comparable to the
S&P 500. The S&P 500 is an index of 500 stocks that emphasizes large
capitalization companies. The Fund pursues its goal by normally holding a
substantial amount of its assets in securities of at least 400 of the stocks in
the S&P 500. The Fund is managed through the use of a "quantitative" or
"indexing" investment approach and tries to mirror the composition and
performance of the S&P 500 through statistical procedures. The Fund will try to
achieve a correlation between the performance of its portfolio and that of the
S&P 500 of at least .95. A correlation of 1.0 would mean that the changes in
the Fund's price mirror exactly the changes in the S&P 500.
International Equity Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing primarily in foreign securities, including American
Depositary Receipts. The Fund mostly invests in mature markets, but may also
invest in emerging markets. The Fund emphasizes companies with a market
capitalization of at least $250 million.
International Netnet Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by using a growth strategy to invest primarily in foreign companies
engaged in the Internet or Intranet related business. Under normal market
conditions, the Fund will invest at least 65% of its total assets in equity
securities of foreign companies that are engaged in the research, design,
development, manufacturing or engaged to a significant extent in the business
of distributing products, processes or services for use with the Internet or
Intranet related businesses.
Micro-Cap Equity Fund
The Fund's goal is to provide capital appreciation. The Fund pursues its goal
by investing at least 65% of its assets in equity securities of micro-
capitalization companies having market capitalizations within the range of the
companies in the Wilshire Micro-Cap Index. There is no limit on the length of
operating history for the companies in which the Fund may invest. The Fund may
invest without limit in initial public offerings of small capitalization
companies. In addition, the Fund may invest up to 35% of its assets in equity
securities of medium and larger capitalization companies, including initial
public offerings of such companies.
8
<PAGE>
Multi-Season Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities. The Fund
generally invests in equity securities of companies with market capitalizations
over $1 billion. Its style, which focuses on both growth prospects and
valuation, is known as GARP (Growth at a Reasonable Price) and seeks to produce
attractive returns during various market environments.
NetNet Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing primarily in companies engaged in the Intranet and
Internet related business. Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of companies that are
engaged in research, design, development, manufacturing or engaged to a
significant extent in the business of distributing products, processes or
services for use with Internet or Intranet related businesses.
Real Estate Equity Investment Fund
The Fund's goal is to provide both capital appreciation and current income. The
Fund pursues its goal by investing at least 65% of its total assets in equity
securities of U.S. companies which are principally engaged in the real estate
industry.
Small-Cap Value Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of small
capitalization companies having market capitalizations within the range of the
companies in the Russell 2000 Index. The advisor will concentrate on companies
that it believes are undervalued.
Small Company Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing, under normal market conditions, at least 65% of its
assets in equity securities of small capitalization companies with market
capitalizations below $1.5 billion.
Framlington Emerging Markets Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of
companies in emerging market countries, as defined by the World Bank, the
International Finance Corporation, the United Nations or the European Bank for
Reconstruction and Development. It may also invest in foreign securities of
companies located in countries with mature markets.
Framlington Global Financial Services Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of U.S.
and foreign companies which are principally engaged in the financial services
industry and companies providing services primarily within the financial
services industry. The Fund focuses specifically on companies which are likely
to benefit from growth or consolidation in the financial services industry. The
Fund may invest in securities of companies located in countries with mature
markets and in those with emerging markets.
Framlington Healthcare Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing in equity securities of companies providing healthcare
and medical services and products worldwide. Currently, most of these companies
are located in the United States. The Fund's investments may include foreign
securities of companies located in countries with mature markets and in those
with emerging markets.
Framlington International Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of
issuers located in at least three foreign countries. The Fund may invest in
companies located in countries with mature markets and in those with emerging
markets.
Money Market Funds
Cash Investment Fund
The Fund's primary goal is to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments. The Fund invests solely in U.S. dollar-
denominated debt securities with remaining maturities of 13 months or less and
maintains an average dollar-weighted portfolio maturity of 90 days or less.
9
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Institutional Money Market Fund
The Fund's primary goal is to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments. The Fund invests solely in U.S. dollar-
denominated debt securities with remaining maturities of 13 months or less and
maintains an average dollar-weighted portfolio maturity of 90 days or less.
U.S. Treasury Money Market Fund
The Fund's goal is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal. The Fund
pursues its goal by investing its assets solely in short-term bills and notes,
issued by the U.S. Treasury (including "stripped" securities) and in repurchase
agreements relating to such obligations. The Fund invests solely in U.S.
dollar-denominated debt securities with remaining maturities of 13 months or
less and maintains an average dollar-weighted portfolio maturity of 90 days or
less.
Principal Investment Strategies and Risks
Foreign Investment Risk. Certain underlying funds may invest in foreign
securities. Foreign securities include investments in non-U.S. dollar-
denominated securities traded outside of the United States and dollar-
denominated securities of foreign issuers traded in the United States. Foreign
securities also include American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") and Global Depository Receipts ("GDRs"). ADRs are
U.S. dollar-denominated receipts representing shares of foreign-based
corporations. ADRs are issued by U.S. banks or trust companies, and entitle the
holder to all dividends and capital gains that are paid out on the underlying
foreign shares. EDRs and GDRs are receipts issued by non-U.S. financial
institutions that often trade on foreign exchanges. They represent ownership in
an underlying foreign or U.S. security and are generally denominated in a
foreign currency.
Special Risks. Foreign securities involve special risks and costs.
Investment in the securities of foreign governments involves the risk that
foreign governments may default on their obligations or may otherwise not
respect the integrity of their debt.
Investments in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of taxes by foreign governments. Foreign investments may
also involve risks associated with the level of currency exchange rates,
less complete financial information about the issuers, less market
liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls or
freezes on the convertibility of currency, or the adoption of other
governmental restrictions might adversely affect an investment in foreign
securities. Additionally, foreign issuers may be subject to less stringent
regulation, and to different accounting, auditing and recordkeeping
requirements.
Currency exchange rates may fluctuate significantly over short periods of
time causing an underlying fund's net asset value to fluctuate as well. A
decline in the value of a foreign currency relative to the U.S. dollar will
reduce the value of a foreign currency-denominated security. To the extent
that an underlying fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined risk.
The underlying funds' respective net currency positions may expose them to
risks independent of their securities positions.
Additional risks are involved when investing in countries with emerging
economies or securities markets. In general, the securities markets of
these countries are less liquid, are subject to greater price volatility,
have smaller market capitalizations and may have problems with securities
registration and custody. In addition, because the securities settlement
procedures are less developed in these countries, an underlying fund may be
required to deliver securities before receiving payment and may also be
unable to complete transactions during market disruptions. As a result of
these and other risks, investments in these countries generally present a
greater risk of loss to the Fund.
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<PAGE>
A further risk of investing in foreign securities is the risk that an
underlying fund may be adversely affected by the conversion of certain
European currencies into the Euro. This conversion, which is underway, is
scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in world capital
markets and affect European capital markets in particular.
Investments in Financial Services Companies by Framlington Global Financial
Services Fund. Financial services companies are subject to extensive
governmental regulation which may limit both the financial commitments they can
make, and the interest rates and fees they can charge. Insurance companies may
be subject to severe price competition.
Investments in the Healthcare Industry by Framlington Healthcare Fund. The
Framlington Healthcare Fund will invest most of its assets in the healthcare
industry, which is particularly affected by rapidly changing technology and
extensive government regulation, including cost containment measures.
Investments in the Real Estate Industry by Real Estate Equity Investment
Fund. The Real Estate Equity Investment Fund will invest primarily in the real
estate industry and may invest more than 25% of its assets in any one sector of
the real estate industry. As a result, the Real Estate Equity Investment Fund
will be particularly vulnerable to declines in real estate prices and new
construction rates.
Investments by the NetNet Fund. The NetNet Fund will invest primarily in
companies engaged in Internet and Intranet related activities. The value of
such companies is particularly vulnerable to rapidly changing technology,
extensive government regulation and relatively high risks of obsolescence
caused by scientific and technological advances. The value of the Fund's shares
may fluctuate more than shares of a fund investing in a broader range of
industries.
Investments in the Technology Industry by Future Technology Fund. The Future
Technology Fund will invest most of its assets in the technology industry,
which is particularly affected by rapidly changing 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.
Short-Term Trading. The underlying funds may engage in short-term trading,
including initial public offerings.
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could detract
from a Fund's performance.
Defensive Investing. The Fund and each underlying fund (except the
Institutional S&P 500 Index Equity Fund) may invest all or any portion of its
assets in short-term obligations as a temporary defensive measure in response
to adverse market or economic conditions.
Special Risks. If the Fund or one or more underlying funds adopts a
defensive strategy, the Fund may not achieve its investment objective.
Other Investment Strategies and Risks of the Fund and Underlying Funds
Borrowing and Reverse Repurchase Agreements. The Fund and underlying funds can
borrow money from banks and enter into reverse repurchase agreements with banks
and other financial institutions. Reverse repurchase agreements involve the
sale of securities held by the Fund (or underlying fund) subject to the Fund's
(or underlying fund) agreement to repurchase them at a mutually agreed upon
date and price (including interest).
Investment Strategy. The Fund (or underlying fund) may borrow money in an
amount up to 5% of its assets for temporary emergency purposes and in an
amount up to 33 1/3% of its assets to meet redemptions. This is a
fundamental policy which can be changed only by shareholders.
Special Risks. Borrowings and reverse repurchase agreements by the Fund (or
underlying fund) may involve leveraging. If the securities held by the Fund
(or underlying fund) decline in value while these transactions are
outstanding, the Fund's net asset value will decline in value by
proportionately more than the decline in value of the securities. In
addition, reverse repurchase agreements involve
11
<PAGE>
the risks that the interest income earned by the Fund (or underlying fund)
(from the investment of the proceeds) will be less than the interest
expense of the transaction, that the market value of the securities sold by
the Fund (or underlying fund) will decline below the price the Fund (or
underlying fund) is obligated to pay to repurchase the securities, and that
the securities may not be returned to the Fund (or underlying fund).
Derivative Risk. Some underlying funds may purchase certain "derivative"
instruments. Derivatives are financial contracts whose value is based on an
underlying security, a currency exchange rate, an interest rate or a market
index. Many types of instruments representing a wide range of potential risks
and rewards are derivatives, including futures contracts options on futures
contracts, options, forward currency contracts and structured debt obligations
(including collateralized mortgage obligations and other types of asset-backed
securities, "stripped" securities and various floating rate instruments).
Investment Strategy. Derivatives can be used for hedging (attempting to
reduce risk by offsetting one investment position with another) or
speculation (taking a position in the hope of increasing return). The
underlying funds may, but are not required to, use derivatives for hedging
purposes or for the purpose of remaining fully invested or maintaining
liquidity. The underlying funds will not use derivatives for speculative
purposes.
Special Risks. The use of derivative instruments exposes a Fund to
additional risks and transaction costs. Risks of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the direction that a portfolio manager
anticipates; (2) imperfect correlation between the price of derivative
instruments and movements in the prices of the securities, interest rates
or currencies being hedged; (3) the fact that skills needed to use these
strategies are different than those needed to select portfolio securities;
(4) the possible absence of a liquid secondary market for any particular
instrument and possible exchange imposed price fluctuation limits, either
of which may make it difficult or impossible to close out a position when
desired; (5) the risk that adverse price movements in an instrument can
result in a loss substantially greater than the underlying fund's initial
investment in that instrument (in some cases, the potential loss is
unlimited); (6) particularly in the case of privately-negotiated
instruments, the risk that the counterparty will not perform its
obligations, which could leave the underlying fund worse off than if it had
not entered into the position; and (7) the inability to close our 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 underlying fund is required to hedge its foreign currency positions.
Special Risks. Forward currency contracts are privately negotiated
transactions, and can have substantial price volatility. When used for
hedging purposes, they tend to limit any potential gain that may be
realized if the value of an underlying fund's foreign holdings increases
because of currency fluctuations.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When an underlying fund purchases an option on
a futures contract, it has the right to assume a position as a purchaser or
seller of a futures contract at a specified exercise price during the option
period. When an underlying fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the option is
exercised.
Investment Strategy. The underlying funds may invest in futures contracts
and options on futures contracts on domestic or foreign
12
<PAGE>
exchanges or boards of trade. These instruments may be used for hedging
purposes, to maintain liquidity to meet potential shareholder redemptions,
to invest cash balances or dividends, or to minimize trading costs.
An underlying fund will not purchase or sell a futures contract unless,
after the transaction, the sum of the aggregate amount of margin deposits
on its existing futures positions and the amount of premiums paid for
related options used for non-hedging purposes is 5% or less of the
underlying fund's total assets.
Special Risks. Futures contracts and related options present the following
risks: imperfect correlation between the change in market value of an
underlying fund's securities and the price of futures contracts and
options; the possible inability to close a futures contract when desired;
losses due to unanticipated market movements, which are potentially
unlimited; and the possible inability of the advisor or sub-advisor to
correctly predict the direction of securities prices, interest rates,
currency exchange rates and other economic factors.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. Each underlying fund may invest up to 15% of its net
assets in securities that are illiquid.
Special Risks. To the extent that an underlying fund invests in illiquid
securities, the underlying fund risks not being able to sell the securities
at the time and the price that it would like. The underlying fund may have
to lower the price, sell substitute securities or forego an investment
opportunity, each of which may cause a loss to the underlying fund.
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. The underlying funds may write (sell) covered call
options, buy put options, buy call options and write secured put options
for hedging purposes. Options may relate to particular securities, foreign
or domestic securities indices, financial instruments or foreign
currencies.
Special Risks. The value of options can be highly volatile, and their use
can result in loss if the advisor or sub-advisor is incorrect in its
expectation of price fluctuations. The successful use of options for
hedging purposes also depends in part on the ability of the advisor or sub-
advisor to predict future price fluctuations and the degree of correlation
between the options and securities markets.
Securities Lending. In order to generate additional income, each underlying
fund may lend securities on a short-term basis to qualified institutions. By
reinvesting any cash collateral it receives in these transactions, the
underlying fund could realize additional income gains or losses.
Investment Strategy. Securities lending may represent no more than 25% of
the value of an underlying fund's total assets (including the loan
collateral).
Special Risks. The main risk when lending securities is that if the
borrower fails to return the securities or the invested collateral has
declined in value, the underlying fund could lose money.
Temporary Investments. Short-term obligations refer to U.S. Government
securities, high-quality money market instruments and repurchase agreements
with maturities of 13 months or less. Generally, these obligations are
purchased to provide stability and liquidity to a Fund or underlying fund.
Investment Strategy. The Fund or underlying fund may invest a portion of
its assets in short-term obligations pending investment or to meet
anticipated redemption requests.
Special Risks. The Fund or underlying fund may not achieve its investment
objective when its asset are invested in short-term obligations.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that
13
<PAGE>
float at a margin above a generally recognized index rate. These instruments
include variable amount master demand notes.
Special Risks. Variable and floating rate instruments are subject to the same
risks as fixed income investments, particularly interest rate and credit risk.
Because there is no active secondary market for certain variable and floating
rate instruments, they may be more difficult to sell if the issuer defaults on
its payment obligations or during periods when an underlying fund is not
entitled to exercise its demand rights. As a result, the underlying fund could
suffer a loss with respect to these instruments.
Disclaimers
The Institutional S&P 500 Index Equity Fund is not sponsored, endorsed, sold or
promoted by S&P, nor does S&P guarantee the accuracy and/or completeness of the
S&P 500(R) Index or any data included therein. S&P makes no warranty, express
or implied, as to the results to be obtained by the Fund, owners of the Fund,
any person or any entity from the use of the S&P 500(R) Index or any data
included therein. S&P makes no express or implied warranties and expressly
disclaims all such warranties of merchantability or fitness for a particular
purpose for use with respect to the S&P(R) Index or any data included therein.
14
<PAGE>
Your Investment
-------------------------------------------------------------------------------
This section describes how to do business with the Funds.
How To Reach The Funds
By telephone: 1-800-438-5789
Call for shareholder services.
By mail: The Munder Funds
c/o PFPC Global Fund Services
P.O. Box 60428
King of Prussia, PA 19406-0428
Purchasing Shares
Purchase Price of Shares
Class A shares of a Fund are sold at the NAV next determined after a purchase
order is received in proper form plus any applicable sales charge. Please see
"Distribution Arrangements" below for information about sales charges.
Class B shares of a Fund are sold at NAV next determined after a purchase
order is received in proper form.
Broker-dealers or financial advisors (other than the Funds' distributor) may
charge you additional fees for shares you purchase through them.
Policies for Purchasing Shares
Investment minimums
. Initial: $250
. Subsequent: $50
. Automatic Investment Plan: $50
Purchases over $250,000 must be for Class A shares.
Timing of orders
Purchase orders must be received by the Funds' distributor, 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 and/or Financial Advisor. Any broker or financial advisor
authorized by the Fund's distributor can sell you shares of the Fund. Please
note that brokers may charge you fees for their services.
. By Mail. You may open an account by completing, signing and mailing the
attached account application form and a check or other negotiable bank draft
(payable to The Munder Funds) for $250 or more to: The Munder Funds, c/o
PFPC Global Fund Services, P.O. Box 60428, King of Prussia, Pennsylvania
19406-0428. Be sure to specify on your account application form the class of
shares being purchased. If the class is not specified, your purchase will
automatically be invested in Class A shares. For additional investments,
send a letter stating the Fund and share class you wish to purchase, your
name and your account number with a check for $50 or more to the address
listed above. We do not accept third party checks.
. By Wire. To open a new account, you should call the Fund at (800) 438-5789
to obtain an account number and complete wire instructions prior to wiring
any funds. Within seven days of purchase, you must send a completed account
application form containing your certified taxpayer identification number to
the Fund's transfer agent at The Munder Funds, c/o PFPC Global Fund
Services, 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.
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<PAGE>
Exchanging Shares
Policies for Exchanging Shares
. You may exchange Fund shares for shares of the same class of other Munder
Funds based on their relative net asset values.
. You may acquire shares of the Fund by exchanging shares of the same class of
other Munder Funds.
. You may also acquire Class A shares of the Fund by exchanging Class K shares
of other Munder Funds. Class A shares of the Fund acquired in this manner may
be exchanged for Class K shares of other Munder Funds, but they may not be
exchanged for Class A shares of other Munder Funds.
. Class A shares of a Munder money market fund that were (1) acquired through
the use of the exchange privilege and (2) can be traced back to a purchase of
shares in one or more Munder Funds for which a sales charge was paid, can be
exchanged for Class A shares of the Fund.
. Class B shares will continue to age from the date of the original purchase
and will retain the same CDSC rate as they had before the exchange.
. You must meet the minimum purchase requirements for the Munder Fund of that
you purchase by exchange.
. If you are exchanging into shares of a Munder Fund with a higher sales
charge, you must pay the difference at the time of the exchange.
. A share exchange is a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund you
wish to purchase by exchange. You can obtain a prospectus for any Munder Fund
by contacting your broker or calling the Munder Funds at (800) 438-5789.
. Brokers or financial advisors may charge you a fee for handling exchanges.
. We may change, suspend or terminate the exchange privilege at any time. You
will be given notice of any material modifications except where notice is not
required.
Methods for Exchanging Shares
. Exchanges By Telephone. You may give exchange instructions by telephone to
the Fund at (800) 438-5789. You may not exchange shares by telephone if you
hold share certificates. We reserve the right to reject any telephone
exchange request and to place restrictions on telephone exchanges.
. Exchanges By Mail. You may send exchange orders to your broker, your
financial advisor or you may send them directly to the Fund's transfer agent
at The Munder Funds, c/o PFPC Global Fund Services, 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 medallion 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; (d) if the redemption proceeds are being transferred to another
Munder Fund account with a different registration; (e) change in ownership or
registration of the account or (f) changes to banking information without a
voided check being supplied. When the Fund requires a signature guarantee, a
medallion signature guarantee must be provided. A medallion signature
guarantee may be obtained from a domestic bank or trust company, broker,
dealer, clearing agency, savings association, or other financial institution
which is participating in a medallion program recognized by the Securities
Transfer Association. The three recognized medallion programs are Securities
Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program
(SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (NYSE
MSP). Signature guarantees from financial institutions which are
16
<PAGE>
not participating in one of these programs will not be accepted.
Methods for Redeeming Shares
You may redeem shares of the Fund in several ways:
. By Mail. You may mail your redemption request to: The Munder Funds, c/o PFPC
Global Fund Services, 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, your
financial advisor or calling the Fund at (800) 438-5789. There is no minimum
requirement for telephone redemptions.
If you are redeeming at least $1,000 of shares and you have authorized
expedited redemption on your account application form, simply call the Fund
prior to 4:00 p.m. (Eastern time), and request the redemption proceeds be
mailed to the commercial bank, registered broker-dealer or financial advisor
you designated on your account application form. We will send your redemption
proceeds to you on the next business day. We reserve the right at any time to
change or impose fees for this expedited redemption procedure.
During periods of unusual economic or market activity, you may experience
difficulties or delays in effecting telephone redemptions. In such cases you
should consider placing your redemption request by mail.
. You may redeem shares through the Automatic Withdrawal Plan.
Additional Policies For Purchases, Exchanges And Redemptions
. We consider orders to be in "proper form" when all required documents are
properly completed, signed and received.
. The Fund reserves the right to reject any purchase order.
. At any time, the Fund may change any of its purchase or redemption
procedures, and may suspend the sale of its shares.
. The Fund may delay sending redemption proceeds for up to seven days, or
longer if permitted by the Securities and Exchange Commission.
. We will typically send redemption amounts to you within seven business days
after you redeem shares. We may hold redemption amounts from the sale of
shares you purchased by check until the purchase check has cleared, which may
be as long as 15 days.
. To limit the Fund's expenses, we no longer issue share certificates.
. The Fund may temporarily stop redeeming shares if:
L the New York Stock Exchange is closed;
L trading on the New York Stock Exchange is restricted;
L an emergency exists and the Fund cannot sell its assets or accurately
determine the value of its assets; or
L the Securities and Exchange Commission orders the Fund to suspend
redemptions.
. 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.
. We may redeem your account if its value falls below $250 as a result of
redemptions (but not as a result of a decline in NAV). You will be notified
in writing and allowed 60 days to increase the value of your account to the
minimum investment level.
. If you purchased shares directly from the Fund, the Fund's transfer agent
will send you confirmations of the opening of an account and of all
subsequent purchases, exchanges or
17
<PAGE>
redemptions in the account. If your account has been set up by a broker or
other investment professional, account activity will be detailed in their
statements to you.
. The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and have
an adverse effect on all shareholders. The Fund and its distributor reserve
the right to refuse any purchase or exchange request that could adversely
affect the fund or its operations, including those from any individual or
group who, in the Fund's view, is likely to engage in excessive trading or
any order considered market-timing activity. If the Fund refuses a purchase
or exchange request and the shareholder deems it necessary to redeem their
account, any CDSC as permitted by the prospectus will be applicable.
Additionally, in no event will any Fund permit more than six exchanges into
or out of the Fund in any one-year period per account, tax identification
number, social security number or related investment group. The Munder Money
Market Funds are exempt from this policy.
Shareholder Privileges
Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in the Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Fund at (800) 438-5789. The minimum pre-authorized investment amount
is $50. You may discontinue the AIP at any time. We may discontinue the AIP on
30 days' written notice to you.
Reinvestment Privilege. For 60 days after you sell shares of the Fund, you may
reinvest your redemption proceeds in shares of the same class of the SAME Fund
at NAV. Any CDSC you paid on the amount you are reinvesting will be credited to
your account. You may use this privilege once in any given twelve-month period
with respect to your shares of the Fund. You or your broker must notify the
Fund's transfer agent in writing at the time of reinvestment in order to
eliminate the sales charge on your reinvestment.
Automatic Withdrawal Plan (AWP). If you have an account value of $2,500 or more
in the Fund, you may redeem shares on a monthly, quarterly, semi-annual or
annual basis. The minimum withdrawal is $50. We usually process withdrawals on
the 20th day of the month and promptly send you your redemption amount. You may
enroll in the AWP by completing the AWP application form available through the
Funds' transfer agent. To participate in the AWP you must have your dividends
automatically reinvested and may not hold share certificates. You may change or
cancel the AWP at any time upon notice to the Fund's transfer agent. You should
not buy Class A shares (and pay a sales charge) while you participate in the
AWP and you must pay any applicable CDSC when you redeem shares.
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<PAGE>
Distribution Arrangements
--------------------------------------------------------------------------------
Share Class Selection
The Fund offers Class A and Class B shares. Each class has its own cost
structure, allowing you to choose the one that best meets your requirements
given the amount of your purchase and the intended length of your investment.
You should consider both ongoing annual expenses and initial sales charge or
CDSC in estimating the costs of investing in a particular class of shares.
Class A shares
. Front end sales charge. There are several ways to reduce these sale charges.
. Lower annual expenses than Class B shares.
Class B shares
. No front end sales charge. All your money goes to work for you right away.
. Higher annual expenses than Class A shares.
. A CDSC on shares you sell within six years of purchase.
. Automatic conversion to Class A shares approximately six years after
issuance, thus reducing future annual expenses.
. CDSC is waived for certain redemptions.
The Fund also issues Class Y shares, which have different sales charges,
expense levels and performance. Class Y shares are available to limited types
of investors. Call (800) 438-5789 to obtain more information about Class Y
shares.
Applicable Sales Charge--Class A Shares
You can purchase Class A shares at NAV plus an initial sales charge. The sales
charge as a percentage of your investment decreases as the amount you invest
increases. The current sales charge rates and commissions paid to selected
dealers as follows:
<TABLE>
<CAPTION>
Sales Charge as Dealer
a Percentage of Reallowance
---------------- as a
Net Percentage of
Your Asset the Offering
Investment Value Price
---------- ----- -------------
<S> <C> <C> <C>
Less than $25,000................................ 5.50% 5.82% 5.00%
$25,000 but less than $50,000.................... 5.25% 5.54% 4.75%
$50,000 but less than $100,000................... 4.50% 4.71% 4.00%
$100,000 but less than $250,000.................. 3.50% 3.63% 3.25%
$250,000 but less than $500,000.................. 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000................ 1.50% 1.52% 1.25%
$1,000,000 or more............................... None* None* (see below)**
</TABLE>
--------
* No initial sales charge applies on investments of $1 million or more.
However, a CDSC of 1% is imposed on certain redemptions within one year of
purchase.
** The Distributor will pay a 1% commission to dealers who initiate and are
responsible for purchases of $1 million or more.
Sales Charge Waivers--General
We will waive the initial sales charge on Class A shares for the following
types of purchasers (the word "advisor" in the following refers to Munder
Capital Management the advisor to the Munder Funds):
1. individuals with an investment account or relationship with the advisor;
2. full-time employees and retired employees of the advisor or its affiliates,
employees of the Funds' service providers and immediate family members of such
persons;
3. registered broker-dealers or financial advisors that have entered into
selling agreements with the Fund's distributor, for their own accounts or for
retirement plans for their employees or sold to registered representatives for
full-time employees (and their families) that certify to the distributor at the
time of purchase that such purchase is for their own account (or for the
benefit of their families);
4. certain qualified employee benefit plans as described below;
5. individuals who reinvest a distribution from a qualified retirement plan for
which the advisor serves as investment advisor;
19
<PAGE>
6. individuals who reinvest the proceeds of redemptions from Class Y Shares of
another Munder Fund, within 60 days of redemption;
7. banks and other financial institutions that have entered into agreements
with the Munder Funds to provide shareholder services for customers (including
customers of such banks and other financial institutions, and the immediate
family members of such customers);
8. fee-based financial planners or employee benefit plan consultants acting for
the accounts of their clients;
9. employer sponsored retirement plans which are administered by Universal
Pensions, Inc. (UPI Plans); and
10. employer sponsored 401(k) plans that are administered by Merrill Lynch
Group Employee Services (Merrill Lynch Plans) which meet the criteria described
below under "Sales Charge Waivers--Qualified Employer Sponsored Retirement
Plans."
Sales Charge Waivers--Qualified Employer Sponsored Retirement Plans
We will waive the initial sales charge on purchases of Class A shares by
employer sponsored retirement plans that are qualified under Section 401(a) or
Section 403(b) of the Internal Revenue Code (each, a Qualified Employee Benefit
Plan) and that (1) invest $1,000,000 or more in Class A shares offered by the
Munder Funds or (2) have at least 75 eligible plan participants.
In addition, we will waive the CDSC of 1% charged on certain redemptions within
one year of purchase for Qualified Employee Benefit Plan purchases that meet
the above criteria. A 1% commission will be paid by the distributor to dealers
and other entities (as permitted by applicable Federal and state law) who
initiate and are responsible for Qualified Employee Benefit Plan purchases that
meet the above criteria. This sales charge waiver does not apply to Simplified
Employee Pension Plans (SEPs), Individual Retirement Accounts (IRAs), UPI Plans
and Merrill Lynch Plans.
UPI Plans. We also will waive (i) the initial sales charge on Class A shares
purchased by UPI Plans for employees participating in an employer-sponsored or
administered retirement program operating under Section 408A of the Internal
Revenue Code and (ii) the CDSC of 1% imposed on certain redemptions within one
year of purchase for these accounts. The distributor will pay a 1% commission
to dealers and others (as permitted by applicable Federal and state law) who
initiate and are responsible for UPI Plan purchases.
Merrill Lynch Plans. We will waive the initial sales charge for all investments
by Merrill Lynch Plans if
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch Group
Employee Services (Merrill Lynch) and, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million
or more in assets invested in broker/dealer funds not advised or managed by
Merrill Lynch Asset Management, L.P. (MLAM) that are made available
pursuant to a Services Agreement between Merrill Lynch and the Fund's
distributor and in funds advised or managed by MLAM (collectively, the
Applicable Investments); or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch, and on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in Applicable
Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the Merrill
Lynch plan conversion manager, on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement.
For further information on sales charge waivers, call (800) 438-5789.
Sales Charge Reductions
You may qualify for reduced sales charges in the following cases:
. Letter of Intent. If you intend to purchase at least $25,000 of Class A
shares of the Fund you may wish to complete the Letter of Intent section of
your account application form. By doing so, you agree to invest a certain
amount over a 13-month period. You would pay a sales charge on any Class A
shares you purchase during the 13
20
<PAGE>
months based on the total amount to be invested under the Letter of Intent.
You can apply any investments you made in any of the Munder Funds during the
preceding 90-day period toward fulfillment of the Letter of Intent (although
there will be no refund of sales charges you paid during the 90-day period).
You should inform the Fund's transfer agent that you have a Letter of Intent
each time you make an investment.
You are not obligated to purchase the amount specified in the Letter of
Intent. If you purchase less than the amount specified, however, you must pay
the difference between the sales charge paid and the sales charge applicable
to the purchases actually made. The Fund's custodian will hold such amount in
escrow. The custodian will pay the escrowed funds to your account at the end
of the 13 months unless you do not complete your intended investment.
. Quantity Discounts. You may combine purchases of Class A shares that are made
by you, your spouse, your children under age 21 and your IRA when calculating
the sales charge. You must notify your broker, your financial advisor or the
Fund's transfer agent to qualify.
. Right of Accumulation. You may add the value of any other Class A shares of
non-money market Munder Funds you already own to the amount of your next
Class A share investment for purposes of calculating the sales charge at the
time of the current purchase. You must notify your broker, your financial
advisor or the Funds' transfer agent to qualify.
Certain brokers or financial advisors may not offer these programs or may
impose conditions or fees to use these programs. You should consult with your
broker prior to purchasing the Funds' shares.
For further information on sales charge reductions, call (800) 438-5789.
Cdsc
You pay a CDSC when you redeem:
. Class A shares that were bought as part of an investment of at least $1
million within one year of buying them;
. Class B shares within six years of buying them.
These time periods include the time you held Class B shares of another Munder
Fund which you may have exchanged for Class B shares of the Fund you are
redeeming.
The CDSC schedule for Class B shares is set forth below. Consult the Statement
of Additional Information for the CDSC schedule for Class B shares acquired
through an exchange of shares purchased on or before June 27, 1995. The CDSC is
based on the original NAV at the time of your investment or the NAV at the time
of redemption, whichever is lower. Shares purchased through reinvestment of
distributions are not subject to CDSC.
<TABLE>
<CAPTION>
Years Since Purchase CDSC
-------------------- -----
<S> <C>
First..................................................................... 5.00%
Second.................................................................... 4.00%
Third..................................................................... 3.00%
Fourth.................................................................... 3.00%
Fifth..................................................................... 2.00%
Sixth..................................................................... 1.00%
Seventh and thereafter.................................................... 0.00%
</TABLE>
If you sell some but not all of your shares, certain shares not subject to CDSC
(i.e., shares purchased with reinvested dividends) will be redeemed first,
followed by shares subject to the lowest CDSC (typically shares held for the
longest time).
For example, assume an investor purchased 1,000 shares at $10 a share (for a
total cost of $10,000). Three years later, the shares have a net asset value of
$12 per share and during that time, the investor acquired 100 additional shares
through dividend reinvestment. If the investor then makes one redemption of 500
shares (resulting in proceeds of $6,000, 500 shares x $12 per share), the first
100 shares redeemed will not be subject to the CDSC because they were acquired
through reinvestment of dividends. With respect to the remaining 400 shares
redeemed, the CDSC is charged at $10 per share (because the original purchase
price of $10 per share is lower than the current net asset value of $12 per
share). Therefore, only $4,000 of the $6,000 such investor received from
selling his or her shares will be subject to the CDSC, at a rate of 3.00% (the
applicable rate in the third year after purchase).
At the time of purchase of Class B shares, the Fund's distributor pays sales
commissions of 4.00% of the purchase price to brokers that initiate and are
responsible for purchases of such Class B shares.
21
<PAGE>
CDSC Waivers
We will waive the CDSC payable upon redemptions for:
. redemptions made within one year after the death of a shareholder or
registered joint owner;
. minimum required distributions made from an IRA or other retirement plan
account after you reach age 70 1/2;
. involuntary redemptions made by the Fund;
. redemptions limited to 10% per year of an account's net asset value if taken
by Systematic Withdrawal Plan ("SWP"). For example, if your balance on
December 31st is $10,000 you can redeem up to $1,000 that following year free
of charge through SWP.
We will waive the CDSC payable upon redemptions of shares which you purchased
after December 1, 1998 (or acquired through an exchange of shares of another
Munder Fund purchased after December 1, 1998) for:
. redemptions made from an IRA or other individual retirement plan account
established through Comerica Securities, Inc. after you reach age 59 1/2 and
after the eighteen month anniversary of the purchase of Fund shares.
Consult the Statement of Additional Information for Class B CDSC waivers which
apply when you redeem shares acquired through an exchange of shares of another
Munder Fund purchased on or before June 27, 1995.
We will waive the CDSC for Class B shares for all redemptions by Merrill Lynch
Plans if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch; or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch; or
(iii) the Plan has less than 500 eligible employees, as determined by the
Merrill Lynch plan conversion manager, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement.
12b-1 Fees
The Fund has adopted Rule 12b-1 plans with respect to its Class A and Class B
shares that allow the Fund to pay distribution and other fees for the sale of
its shares and for services provided to shareholders. Under the plans, the Fund
may pay up to .25% of the daily net assets of Class A and Class B shares to pay
for certain shareholder services provided by institutions that have agreements
with the Fund's distributor to provide such services. The Fund may also pay up
to .75% of the daily net assets of the Class B shares to finance activities
relating to the distribution of its shares.
Because the fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of an investment in the Fund and may
cost a shareholder more than paying other types of sales charges.
Other Information
The advisor may, from time to time, make payments to banks, broker-dealers,
financial advisors or other financial institutions for certain services to the
Fund and/or its shareholders, including sub-administration, sub-transfer agency
and shareholder servicing. The advisor may make such payments out of its own
resources and there are no additional costs to the Fund or its shareholders.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee
from the Fund for providing shareholder services to its customers who own
shares of the Fund.
22
<PAGE>
Pricing Of Fund Shares
--------------------------------------------------------------------------------
The Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV is the value of a single share of the Fund.
The Fund calculates NAV as of the close of regular trading 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 calculation of NAV and
transaction deadlines to that time.
The NAV of each underlying fund is generally based on the market value of the
securities held in the underlying fund. If market values are not available, the
fair value of securities is determined in good faith by, or using procedures
approved by, the boards of directors/trustees of the underlying funds.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. An underlying fund values foreign
securities at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the New York Stock Exchange. Certain
foreign currency exchange rates may also be determined at the latest rate prior
to the closing of the New York Stock Exchange. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at current rates.
Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the New York
Stock Exchange. If the advisor believes that such events materially affect the
value of portfolio securities, these securities may be valued at their fair
market value as determined in good faith by, or using procedures approved by,
the underlying funds' boards of directors/trustees.
Distributions
--------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of 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 the Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
The Fund will pay distributions in additional shares of the same class of that
Fund. If you wish to receive distributions in cash, either, indicate this
request on your account application form or notify the Fund at (800) 438-5789.
23
<PAGE>
Federal Tax Considerations
--------------------------------------------------------------------------------
Investments in the Fund may have tax consequences that you should consider.
This section briefly describes some of the more common federal tax
consequences. A more detailed discussion about the tax treatment of
distributions from the Fund and about other potential tax liabilities,
including backup withholding for certain taxpayers and about tax aspects of
dispositions of shares of the Fund, is contained in the Statement of Additional
Information. You should consult your tax adviser about your own particular tax
situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. Shareholders not
subject to tax on their income generally will not be required to pay any tax on
distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held
the portfolio securities it sold. It does not depend on how long you held your
Fund shares.
Distributions are generally taxable to you in the year in which they are paid,
with one exception: distributions declared in October, November or December,
but not paid until January of the following year, are taxed as though they were
paid on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Fund will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Taxes On Sales Or Exchanges
If you sell shares of the Fund or exchange them for shares of another Munder
Fund, you generally will be subject to tax on any taxable gain. Taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale or an exchange will result in a taxable
gain.
Other Considerations
If you buy shares of the Fund just before the Fund makes any distribution, you
will pay the full price for the shares then receive back a portion of the money
you just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law, the
Fund must withhold a portion of your distributions and redemption proceeds to
pay federal income taxes.
24
<PAGE>
Management
--------------------------------------------------------------------------------
Investment Advisor
Munder Capital Management ("MCM"), 480 Pierce Street, Birmingham, Michigan
48009 is the investment advisor of each Fund and each underlying fund except
Institutional S&P 500 Index Equity Fund and International Equity Fund. The
advisors provide overall investment management for the Funds. As of March 31,
2000, MCM and its affiliates had approximately $62 billion in assets under
management, of which $39 billion were invested in equity securities, $7 billion
were invested in money market or other short-term instruments, $6 billion were
invested in other fixed income securities, $3 billion were invested in balanced
investment and $7 billion in non-discretionary assets.
World Asset Management ("World"), 255 East Brown Street, Birmingham, Michigan
48009, is the investment advisor of Institutional S&P 500 Index Equity Fund and
International Equity Fund. World is a wholly-owned subsidiary of the advisor.
As of March 31, 2000, World had approximately $22.7 billion in assets under
management, of which $17.6 billion were invested in domestic equity securities,
$4.5 billion were invested in international equity securities and $600 billion
were invested in other fixed income securities.
Framlington Overseas Investment Management Limited, and affiliate of the
advisor, is the sub-advisor of the Framlington Emerging Markets Fund,
Framlington Global Financial Services Fund, Framlington Healthcare Fund and
Framlington International Growth Fund.
Portfolio Managers
A committee of professional portfolio managers employed by MCM makes investment
decision for the Fund.
25
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information has been audited by Ernst & Young LLP,
independent auditors, whose report, along with the Fund's financial statements,
are included in the annual reports of the Fund, and are incorporated by
reference into the Statement of Additional Information. The information for the
period ended December 31, 1999 is unaudited, is included in the semi-annual
report of the Fund, and is incorporated by reference into the Statement of
Additional Information. You may obtain the semi-annual and annual reports
without charge by calling (800) 438-5789.
<TABLE>
<CAPTION>
Munder Fund of Funds (a)
-----------------------------------------------------------------------
Period Period
Ended Year Period Ended Year Period
12/31/99 Ended Ended 12/31/99 Ended Ended
(Unaudited) 6/30/99 6/30/98(d) (Unaudited) 6/30/99 6/30/98(d)
Class A Class A Class A Class B Class B Class B
----------- ------- ---------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $13.21 $12.58 $13.23 $13.20 $12.54 $11.40
------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income... 0.03 0.05 0.01 (0.03) (0.01) (0.04)
Net realized and
unrealized gain/(loss)
on investments......... 1.73 0.74 (0.25) 1.72 0.80 1.18
------ ------ ------ ------ ------ ------
Total from investment
operations............. 1.76 0.79 (0.24) 1.69 0.79 1.14
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.21) (0.06) (0.01) (0.18) - -
Distributions in excess
of net investment
income................. - (0.02) - - (0.04) -
Distributions from net
realized gains......... (0.30) (0.09) (0.36) (0.30) (0.09) -
Distributions in excess
of net realized gains.. - - (0.04) (0.40) - -
------ ------ ------ ------ ------ ------
Total distributions..... (0.51) (0.17) (0.41) (0.48) (0.13) -
------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $14.45 $13.20 $12.58 $14.41 $13.20 $12.54
------ ------ ------ ------ ------ ------
Total return (c)........ 13.63% 6.41% (1.20)% 13.10% 6.40% 10.00%
------ ------ ------ ------ ------ ------
Ratios to average net
assets/ supplemental
data:
Net assets, end of
period (in 000's)...... $ 490 $ 344 $ 154 $ 319 $ 222 $ 260
Ratio of operating
expenses to average net
assets................. 0.66%(b) 0.66% 0.88%(b) 1.36%(b) 1.36% 1.58%(b)
Ratio of net investment
income/(loss) to
average net assets..... 0.47%(b) 0.12% 0.09%(b) (0.23)%(b) (0.58)% (0.61)%(b)
Portfolio turnover rate. 24% 73% 55% 24% 73% 55%
Ratio of operating
expenses to average net
assets without waivers. 0.91%(b) 0.93% 1.06%(b) 1.61%(b) 1.63% 1.76%(b)
</TABLE>
--------
(a) The Munder Fund of Funds (formerly the Munder All-Season Aggressive Fund)
Class A Shares and B Shares commenced operations on October 7, 1997 and
January 9, 1998, respectively.
(b) Annualized.
(c) Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
(d) Per share numbers have been calculated using the average shares method.
26
<PAGE>
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 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 herein by reference (is legally considered part of this
prospectus).
To Obtain Information:
-------------------------------------------------------------------------------
By telephone
1-800-438-5789
By mail
Write to:
The Munder Funds
c/o PFPC Global Fund Services
P.O. Box 60428
King of Prussia, PA 19406-0428
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. 20549-0102. You may also obtain
information, after paying a duplicating fee, by electronic request at:
[email protected].
You may also find more information about the Fund on the Internet at:
http://www.munderfunds.com
-------------------------------------------------------------------------------
The Munder Funds, Inc.
SEC file number: 811-7346
PROMFFAB600
Investment Advisor: Munder Capital Management
Distributor: Funds Distributor, Inc.
<PAGE>
[LOGO]
THE
MUNDER
FUNDS
Investments
for all seasons
CLASS Y SHARES
Prospectus
June 29, 2000
MUNDER FUND OF FUNDS
(formerly Munder All-Season Agressive 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
3 Who May Want To Invest
4 Performance
5 Fees And Expenses
6 More About The Fund
6 Glossary
7 Asset Allocation Chart
8 Description Of The Underlying Funds
10 Principal Investment Strategies And Risks
11 Other Investment Strategies And Risks Of The Fund And Underlying Funds
14 Disclaimers
15 Your Investment
15 How To Reach The Fund
15 Purchasing Shares
16 Exchanging Shares
16 Redeeming Shares
16 Additional Policies For Purchases, Exchanges And Redemptions
17 Shareholder Privileges
18 Pricing Of Fund Shares
18 Distributions
19 Federal Tax Considerations
19 Taxes On Distributions
19 Taxes On Sales Or Exchanges
19 Other Considerations
20 Management
20 Investment Advisor
20 Portfolio Managers
21 Financial Highlights
</TABLE>
Back Cover For Additional Information
<PAGE>
Risk/Return Summary
--------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goals and principal investment
strategies of the Munder Fund of Funds (formerly Munder All- Season Aggressive
Fund) and the principal risks of investing in the Fund. For further information
on these and the Funds' other investment strategies and risks, please read the
section entitled "More About the Fund." Certain terms used in this prospectus
are defined in the Glossary.
Fund of Funds
The Fund is a fund of funds, which
means that it invests almost all
of its assets in other mutual
funds, rather than in individual
securities. The Fund invests its
assets in a variety of other
Munder Funds, referred to as
"underlying funds."
The risks of investing in the Fund
are dependent on which underlying
funds the Fund invests in, and to
what extent. In addition, the
investment performance of the Fund
is directly related to the
performance of the underlying
funds in which it invests.
Investment Approach of the
Underlying Funds
. The underlying equity funds
represented in the Fund vary
from growth to value styles of
investing, from larger to
smaller company stocks and from
domestic to international
equities.
Goal
The Fund's goal is to provide long-term capital appreciation.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in equity securities.
The Fund may also invest a portion of its assets in underlying funds that
invest in money market instruments.
The advisor may periodically adjust the Fund's asset allocation among
underlying funds in response to changing economic and market conditions. The
typical allocation is expected to be: 95% Equity Funds and 5% Money Market
Funds.
The Fund's indirect stock holdings will be a combination of large-cap, mid-cap
and small-cap U.S. stocks as well as foreign stocks.
In the "More About the Fund" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
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.
2
<PAGE>
Among the principal risks of investing in the Fund are:
. Stock Market Risk. The value of the securities in which the Fund invests may
decline in response to developments affecting particular 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 the Fund's investments
may decline if the particular companies the Fund invests in do not perform
well.
. Foreign Securities Risk. Investments by an underlying fund in foreign
securities may experience greater and more rapid changes in value than U.S.
securities. Foreign securities are generally more volatile and less liquid
than U.S. securities, in part because of greater political and economic risks
and because there is less public information available about foreign
companies. Issuers of foreign securities are generally not subject to the
same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards.
. Currency Risk. A decline in the value of foreign currencies relative to the
U.S. dollar will reduce the value of an underlying fund's portfolio
securities denominated in those currencies.
. Smaller Company Stock Risk. The stocks of small companies may have more risks
than those of larger companies. Small companies often have narrower markets
and more limited managerial and financial resources than larger, more
established companies. As a result, they may be more sensitive to changing
economic conditions, which could increase the volatility of an underlying
fund's portfolio. In addition, small company stocks typically are traded in
lower volume making them more difficult to sell.
. Sector Risk. Certain underlying funds may concentrate its investments in a
particular industry sector. Adverse economic, business or political
developments affecting that industry sector could have a major effect on the
value of the underlying fund's investments.
Who May Want to Invest
The Fund may be appropriate for investors who:
. Seek long-term growth of capital.
. Can tolerate short-term fluctuations in the financial markets.
3
<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 in 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 a Fund's performance in
past years is not necessarily an indication of how a Fund will perform in the
future.
<TABLE>
<CAPTION>
Average Annual Total Return
(for the periods ended December 31, 1999)
------------------------------------------
Since
Inception
1 Year (4/3/97)
------------------------------------------
<S> <C> <C>
Class Y 22.61% 18.18%
Wilshire 5000 Index* 23.56% 28.49%**
</TABLE>
--------
*The Wilshire 5000 Equity Index
measures the performance of all
U.S. headquartered equity
securities with readily available
price data. Our 7,000
capitalization weighted security
are used to adjust the index.
**Index return from 3/31/97.
Total Return
(per calendar year)
[BAR CHART]
1998 3.84%
1999 22.61%
Year-to-date through March 31, 2000: 11.83%
<TABLE>
<S> <C> <C>
Best Quarter: Q4 1999 20.97%
Worst Quarter: Q3 1998 (16.15%)
</TABLE>
4
<PAGE>
Fees And Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold Class Y shares of the Fund. Please note that the following information
does not include fees that institutions may charge for services they provide to
you.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment)
----------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases........................... None
Sales Charge (Load) Imposed on Reinvested Dividends........................ None
Maximum Deferred Sales Charge (Load)....................................... None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
Annual Fund Operating Expenses (expenses that are paid from Fund assets)
as a % of net assets
<TABLE>
<S> <C>
Management Fees....................................................... None
Other Expenses........................................................ 0.25%
----
Total Annual Fund Operating Expenses.................................. 0.25%
====
</TABLE>
--------
In addition to the expenses shown above, shareholders of the Fund will
indirectly bear their pro rata shares of the annual operating expenses of
the underlying funds. As a result, the investment returns of the Fund will
be net of the expenses of the Underlying Funds. Since the Fund invests in
other Munder Funds, as a shareholder you will pay a higher expense ratio
than if you had purchased shares of an underlying fund directly. The
underlying funds' total annual fund operating expense ratios for the fiscal
year ended June 30, 1999 ranged from .37% to 2.45%.
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 and that all dividends and distributions are
reinvested. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$26 $81 $141 $320
</TABLE>
5
<PAGE>
More About The Fund
--------------------------------------------------------------------------------
This section describes the underlying funds in which the Fund may invest. It
also discusses the risks of investing in the Fund, which are dependent upon
which underlying funds the Fund invests in, and to what extent. Further,
included in this section is a chart that shows the maximum percentage of its
assets that the Fund may invest in each underlying fund. Please note that the
underlying funds may also invest in securities and are subject to restrictions
and additional risks which are described in the Statement of Additional
Information.
The Glossary below explains certain terms used throughout this prospectus.
Glossary
Types Of Securities
Equity securities include common stocks, preferred stocks, securities
convertible into common stocks, and rights and warrants to subscribe for the
purchase of common stocks. Equity securities may be listed on a stock exchange
or NASDAQ National Market System or unlisted. Warrants are rights to purchase
securities at a specified time at a specified price.
Convertible Securities A convertible security is a bond or preferred stock that
may be converted (exchanged) into the common stock of the issuing company
within a specified time period for a specified number of shares. Convertible
securities offer the underlying funds a way to participate in the capital
appreciation of the common stock into which the securities are convertible,
while earning higher current income than is available from the common stock.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit
of banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Rating Agencies and Indices
S&P is Standard & Poor's Rating Services.
S&P 500 is S&P's 500 Composite Stock Price Index, a widely recognized unmanaged
index of U.S. stock market activity.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Internal Revenue Code is the Internal Revenue Code of 1986, as amended.
NAV is the net asset value per share of the Fund. NAV is the value of a single
share of the Fund. The Fund calculates NAV separately for each class. NAV is
calculated by (1) taking the current value of the Fund's total assets allocated
to a particular class of shares, (2) subtracting the liabilities and expenses
charged to that class (3) dividing that amount by the total number of shares of
that class outstanding.
6
<PAGE>
Asset Allocation Chart
The following chart shows the Fund's maximum investment (expressed as a
percentage of each Fund's assets) that the Fund may make in the underlying
funds.
<TABLE>
<S> <C>
Equity Funds
Equity Income Fund.......................................................... 20%
Focus Growth Fund........................................................... 30%
Future Technology Fund...................................................... 15%
Growth Opportunities Fund................................................... 20%
Institutional S&P 500 Index Equity Fund..................................... 40%
International Equity Fund................................................... 15%
International NetNet Fund................................................... 10%
Micro-Cap Equity Fund....................................................... 10%
Multi-Season Growth Fund.................................................... 30%
NetNet Fund................................................................. 10%
Real Estate Equity Investment Fund.......................................... 25%
Small-Cap Value Fund........................................................ 35%
Small Company Growth Fund................................................... 35%
Framlington Emerging Markets Fund........................................... 15%
Framlington Global Financial Services Fund.................................. 15%
Framlington Healthcare Fund................................................. 10%
Framlington International Growth Fund....................................... 15%
Other Munder Equity Funds................................................... 20%
Money Market Funds
Cash Investment Fund........................................................ 15%
Institutional Money Market Fund............................................. 10%
U.S. Treasury Money Market Fund............................................. 10%
</TABLE>
7
<PAGE>
Description of Underlying Funds
Equity Funds
Equity Income Fund
The Fund's goal is to provide capital appreciation and current income. The Fund
pursues its goal by investing primarily in dividend-paying equity securities
and fixed income securities which are convertible into or exchangeable for
common stock. The advisor generally selects large, well-known companies that it
believes have favorable prospects for dividend growth and capital appreciation.
The Fund will seek to produce a current yield greater than the S&P 500.
Focus Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities 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.
Future Technology Fund
The Fund's goal is to provide capital appreciation. 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.
Growth Opportunities Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in the equity securities of
companies with market capitalizations between $500 million and $10 billion. Its
style, which focuses on both growth prospects and valuation, is known as GARP
(Growth at a Reasonable Price) and seeks to produce attractive returns during
various market environments.
Institutional S&P 500 Index Equity Fund
The Fund's goal is to provide performance and income that is comparable to the
S&P 500. The S&P 500 is an index of 500 stocks that emphasizes large
capitalization companies. The Fund pursues its goal by normally holding a
substantial amount of its assets in securities of at least 400 of the stocks in
the S&P 500. The Fund is managed through the use of a "quantitative" or
"indexing" investment approach and tries to mirror the composition and
performance of the S&P 500 through statistical procedures. The Fund will try to
achieve a correlation between the performance of its portfolio and that of the
S&P 500 of at least .95. A correlation of 1.0 would mean that the changes in
the Fund's price mirror exactly the changes in the S&P 500.
International Equity Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing primarily in foreign securities, including American
Depositary Receipts. The Fund mostly invests in mature markets, but may also
invest in emerging markets. The Fund emphasizes companies with a market
capitalization of at least $250 million.
International NetNet Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by using a growth strategy to invest primarily in foreign companies
engaged in the Internet or Intranet related business. Under normal market
conditions, the Fund will invest at least 65% of its total assets in equity
securities of foreign companies that are engaged in the research, design,
development, manufacturing or engaged to a significant extent in the business
of distributing products, processes or services for use with the Internet or
Intranet related businesses.
Micro-Cap Equity Fund
The Fund's goal is to provide capital appreciation. The Fund pursues its goal
by investing at least 65% of its assets in equity securities of micro-
capitalization companies having market capitalizations within the range of the
companies in the Wilshire Micro-Cap Index. There is no limit on the length of
operating history for the companies in which the Fund may invest. The Fund may
invest without limit in initial public offerings of small capitalization
companies. In addition, the Fund may invest up to 35% of its assets in equity
securities of medium and larger capitalization companies, including initial
public offerings of such companies.
8
<PAGE>
Multi-Season Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities. The Fund
generally invests in equity securities of companies with market capitalizations
over $1 billion. Its style, which focuses on both growth prospects and
valuation, is known as GARP (Growth at a Reasonable Price) and seeks to produce
attractive returns during various market environments.
NetNet Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing primarily in companies engaged in the Intranet and
Internet related business. Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of companies that are
engaged in research, design, development, manufacturing or engaged to a
significant extent in the business of distributing products, processes or
services for use with Internet or Intranet related businesses.
Real Estate Equity Investment Fund
The Fund's goal is to provide both capital appreciation and current income. The
Fund pursues its goal by investing at least 65% of its total assets in equity
securities of U.S. companies which are principally engaged in the real estate
industry.
Small-Cap Value Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of small
capitalization companies having market capitalizations within the range of the
companies in the Russell 2000 Index. The advisor will concentrate on companies
that it believes are undervalued.
Small Company Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing, under normal market conditions, at least 65% of its
assets in equity securities of small capitalization companies with market
capitalizations below $1.5 billion.
Framlington Emerging Markets Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of
companies in emerging market countries, as defined by the World Bank, the
International Finance Corporation, the United Nations or the European Bank for
Reconstruction and Development. It may also invest in foreign securities of
companies located in countries with mature markets.
Framlington Global Financial Services Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of U.S.
and foreign companies which are principally engaged in the financial services
industry and companies providing services primarily within the financial
services industry. The Fund focuses specifically on companies which are likely
to benefit from growth or consolidation in the financial services industry. The
Fund may invest in securities of companies located in countries with mature
markets and in those with emerging markets.
Framlington Healthcare Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing in equity securities of companies providing healthcare
and medical services and products worldwide. Currently, most of these companies
are located in the United States. The Fund's investments may include foreign
securities of companies located in countries with mature markets and in those
with emerging markets.
Framlington International Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of
issuers located in at least three foreign countries. The Fund may invest in
companies located in countries with mature markets and in those with emerging
markets.
Money Market Funds
Cash Investment Fund
The Fund's primary goal is to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments. The Fund invests solely in U.S. dollar-
denominated debt securities with remaining maturities of 13 months or less and
maintains an average dollar-weighted portfolio maturity of 90 days or less.
9
<PAGE>
Institutional Money Market Fund
The Fund's primary goal is to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments. The Fund invests solely in U.S. dollar-
denominated debt securities with remaining maturities of 13 months or less and
maintains an average dollar-weighted portfolio maturity of 90 days or less.
U.S. Treasury Money Market Fund
The Fund's goal is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal.
The Fund pursues its goal by investing its assets solely in short-term bills
and notes, issued by the U.S. Treasury (including "stripped" securities) and in
repurchase agreements relating to such obligations. The Fund invests solely in
U.S. dollar-denominated debt securities with remaining maturities of 13 months
or less and maintains an average dollar-weighted portfolio maturity of 90 days
or less.
Principal Investment Strategies and Risks
Foreign Investment Risk. Certain underlying funds may invest in foreign
securities. Foreign securities include investments in non-U.S. dollar-
denominated securities traded outside of the United States and dollar-
denominated securities of foreign issuers traded in the United States. Foreign
securities also include American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") and Global Depository Receipts ("GDRs"). ADRs are
U.S. dollar-denominated receipts representing shares of foreign-based
corporations. ADRs are issued by U.S. banks or trust companies, and entitle the
holder to all dividends and capital gains that are paid out on the underlying
foreign shares. EDRs and GDRs are receipts issued by non-U.S. financial
institutions that often trade on foreign exchanges. They represent ownership in
an underlying foreign or U.S. security and are generally denominated in a
foreign currency.
Special Risks. Foreign securities involve special risks and costs.
Investment in the securities of foreign governments involves the risk that
foreign governments may default on their obligations or may otherwise not
respect the integrity of their debt.
Investment in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of taxes by foreign governments. Foreign investments may
also involve risks associated with the level of currency exchange rates,
less complete financial information about the issuers, less market
liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls or
freezes on the convertibility of currency, or the adoption of other
governmental restrictions might adversely affect an investment in foreign
securities. Additionally, foreign issuers may be subject to less stringent
regulation, and to different accounting, auditing and recordkeeping
requirements.
Currency exchange rates may fluctuate significantly over short periods of
time causing an underlying fund's net asset value to fluctuate as well. A
decline in the value of a foreign currency relative to the U.S. dollar will
reduce the value of a foreign currency-denominated security. To the extent
that an underlying fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined risk.
The underlying funds' respective net currency positions may expose them to
risks independent of their securities positions.
Additional risks are involved when investing in countries with emerging
economies or securities markets. In general, the securities markets of
these countries are less liquid, are subject to greater price volatility,
have smaller market capitalizations and may have problems with securities
registration and custody. In addition, because the securities settlement
procedures are less developed in these countries, an underlying fund may be
required to deliver securities before receiving payment and may also be
unable to complete transactions during market
10
<PAGE>
disruptions. As a result of these and other risks, investments in these
countries generally present a greater risk of loss to the Fund.
A further risk of investing in foreign securities is the risk that an
underlying fund may be adversely affected by the conversion of certain
European currencies into the Euro. This conversion, which is under way, is
scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in world capital
markets and affect European capital markets in particular.
Investments in Financial Services Companies by Framlington Global Financial
Services Fund. Financial services companies are subject to extensive
governmental regulation which may limit both the financial commitments they can
make, and the interest rates and fees they can charge. Insurance companies may
be subject to severe price competition.
Investments in the Healthcare Industry by Framlington Healthcare Fund. The
Framlington Healthcare Fund will invest most of its assets in the healthcare
industry, which is particularly affected by rapidly changing technology and
extensive government regulation, including cost containment measures.
Investments in the Real Estate Industry by Real Estate Equity Investment
Fund. The Real Estate Equity Investment Fund will invest primarily in the real
estate industry and may invest more than 25% of its assets in any one sector of
the real estate industry. As a result, the Real Estate Equity Investment Fund
will be particularly vulnerable to declines in real estate prices and new
construction rates.
Investments by the NetNet Fund. The NetNet Fund will invest primarily in
companies engaged in Internet and Intranet related activities. The value of
such companies is particularly vulnerable to rapidly changing technology,
extensive government regulation and relatively high risks of obsolescence
caused by scientific and technological advances. The value of the Fund's shares
may fluctuate more than shares of a fund investing in a broader range of
industries.
Investments in the Technology Industry by Future Technology Fund. The Future
Technology Fund will invest most of its assets in the technology industry,
which is particularly affected by rapidly changing 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.
Short-Term Trading. The underlying funds may engage in short-term trading,
including initial public offerings.
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could detract
from a Fund's performance.
Defensive Investing. The Fund and each underlying fund (except the
Institutional S&P 500 Index Equity Fund) may invest all or any portion of its
assets in short-term obligations as a temporary defensive measure in response
to adverse market or economic conditions.
Special Risks. If the Fund or one or more underlying funds adopts a
defensive strategy, the Fund may not achieve its investment objective.
Other Investment Strategies and Risks Of The Fund And Underlying Funds
Borrowing and Reverse Repurchase Agreements. The Fund and underlying funds can
borrow money from banks and enter into reverse repurchase agreements with banks
and other financial institutions. Reverse repurchase agreements involve the
sale of securities held by a Fund (or underlying fund) subject to the Fund's
(or underlying fund) agreement to repurchase them at a mutually agreed upon
date and price (including interest).
Investment Strategy. The Fund (or underlying fund) may borrow money in an
amount up to 5% of its assets for temporary emergency purposes and in an
amount up to 33 1/3% of its assets to meet redemptions. This is a
fundamental policy which can be changed only by shareholders.
11
<PAGE>
Special Risks. Borrowings and reverse repurchase agreements by the Fund
(or underlying fund) may involve leveraging. If the securities held by the
Fund (or underlying fund) decline in value while these transactions are
outstanding, the Fund's net asset value will decline in value by
proportionately more than the decline in value of the securities. In
addition, reverse repurchase agreements involve the risks that the interest
income earned by the Fund (or underlying fund) (from the investment of the
proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by the Fund (or underlying fund)
will decline below the price the Fund (or underlying fund) is obligated to
pay to repurchase the securities, and that the securities may not be
returned to the Fund (or underlying fund).
Derivative Risk. Some underlying funds may purchase certain "derivative"
instruments. Derivatives are financial contracts whose value is based on any
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, forward currency contracts and structured debt obligations
(including collateralized mortgage obligations and other types of asset-backed
securities, "stripped" securities and various floating rate instruments).
Investment Strategy. Derivatives can be used for hedging (attempting to
reduce risk by offsetting one investment position with another) or
speculation (taking a position in the hope of increasing return). The
underlying funds may, but are not required to, use derivatives for hedging
purposes or for the purpose of remaining fully invested or maintaining
liquidity. The underlying funds will not use derivatives for speculative
purposes.
Special Risks. The use of derivative instruments exposes a Fund to
additional risks and transaction costs. Risks of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the direction that a portfolio manager
anticipates; (2) imperfect correlation between the price of derivative
instruments and movements in the prices of the securities, interest rates
or currencies being 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 movement in an instrument can
result in a loss substantially greater that the Funds initial nvestment in
that instrument (in some leases, 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 that 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 underlying fund is required to hedge its foreign currency positions.
Special Risks. Forward currency contracts are privately negotiated
transactions, and can have substantial price volatility. When used for
hedging purposes, they tend to limit any potential gain that may be
realized if the value of an underlying fund's foreign holdings increases
because of currency fluctuations.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When an underlying fund purchases an option on
a futures contract, it has the right to assume a position as a purchaser or
12
<PAGE>
seller of a futures contract at a specified exercise price during the option
period. When an underlying fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the option is
exercised.
Investment Strategy. The underlying funds may invest in futures contracts
and options on futures contracts on domestic or foreign exchanges or boards
of trade. These instruments may be used for hedging purposes, to maintain
liquidity to meet potential shareholder redemptions, to invest cash
balances or dividends, or to minimize trading costs.
An underlying fund will not purchase or sell a futures contract unless,
after the transaction, the sum of the aggregate amount of margin deposits
on its existing futures positions and the amount of premiums paid for
related options used for non-hedging purposes is 5% or less of the
underlying fund's total assets.
Special Risks. Futures contracts and related options present the following
risks: imperfect correlation between the change in market value of an
underlying fund's securities and the price of futures contracts and
options; the possible inability to close a futures contract when desired;
losses due to unanticipated market movements, which are potentially
unlimited; and the possible inability of the advisor or sub-advisor to
correctly predict the direction of securities prices, interest rates,
currency exchange rates and other economic factors.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. Each underlying fund may invest up to 15% of its net
assets in securities that are illiquid.
Special Risks. To the extent that an underlying fund invests in illiquid
securities, the underlying fund risks not being able to sell the securities
at the time and the price that it would like. The underlying fund may have
to lower the price, sell substitute securities or forego an investment
opportunity, each of which may cause a loss to the underlying fund.
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. The underlying funds may write (sell) covered call
options, buy put options, buy call options and write secured put options
for hedging purposes. Options may relate to particular securities, foreign
or domestic securities indices, financial instruments or foreign
currencies.
Special Risks. The value of options can be highly volatile, and their use
can result in loss if the advisor or sub-advisor is incorrect in its
expectation of price fluctuations. The successful use of options for
hedging purposes also depends in part on the ability of the advisor or sub-
advisor to predict future price fluctuations and the degree of correlation
between the options and securities markets.
Securities Lending. In order to generate additional income, each underlying
fund may lend securities on a short-term basis to qualified institutions. By
reinvesting any cash collateral it receives in these transactions, the
underlying fund could realize additional income gains or losses.
Investment Strategy. Securities lending may represent no more than 25% of
the value of an underlying fund's total assets (including the loan
collateral).
Special Risks. The main risk when lending securities is that if the
borrower fails to return the securities or the invested collateral has
declined in value, the underlying fund could lose money.
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 the Fund or underlying fund.
Investment Strategy. The Fund or underlying fund may invest a portion of
its assets in short-term obligations pending investment or to meet
anticipated redemption requests.
13
<PAGE>
Special Risks. The Fund or underlying fund may not achieve its investment
objective when its asset are invested in short-term obligations.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
instruments include variable amount master demand notes.
Special Risks. Variable and floating rate instruments are subject to the
same risks as fixed income investments, particularly interest rate and
credit risk. Because there is no active secondary market for certain
variable and floating rate instruments, they may be more difficult to sell
if the issuer defaults on its payment obligations or during periods when an
underlying fund is not entitled to exercise its demand rights. As a result,
the underlying fund could suffer a loss with respect to these instruments.
Disclaimers
Disclaimers. The Institutional S&P 500 Index Equity Fund is not sponsored,
endorsed, sold or promoted by S&P, nor does S&P guarantee the accuracy and/or
completeness of the S&P 500(R) Index or any data included therein. S&P makes no
warranty, express or implied, as to the results to be obtained by the Fund,
owners of the Fund, any person or any entity from the use of the S&P 500(R)
Index or any data included therein. S&P makes no express or implied warranties
and expressly disclaims all such warranties of merchantability or fitness for a
particular purpose for use with respect to the S&P(R) Index or any data
included therein.
14
<PAGE>
Your Investment
--------------------------------------------------------------------------------
This section describes how to do business with the Fund.
How To Reach The Fund
By telephone: 1-800-438-5789
Call for account information.
By mail:The Munder Funds
c/o PFPC Global Fund Services
P.O. Box 60428
King of Prussia, PA 19406-0428
Purchasing Shares
Who May Purchase Shares
The following persons may purchase shares of the Fund:
. fiduciary and discretionary accounts of institutions;
. institutional investors (including: banks; savings institutions; credit
unions and other financial institutions; pension, profit sharing and
employee benefit plans and trusts; insurance companies; investment
companies; investment advisers, broker-dealers and financial advisors
acting for their own accounts or for the accounts of their clients);
. directors, trustees, officers and employees of the Munder Funds, the
advisor and the Funds' distributor;
. the advisor's investment advisory clients; and
. family members of employees of the advisor.
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 about the Fund's other classes of shares.
Purchase Price of Shares
Class Y shares of the Fund are sold at the NAV next determined after a purchase
order is received in proper form.
Broker-dealers or financial advisors (other than the Fund's distributor) may
charge you a fee for shares you purchase through them.
Policies for Purchasing Shares
Minimum initial investment
The minimum initial investment by fiduciary and discretionary accounts of
institutions and by institutional investors is $5,000. Other investors are not
subject to any minimum.
There is no minimum for subsequent investments.
Timing of orders
Purchase orders must be received by the 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).
Methods for Purchasing Shares
You can purchase Class Y shares through the Fund's transfer agent or through
the Fund's distributor through arrangements with a broker-dealer, financial
advisor or financial institution.
. Through a Financial Institution. You may purchase shares through a financial
institution through procedures established with that institution.
Confirmations of share purchases will be sent to the institution.
. By Mail. You may open an account directly through the Fund's transfer agent
by completing, signing and mailing an account application form and a check or
other negotiable bank draft (payable to The Munder Funds) to: The Munder
Funds, c/o PFPC Gobal Fund Services, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. You can obtain an account application form by
calling (800) 438-5789. For additional investments, send a letter stating the
Fund and share class you wish to purchase, your name and your account number
with a check for $50 or more to the address listed above. We do not accept
third-party checks.
. By Wire. You may make additional investments in the Funds by wire. Wire
instructions must state the Fund name, share class, your registered name and
your account number. Your bank wire should be sent through the Federal
Reserve Bank Wire System to:
Boston Safe Deposit and Trust Company
Boston, MA
ABA# 011001234
DDA# 16-798-3
Account No.:
15
<PAGE>
Note that banks may charge fees for transmitting wires.
. You may purchase shares through the Automatic Investment Plan.
Exchanging Shares
Policies for Exchanging Shares
. You may exchange your Fund shares for Class Y shares of other Munder Funds
based on their relative net asset values.
. You must meet the minimum purchase requirements for the Munder Fund that you
purchase by exchange.
. A share exchange may be a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund you
wish to purchase by exchange. You can obtain a prospectus for any Munder Fund
by contacting your broker or the Munder Funds at (800) 438-5789.
. Brokers or financial advisors may charge you a fee for handling exchanges.
. We may modify or terminate the exchange privilege at any time. You will be
given notice of any material modifications except where notice is not
required.
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the
redemption request in proper form.
Methods for Redeeming Shares
. You may redeem shares of all Funds through your broker-dealer, financial
advisor or 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 a Fund before 4:00 p.m. (Eastern time),
we will normally wire payment to the redeeming institution on the next
business day.
Additional Policies For Purchases, Exchanges And Redemptions
. We consider requests to be in "proper form" when all required documents are
properly completed, signed and received.
. The Fund reserves the right to reject any purchase order.
. At any time, the Fund may change any of its purchase, redemption or
exchange practices, and may suspend the sale of its shares.
. The Fund may delay sending redemption proceeds for up to seven days, or
longer if permitted by the Securities and Exchange Commission.
. To limit the Fund's expenses, we no longer issue share certificates.
. We will typically send redemption amounts to you within seven business days
after you redeem shares. We may hold redemption amounts from the sale of
shares you purchased by check until the purchase check has cleared, which
may be as long as 15 days.
. The Fund may temporarily stop redeeming shares if:
L the New York Stock Exchange is closed;
L trading on the New York Stock Exchange is restricted;
L an emergency exists and the Fund cannot sell its assets or accurately
determine the value of its assets; or
L the Securities and Exchange Commission orders the Fund to suspend
redemptions.
. If accepted by the Fund, investors may purchase shares of that Fund with
securities which the Fund may hold. The advisor will determine if
16
<PAGE>
the securities are consistent with the Fund 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.
. We may redeem your account if its value falls below $250 as a result of
redemptions (but not as a result of a decline in net asset value). You will
be notified in writing and allowed 60 days to increase the value of your
account to the minimum investment level.
. If you purchased shares directly through the Fund's transfer agent, the
transfer agent will send you confirmations of the opening of an account and
of all subsequent purchases, exchanges or redemptions in the account.
Confirmations of transactions effected through an institution will be sent
to the institution.
. Financial institutions are responsible for transmitting orders and payments
for their customers on a timely basis.
Shareholder Privileges
Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in the Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Fund at (800) 438-5789. The minimum pre-authorized investment amount
is $50. You may discontinue the AIP at any time. We may discontinue the AIP on
30 days' written notice to you.
17
<PAGE>
Pricing Of Fund Shares
--------------------------------------------------------------------------------
The Fund's NAV is calculated on each day the New York Stock Exchange is open.
The Fund calculates NAV as of the close of regular trading 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 calculation of NAV and
transaction deadlines to that time.
The NAV of each underlying fund is generally based on the market value of the
securities held in the underlying fund. If market values are not available, the
fair value of securities is determined in good faith by, or using procedures
approved by, the boards of directors/trustees of the underlying funds.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. An underlying fund values foreign
securities at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the New York Stock Exchange. Certain
foreign currency exchange rates may also be determined at the latest rate prior
to the closing of the New York Stock Exchange. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at current rates.
Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the New York
Stock Exchange. If the advisor believes that such events materially affect the
value of portfolio securities, these securities may be valued at their fair
market value as determined in good faith by, or using procedures approved by,
the underlying funds' boards of directors/trustees.
Distributions
--------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of 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 the Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
The Fund will pay distributions in additional shares of the same class of that
Fund. If you wish to receive distributions in cash, either, indicate this
request on your account application form or notify the Fund at (800) 438-5789.
18
<PAGE>
Federal Tax Considerations
--------------------------------------------------------------------------------
Investments in the Fund may have tax consequences that you should consider.
This section briefly describes some of the more common federal tax
consequences. A more detailed discussion about the tax treatment of
distributions from the Fund and about other potential tax liabilities,
including backup withholding for certain taxpayers and about tax aspects of
dispositions of shares of the Fund, is contained in the Statement of Additional
Information. You should consult your tax adviser about your own particular tax
situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. Shareholders not
subject to tax on their income generally will not be required to pay any tax on
distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held
the portfolio securities it sold. It does not depend on how long you held your
Fund shares.
Distributions are generally taxable to you in the year in which they are paid,
with one exception: distributions declared in October, November or December,
but not paid until January of the following year, are taxed as though they were
paid on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Funds will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Taxes On Sales Or Exchanges
If you sell shares of the Fund or exchange them for shares of another Munder
Fund, you generally will be subject to tax on any taxable gain. Taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale or an exchange will result in a taxable
gain.
Other Considerations
If you buy shares of the Fund just before the Fund makes any distribution, you
will pay the full price for the shares then receive back a portion of the money
you just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law, the
Fund must withhold a portion of your distributions and redemption proceeds to
pay federal income taxes.
19
<PAGE>
Management
--------------------------------------------------------------------------------
Investment Advisor
Munder Capital Management ("MCM"), 480 Pierce Street, Birmingham, Michigan
48009 is the investment advisor of each Fund and each underlying fund except
Institutional S&P 500 Index Equity Fund and International Equity Fund. The
advisors provide overall investment management for the Funds. As of March 31,
2000, MCM and its affiliates had approximately $62 billion in assets under
management, of which $34 billion were invested in equity securities, $7 billion
were invested in money market or other short-term instruments, $6 billion were
invested in other fixed income securities, $3 billion were invested in balanced
investments and $7 billion in non-discretionary assets.
World Asset Management ("World"), 255 East Brown Street, Birmingham, Michigan
48009, is the investment advisor of Institutional S&P 500 Index Equity Fund and
International Equity Fund. World is a wholly-owned subsidiary of the advisor.
As of March 31, 2000, World had approximately $22.7 billion in assets under
management, of which $17.6 billion were invested in domestic equity securities,
$4.5 billion were invested in international equity securities and $600 million
were invested in other fixed income securities.
Framlington Overseas Investment Management Limited, an affiliate of the
advisor, is the sub-advisor of the Framlington Emerging Markets Fund,
Framlington Global Financial Services Fund, Framlington Healthcare Fund and
Framlington International Growth Fund.
The advisor may, from time to time, make payments to banks, broker-dealers,
financial advisors or other financial institutions for certain services to the
Fund and/or their shareholders, including sub-administration, sub-transfer
agency and shareholder servicing. The advisor may make such payments out of its
own resources and there are no additional costs to the Fund or its
shareholders.
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.
Portfolio Managers
A committee of professional portfolio managers employed by MCM makes investment
decisions for the Fund.
20
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information has been audited by Ernst & Young LLP,
independent auditors, whose report, along with the Fund's financial statements,
are included in the annual reports of the Fund, and are incorporated by
reference into the Statement of Additional Information. The information for the
period ended December 31, 1999 is unaudited, is included in the semi-annual
report of the Fund, and is incorporated by reference into the Statement of
Additional Information. You may obtain the semi-annual and annual reports
without charge by calling (800) 438-5789.
<TABLE>
<CAPTION>
Munder Fund of Funds(a)
--------------------------------------------
Period
Ended Year Period
12/31/99 Ended Year Ended Ended
(Unaudited) 6/30/99 6/30/98(d) 6/30/97
----------- ------- ---------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 13.19 $ 12.57 $ 11.35 $10.00
------- ------- ------- ------
Income from investment opera-
tions:
Net investment income.......... 0.05 0.10 0.05 0.01
Net realized and unrealized
gain on investments........... 1.71 0.71 1.61 1.34
------- ------- ------- ------
Total from investment opera-
tions......................... 1.76 0.81 1.66 1.35
------- ------- ------- ------
Less distributions:
Dividends from net investment
income........................ (0.23) (0.10) (0.04) --
Distributions in excess of net
investment income............. -- (0.00)(c) -- --
Distributions from net realized
capital gains................. (0.30) (0.09) (0.36) --
Distributions in excess of net
realized gains................ -- -- (0.04) --
------- ------- ------- ------
Total distributions............ (0.53) (0.19) (0.44) --
------- ------- ------- ------
Net asset value, end of period. $ 14.42 $ 13.19 $ 12.57 $11.35
======= ======= ======= ======
Total return(c)................ 13.66% 6.63% 15.04% 13.50%
======= ======= ======= ======
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's)........................ $66,720 $59,236 $58,780 $1,483
Ratio of operating expenses to
average net assets............ 0.36%(b) 0.36% 0.58% 0.55%(b)
Ratio of net investment income
to average net assets......... 0.77%(b) 0.41% 0.39% 1.08%(b)
Portfolio turnover rate........ 24% 73% 55% 3%
Ratio of operating expenses to
average net assets without
expenses reimbursed........... 0.61%(b) 0.63% 0.76% 14.30%(b)
</TABLE>
--------
(a) The Munder Fund of Funds (formerly Munder All-Season Aggressive Fund) Class
Y Shares commenced operations on April 3, 1997.
(b) Annualized.
(c) Total return represents aggregate total return for the period indicated.
(d) Per share numbers have been calculated using the average shares method.
(e) Amount represents less than $0.01 per share.
21
<PAGE>
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 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).
To Obtain Information:
--------------------------------------------------------------------------------
By telephone
1-800-438-5789
By mail
Write to:
The Munder Funds
c/o PFPC Global Fund Services
P.O. Box 60428
King of Prussia, PA 19406-0428
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. 20549-0102.
You may also obtain information, after paying a duplicating fee, by electronic
request at: [email protected]
You may also find more information about the Fund on the Internet at:
http://www.munderfunds.com
--------------------------------------------------------------------------------
The Munder Funds, Inc.
SEC file number: 811-7346
PROMFFY600
Investment Advisor: Munder Capital Management
Distributor: Funds Distributor, Inc.
<PAGE>
[LOGO]
THE
MUNDER
FUNDS
Investments
for all seasons
CLASS A & B SHARES
Prospectus
June 29, 2000
Munder All-Season Conservative Fund
Munder All-Season Moderate 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
8 Who May Want To Invest
9 Fees And Expenses
11 More About The Funds
11 Glossary
12 Asset Allocation Chart
13 Description Of The Underlying funds
15 Principal Investment Strategies And Risks
17 Other Investment Strategies And Risks Of The Funds And Underlying Funds
20 Disclaimers
21 Your Investment
21 How To Reach The Funds
21 Purchasing Shares
22 Exchanging Shares
22 Redeeming Shares
23 Additional Policies For Purchases, Exchanges And Redemptions
24 Shareholder Privileges
25 Distribution Arrangements
25 Share Class Selection
25 Applicable Sales Charge
27 CDSC
28 12b-1 Fees
28 Other Information
29 Pricing of Fund Shares
29 Distributions
30 Federal Tax Considerations
30 Taxes On Distributions
30 Taxes On Sales Or Exchanges
30 Other Considerations
31 Management
31 Investment Advisor
31 Portfolio Managers
32 Financial Highlights
</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." Certain terms
used in this prospectus are defined in the Glossary.
Fund of Funds
Each Fund is a fund of funds,
which means that it invests almost
all of its assets in other mutual
funds, rather than in individual
securities. Each Fund invests its
assets in a variety of other
Munder Funds, referred to as
"underlying funds."
The risks of investing in the
Funds are dependent on which
underlying funds the Funds invest
in, and to what extent. In
addition, the investment
performance of each Fund is
directly related to the
performance of the underlying
funds in which it invests.
Investment Approach of the Underlying Funds
. The underlying equity funds
represented in each Fund vary
from growth to value styles of
investing, from larger to
smaller company stocks and from
domestic to international
equities.
. The underlying fixed income
funds reflect the advisor's core
fixed income philosophy:
interest rate relationships,
sector weightings and credit
analysis. Some exposure to
international bonds may also be
included.
Conservative Fund
Goal
The Fund's goal is to provide current income with capital appreciation as a
secondary objective.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in fixed income securities.
The Fund may also invest a portion of its assets in underlying funds that
invest primarily in equity securities or money market instruments.
The advisor may periodically adjust the Fund's asset allocation among
underlying funds in response to changing economic and market conditions. The
typical allocation is expected to be: 70% Fixed Income Funds, 25% Equity Funds
and 5% Money Market Funds.
The Fund's indirect fixed income holdings are a mix of short-, intermediate-
and long-term U.S. government securities, mortgage and other asset-backed
securities, stripped securities and obligations of state, local and foreign
issuers. The average maturity will range from three to 15 years and the
portfolios' holdings will be rated investment grade or better or if unrated are
of comparable quality. The Fund's indirect, stock holdings will be a
combination of large-cap, mid-cap and small-cap U.S. stocks as well as foreign
stocks.
In the "More About the Funds" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
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.
2
<PAGE>
Among the principal risks of investing in the Fund are:
. Interest Rate Risk. Increases in prevailing interest rates will cause fixed-
income securities held by an underlying fund to decline in value. Longer term
bonds are generally more sensitive to interest rate changes than shorter term
bonds. Generally, the longer the average maturity of the bonds held by the
underlying fund, the more the Fund's share price will fluctuate in response
to interest rate changes.
. Credit (or Default) Risk. An issuer of a security may default on its payment
obligations. Also, an issuer may suffer adverse changes in financial
condition that could lower the credit quality of a security, leading to
greater volatility in the price of the security and in shares of the Fund. A
change in the quality rating of a bond can affect the bond's liquidity and
make it more difficult for the underlying fund to sell.
. Prepayment Risk. The fund may experience losses when an issuer exercises its
right to pay principal on an obligation held by an underlying fund (such as a
mortgage-backed security) earlier than expected. This may happen during a
period of declining interest rates. Under these circumstances, the underlying
fund may be unable to recoup all of its initial investment and will suffer
from having to reinvest in lower yielding securities. The loss of higher
yielding securities and the reinvestment at lower interest rates can reduce
the Fund's income, total return and share price.
Because the mix of underlying funds held by the Fund can change from time to
time, the Fund may be subject to the following additional principal risks at
various times:
. Stock Market Risk. The value of the securities in which a Fund invests may
decline in response to general economic conditions. Price changes may be
temporary or last for extended periods. For example, stock prices have
historically risen and fallen in periodic cycles. In addition, the value of a
Fund's investments may decline if the particular companies the Fund invests
in do not perform well.
. Foreign Securities Risk. Investments by an underlying fund in foreign
securities may experience greater and more rapid changes in value than U.S.
securities. Foreign securities are generally more volatile and less liquid
than U.S. securities, in part because of greater political and economic risks
and because there is less public information available about foreign
companies. Issuers of foreign securities are generally not subject to the
same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards.
. Currency Risk. A decline in the value of foreign currencies relative to the
U.S. dollar will reduce the value of an underlying fund's portfolio
securities denominated in those currencies.
. Smaller Company Stock Risk. The stocks of small or medium-size companies may
have more risks than those of larger companies. Small or medium-size
companies often have narrower markets and more limited managerial and
financial resources than larger, more established companies. As a result,
they may be more sensitive to changing economic conditions, which could
increase the volatility of an underlying fund's portfolio. In addition, small
company stocks typically are traded in lower volume making them more
difficult to sell.
. Sector Risk. Certain underlying funds may concentrate its investments in a
particular industry sector. Adverse economic, business or political
developments affecting that industry sector could have a major effect on the
value of the underlying fund's investments.
3
<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.
The annual returns in the bar chart
are for the Fund's Class B Shares
and do not reflect sales loads. If
sales loads were reflected, returns
would be less than those shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ended December 31, 1999)
----------------------------------------
Since
1 Year Inception*
----------------------------------------
<S> <C> <C>
Class A (3.73)% (2.17)%
Class B (2.88)% 0.62%
Lehman Brothers Int.
Gov't/Corp. Index** 0.39% 4.10%***
Class B 2.18%***
</TABLE>
--------
*The inception dates for Class A and
Class B shares are 3/13/98 and
1/14/98, respectively.
**The Lehman Brothers Intermediate
Government/Corporate Bond Index
is a weighted composite of (i)
Lehman Brothers Intermediate
Government Bond Index, which is
comprised of all publicly issued,
non-convertible debt of the U.S.
Government or any agency thereof,
quasi-federal corporations and
corporate debt guaranteed by the
U.S. Government with a maturity
between one and ten years and
(ii) Lehman Brothers Corporate
Bond Index, which is comprised of
all public fixed-rate, non-
convertible investment-grade
domestic corporate debt,
excluding collaterized mortgage
obligations.
***Index return from 3/31/97 for
Class A shares and 1/31/98 for
Class B shares.
The average annual total returns
reflect imposition of the maximum
front-end or contingent deferred
sales charge and conversion of Class
B shares to Class A shares after the
applicable period.
[LINE CHART]
All-Season Conservative Fund Class B
Total Return (per calendar year)
[Bar Chart]
1999: 2.09%
Year-to-date through March 31, 2000: 4.47%
<TABLE>
<S> <C> <C>
Best Quarter: Q4 1999 4.34%
Worst Quarter: Q3 1999 (2.34%)
</TABLE>
4
<PAGE>
Moderate Fund
Goal
The Fund's goal is to provide high total return through both capital
appreciation and current income.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in equity securities and fixed
income securities.
The Fund may also invest a small portion of its assets in underlying money
market funds.
The advisor may periodically adjust the Fund's asset allocation among
underlying funds in response to changing economic and market conditions. The
typical allocation is expected to be: 60% Equity Funds, 35% Fixed Income Funds
and 5% Money Market Funds.
The Fund's indirect stock holdings will be a mix of large-cap, mid-cap and
small-cap U.S. stocks as well as foreign stocks. The Fund's indirect fixed
income holdings are a combination of short-, intermediate- and long-term U.S.
government securities, mortgage and other asset-backed securities, stripped
securities and obligations of state, local and foreign issuers. The average
maturity will range from three to 15 years and the portfolios' holdings will be
rated investment grade or better or if unrated are of comparable quality.
In the "More About the Funds" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
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.
Among the principal risks of investing in the Fund are:
. Stock Market Risk. The value of the securities in which a Fund invests may
decline in response to general economic conditions. Price changes may be
temporary or last for extended periods. For example, stock prices have
historically risen and fallen in periodic cycles. In addition, the value of a
Fund's investments may decline if the particular companies the Fund invests
in do not perform well.
. Foreign Securities Risk. Investments by an underlying fund in foreign
securities may experience greater and more rapid changes in value than U.S.
securities. Foreign securities are generally more volatile and less liquid
than U.S. securities, in part because of greater political and economic risks
and because there is less public information available about foreign
companies. Issuers of foreign securities are generally not subject to the
same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards.
. Currency Risk. A decline in the value of foreign currencies relative to the
U.S. dollar will reduce the value of an underlying fund's portfolio
securities denominated in those currencies.
. Smaller Company Stock Risk. The stocks of small or medium-size companies may
have more risks than those of larger companies. Small or medium-size
companies often have narrower markets and more limited managerial and
financial resources than larger, more established companies. As a result,
they may be more sensitive to changing economic conditions, which could
increase the volatility of an underlying fund's portfolio. In addition, small
company stocks typically are traded in lower volume making them more
difficult to sell.
. Sector Risk. Certain underlying funds may concentrate its investments in a
particular industry sector. Adverse economic, business or political
developments affecting that industry sector could have a major effect on the
value of the underlying fund's investments.
5
<PAGE>
Because the mix of underlying funds held by the Fund can change from time to
time, the Fund may be subject to the following additional principal risks at
various times:
. Interest Rate Risk. Increases in prevailing interest rates will cause fixed-
income securities held by an underlying fund to decline in value. Longer
term bonds are generally more sensitive to interest rate changes than
shorter term bonds. Generally, the longer the average maturity of the bonds
held by the underlying fund, the more the Fund's share price will fluctuate
in response to interest rate changes.
. Credit (or Default) Risk. An issuer of a security may default on its payment
obligations. Also, an issuer may suffer adverse changes in financial
condition that could lower the credit quality of a security, leading to
greater volatility in the price of the security and in shares of the Fund. A
change in the quality rating of a bond can affect the bond's liquidity and
make it more difficult for the underlying fund to sell.
. Prepayment Risk. The Fund may experience losses when an issuer exercises its
right to pay principal on an obligation held by an underlying fund (such as
a mortgage-backed security) earlier than expected. This may happen during a
period of declining interest rates. Under these circumstances, the
underlying fund may be unable to recoup all of its initial investment and
will suffer from having to reinvest in lower yielding securities. The loss
of higher yielding securities and the reinvestment at lower interest rates
can reduce the Fund's income, total return and share price.
6
<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.
The annual returns in the bar chart Average Annual Total Returns
are for the Fund's Class A Shares
and do not reflect sales loads. If (for the periods ended December 31,
sales loads were reflected, returns 1999)
would be less than those shown.
<TABLE>
--------------------------------------
<CAPTION>
Since
1 Year Inception*
--------------------------------------
<S> <C> <C>
Class A 8.51% 13.12%
Class B 9.12% 9.72%
60% S&P 500 Index/40% Lehman Gov't
Corp. Index** 11.76% 21.05%***
Class B % 7.98%***
</TABLE>
--------
* The inception dates for the Class
A shares and Class B shares are
4/4/97 and 1/14/98, respectively.
** Standard & Poor's Composite 500
Index is an unmanaged index of
common stock prices. The Lehman
Brothers Government/Corporate
Bond Index is a weighted
composite of (i) Lehman Brothers
Government Bond Index, which is
comprised of all publicly issued,
non-convertible debt of the U.S.
Government or any agency thereof,
quasi-federal corporations, and
corporate debt guaranteed by the
U.S. Government and (ii) Lehman
Brothers Corporate Bond Index,
which is comprised of all public
fixed-rate, non-convertible
investment-grade domestic
corporate debt, excluding
collateralized mortgage
obligations.
***Index return from 3/31/97 for
Class A shares and 1/31/98 for
Class B shares.
The average annual total returns
reflect imposition of the maximum
front-end or contingent deferred
sales charge and conversion of Class
B shares to Class A shares after the
applicable period.
[BAR CHART]
Year-to-date through March 31, 2000:
9.66%
<TABLE>
<S> <C> <C>
Best Quarter: Q 4 1999 14.70%
Worst Quarter: Q 3 1998 (9.74)%
</TABLE>
7
<PAGE>
Who May Want To Invest
The All-Season Conservative Fund may be appropriate for investors who:
. Seek current income.
. Seek long term growth without taking undue risk.
The All-Season Moderate Fund may be appropriate for investors who:
. Seek a balance of both capital appreciation and income.
8
<PAGE>
Fees And Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold shares the Funds. Please note that the following information does not
include fees that institutions may charge for services they provide to you.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
Shareholder Fees (fees paid directly from your investment) ------- -------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)............................................ 5.5%(a) None
Maximum Deferred Sales Charge (Load)(as a % of the lesser of
original purchase price or redemption proceeds)............ None(b) 5%(c)
Sales Charge (Load) Imposed on Reinvested Dividends......... None None
Redemption Fees............................................. None None
Exchange Fees............................................... None None
</TABLE>
Annual Fund Operating Expenses (expenses that are paid from Fund assets) as a %
of net assets
<TABLE>
<S> <C> <C>
Conservative Fund
<CAPTION>
Class A Class B
Shares Shares
------- -------
<S> <C> <C>
Management Fees(1).............................................. .35% .35%
Distribution and/or Service (12b-1) Fees........................ .30% 1.00%
Other Expenses(1)............................................... 5.61% 5.61%
---- ----
Total Annual Fund Operating Expenses(1)......................... 6.26% 6.96%
==== ====
Moderate Fund
<CAPTION>
Class A Class B
Shares Shares
------- -------
<S> <C> <C>
Management Fees(1).............................................. .35% .35%
Distribution and/or Service (12b-1) Fees........................ .30% 1.00%
Other Expenses(1)............................................... 1.89% 1.89%
---- ----
Total Annual Fund Operating Expenses(1)......................... 2.54% 3.24%
==== ====
</TABLE>
--------
(a) The sales charge declines as the amount invested increases.
(b) A contingent deferred sales charge (CDSC) is a one-time fee charged at the
time of redemption. A 1% CDSC applies to redemptions of Class A shares
within one year of investment that were purchased with no initial sales
charge as part of an investment of $1,000,000 or more.
(c) The CDSC payable upon redemption of Class B shares declines over time.
(1) For the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of its management fees and voluntarily reimbursed certain operating
expenses. As a result of these voluntary fee waivers and expense
reimbursements, the actual management fees, operating expenses and total
annual fund operating expenses paid by the Funds were: .10%, .31% and .71%,
respectively, for Class A shares and .10%, .31% and 1.41%, respectively,
for Class B shares of the Conservative Fund; and .10%, .26% and .66%,
respectively, for Class A shares and .10%, .26% and 1.36%, respectively,
for Class B shares of the Moderate Fund. The advisor may terminate the fee
waivers and/or expense reimbursements at any time.
In addition to the expenses shown above, shareholders of the Funds will
indirectly bear their pro rata shares of the annual operating expenses of the
underlying funds. As a result, the investment returns of the Funds will be net
of the expenses of the Underlying Funds. Since the Funds invest in other Munder
Funds, as a shareholder you will pay a higher expense ratio than if you had
purchased shares of an underlying fund directly. The underlying funds' total
annual fund operating expense ratios for the fiscal year ended June 30, 1999
ranged from .37% to 2.45%.
9
<PAGE>
Example
The examples are intended to help you compare the cost of investing in each
Fund to the cost of investing in other mutual funds. The examples assume that
you invest $10,000 in each Fund for the time periods indicated. The examples
also assume that your investment has a 5% return each year, that each Fund's
operating expenses remain the same and that all dividends and distributions are
reinvested. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<S> <C> <C> <C>
Conservative Fund
<CAPTION>
Class A Class B Class B
Shares Shares* Shares**
------- ------- --------
<S> <C> <C> <C>
1 Year............................................. $1,146 $1,185 $ 695
3 Years............................................ $2,308 $2,327 $2,045
5 Years............................................ $3,439 $3,430 $3,430
10 Years........................................... $6,143 $6,149*** $6,149***
Moderate Fund
<CAPTION>
Class A Class B Class B
Shares Shares* Shares**
------- ------- --------
<S> <C> <C> <C>
1 Year............................................. $ 796 $ 837 $ 328
3 Years............................................ $1,301 $1,318 $1,002
5 Years............................................ $1,832 $1,808 $1,700
10 Years........................................... $3,279 $3,246*** $3,246***
</TABLE>
--------
* Assumes you sold your shares at the end of the time period.
** Assumes you stayed in the Fund.
*** Reflects conversion of Class B shares to Class A shares (which pay lower
ongoing expenses) approximately six years after the date of original
purchase.
10
<PAGE>
More About The Funds
--------------------------------------------------------------------------------
This section describes the underlying funds in which the Funds may invest. It
also discusses the risks of investing in the Funds, which are dependent upon
which underlying funds the Funds invest in, and to what extent. Further,
included in this section is a chart that shows the maximum percentage of its
assets that a Fund may invest in each underlying fund. Please note that the
underlying funds may also invest in securities and are subject to restrictions
and additional risks which are described in the Statement of Additional
Information.
The Glossary below explains certain terms used throughout this prospectus.
Glossary
Types Of Securities
Equity securities include common stocks, preferred stocks, securities
convertible into common stocks, and rights and warrants to subscribe for the
purchase of common stocks. Equity securities may be listed on a stock exchange
or NASDAQ National Market System or unlisted. Warrants are rights to purchase
securities at a specified time at a specified price.
Fixed income securities are securities that pay interest at set times at either
fixed, floating or variable rates, or which are issued at a discount to their
principal amount instead of making periodic interest payments. Fixed income
securities include corporate bonds, debentures and other similar corporate debt
instruments, zero coupon bonds and variable amount master demand notes.
Convertible Securities. A convertible security is a bond or preferred stock
that may be converted (exchanged) into the common stock of the issuing company
within a specified time period for a specified number of shares. Convertible
securities offer the underlying funds a way to participate in the capital
appreciation of the common stock into which the securities are convertible,
while earning higher current income than is available from the common stock.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include U.S.
Treasury bills, U.S. Treasury notes, U.S. Treasury bonds and obligations of the
Federal Home Loan Corporation, Federal National Mortgage Association and
Government National Mortgage Association.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit
of banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Rating Agencies and Indices
Moody's is Moody's Investor Services, Inc.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
S&P is Standard & Poor's Rating Services.
S&P 500 is S&P's 500 Composite Stock Price Index, a widely recognized unmanaged
index of U.S. stock market activity.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Internal Revenue Code is the Internal Revenue Code of 1986, as amended.
NAV is the net asset value per share of a Fund. NAV is the value of a single
share of a Fund. Each Fund calculates NAV separately for each class. NAV is
calculated by (1) taking the current value of a Fund's total assets allocated
to a particular class of shares, (2) subtracting the liabilities and expenses
charged to that class (3) dividing that amount by the total number of shares of
that class outstanding.
11
<PAGE>
Asset Allocation Chart
The following chart shows the Fund's maximum investment (expressed as a
percentage of each Fund's assets) that each Fund may make in the underlying
funds.
<TABLE>
<CAPTION>
Conservative Moderate
Fund Fund
------------ --------
<S> <C> <C>
Equity Funds
Equity Income Fund.................................. 10% 15%
Focus Growth Fund................................... 10% 20%
Future Technology Fund.............................. 5% 10%
Growth Opportunities Fund........................... 10% 15%
Institutional S&P 500 Index Equity Fund............. 20% 30%
International Equity Fund........................... 5% 10%
Micro-Cap Equity Fund............................... 10% 10%
Multi-Season Growth Fund............................ 20% 30%
NetNet Fund......................................... 5% 5%
Real Estate Equity Investment Fund.................. 10% 20%
Small-Cap Value Fund................................ 10% 20%
Small Company Growth Fund........................... 20% 30%
Framlington Emerging Markets Fund................... 5% 10%
Framlington Global Financial Services Fund.......... 5% 10%
Framlington Healthcare Fund......................... 5% 5%
Framlington International Growth Fund............... 5% 10%
Income Funds
Bond Fund........................................... 80% 50%
Intermediate Bond Fund.............................. 80% 50%
International Bond Fund............................. 30% 20%
U.S. Government Income Fund......................... 60% 40%
Money Market Funds
Cash Investment Fund................................ 15% 15%
Money Market Fund................................... 10% 10%
U.S. Treasury Money Market Fund..................... 10% 10%
</TABLE>
12
<PAGE>
Description of Underlying Funds
Equity Funds
Focus Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities 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.
Future Technology Fund
The Fund's goal is to provide capital appreciation. 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.
Equity Income Fund
The Fund's goal is to provide capital appreciation and current income. The Fund
pursues its goal by investing primarily in dividend-paying equity securities
and fixed income securities which are convertible into or exchangeable for
common stock. The advisor generally selects large, well-known companies that it
believes have favorable prospects for dividend growth and capital appreciation.
The Fund will seek to produce a current yield greater than the S&P 500.
Growth Opportunities Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in the equity securities of
companies with market capitalizations between $500 million and $10 billion. Its
style, which focuses on both growth prospects and valuation, is known as GARP
(Growth at a Reasonable Price) and seeks to produce attractive returns during
various market environments.
Institutional S&P 500 Index Equity Fund
The Fund's goal is to provide performance and income that is comparable to the
S&P 500. The S&P 500 is an index of 500 stocks that emphasizes large
capitalization companies. The Fund pursues its goal by normally holding a
substantial amount of its assets in securities of at least 400 of the stocks in
the S&P 500. The Fund is managed through the use of a "quantitative" or
"indexing" investment approach and tries to mirror the composition and
performance of the S&P 500 through statistical procedures. The Fund will try to
achieve a correlation between the performance of its portfolio and that of the
S&P 500 of at least .95. A correlation of 1.0 would mean that the changes in
the Fund's price mirror exactly the changes in the S&P 500.
International Equity Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing primarily in foreign securities, including American
Depositary Receipts. The Fund mostly invests in mature markets, but may also
invest in emerging markets. The Fund emphasizes companies with a market
capitalization of at least $250 million.
International Netnet Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by using a growth strategy to invest primarily in foreign companies
engaged in the Internet or Intranet related business. Under normal market
conditions, the Fund will invest at least 65% of its total assets in equity
securities of foreign companies that are engaged in the research, design,
development, manufacturing or engaged to a significant extent in the business
of distributing products, processes or services for use with the Internet or
Intranet related businesses.
Micro-Cap Equity Fund
The Fund's goal is to provide capital appreciation. The Fund pursues its goal
by investing at least 65% of its assets in equity securities of micro-
capitalization companies having market capitalizations within the range of the
companies in the Wilshire Micro-Cap Index. There is no limit on the length of
operating history for the companies in which the Fund may invest. The Fund may
invest without limit in initial public offerings of small capitalization
companies. In addition, the Fund may invest up to 35% of its assets in equity
securities of medium and larger capitalization companies, including initial
public offerings of such companies.
13
<PAGE>
Multi-Season Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities. The Fund
generally invests in equity securities of companies with market capitalizations
over $1 billion. Its style, which focuses on both growth prospects and
valuation, is known as GARP (Growth at a Reasonable Price) and seeks to produce
attractive returns during various market environments.
NetNet Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing primarily in companies engaged in the Intranet and
Internet related business. Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of companies that are
engaged in research, design, development, manufacturing or engaged to a
significant extent in the business of distributing products, processes or
services for use with Internet or Intranet related businesses.
Real Estate Equity Investment Fund
The Fund's goal is to provide both capital appreciation and current income. The
Fund pursues its goal by investing at least 65% of its total assets in equity
securities of U.S. companies which are principally engaged in the real estate
industry.
Small-Cap Value Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of small
capitalization companies having market capitalizations within the range of the
companies in the Russell 2000 Index. The advisor will concentrate on companies
that it believes are undervalued.
Small Company Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing, under normal market conditions, at least 65% of its
assets in equity securities of small capitalization companies with market
capitalizations below $1.5 billion.
Framlington Emerging Markets Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of
companies in emerging market countries, as defined by the World Bank, the
International Finance Corporation, the United Nations or the European Bank for
Reconstruction and Development. It may also invest in foreign securities of
companies located in countries with mature markets.
Framlington Global Financial Services Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of U.S.
and foreign companies which are principally engaged in the financial services
industry and companies providing services primarily within the financial
services industry. The Fund focuses specifically on companies which are likely
to benefit from growth or consolidation in the financial services industry. The
Fund may invest in securities of companies located in countries with mature
markets and in those with emerging markets.
Framlington Healthcare Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing in equity securities of companies providing healthcare
and medical services and products worldwide. Currently, most of these companies
are located in the United States. The Fund's investments may include foreign
securities of companies located in countries with mature markets and in those
with emerging markets.
Framlington International Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of
issuers located in at least three foreign countries. The Fund may invest in
companies located in countries with mature markets and in those with emerging
markets.
Income Funds
Bond Fund
The Fund's primary goal is to provide a high level of current income. Its
secondary goal is capital appreciation. The Fund pursues its goals by investing
at least 65% of its total assets in a broad range of bonds and other fixed
income securities. The Fund's dollar-weighted average maturity will generally
range between six and fifteen years. The Fund will purchase only fixed income
securities that are rated
14
<PAGE>
investment grade or better, or if unrated, are of comparable quality.
Intermediate Bond Fund
The Fund's goal is to provide a competitive rate of return which, over time,
exceeds the rate of inflation and the return provided by money market
instruments. The Fund pursues its goals by investing at least 65% of its total
assets in a broad range of bonds and other fixed income securities. The Fund's
dollar-weighted average maturity will generally range between three and eight
years. The Fund will purchase only fixed income securities that are rated
investment grade or better, or if unrated, are of comparable quality.
International Bond Fund
The Fund's goal is to realize a competitive total return through a combination
of current income and capital appreciation. The Fund pursues its goal by
investing at least 65% of its total assets in a broad range of bonds and other
fixed income securities of foreign issuers. The Fund will invest in the
securities of issuers in at least three foreign countries. The Fund's dollar-
weighted average maturity will generally range between three and fifteen years.
The Fund may invest a portion of its assets in domestic obligations, including
U.S. Government securities and obligations of domestic banks and corporations.
U.S. Government Income Fund
The Fund's goal is to provide high current income. The Fund pursues its goal by
investing at least 65% of its total assets in a broad range of U.S. Government
securities and repurchase agreements relating to such securities. The Fund's
dollar-weighted average maturity generally will range between six and fifteen
years.
Money Market Funds
Cash Investment Fund
The Fund's primary goal is to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments. The Fund invests solely in U.S. dollar-
denominated debt securities with remaining maturities of 13 months or less and
maintains an average dollar-weighted portfolio maturity of 90 days or less.
Institutional Money Market Fund
The Fund's primary goal is to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments. The Fund invests solely in U.S. dollar-
denominated debt securities with remaining maturities of 13 months or less and
maintains an average dollar-weighted portfolio maturity of 90 days or less.
U.S. Treasury Money Market Fund
The Fund's goal is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal. The Fund
pursues its goal by investing its assets solely in short-term bills and notes,
issued by the U.S. Treasury (including "stripped" securities) and in repurchase
agreements relating to such obligations. The Fund invests solely in U.S.
dollar-denominated debt securities with remaining maturities of 13 months or
less and maintains an average dollar-weighted portfolio maturity of 90 days or
less.
Principal Investment Strategies and Risks
Foreign Investment Risk. Certain underlying funds may invest in foreign
securities. Foreign securities include investments in non-U.S. dollar-
denominated securities traded outside of the United States and dollar-
denominated securities of foreign issuers traded in the United States. Foreign
securities also include American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") and Global Depository Receipts ("GDRs"). ADRs are
U.S. dollar-denominated receipts representing shares of foreign-based
corporations. ADRs are issued by U.S. banks or trust companies, and entitle the
holder to all dividends and capital gains that are paid out on the underlying
foreign shares. EDRs and GDRs are receipts issued by non-U.S. financial
institutions that often trade on foreign exchanges. They represent ownership in
an underlying foreign or U.S. security and are generally denominated in a
foreign currency.
Special Risks. Foreign securities involve special risks and costs.
Investment in the securities of foreign governments involves the risk that
foreign governments may default on their obligations or may otherwise not
respect the integrity of their debt.
15
<PAGE>
Investments in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of taxes by foreign governments. Foreign investments may
also involve risks associated with the level of currency exchange rates,
less complete financial information about the issuers, less market
liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls or
freezes on the convertibility of currency, or the adoption of other
governmental restrictions might adversely affect an investment in foreign
securities. Additionally, foreign issuers may be subject to less stringent
regulation, and to different accounting, auditing and recordkeeping
requirements.
Currency exchange rates may fluctuate significantly over short periods of
time causing an underlying fund's net asset value to fluctuate as well. A
decline in the value of a foreign currency relative to the U.S. dollar will
reduce the value of a foreign currency-denominated security. To the extent
that an underlying fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined risk.
The underlying funds' respective net currency positions may expose them to
risks independent of their securities positions.
Additional risks are involved when investing in countries with emerging
economies or securities markets. In general, the securities markets of
these countries are less liquid, are subject to greater price volatility,
have smaller market capitalizations and may have problems with securities
registration and custody. In addition, because the securities settlement
procedures are less developed in these countries, an underlying fund may be
required to deliver securities before receiving payment and may also be
unable to complete transactions during market disruptions. As a result of
these and other risks, investments in these countries generally present a
greater risk of loss to the Fund.
A further risk of investing in foreign securities is the risk that an
underlying fund may be adversely affected by the conversion of certain
European currencies into the Euro. This conversion, which is underway, is
scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in world capital
markets and affect European capital markets in particular.
Investment Grade Credit Risk. A security is considered investment grade if, at
the time of purchase, it is rated:
. BBB or higher by S&P;
. Baa or higher by Moody's;
. BBB or higher by Duff & Phelps; or
. BBB or higher by Fitch.
A security will be considered investment grade if it receives one of the above
ratings, even if it receives a lower rating from other rating organizations.
Investment Strategy. Except as stated in the next section, fixed income and
convertible securities purchased by the underlying funds will generally be
rated at least investment grade. The underlying funds may also invest in
unrated securities if the advisor or sub-advisor believes they are
comparable in quality.
Special Risks. Although securities rated "BBB" by S&P, Duff & Phelps or
Fitch, or "Baa" by Moody's are considered investment grade, they have
certain speculative characteristics. Therefore, they may be subject to a
higher risk of default than obligations with higher ratings. Subsequent to
its purchase by an underlying fund, a rated security may cease to be rated
or its rating may be reduced below the minimum rating required for purchase
by the underlying fund. The adviser or sub-advisor will consider such an
event in determining whether the underlying fund should continue to hold
the security.
Investments in Financial Services Companies by Framlington Global Financial
Services Fund. Financial services companies are subject to extensive
governmental regulation which may limit
16
<PAGE>
both the financial commitments they can make, and the interest rates and fees
they can charge. Insurance companies may be subject to severe price
competition.
Investments in the Healthcare Industry by Framlington Healthcare Fund. The
Framlington Healthcare Fund will invest most of its assets in the healthcare
industry, which is particularly affected by rapidly changing technology and
extensive government regulation, including cost containment measures.
Investments in the Real Estate Industry by Real Estate Equity Investment
Fund. The Real Estate Equity Investment Fund will invest primarily in the real
estate industry and may invest more than 25% of its assets in any one sector of
the real estate industry. As a result, the Real Estate Equity Investment Fund
will be particularly vulnerable to declines in real estate prices and new
construction rates.
Investments by the NetNet Fund. The NetNet Fund will invest primarily in
companies engaged in Internet and Intranet related activities. The value of
such companies is particularly vulnerable to rapidly changing technology,
extensive government regulation and relatively high risks of obsolescence
caused by scientific and technological advances. The value of the Fund's shares
may fluctuate more than shares of a fund investing in a broader range of
industries.
Investments in the Technology Industry by Future Technology Fund. The Future
Technology Fund will invest most of its assets in the technology industry,
which is particularly affected by rapidly changing 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.
Short-Term Trading. The underlying funds may engage in short-term trading,
including initial public offerings.
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could detract
from a Fund's performance.
Defensive Investing. Each Fund and underlying fund (except the Index 500 Fund)
may invest all or any portion of its assets in short-term obligations as a
temporary defensive measure in response to adverse market or economic
conditions.
Special Risks. If a Fund or one or more underlying funds adopts a defensive
strategy, the Fund may not achieve its investment objective.
Other Investment Strategies and Risks Of The Funds and Underlying Funds
Asset-Backed Securities. Asset-backed securities are debt securities backed by
mortgages, installment sales contract and credit card receivables. The
securities are sponsored by entities such as government agencies, banks,
financial companies and commercial or industrial companies. In effect, these
securities "pass through" the monthly payments that individual borrowers make
on their mortgage or other assets net of any fees paid to the issuers. Examples
of these include guaranteed mortgage pass-through certificates, collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").
Special Risks. In addition to credit and market risk, asset-backed
securities involve repayment risk because the underlying assets (loans) may
be prepaid at any time. The value of these securities may also change
because of actual or perceived changes in the creditworthiness of the
originator, the servicing agent, the financial institution providing the
credit support, or the counterparty. Like other fixed income securities,
when interest rates rise the value of an asset-backed security generally
will decline. However, when interest rates decline, the value of an asset-
backed security with prepayment features may not increase as much as that
of other fixed income securities. In addition, non-mortgage asset-backed
securities involve certain risks not presented by mortgage-backed
securities. Primarily, these securities do not have the benefit of the same
security interest in the underlying collateral.
Borrowing and Reverse Repurchase Agreements. The Funds and underlying funds can
borrow money from banks and enter into reverse repurchase agreements with banks
and other financial
17
<PAGE>
institutions. Reverse repurchase agreements involve the sale of securities held
by a Fund (or underlying fund) subject to the Fund's (or underlying fund)
agreement to repurchase them at a mutually agreed upon date and price
(including interest).
Investment Strategy. Each Fund (or underlying fund) may borrow money in an
amount up to 5% of its assets for temporary emergency purposes and in an
amount up to 33 1/3% of its assets to meet redemptions. This is a
fundamental policy which can be changed only by shareholders.
Special Risks. Borrowings and reverse repurchase agreements by a Fund (or
underlying fund) may involve leveraging. If the securities held by the Fund
(or underlying fund) decline in value while these transactions are
outstanding, the Fund's net asset value will decline in value by
proportionately more than the decline in value of the securities. In
addition, reverse repurchase agreements involve the risks that the interest
income earned by the Fund (or underlying fund) (from the investment of the
proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by the Fund (or underlying fund)
will decline below the price the Fund (or underlying fund) is obligated to
pay to repurchase the securities, and that the securities may not be
returned to the Fund (or underlying fund).
Derivative Risk. Some underlying funds may purchase certain "derivative"
instruments. Derivatives are financial contracts whose value is based on an
underlying security, a currency exchange rate, an interest rate or a market
index. Many types of instruments representing a wide range of potential risks
and rewards are derivatives, including futures contracts options on futures
contracts, options, forward currency contracts and structured debt obligations
(including collateralized mortgage obligations and other types of asset-backed
securities, "stripped" securities and various floating rate instruments).
Investment Strategy. Derivatives can be used for hedging (attempting to
reduce risk by offsetting one investment position with another) or
speculation (taking a position in the hope of increasing return). The
underlying funds may, but are not required to, use derivatives for hedging
purposes or for the purpose of remaining fully invested or maintaining
liquidity. The underlying funds will not use derivatives for speculative
purposes.
Special Risks. The use of derivative instruments exposes a Fund to
additional risks and transaction costs. Risks of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the direction that a portfolio manager
anticipates; (2) imperfect correlation between the price of derivative
instruments and movements in the prices of the securities, interest rates
or currencies being hedged; (3) the fact that skills needed to use these
strategies are different than those needed to select portfolio securities;
(4) the possible absence of a liquid secondary market for any particular
instrument and possible exchange imposed price fluctuation limits, either
of which may make it difficult or impossible to close out a position when
desired; (5) the risk that adverse price movements in an instrument can
result in a loss substantially greater than the underlying fund's initial
investment in that instrument (in some cases, the potential loss is
unlimited); (6) particularly in the case of privately-negotiated
instruments, the risk that the counterparty will not perform its
obligations, which could leave the underlying fund worse off than if it had
not entered into the position; and (7) the inability to close our 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 underlying fund is required to hedge its foreign currency positions.
Special Risks. Forward currency contracts are privately negotiated
transactions, and can have substantial price volatility. When used for
18
<PAGE>
hedging purposes, they tend to limit any potential gain that may be
realized if the value of an underlying fund's foreign holdings increases
because of currency fluctuations.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When an underlying fund purchases an option on
a futures contract, it has the right to assume a position as a purchaser or
seller of a futures contract at a specified exercise price during the option
period. When an underlying fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the option is
exercised.
Investment Strategy. The underlying funds may invest in futures contracts
and options on futures contracts on domestic or foreign exchanges or boards
of trade. These instruments may be used for hedging purposes, to maintain
liquidity to meet potential shareholder redemptions, to invest cash
balances or dividends, or to minimize trading costs.
An underlying fund will not purchase or sell a futures contract unless,
after the transaction, the sum of the aggregate amount of margin deposits
on its existing futures positions and the amount of premiums paid for
related options used for non-hedging purposes is 5% or less of the
underlying fund's total assets.
Special Risks. Futures contracts and related options present the following
risks: imperfect correlation between the change in market value of an
underlying fund's securities and the price of futures contracts and
options; the possible inability to close a futures contract when desired;
losses due to unanticipated market movements, which are potentially
unlimited; and the possible inability of the advisor or sub-advisor to
correctly predict the direction of securities prices, interest rates,
currency exchange rates and other economic factors.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. Each underlying fund may invest up to 15% of its net
assets in securities that are illiquid.
Special Risks. To the extent that an underlying fund invests in illiquid
securities, the underlying fund risks not being able to sell the securities
at the time and the price that it would like. The underlying fund may have
to lower the price, sell substitute securities or forego an investment
opportunity, each of which may cause a loss to the underlying fund.
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. The underlying funds may write (sell) covered call
options, buy put options, buy call options and write secured put options
for hedging purposes. Options may relate to particular securities, foreign
or domestic securities indices, financial instruments or foreign
currencies.
Special Risks. The value of options can be highly volatile, and their use
can result in loss if the advisor or sub-advisor is incorrect in its
expectation of price fluctuations. The successful use of options for
hedging purposes also depends in part on the ability of the advisor or sub-
advisor to predict future price fluctuations and the degree of correlation
between the options and securities markets.
Securities Lending. In order to generate additional income, each underlying
fund may lend securities on a short-term basis to qualified institutions. By
reinvesting any cash collateral it receives in these transactions, the
underlying fund could realize additional income gains or losses.
Investment Strategy. Securities lending may represent no more than 25% of
the value of an underlying fund's total assets (including the loan
collateral).
Special Risks. The main risk when lending securities is that if the
borrower fails to return the securities or the invested collateral has
declined in value, the underlying fund could lose money.
Stripped Securities. These securities are issued by the U.S. Government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
19
<PAGE>
obligations include participations in trusts that hold U.S. Treasury or agency
securities.
Special Risks. Stripped securities are very sensitive to changes in
interest rates and to the rate of principal repayments. A rapid or
unexpected increase in mortgage prepayments could severely depress the
price of certain stripped mortgage-backed securities and adversely affect
an underlying fund's total returns.
Temporary Investments. Short-term obligations refer to U.S. Government
securities, high-quality money market instruments and repurchase agreements
with maturities of 13 months or less. Generally, these obligations are
purchased to provide stability and liquidity to a Fund or underlying fund.
Investment Strategy. Each Fund or underlying fund may invest a portion of
its assets in short-term obligations pending investment or to meet
anticipated redemption requests.
Special Risks. A Fund or underlying fund may not achieve its investment
objective when its asset are invested in short-term obligations.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
instruments include variable amount master demand notes.
Special Risks. Variable and floating rate instruments are subject to the same
risks as fixed income investments, particularly interest rate and credit risk.
Because there is no active secondary market for certain variable and floating
rate instruments, they may be more difficult to sell if the issuer defaults on
its payment obligations or during periods when an underlying fund is not
entitled to exercise its demand rights. As a result, the underlying fund could
suffer a loss with respect to these instruments.
Zero Coupon Bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity.
Special Risks. The market prices of zero coupon bonds generally are more
volatile than the market prices of interest-bearing securities and are
likely to respond to a greater degree to changes in interest rates than
interest-bearing securities having similar maturities and credit quality.
An underlying fund's investments in zero coupon bonds may require the
underlying fund to sell some of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements.
Disclaimers
The Institutional S&P 500 Index Equity Fund is not sponsored, endorsed, sold or
promoted by S&P, nor does S&P guarantee the accuracy and/or completeness of the
S&P 500(R) Index or any data included therein. S&P makes no warranty, express
or implied, as to the results to be obtained by the Fund, owners of the Fund,
any person or any entity from the use of the S&P 500(R) Index or any data
included therein. S&P makes no express or implied warranties and expressly
disclaims all such warranties of merchantability or fitness for a particular
purpose for use with respect to the S&P(R) Index or any data included therein.
20
<PAGE>
Your Investment
-------------------------------------------------------------------------------
This section describes how to do business with the Funds.
How To Reach The Funds
By telephone: 1-800-438-5789
Call for shareholder services.
By mail: The Munder Funds
c/o PFPC Global Fund Services
P.O. Box 60428
King of Prussia, PA 19406-0428.
Purchasing Shares
Purchase Price of Shares
Class A shares of a Fund are sold at the NAV next determined after a purchase
order is received in proper form plus any applicable sales charge. Please see
"Distribution Arrangements" below for information about sales charges.
Class B shares of a Fund are sold at NAV next determined after a purchase
order is received in proper form.
Broker-dealers or financial advisors (other than the Funds' distributor) may
charge you additional fees for shares you purchase through them.
Policies for Purchasing Shares
Investment minimums
. Initial: $250
. Subsequent: $50
. Automatic Investment Plan: $50
Purchases over $250,000 must be for Class A shares.
Timing of orders
Purchase orders must be received by the Funds' distributor, 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 and/or Financial Advisor. Any broker or financial advisor
authorized by the Funds' distributor can sell you shares of the Funds.
Please note that brokers or financial advisors 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
PFPC Global Fund Services, P.O. Box 60428, King of Prussia, Pennsylvania
19406-0428. Be sure to specify on your account application form the class of
shares being purchased. If the class is not specified, your purchase will
automatically be invested in Class A shares. For additional investments,
send a letter stating the Fund and share class you wish to purchase, your
name and your account number with a check for $50 or more to the address
listed above. We do not accept third party checks.
. By Wire. To open a new account, you should call the Funds at (800) 438-5789
to obtain an account number and complete wire instructions prior to wiring
any funds. Within seven days of purchase, you must send a completed account
application form containing your certified taxpayer identification number to
the Funds' transfer agent at The Munder Funds, c/o PFPC Global Fund
Services, 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.
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<PAGE>
Exchanging Shares
Policies for Exchanging Shares
. You may exchange Fund shares for shares of the same class of other Munder
Funds based on their relative net asset values.
. You may acquire shares of Funds by exchanging shares of the same class of
other Munder Funds.
. You may also acquire Class A shares of the Funds by exchanging Class K shares
of other Munder Funds. Class A shares of the Funds acquired in this manner
may be exchanged for Class K shares of other Munder Funds, but they may not
be exchanged for Class A shares of other Munder Funds.
. Class A shares of a Munder money market fund that were (1) acquired through
the use of the exchange privilege and (2) can be traced back to a purchase of
shares in one or more Munder Funds for which a sales charge was paid, can be
exchanged for Class A shares of a Fund.
. Class B shares will continue to age from the date of the original purchase
and will retain the same CDSC rate as they had before the exchange.
. You must meet the minimum purchase requirements for the Munder Fund of that
you purchase by exchange.
. If you are exchanging into shares of a Munder Fund with a higher sales
charge, you must pay the difference at the time of the exchange.
. A share exchange is a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund you
wish to purchase by exchange. You can obtain a prospectus for any Munder Fund
by contacting your broker or calling the Munder Funds at (800) 438-5789.
. Brokers or financial advisors may charge you a fee for handling exchanges.
. We may change, suspend or terminate the exchange privilege at any time. You
will be given notice of any material modifications except where notice is not
required.
Methods for Exchanging Shares
. Exchanges By Telephone. You may give exchange instructions by telephone to
the Funds at (800) 438-5789. You may not exchange shares by telephone if you
hold share certificates. We reserve the right to reject any telephone
exchange request and to place restrictions on telephone exchanges.
. Exchanges By Mail. You may send exchange orders to your broker, your
financial advisor or you may send them directly to the Funds' transfer agent
at The Munder Funds, c/o PFPC Global Fund Services, 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 medallion 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; (d) if the redemption proceeds are being transferred to another
Munder Fund account with a different registration; (e) change in ownership or
registration of the account or (f) changes to banking information without a
voided check being supplied. When a Fund requires a signature guarantee, a
medallion signature guarantee must be provided. A medallion signature
guarantee may be obtained from a domestic bank or trust company, broker,
dealer, clearing agency, savings association, or other financial institution
which is participating in a medallion program recognized by the Securities
Transfer Association. The three recognized medallion programs are Securities
Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program
(SEMP) and
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<PAGE>
New York Stock Exchange, Inc. Medallion Signature Program (NYSE MSP).
Signature guarantees from financial institutions which are not participating
in one of these programs will not be accepted.
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 PFPC
Global Fund Services, 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, your
financial advisor or calling the Funds at (800) 438-5789. There is no minimum
requirement for telephone redemptions.
If you are redeeming at least $1,000 of shares and you have authorized
expedited redemption on your account application form, simply call the Funds
prior to 4:00 p.m. (Eastern time), and request the redemption proceeds be
mailed to the commercial bank, registered broker-dealer or financial advisor
you designated on your account application form. We will send your redemption
proceeds to you on the next business day. We reserve the right at any time to
change or impose fees for this expedited redemption procedure.
During periods of unusual economic or market activity, you may experience
difficulties or delays in effecting telephone redemptions. In such cases you
should consider placing your redemption request by mail.
. You may redeem shares through the Automatic Withdrawal Plan.
Additional Policies For Purchases, Exchanges And Redemptions
. We consider orders to be in "proper form" when all required documents are
properly completed, signed and received.
. The Funds reserve the right to reject any purchase order.
. At any time, the Funds may change any of their purchase or redemption
procedures, and may suspend the sale of their shares.
. The Funds may delay sending redemption proceeds for up to seven days, or
longer if permitted by the Securities and Exchange Commission.
. We will typically send redemption amounts to you within seven business days
after you redeem shares. We may hold redemption amounts from the sale of
shares you purchased by check until the purchase check has cleared, which may
be as long as 15 days.
. To limit the Funds' expenses, we 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; or
. the Securities and Exchange Commission orders the Funds to suspend
redemptions.
. The Funds reserve the right to make payment for redeemed shares wholly or in
part by giving the redeeming shareholder portfolio securities. The
shareholder may pay transaction costs to dispose of these securities.
. We record all telephone calls for your protection and take measures to
identify the caller. As long as the Funds' transfer agent takes reasonable
measures to authenticate telephone requests on an investor's account, neither
the Funds, the Funds' distributor nor the transfer agent will be held
responsible for any losses resulting from unauthorized transactions.
. We may redeem your account if its value falls below $250 as a result of
redemptions (but not as a result of a decline in NAV). You will be notified
in writing and allowed 60 days to increase the value of your account to the
minimum investment level.
. If you purchased shares directly from the Funds, the Funds' transfer agent
will send you confirmations of the opening of an account and of all
subsequent purchases, exchanges or
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<PAGE>
redemptions in the account. If your account has been set up by a broker,
financial advisor or other investment professional, account activity will be
detailed in their statements to you.
. The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and have
an adverse effect on all shareholders. Each Fund and its distributor reserve
the right to refuse any purchase or exchange request that could adversely
affect the fund or its operations, including those from any individual or
group who, in the Fund's view, is likely to engage in excessive trading or
any order considered market-timing activity. If a Fund refuses a purchase or
exchange request and the shareholder deems it necessary to redeem their
account, any CDSC as permitted by the prospectus will be applicable.
Additionally, in no event will any Fund permit more than six exchanges into
or out of a Fund in any one-year period per account, tax identification
number, social security number or related investment group. The Munder Money
Market Funds are exempt from this policy.
Shareholder Privileges
Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in a Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Funds at (800) 438-5789. The minimum pre-authorized investment amount
is $50. You may discontinue the AIP at any time. We may discontinue the AIP on
30 days' written notice to you.
Reinvestment Privilege. For 60 days after you sell shares of a Fund, you may
reinvest your redemption proceeds in shares of the same class of the SAME Fund
at NAV. Any CDSC you paid on the amount you are reinvesting will be credited to
your account. You may use this privilege once in any given twelve-month period
with respect to your shares of a Fund. You, your broker or financial advisor
must notify the Funds' transfer agent in writing at the time of reinvestment in
order to eliminate the sales charge on your reinvestment.
Automatic Withdrawal Plan (AWP). If you have an account value of $2,500 or more
in a Fund, you may redeem shares on a monthly, quarterly, semi-annual or annual
basis. The minimum withdrawal is $50. We usually process withdrawals on the
20th day of the month and promptly send you your redemption amount. You may
enroll in the AWP by completing the AWP application form available through the
Funds' transfer agent. To participate in the AWP you must have your dividends
automatically reinvested and may not hold share certificates. You may change or
cancel the AWP at any time upon notice to the Funds' transfer agent. You should
not buy Class A shares (and pay a sales charge) while you participate in the
AWP and you must pay any applicable CDSC when you redeem shares.
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<PAGE>
Distribution Arrangements
--------------------------------------------------------------------------------
Share Class Selection
Each Fund offers Class A and Class B shares. Each class has its own cost
structure, allowing you to choose the one that best meets your requirements
given the amount of your purchase and the intended length of your investment.
You should consider both ongoing annual expenses and initial sales charge or
CDSC in estimating the costs of investing in a particular class of shares.
Class A shares
. Front end sales charge. There are several ways to reduce these sale charges.
. Lower annual expenses than Class B shares.
Class B shares
. No front end sales charge. All your money goes to work for you right away.
. Higher annual expenses than Class A shares.
. A CDSC on shares you sell within six years of purchase.
. Automatic conversion to Class A shares approximately six years after
issuance, thus reducing future annual expenses.
. CDSC is waived for certain redemptions.
Each Fund also issues Class Y shares, which have different sales charges,
expense levels and performance. Class Y shares are available to limited types
of investors. Call (800) 438-5789 to obtain more information about Class Y
shares.
Applicable Sales Charge--Class A Shares
You can purchase Class A shares at NAV plus an initial sales charge. The sales
charge as a percentage of your investment decreases as the amount you invest
increases. The current sales charge rates and commissions paid to selected
dealers as follows:
<TABLE>
<CAPTION>
Sales Charge as Dealer
a Percentage of Reallowance
---------------- as a
Net Percentage of
Your Asset the Offering
Investment Value Price
---------- ----- -------------
<S> <C> <C> <C>
Less than $25,000................................ 5.50% 5.82% 5.00%
$25,000 but less than $50,000.................... 5.25% 5.54% 4.75%
$50,000 but less than $100,000................... 4.50% 4.71% 4.00%
$100,000 but less than $250,000.................. 3.50% 3.63% 3.25%
$250,000 but less than $500,000.................. 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000................ 1.50% 1.52% 1.25%
$1,000,000 or more............................... None* None* (see below)**
</TABLE>
--------
* No initial sales charge applies on investments of $1 million or more.
However, a CDSC of 1% is imposed on certain redemptions within one year of
purchase.
** The Distributor will pay a 1% commission to dealers who initiate and are
responsible for purchases of $1 million or more.
Sales Charge Waivers--General
We will waive the initial sales charge on Class A shares for the following
types of purchasers (the word "advisor" in the following refers to Munder
Capital Management the advisor to the Munder Funds):
1. individuals with an investment account or relationship with the advisor;
2. full-time employees and retired employees of the advisor or its affiliates,
employees of the Funds' service providers and immediate family members of such
persons;
3. registered broker-dealers or financial advisors that have entered into
selling agreements with the Fund's distributor, for their own accounts or for
retirement plans for their employees or sold to registered representatives for
full-time employees (and their families) that certify to the distributor at the
time of purchase that such purchase is for their own account (or for the
benefit of their families);
4. certain qualified employee benefit plans as described below;
5. individuals who reinvest a distribution from a qualified retirement plan for
which the advisor serves as investment advisor;
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<PAGE>
6. individuals who reinvest the proceeds of redemptions from Class Y Shares of
another Munder Fund, within 60 days of redemption;
7. banks and other financial institutions that have entered into agreements
with the Munder Funds to provide shareholder services for customers (including
customers of such banks and other financial institutions, and the immediate
family members of such customers);
8. fee-based financial planners or employee benefit plan consultants acting for
the accounts of their clients;
9. employer sponsored retirement plans which are administered by Universal
Pensions, Inc. (UPI Plans); and
10. employer sponsored 401(k) plans that are administered by Merrill Lynch
Group Employee Services (Merrill Lynch Plans) which meet the criteria described
below under "Sales Charge Waivers--Qualified Employer Sponsored Retirement
Plans."
Sales Charge Waivers--Qualified Employer Sponsored Retirement Plans
We will waive the initial sales charge on purchases of Class A shares by
employer sponsored retirement plans that are qualified under Section 401(a) or
Section 403(b) of the Internal Revenue Code (each, a Qualified Employee Benefit
Plan) and that (1) invest $1,000,000 or more in Class A shares offered by The
Munder Funds or (2) have at least 75 eligible plan participants.
In addition, we will waive the CDSC of 1% charged on certain redemptions within
one year of purchase for Qualified Employee Benefit Plan purchases that meet
the above criteria. A 1% commission will be paid by the distributor to dealers
and other entities (as permitted by applicable Federal and state law) who
initiate and are responsible for Qualified Employee Benefit Plan purchases that
meet the above criteria. This sales charge waiver does not apply to Simplified
Employee Pension Plans (SEPs), Individual Retirement Accounts (IRAs), UPI Plans
and Merrill Lynch Plans.
UPI Plans. We also will waive (i) the initial sales charge on Class A shares
purchased by UPI Plans for employees participating in an employer-sponsored or
administered retirement program operating under Section 408A of the Internal
Revenue Code and (ii) the CDSC of 1% imposed on certain redemptions within one
year of purchase for these accounts. The distributor will pay a 1% commission
to dealers and others (as permitted by applicable Federal and state law) who
initiate and are responsible for UPI Plan purchases.
Merrill Lynch Plans. We will waive the initial sales charge for all investments
by Merrill Lynch Plans if
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch Group
Employee Services (Merrill Lynch) and, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million
or more in assets invested in broker/dealer funds not advised or managed by
Merrill Lynch Asset Management, L.P. (MLAM) that are made available
pursuant to a Services Agreement between Merrill Lynch and the Fund's
distributor and in funds advised or managed by MLAM (collectively, the
Applicable Investments); or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch, and on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in Applicable
Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the Merrill
Lynch plan conversion manager, on the date the plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement.
For further information on sales charge waivers, call (800) 438-5789.
Sales Charge Reductions
You may qualify for reduced sales charges in the following cases:
. Letter of Intent. If you intend to purchase at least $25,000 of Class A
shares of the Funds you may wish to complete the Letter of Intent section of
your account application form. By doing so, you agree to invest a certain
amount over a 13-month period. You would pay a sales charge on any Class A
shares you purchase during the 13
26
<PAGE>
months based on the total amount to be invested under the Letter of Intent.
You can apply any investments you made in any of the Munder Funds during the
preceding 90-day period toward fulfillment of the Letter of Intent (although
there will be no refund of sales charges you paid during the 90-day period).
You should inform the Funds' transfer agent that you have a Letter of Intent
each time you make an investment.
You are not obligated to purchase the amount specified in the Letter of
Intent. If you purchase less than the amount specified, however, you must pay
the difference between the sales charge paid and the sales charge applicable
to the purchases actually made. The Funds' custodian will hold such amount in
escrow. The custodian will pay the escrowed funds to your account at the end
of the 13 months unless you do not complete your intended investment.
. Quantity Discounts. You may combine purchases of Class A shares that are made
by you, your spouse, your children under age 21 and your IRA when calculating
the sales charge. You must notify your broker, your financial advisor or the
Funds' transfer agent to qualify.
. Right of Accumulation. You may add the value of any other Class A shares of
non-money market Munder Funds you already own to the amount of your next
Class A share investment for purposes of calculating the sales charge at the
time of the current purchase. You must notify your broker, your financial
advisor or the Funds' transfer agent to qualify.
Certain brokers or financial advisors may not offer these programs or may
impose conditions or fees to use these programs. You should consult with your
broker or your financial advisor prior to purchasing the Funds' shares.
For further information on sales charge reductions, call (800) 438-5789.
Cdsc
You pay a CDSC when you redeem:
. Class A shares that were bought as part of an investment of at least $1
million within one year of buying them;
. Class B shares within six years of buying them.
These time periods include the time you held Class B shares of another Munder
Fund which you may have exchanged for Class B shares of the Fund you are
redeeming.
The CDSC schedule for Class B shares is set forth below. Consult the Statement
of Additional Information for the CDSC schedule for Class B shares acquired
through an exchange of shares purchased on or before June 27, 1995. The CDSC is
based on the original NAV at the time of your investment or the NAV at the time
of redemption, whichever is lower. Shares purchased through reinvestment of
distributions are not subject to CDSC.
<TABLE>
<CAPTION>
Years Since Purchase CDSC
-------------------- -----
<S> <C>
First..................................................................... 5.00%
Second.................................................................... 4.00%
Third..................................................................... 3.00%
Fourth.................................................................... 3.00%
Fifth..................................................................... 2.00%
Sixth..................................................................... 1.00%
Seventh and thereafter.................................................... 0.00%
</TABLE>
If you sell some but not all of your shares, certain shares not subject to CDSC
(i.e., shares purchased with reinvested dividends) will be redeemed first,
followed by shares subject to the lowest CDSC (typically shares held for the
longest time).
For example, assume an investor purchased 1,000 shares at $10 a share (for a
total cost of $10,000). Three years later, the shares have a net asset value of
$12 per share and during that time, the investor acquired 100 additional shares
through dividend reinvestment. If the investor then makes one redemption of 500
shares (resulting in proceeds of $6,000, 500 shares x $12 per share), the first
100 shares redeemed will not be subject to the CDSC because they were acquired
through reinvestment of dividends. With respect to the remaining 400 shares
redeemed, the CDSC is charged at $10 per share (because the original purchase
price of $10 per share is lower than the current net asset value of $12 per
share). Therefore, only $4,000 of the $6,000 such investor received from
selling his or her shares will be subject to the CDSC, at a rate of 3.00% (the
applicable rate in the third year after purchase).
At the time of purchase of Class B shares, the Funds' distributor pays sales
commissions of 4.00% of the purchase price to brokers that initiate and are
responsible for purchases of such Class B shares.
27
<PAGE>
CDSC Waivers
We will waive the CDSC payable upon redemptions for:
. redemptions made within one year after the death of a shareholder or
registered joint owner;
. minimum required distributions made from an IRA or other retirement plan
account after you reach age 70 1/2;
. involuntary redemptions made by the Fund;
. redemptions limited to 10% per year of an account's net asset value if taken
by Systematic Withdrawal Plan ("SWP"). For example, if your balance on
December 31st is $10,000 you can redeem up to $1,000 that following year free
of charge through SWP.
We will waive the CDSC payable upon redemptions of shares which you purchased
after December 1, 1998 (or acquired through an exchange of shares of another
Munder Fund purchased after December 1, 1998) for:
. redemptions made from an IRA or other individual retirement plan account
established through Comerica Securities, Inc. after you reach age 59 1/2 and
after the eighteen month anniversary of the purchase of Fund shares.
Consult the Statement of Additional Information for Class B CDSC waivers which
apply when you redeem shares acquired through an exchange of shares of another
Munder Fund purchased on or before June 27, 1995.
We will waive the CDSC for Class B shares for all redemptions by Merrill Lynch
Plans if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch; or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch; or
(iii) the Plan has less than 500 eligible employees, as determined by the
Merrill Lynch plan conversion manager, on the date the plan sponsor signs
the Merrill Lynch Recordkeeping Service Agreement.
12b-1 Fees
The Funds have adopted Rule 12b-1 plans with respect to their Class A and Class
B shares that allow the Funds to pay distribution and other fees for the sale
of its shares and for services provided to shareholders. Under the plans, the
Funds may pay up to .25% of the daily net assets of Class A and Class B shares
to pay for certain shareholder services provided by institutions that have
agreements with the Funds' distributor to provide such services. The Funds may
also pay up to .75% of the daily net assets of the Class B shares to finance
activities relating to the distribution of its shares.
Because the fees are paid out of each Fund's assets on an on-going basis, over
time these fees will increase the cost of an investment in a Fund and may cost
a shareholder more than paying other types of sales charges.
Other Information
The advisor may, from time to time, make payments to banks, broker-dealers,
financial advisors or other financial institutions for certain services to the
Funds and/or their shareholders, including sub-administration, sub-transfer
agency and shareholder servicing. The advisor may make such payments out of its
own resources and there are no additional costs to the Funds or their
shareholders.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee
from the Funds for providing shareholder services to its customers who own
shares of the Funds.
28
<PAGE>
Pricing Of Fund Shares
--------------------------------------------------------------------------------
Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV is the value of a single share of a Fund.
The Funds calculate NAV as of the close of regular trading on the New York
Stock Exchange, normally 4:00 p.m. (Eastern time). If the New York Stock
Exchange closes early, the Funds will accelerate calculation of NAV and
transaction deadlines to that time.
The NAV of each underlying fund is generally based on the market value of the
securities held in the underlying fund. If market values are not available, the
fair value of securities is determined in good faith by, or using procedures
approved by, the boards of directors/trustees of the underlying funds.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. An underlying fund values foreign
securities at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the New York Stock Exchange. Certain
foreign currency exchange rates may also be determined at the latest rate prior
to the closing of the New York Stock Exchange. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at current rates.
Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the New York
Stock Exchange. If the advisor believes that such events materially affect the
value of portfolio securities, these securities may be valued at their fair
market value as determined in good faith by, or using procedures approved by,
the underlying funds' boards of directors/trustees.
Distributions
--------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of a Fund's net income and
gains on its investments. Each Fund passes substantially all of its earnings
along to its shareholders as distributions. When a Fund earns dividends from
stocks and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these
gains are distributed to shareholders, it is called a capital gain
distribution.
Each Fund pays dividends, if any, at least annually.
Each Fund distributes its net realized capital gains, if any, at least
annually.
It is possible that a Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
Each Fund will pay distributions in additional shares of the same class of that
Fund. If you wish to receive distributions in cash, either, indicate this
request on your account application form or notify the Funds at (800) 438-5789.
29
<PAGE>
Federal Tax Considerations
--------------------------------------------------------------------------------
Investments in a Fund may have tax consequences that you should consider. This
section briefly describes some of the more common federal tax consequences. A
more detailed discussion about the tax treatment of distributions from the
Funds and about other potential tax liabilities, including backup withholding
for certain taxpayers and about tax aspects of dispositions of shares of the
Funds, is contained in the Statement of Additional Information. You should
consult your tax adviser about your own particular tax situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. Shareholders not
subject to tax on their income generally will not be required to pay any tax on
distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held
the portfolio securities it sold. It does not depend on how long you held your
Fund shares.
Distributions are generally taxable to you in the year in which they are paid,
with one exception: distributions declared in October, November or December,
but not paid until January of the following year, are taxed as though they were
paid on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Funds will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Taxes On Sales Or Exchanges
If you sell shares of a Fund or exchange them for shares of another Munder
Fund, you generally will be subject to tax on any taxable gain. Taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale or an exchange will result in a taxable
gain.
Other Considerations
If you buy shares of a Fund just before the Fund makes any distribution, you
will pay the full price for the shares then receive back a portion of the money
you just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law, the
Funds must withhold a portion of your distributions and redemption proceeds to
pay federal income taxes.
30
<PAGE>
Management
--------------------------------------------------------------------------------
Investment Advisor
Munder Capital Management ("MCM"), 480 Pierce Street, Birmingham, Michigan
48009 is the investment advisor of each Fund and each underlying fund except
Institutional S&P 500 Index Equity Fund and International Equity Fund. The
advisors provide overall investment management for the Funds. As of March 31,
2000, MCM and its affiliates had approximately $62 billion in assets under
management, of which $39 billion were invested in equity securities, $7 billion
were invested in money market or other short-term instruments, $6 billion were
invested in other fixed income securities, $3 billion were invested in balanced
investment and $7 billion in non-discretionary assets.
World Asset Management ("World"), 255 East Brown Street, Birmingham, Michigan
48009, is the investment advisor of Institutional S&P 500 Index Equity Fund and
International Equity Fund. World is a wholly-owned subsidiary of the advisor.
As of March 31, 2000, World had approximately $22.7 billion in assets under
management, of which $17.6 billion were invested in domestic equity securities,
$4.5 billion were invested in international equity securities and $600 billion
were invested in other fixed income securities.
Framlington Overseas Investment Management Limited, and affiliate of the
advisor, is the sub-advisor of the Framlington Emerging Markets Fund,
Framlington Global Financial Services Fund, Framlington Healthcare Fund and
Framlington International Growth Fund.
During the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of the advisory fees for each Fund. Each Fund paid an advisory fee at
an annual rate of 0.10% of each Fund's average daily net assets (after
waivers). As a result, the payments shown for the Funds were less than the
contractual advisory fees of .35% of each Fund's average daily net assets.
Portfolio Managers
A committee of professional portfolio managers employed by MCM makes investment
decision for the Funds.
31
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand each
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in a Fund (assuming reinvestment of all dividends and
distributions). The information has been audited by Ernst & Young LLP,
independent auditors, whose report, along with each Fund's financial
statements, are included in the annual reports of the Funds, and are
incorporated by reference into the Statement of Additional Information. The
information for the period ended December 31, 1999 is unaudited. You may obtain
the semi-annual and annual reports without charge by calling (800) 438-5789.
<TABLE>
<CAPTION>
Conservative Fund (a)
Class A Shares
----------------------------------------
Period
Ended Year Period
12/31/99(d) Ended Ended
(Unaudited) 6/30/99(d) 6/30/98(d)
----------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.. $8.91 $11.10 $11.10
----- ------ ------
Income from investment operations:
Net investment income................. 0.15 0.25 0.14
Net realized and unrealized
gain/(loss) on investments........... 0.01 (0.40) (0.04)
----- ------ ------
Total from investment operations...... 0.16 (0.15) 0.10
----- ------ ------
Less distributions:
Dividends from net investment income.. (0.23) (1.33) (0.10)
Distributions in excess of net invest-
ment income.......................... - (0.05) -
Distributions from net realized gains. - (0.66) -
----- ------ ------
Total distributions................... (0.23) (2.04) (0.10)
----- ------ ------
Net asset value, end of period........ $8.84 $ 8.91 $11.10
----- ------ ------
Total return(c)....................... 1.83% (0.98%) 0.91%
===== ====== ======
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's).. $ 243 $ 190 $ 1
Ratio of operating expenses to average
net assets........................... 0.72%(b) 0.71% 0.93%(b)
Ratio of net investment income to av-
erage net assets..................... 3.48%(b) 2.79% 4.46%(b)
Portfolio turnover rate............... 86% 167% 31%
Ratio of operating expenses to average
net assets without waivers........... 11.02%(b) 6.26% 23.99%(b)
</TABLE>
--------
(a) The Munder All-Season Conservative Fund Class A Shares commenced operations
on March 13, 1998.
(b)Annualized.
(c) Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
(d) Per share numbers have been calculated using the average shares method.
32
<PAGE>
<TABLE>
<CAPTION>
Conservative Fund (a)
Class B Shares
----------------------------------------
Period
Ended Year Period
12/31/99(d) Ended Ended
(Unaudited) 6/30/99(d) 6/30/98(d)
----------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.. $8.94 $11.10 $10.74
----- ------ ------
Income from investment operations:
Net investment income................. 0.12 0.21 0.19
Net realized and unrealized
gain/(loss) on investments........... 0.04 (0.38) 0.23
----- ------ ------
Total from investment operations...... 0.16 (0.17) 0.42
----- ------ ------
Less distributions:
Dividends from net investment income.. (0.20) (0.22) (0.06)
Distributions in excess of net invest-
ment income.......................... - (1.11) -
Distributions from net realized gains. - (0.66) -
----- ------ ------
Total distributions................... (0.20) (1.99) (0.06)
----- ------ ------
Net asset value, end of period........ $8.90 $ 8.94 $11.10
----- ------ ------
Total return(c)....................... 1.80% (1.17%) 3.91%
===== ====== ======
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's).. $ 139 $ 199 $ 208
Ratio of operating expenses to average
net assets........................... 1.42%(b) 1.41% 1.63%(b)
Ratio of net investment income to av-
erage net assets..................... 2.78%(b) 2.21% 3.76%(b)
Portfolio turnover rate............... 86% 167% 31%
Ratio of operating expenses to average
net assets without waivers........... 11.74%(b) 6.96% 24.69%(b)
</TABLE>
--------
(a) The Munder All-Season Conservative Fund Class B Shares commenced operations
on January 14, 1998.
(b)Annualized.
(c) Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
(d) Per share numbers have been calculated using the average shares method.
33
<PAGE>
<TABLE>
<CAPTION>
Moderate Fund (a)
Class A Shares
-------------------------------------------
Period
Ended Year Year Period
12/31/99(d) Ended Ended Ended
(Unaudited) 6/30/99(d) 6/30/98(d) 6/30/97
----------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of pe-
riod............................ $12.30 $11.92 $11.02 $10.00
------ ------ ------ ------
Income from investment opera-
tions:
Net investment income............ 0.11 0.18 0.16 0.04
Net realized and unrealized
gain/(loss) on investments...... 1.00 0.60 1.44 0.98
------ ------ ------ ------
Total from investment operations. 1.11 0.78 1.60 1.02
------ ------ ------ ------
Less distributions:
Dividends from net investment in-
come............................ (0.21) (0.22) (0.18) -
Dividends in excess of net in-
vestment income................. - (0.03) - -
Distributions from net realized
gains........................... (0.57) (0.15) (0.52) -
------ ------ ------ ------
Total distributions.............. (0.78) (0.40) (0.70) -
------ ------ ------ ------
Net asset value, end of period... $12.63 $12.30 $11.92 $11.02
------ ------ ------ ------
Total return(b).................. 9.60% 6.74% 15.10% 10.20%
====== ====== ====== ======
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's).......................... $ 636 $ 432 $ 342 $ 214
Ratio of operating expenses to
average net assets.............. 0.69%(b) 0.66% 0.88% 0.85%(b)
Ratio of net investment income to
average net assets.............. 1.77%(b) 1.54% 1.38% 2.22%(b)
Portfolio turnover rate.......... 18% 115% 54% 5%
Ratio of operating expenses to
average net assets without
waivers......................... 2.36%(b) 2.54% 11.07% 41.36%(b)
</TABLE>
--------
(a) The Munder All-Season Moderate Fund Class A Shares commenced operations on
April 4, 1997.
(b)Annualized.
(c) Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
(d) Per share numbers have been calculated using the average shares method.
34
<PAGE>
<TABLE>
<CAPTION>
Moderate Fund (a)
Class B Shares
-----------------------------------------
Period
Ended Year Period
12/31/99(d) Ended Ended
(Unaudited) 6/30/99(d) 6/30/98(d)
----------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.. $12.29 $11.90 $11.14
------ ------ ------
Income from investment operations:
Net investment income................. 0.06 0.10 0.04
Net realized and unrealized
gain/(loss) on investments........... 1.02 0.60 0.74
------ ------ ------
Total from investment operations...... 1.08 0.70 0.78
------ ------ ------
Less distributions:
Dividends from net investment income.. (0.17) (0.13) (0.02)
Dividends in excess of net investment
income............................... - (0.03) -
Distributions from net realized gains. (0.57) (0.15) -
------ ------ ------
Total distributions................... (0.74) (0.31) (0.02)
------ ------ ------
Net asset value, end of period........ $12.63 $12.22 $11.09
------ ------ ------
Total return(b)....................... 9.30% 6.06% 6.96%
====== ====== ======
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's).. $ 274 $ 155 $ 193
Ratio of operating expenses to average
net assets........................... 1.39%(b) 1.36% 1.58%(b)
Ratio of net investment income to av-
erage net assets..................... 1.07%(b) 0.83% 0.68%(b)
Portfolio turnover rate............... 18% 115% 54%
Ratio of operating expenses to average
net assets without waivers........... 3.06%(b) 3.24% 11.77%(b)
</TABLE>
--------
(a) The Munder All-Season Moderate Fund Class B Shares commenced operations on
January 14, 1998.
(b)Annualized.
(c) Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
(d) Per share numbers have been calculated using the average shares method.
35
<PAGE>
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 market conditions and investment strategies that significantly
affected the Funds' performance during their 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
Write to:
The Munder Funds
c/o PFPC Global Fund Services
P.O. Box 60428
King of Prussia, PA 19406-0428
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. 20549-0102.
You may also obtain information, after paying a duplicating fee, by electronic
request at: [email protected]
You may also find more information about the Fund on the Internet at:
http://www.munderfunds.com
--------------------------------------------------------------------------------
The Munder Funds, Inc.
SEC file number: 811-7346
PROLIFEAB600
Investment Advisor: Munder Capital Management
Distributed by: Funds Distributor, Inc.
<PAGE>
CLASS Y SHARES
[MUNDER LOGO] Prospectus
Investments
for all seasons JUNE 29, 2000
Munder All-Season Conservative Fund
Munder All-Season Moderate 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
8 Who May Want To Invest
9 Fees And Expenses
10 More About The Funds
10 Glossary
11 Asset Allocation Chart
12 Description Of The Underlying Funds
14 Principal Investment Strategies And Risks
16 Other Investment Strategies And Risks Of The Funds And Underlying Funds
19 Disclaimers
20 Your Investment
20 How To Reach The Funds
20 Purchasing Shares
21 Exchanging Shares
21 Redeeming Shares
21 Additional Policies For Purchases, Exchanges And Redemptions
22 Shareholder Privileges
23 Pricing Of Fund Shares
23 Distributions
24 Federal Tax Considerations
24 Taxes On Distributions
24 Taxes On Sales Or Exchanges
24 Other Considerations
25 Management
25 Investment Advisor
25 Portfolio Managers
26 Financial Highlights
</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." Certain terms
used in this prospectus are defined in the Glossary.
Fund of Funds
Each Fund is a fund of funds,
which means that it invests almost
all of its assets in other mutual
funds, rather than in individual
securities. Each Fund invests its
assets in a variety of other
Munder Funds, referred to as
"underlying funds."
The risks of investing in the
Funds are dependent on which
underlying funds the Funds invest
in, and to what extent. In
addition, the investment
performance of each Fund is
directly related to the
performance of the underlying
funds in which it invests.
Investment Approach of the
Underlying Funds
. The underlying equity funds
represented in each Fund vary
from growth to value styles of
investing, from larger to
smaller company stocks and from
domestic to international
equities.
. The underlying fixed income
funds reflect the advisor's core
fixed income philosophy:
interest rate relationships,
sector weightings and credit
analysis. Some exposure to
international bonds may also be
included.
Conservative Fund
Goal
The Fund's goal is to provide current income with capital appreciation as a
secondary objective.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in fixed income securities.
The Fund may also invest a portion of its assets in underlying funds that
invest primarily in equity securities or money market instruments.
The advisor may periodically adjust the Fund's asset allocation among
underlying funds in response to changing economic and market conditions. The
typical allocation is expected to be: 70% Fixed Income Funds, 25% Equity Funds
and 5% Money Market Funds.
The Fund's indirect fixed income holdings are a mix of short-, intermediate-
and long-term U.S. government securities, mortgage and other asset-backed
securities, stripped securities and obligations of state, local and foreign
issuers. The average maturity will range from three to 15 years and the
portfolios' holdings will be rated investment grade or better or if unrated are
of comparable quality. The Fund's indirect stock holdings will be a combination
of large-cap, mid-cap and small-cap U.S. stocks as well as foreign stocks.
In the "More About the Funds" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
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.
Among the principal risks of investing in the Fund are:
. Interest Rate Risk. Increases in prevailing interest rates will cause fixed-
income securities held by an underlying fund to decline in value. Longer term
bonds are generally more sensitive to interest rate changes than shorter term
bonds.
2
<PAGE>
Generally, the longer the average maturity of the bonds held by the
underlying fund, the more the Fund's share price will fluctuate in response
to interest rate changes.
. Credit (or Default) Risk. An issuer of a security may default on its payment
obligations. Also, an issuer may suffer adverse changes in financial
condition that could lower the credit quality of a security, leading to
greater volatility in the price of the security and in shares of the Fund. A
change in the quality rating of a bond can affect the bond's liquidity and
make it more difficult for the underlying fund to sell.
. Prepayment Risk. The Fund may experience losses when an issuer exercises its
right to pay principal on an obligation held by an underlying fund (such as
a mortgage-backed security) earlier than expected. This may happen during a
period of declining interest rates. Under these circumstances, the
underlying fund may be unable to recoup all of its initial investment and
will suffer from having to reinvest in lower yielding securities. The loss
of higher yielding securities and the reinvestment at lower interest rates
can reduce the Fund's income, total return and share price.
Because the mix of underlying funds held by the Fund can change from time to
time, the Fund may be subject to the following additional principal risks at
various times:
. Stock Market Risk. The value of the securities in which a Fund invests may
decline in response to general economic conditions. Price changes may be
temporary or last for extended periods. For example, stock prices have
historically risen and fallen in periodic cycles. In addition, the value of
a Fund's investments may decline if the particular companies the Fund
invests in do not perform well.
. Foreign Securities Risk. Investments by an underlying fund in foreign
securities may experience greater and more rapid changes in value than U.S.
securities. Foreign securities are generally more volatile and less liquid
than U.S. securities, in part because of greater political and economic
risks and because there is less public information available about foreign
companies. Issuers of foreign securities are generally not subject to the
same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards.
. Currency Risk. A decline in the value of foreign currencies relative to the
U.S. dollar will reduce the value of an underlying fund's portfolio
securities denominated in those currencies.
. Smaller Company Stock Risk. The stocks of small companies may have more
risks than those of larger companies. Small companies often have narrower
markets and more limited managerial and financial resources than larger,
more established companies. As a result, they may be more sensitive to
changing economic conditions, which could increase the volatility of an
underlying fund's portfolio. In addition, small company stocks typically are
traded in lower volume making them more difficult to sell.
. Sector Risk. Certain underlying funds may concentrate its investments in a
particular industry sector. Adverse economic, business or political
developments affecting that industry sector could have a major effect on the
value of the underlying fund's investments.
3
<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 in 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 a Fund's performance in
past years is not necessarily an indication of how a Fund will perform in the
future.
<TABLE>
<CAPTION>
Average Annual Total Return
(for the periods ended December 31, 1999)
-------------------------------------------
Since
Inception
1 Year (4/3/97)
-------------------------------------------
<S> <C> <C>
Class Y 3.32% 6.56%
Lehman Brothers Int.
Gov't/Corp. Index* 0.39% 6.06%**
</TABLE>
--------
*The Lehman Brothers Intermediate
Government/Corporate Bond Index
is a weighted composite of (i)
Lehman Brothers Intermediate
Government Bond Index, which is
comprised of all publicly issued,
non-convertible debt of the U.S.
Government or any agency thereof,
quasi-federal corporations and
corporate debt guaranteed by the
U.S. Government with a maturity
between one and ten years and
(ii) Lehman Brothers Corporate
Bond Index, which is comprised of
all public fixed-rate, non-
convertible investment-grade
domestic corporate debt,
excluding collaterized mortgage
obligations.
**Index return from 3/31/97.
Year-to-date through March 31, 2000: 4.05%
<TABLE>
<S> <C> <C>
Best Quarter: Q4 1999 4.24%
Worst Quarter: Q3 1998 (4.33%)
</TABLE>
4
<PAGE>
Moderate Fund
Goal
The Fund's goal is to provide high total return through both capital
appreciation and current income.
Principal Investment Strategies
As a fund of funds, the Fund pursues its goal by investing a majority of its
assets in underlying funds that invest primarily in equity securities and fixed
income securities.
The Fund may also invest a small portion of its assets in underlying money
market funds.
The advisor may periodically adjust the Fund's asset allocation among
underlying funds in response to changing economic and market conditions. The
typical allocation is expected to be: 60% Equity Funds, 35% Fixed Income Funds
and 5% Money Market Funds.
The Fund's indirect stock holdings will be a mix of large-cap, mid-cap and
small-cap U.S. stocks as well as foreign stocks. The Fund's indirect fixed
income holdings are a combination of short-, intermediate- and long-term U.S.
government securities, mortgage and other asset-backed securities, stripped
securities and obligations of state, local and foreign issuers. The average
maturity will range from three to 15 years and the portfolio's holdings will be
rated investment grade or better or if unrated are of comparable quality.
In the "More About the Funds" section, you will find a description of the
underlying funds and a chart showing the percentage of its assets that the Fund
may invest in each underlying fund.
Principal Risks
All investments have some degree of risk which will affect the value of a
portfolio's investment, its investment performance and the price of its shares.
As a result, you may lose money if you invest in the Fund.
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.
Among the principal risks of investing in the Fund are:
. Stock Market Risk. The value of the securities in which a Fund invests may
decline in response to general economic conditions. Price changes may be
temporary or last for extended periods. For example, stock prices have
historically risen and fallen in periodic cycles. In addition, the value of a
Fund's investments may decline if the particular companies the Fund invests
in do not perform well.
. Smaller Company Stock Risk. The stocks of small companies may have more risks
than those of larger companies. Small companies often have narrower markets
and more limited managerial and financial resources than larger, more
established companies. As a result, they may be more sensitive to changing
economic conditions, which could increase the volatility of an underlying
fund's portfolio. In addition, small company stocks typically are traded in
lower volume making them more difficult to sell.
. Sector Risk. Certain underlying funds may concentrate its investments in a
particular industry sector. Adverse economic, business or political
developments affecting that industry sector could have a major effect on the
value of the underlying fund's investments.
. Foreign Securities Risk. Investments by an underlying fund in foreign
securities may experience greater and more rapid changes in value than U.S.
securities. Foreign securities are generally more volatile and less liquid
than U.S. securities, in part because of greater political and economic risks
and because there is less public information available about foreign
companies. Issuers of foreign securities are generally not subject to the
same degree of regulation as are U.S. issuers. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards.
. Currency Risk. A decline in the value of foreign currencies relative to the
U.S. dollar will reduce the value of an underlying fund's portfolio
securities denominated in those currencies.
Because the mix of underlying funds held by the Fund can change from time to
time, the Fund may
5
<PAGE>
be subject to the following additional principal risks at various times:
. Interest Rate Risk. Increases in prevailing interest rates will cause fixed-
income securities held by an underlying fund to decline in value. Longer
term bonds are generally more sensitive to interest rate changes than
shorter term bonds. Generally, the longer the average maturity of the bonds
held by the underlying fund, the more the Fund's share price will fluctuate
in response to interest rate changes.
. Credit (or Default) Risk. An issuer of a security may default on its payment
obligations. Also, an issuer may suffer adverse changes in financial
condition that could lower the credit quality of a security, leading to
greater volatility in the price of the security and in shares of the Fund. A
change in the quality rating of a bond can affect the bond's liquidity and
make it more difficult for the underlying fund to sell.
. Prepayment Risk. The Fund may experience losses when an issuer exercises its
right to pay principal on an obligation held by an underlying fund (such as
a mortgage-backed security) earlier than expected. This may happen during a
period of declining interest rates. Under these circumstances, the
underlying fund may be unable to recoup all of its initial investment and
will suffer from having to reinvest in lower yielding securities. The loss
of higher yielding securities and the reinvestment at lower interest rates
can reduce the Fund's income, total return and share price.
6
<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 in 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 neccessarily an indication of how the Funds will perform in
the future.
<TABLE>
<CAPTION>
Average Annual Total Return
(for the periods ended December 31,
1999)
-----------------------
Since
Inception
1 Year (4/3/97)
-----------------------
<S> <C> <C>
Class Y 15.17% 15.73%
60% S&P/40% Lehman
Brothers Gov't/Corp.
Index* 11.76% 21.02%**
</TABLE>
--------
* Standard & Poor's Composite 500
Index is an unmanaged index of
common stock prices. The Lehman
Brothers Government/Corporate
Bond Index is a weighted
composite of (i) Lehman Brothers
Government Bond Index, which is
comprised of all publicly issued,
non-convertible debt of the U.S.
Government or any agency thereof,
quasi-federal corporations, and
corporate debt guaranteed by the
U.S. Government and (ii) Lehman
Brothers Corporate Bond Index,
which is comprised of all public
fixed-rate, non-convertible
investment-grade domestic
corporate debt, excluding
collateralized mortgage
obligations.
** Index return from 3/31/97.
All-Season Moderate Fund Class Y
Total Return
(per calendar year)
[BAR CHART]
1998 7.27%
1999 15.17%
Year-to-date through March 31, 2000:
9.83%
<TABLE>
<S> <C> <C>
Best Quarter: Q4 1999 14.80%
Worst Quarter: Q3 1998 (9.69)%
</TABLE>
7
<PAGE>
Who May Want To Invest
The All-Season Conservative Fund may be appropriate for investors who:
. Seek current income.
. Seek long term growth without taking undue risk.
The All-Season Moderate Fund may be appropriate for investors who:
. Seek a balance of both capital appreciation and income.
8
<PAGE>
Fees And Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold Class Y shares of the Funds. Please note that the following information
does not include fees that institutions may charge for services they provide to
you.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment)
----------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases........................... None
Sales Charge (Load) Imposed on Reinvested Dividends........................ None
Maximum Deferred Sales Charge (Load)....................................... None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
Annual Fund Operating Expenses (expenses that are paid from Fund assets)
as a % of net assets
<TABLE>
<CAPTION>
Conservative Moderate
Fund Fund
------------ --------
<S> <C> <C>
Management Fees(1)....................................... .35% .35%
Other Expenses(1)........................................ 5.61% 1.89%
---- ----
Total Annual Fund Operating Expenses(1).................. 5.96% 2.24%
==== ====
</TABLE>
--------
(1) For the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of its management fees and voluntarily reimbursed certain operating
expenses. As a result of these voluntary fee waiver and expense
reimbursement, the actual management fees, other expenses and total annual
fund operating expenses were .10%, .31% and .41%. respectively, for the
Conservative Fund, and .10%, .26% and .36%, respectively, for the Moderate
Fund. The advisor may terminate the fee waivers and/or expense
reimbursements at any time.
In addition to the expenses shown above, shareholders of the Funds will
indirectly bear their pro rata shares of the annual operating expenses of
the underlying funds. As a result, the investment returns of the Funds will
be net of the expenses of the Underlying Funds. Since the Funds invest in
other Munder Funds, as a shareholder you will pay a higher expense ratio
than if you had purchased shares of an underlying fund directly. The
underlying funds' total annual fund operating expense ratios for the fiscal
year ended June 30, 1999 ranged from .37% to 2.45%.
Example
The examples are intended to help you compare the cost of investing in each
Fund to the cost of investing in other mutual funds. The examples assume that
you invest $10,000 in each Fund for the time periods indicated. The examples
also assume that your investment has a 5% return each year, that each Fund's
operating expenses remain the same and that all dividends and distributions are
reinvested. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
Conservative Moderate
Fund Fund
------------ --------
<S> <C> <C>
1 Year.............................................. $ 597 $ 228
3 Years............................................. $1,775 $ 703
5 Years............................................. $2,929 $1,204
10 Years............................................ $5,715 $2,585
</TABLE>
9
<PAGE>
More About The Funds
--------------------------------------------------------------------------------
This section describes the underlying funds in which the Funds may invest. It
also discusses the risks of investing in the Funds, which are dependent upon
which underlying funds the Funds invest in, and to what extent. Further,
included in this section is a chart that shows the maximum percentage of its
assets that a Fund may invest in each underlying fund. Please note that the
underlying funds may also invest in securities and are subject to restrictions
and additional risks which are described in the Statement of Additional
Information.
The Glossary below explains certain terms used throughout this prospectus.
Glossary
Types Of Securities
Equity securities include common stocks, preferred stocks, securities
convertible into common stocks, and rights and warrants to subscribe for the
purchase of common stocks. Equity securities may be listed on a stock exchange
or NASDAQ National Market System or unlisted. Warrants are rights to purchase
securities at a specified time at a specified price.
Fixed income securities are securities that pay interest at set times at either
fixed, floating or variable rates, or which are issued at a discount to their
principal amount instead of making periodic interest payments. Fixed income
securities include corporate bonds, debentures and other similar corporate debt
instruments, zero coupon bonds and variable amount master demand notes.
Convertible Securities A convertible security is a bond or preferred stock that
may be converted (exchanged) into the common stock of the issuing company
within a specified time period for a specified number of shares. Convertible
securities offer the underlying funds a way to participate in the capital
appreciation of the common stock into which the securities are convertible,
while earning higher current income than is available from the common stock.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include U.S.
Treasury bills, U.S. Treasury notes, U.S. Treasury bonds and obligations of the
Federal Home Loan Corporation, Federal National Mortgage Association and
Government National Mortgage Association.
Money market instruments are high-quality, short-term instruments including
commercial paper, bankers' acceptances and negotiable certificates of deposit
of banks or savings and loan associations, short-term corporate obligations and
short-term U.S. Government securities.
Rating Agencies and Indices
Moody's is Moody's Investor Services, Inc.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
S&P is Standard & Poor's Rating Services.
S&P 500 is S&P's 500 Composite Stock Price Index, a widely recognized unmanaged
index of U.S. stock market activity.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Internal Revenue Code is the Internal Revenue Code of 1986, as amended.
NAV is the net asset value per share of a Fund. NAV is the value of a single
share of a Fund. Each Fund calculates NAV separately for each class. NAV is
calculated by (1) taking the current value of a Fund's total assets allocated
to a particular class of shares, (2) subtracting the liabilities and expenses
charged to that class (3) dividing that amount by the total number of shares of
that class outstanding.
10
<PAGE>
Asset Allocation Chart
The following chart shows the Fund's maximum investment (expressed as a
percentage of each Fund's assets) that each Fund may make in the underlying
funds.
<TABLE>
<CAPTION>
Conservative Moderate
Fund Fund
------------ --------
<S> <C> <C>
Equity Funds
Equity Income Fund........................................ 10% 15%
Focus Growth Fund......................................... 10% 20%
Future Technology Fund.................................... 5% 10%
Growth Opportunities Fund................................. 10% 15%
Institutional S&P 500 Index Equity Fund................... 20% 30%
International Equity Fund................................. 5% 10%
Micro-Cap Equity Fund..................................... 10% 10%
Multi-Season Growth Fund.................................. 20% 30%
NetNet Fund............................................... 5% 5%
Real Estate Equity Investment Fund........................ 10% 20%
Small-Cap Value Fund...................................... 10% 20%
Small Company Growth Fund................................. 20% 30%
Framlington Emerging Markets Fund......................... 5% 10%
Framlington Global Financial Services Fund................ 5% 10%
Framlington Healthcare Fund............................... 5% 5%
Framlington International Growth Fund..................... 5% 10%
Income Funds
Bond Fund................................................. 80% 50%
Intermediate Bond Fund.................................... 80% 50%
International Bond Fund................................... 30% 20%
U.S. Government Income Fund............................... 60% 40%
Money Market Funds
Cash Investment Fund...................................... 15% 15%
Institutional Money Market Fund........................... 10% 10%
U.S. Treasury Money Market Fund........................... 10% 10%
</TABLE>
11
<PAGE>
Description of Underlying Funds
Equity Funds
Equity Income Fund
The Fund's goal is to provide capital appreciation and current income. The Fund
pursues its goal by investing primarily in dividend-paying equity securities
and fixed income securities which are convertible into or exchangeable for
common stock. The advisor generally selects large, well-known companies that it
believes have favorable prospects for dividend growth and capital appreciation.
The Fund will seek to produce a current yield greater than the S&P 500.
Focus Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities 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.
Future Technology Fund
The Fund's goal is to provide capital appreciation. 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.
Growth Opportunities Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in the equity securities of
companies with market capitalizations between $500 million and $10 billion. Its
style, which focuses on both growth prospects and valuation, is known as GARP
(Growth at a Reasonable Price) and seeks to produce attractive returns during
various market environments.
Institutional S&P 500 Index Equity Fund
The Fund's goal is to provide performance and income that is comparable to the
S&P 500. The S&P 500 is an index of 500 stocks that emphasizes large
capitalization companies. The Fund pursues its goal by normally holding a
substantial amount of its assets in securities of at least 400 of the stocks in
the S&P 500. The Fund is managed through the use of a "quantitative" or
"indexing" investment approach and tries to mirror the composition and
performance of the S&P 500 through statistical procedures. The Fund will try to
achieve a correlation between the performance of its portfolio and that of the
S&P 500 of at least .95. A correlation of 1.0 would mean that the changes in
the Fund's price mirror exactly the changes in the S&P 500.
International Equity Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing primarily in foreign securities, including American
Depositary Receipts. The Fund mostly invests in mature markets, but may also
invest in emerging markets. The Fund emphasizes companies with a market
capitalization of at least $250 million.
International NetNet Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by using a growth strategy to invest primarily in foreign companies
engaged in the Internet or Intranet related business. Under normal market
conditions, the Fund will invest at least 65% of its total assets in equity
securities of foreign companies that are engaged in the research, design,
development, manufacturing or engaged to a significant extent in the business
of distributing products, processes or services for use with the Internet or
Intranet related businesses.
Micro-Cap Equity Fund
The Fund's goal is to provide capital appreciation. The Fund pursues its goal
by investing at least 65% of its assets in equity securities of micro-
capitalization companies having market capitalizations within the range of the
companies in the Wilshire Micro-Cap Index. There is no limit on the length of
operating history for the companies in which the Fund may invest. The Fund may
invest without limit in initial public offerings of small capitalization
companies. In addition, the Fund may invest up to 35% of its assets in equity
securities of medium and larger capitalization companies, including initial
public offerings of such companies.
12
<PAGE>
Multi-Season Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities. The Fund
generally invests in equity securities of companies with market capitalizations
over $1 billion. Its style, which focuses on both growth prospects and
valuation, is known as GARP (Growth at a Reasonable Price) and seeks to produce
attractive returns during various market environments.
NetNet Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing primarily in companies engaged in the Intranet and
Internet related business. Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of companies that are
engaged in research, design, development, manufacturing or engaged to a
significant extent in the business of distributing products, processes or
services for use with Internet or Intranet related businesses.
Real Estate Equity Investment Fund
The Fund's goal is to provide both capital appreciation and current income. The
Fund pursues its goal by investing at least 65% of its total assets in equity
securities of U.S. companies which are principally engaged in the real estate
industry.
Small-Cap Value Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of small
capitalization companies having market capitalizations within the range of the
companies in the Russell 2000 Index. The advisor will concentrate on companies
that it believes are undervalued.
Small Company Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing, under normal market conditions, at least 65% of its
assets in equity securities of small capitalization companies with market
capitalizations below $1.5 billion.
Framlington Emerging Markets Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of
companies in emerging market countries, as defined by the World Bank, the
International Finance Corporation, the United Nations or the European Bank for
Reconstruction and Development. It may also invest in foreign securities of
companies located in countries with mature markets.
Framlington Global Financial Services Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of U.S.
and foreign companies which are principally engaged in the financial services
industry and companies providing services primarily within the financial
services industry. The Fund focuses specifically on companies which are likely
to benefit from growth or consolidation in the financial services industry.
The Fund may invest in securities of companies located in countries with mature
markets and in those with emerging markets.
Framlington Healthcare Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing in equity securities of companies providing healthcare
and medical services and products worldwide. Currently, most of these companies
are located in the United States. The Fund's investments may include foreign
securities of companies located in countries with mature markets and in those
with emerging markets.
Framlington International Growth Fund
The Fund's goal is to provide long-term capital appreciation. The Fund pursues
its goal by investing at least 65% of its assets in equity securities of
issuers located in at least three foreign countries. The Fund may invest in
companies located in countries with mature markets and in those with emerging
markets.
Income Funds
Bond Fund
The Fund's primary goal is to provide a high level of current income. Its
secondary goal is capital appreciation. The Fund pursues its goals by investing
at least 65% of its total assets in a broad range of bonds and other fixed
income securities.The Fund's dollar-weighted average maturity will generally
range between six and fifteen years. The Fund will
13
<PAGE>
purchase only fixed income securities that are rated investment grade or
better, or if unrated, are of comparable quality.
Intermediate Bond Fund
The Fund's goal is to provide a competitive rate of return which, over time,
exceeds the rate of inflation and the return provided by money market
instruments. The Fund pursues its goals by investing at least 65% of its total
assets in a broad range of bonds and other fixed income securities. The Fund's
dollar-weighted average maturity will generally range between three and eight
years. The Fund will purchase only fixed income securities that are rated
investment grade or better, or if unrated, are of comparable quality.
International Bond Fund
The Fund's goal is to realize a competitive total return through a combination
of current income and capital appreciation. The Fund pursues its goal by
investing at least 65% of its total assets in a broad range of bonds and other
fixed income securities of foreign issuers. The Fund will invest in the
securities of issuers in at least three foreign countries. The Fund's dollar-
weighted average maturity will generally range between three and fifteen years.
The Fund may invest a portion of its assets in domestic obligations, including
U.S. Government securities and obligations of domestic banks and corporations.
U.S. Government Income Fund
The Fund's goal is to provide high current income. The Fund pursues its goal by
investing at least 65% of its total assets in a broad range of U.S. Government
securities and repurchase agreements relating to such securities. The Fund's
dollar-weighted average maturity generally will range between six and fifteen
years.
Money Market Funds
Cash Investment Fund
The Fund's primary goal is to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments. The Fund invests solely in U.S. dollar-
denominated debt securities with remaining maturities of 13 months or less and
maintains an average dollar-weighted portfolio maturity of 90 days or less.
Institutional Money Market Fund
The Fund's primary goal is to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Fund pursues its goal by investing in a broad range of U.S. dollar-
denominated money market instruments. The Fund invests solely in U.S. dollar-
denominated debt securities with remaining maturities of 13 months or less and
maintains an average dollar-weighted portfolio maturity of 90 days or less.
U.S. Treasury Money Market Fund
The Fund's goal is to provide as high a level of current interest income as is
consistent with maintaining liquidity and stability of principal.
The Fund pursues its goal by investing its assets solely in short-term bills
and notes, issued by the U.S. Treasury (including "stripped" securities) and in
repurchase agreements relating to such obligations. The Fund invests solely in
U.S. dollar-denominated debt securities with remaining maturities of 13 months
or less and maintains an average dollar-weighted portfolio maturity of 90 days
or less.
Principal Investment Strategies and Risks
Foreign Investment Risk. Certain underlying funds may invest in foreign
securities. Foreign securities include investments in non-U.S. dollar-
denominated securities traded outside of the United States and dollar-
denominated securities of foreign issuers traded in the United States. Foreign
securities also include American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") and Global Depository Receipts ("GDRs"). ADRs are
U.S. dollar-denominated receipts representing shares of foreign-based
corporations. ADRs are issued by U.S. banks or trust companies, and entitle the
holder to all dividends and capital gains that are paid out on the underlying
foreign shares. EDRs and GDRs are receipts issued by non-U.S. financial
institutions that often trade on foreign exchanges. They represent ownership in
an underlying foreign or U.S. security and are generally denominated in a
foreign currency.
Special Risks. Foreign securities involve special risks and costs.
Investment in the securities of foreign governments involves the
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risk that foreign governments may default on their obligations or may
otherwise not respect the integrity of their debt.
Investment in foreign securities may involve higher costs than investment
in U.S. securities, including higher transaction and custody costs as well
as the imposition of taxes by foreign governments. Foreign investments may
also involve risks associated with the level of currency exchange rates,
less complete financial information about the issuers, less market
liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls or
freezes on the convertibility of currency, or the adoption of other
governmental restrictions might adversely affect an investment in foreign
securities. Additionally, foreign issuers may be subject to less stringent
regulation, and to different accounting, auditing and recordkeeping
requirements.
Currency exchange rates may fluctuate significantly over short periods of
time causing an underlying fund's net asset value to fluctuate as well. A
decline in the value of a foreign currency relative to the U.S. dollar will
reduce the value of a foreign currency-denominated security. To the extent
that an underlying fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined risk.
The underlying funds' respective net currency positions may expose them to
risks independent of their securities positions.
Additional risks are involved when investing in countries with emerging
economies or securities markets. In general, the securities markets of
these countries are less liquid, are subject to greater price volatility,
have smaller market capitalizations and may have problems with securities
registration and custody. In addition, because the securities settlement
procedures are less developed in these countries, an underlying fund may be
required to deliver securities before receiving payment and may also be
unable to complete transactions during market disruptions. As a result of
these and other risks, investments in these countries generally present a
greater risk of loss to the Fund.
A further risk of investing in foreign securities is the risk that an
underlying fund may be adversely affected by the conversion of certain
European currencies into the Euro. This conversion, which is under way, is
scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase volatility in world capital
markets and affect European capital markets in particular.
Investment Grade Credit Risk. A security is considered investment grade if, at
the time of purchase, it is rated:
. BBB or higher by S&P;
. Baa or higher by Moody's;
. BBB or higher by Duff & Phelps; or
. BBB or higher by Fitch.
A security will be considered investment grade if it receives one of the above
ratings, even if it receives a lower rating from other rating organizations.
Investment Strategy. Except as stated in the next section, fixed income and
convertible securities purchased by the underlying funds will generally be
rated at least investment grade. The underlying funds may also invest in
unrated securities if the advisor or sub-advisor believes they are
comparable in quality.
Special Risks. Although securities rated "BBB" by S&P, Duff & Phelps or
Fitch, or "Baa" by Moody's are considered investment grade, they have
certain speculative characteristics. Therefore, they may be subject to a
higher risk of default than obligations with higher ratings. Subsequent to
its purchase by an underlying fund, a rated security may cease to be rated
or its rating may be reduced below the minimum rating required for purchase
by the underlying fund. The adviser or sub-advisor will consider such an
event in determining whether the underlying fund should continue to hold
the security.
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Investments in Financial Services Companies by Framlington Global Financial
Services Fund. Financial services companies are subject to extensive
governmental regulation which may limit both the financial commitments they can
make, and the interest rates and fees they can charge. Insurance companies may
be subject to severe price competition.
Investments in the Healthcare Industry by Framlington Healthcare Fund. The
Framlington Healthcare Fund will invest most of its assets in the healthcare
industry, which is particularly affected by rapidly changing technology and
extensive government regulation, including cost containment measures.
Investments in the Real Estate Industry by Real Estate Equity Investment
Fund. The Real Estate Equity Investment Fund will invest primarily in the real
estate industry and may invest more than 25% of its assets in any one sector of
the real estate industry. As a result, the Real Estate Equity Investment Fund
will be particularly vulnerable to declines in real estate prices and new
construction rates.
Investments by the NetNet Fund. The NetNet Fund will invest primarily in
companies engaged in Internet and Intranet related activities. The value of
such companies is particularly vulnerable to rapidly changing technology,
extensive government regulation and relatively high risks of obsolescence
caused by scientific and technological advances. The value of the Fund's shares
may fluctuate more than shares of a fund investing in a broader range of
industries.
Investments in the Technology Industry by Future Technology Fund. The Future
Technology Fund will invest most of its assets in the technology industry,
which is particularly affected by rapidly changing 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.
Short-Term Trading. The underlying funds may engage in short-term trading,
including initial public offerings.
Special Risks. A high rate of portfolio turnover (100% or more) could
produce higher trading costs and taxable distributions, which could detract
from a Fund's performance.
Defensive Investing. Each Fund and underlying fund (except the Index 500 Fund)
may invest all or any portion of its assets in short-term obligations as a
temporary defensive measure in response to adverse market or economic
conditions.
Special Risks. If a Fund or one or more underlying funds adopts a defensive
strategy, the Fund may not achieve its investment objective.
Other Investment Strategies and Risks Of The Funds And Underlying Funds
Asset-Backed Securities. Asset-backed securities are debt securities backed by
mortgages, installment sales contract and credit card receivables. The
securities are sponsored by entities such as government agencies, banks,
financial companies and commercial or industrial companies. In effect, these
securities "pass through" the monthly payments that individual borrowers make
on their mortgage or other assets net of any fees paid to the issuers. Examples
of these include guaranteed mortgage pass-through certificates, collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").
Special Risks. In addition to credit and market risk, asset-backed
securities involve repayment risk because the underlying assets (loans) may
be prepaid at any time. The value of these securities may also change
because of actual or perceived changes in the creditworthiness of the
originator, the servicing agent, the financial institution providing the
credit support, or the counterparty. Like other fixed income securities,
when interest rates rise the value of an asset-backed security generally
will decline. However, when interest rates decline, the value of an asset-
backed security with prepayment features may not increase as much as that
of other fixed income securities. In addition, non-mortgage asset-backed
securities involve certain risks not presented by mortgage-backed
securities. Primarily, these securities do not have the benefit of the same
security interest in the underlying collateral.
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Borrowing and Reverse Repurchase Agreements. The Funds and underlying funds can
borrow money from banks and enter into reverse repurchase agreements with banks
and other financial institutions. Reverse repurchase agreements involve the
sale of securities held by a Fund (or underlying fund) subject to the Fund's
(or underlying fund) agreement to repurchase them at a mutually agreed upon
date and price (including interest).
Investment Strategy. Each Fund (or underlying fund) may borrow money in an
amount up to 5% of its assets for temporary emergency purposes and in an
amount up to 33 1/3% of its assets to meet redemptions. This is a
fundamental policy which can be changed only by shareholders.
Special Risks. Borrowings and reverse repurchase agreements by a Fund (or
underlying fund) may involve leveraging. If the securities held by the Fund
(or underlying fund) decline in value while these transactions are
outstanding, the Fund's net asset value will decline in value by
proportionately more than the decline in value of the securities. In
addition, reverse repurchase agreements involve the risks that the interest
income earned by the Fund (or underlying fund) (from the investment of the
proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by the Fund (or underlying fund)
will decline below the price the Fund (or underlying fund) is obligated to
pay to repurchase the securities, and that the securities may not be
returned to the Fund (or underlying fund).
Derivative Risk. Some underlying funds may purchase certain "derivative"
instruments. Derivatives are financial contracts whose value is based on any
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, forward currency contracts and structured debt obligations
(including collateralized mortgage obligations and other types of asset-backed
securities, "stripped" securities and various floating rate instruments).
Investment Strategy. Derivatives can be used for hedging (attempting to
reduce risk by offsetting one investment position with another) or
speculation (taking a position in the hope of increasing return). The
underlying funds may, but are not required to, use derivatives for hedging
purposes or for the purpose of remaining fully invested or maintaining
liquidity. The underlying funds will not use derivatives for speculative
purposes.
Special Risks. The use of derivative instruments exposes a Fund to
additional risks and transaction costs. Risks of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the direction that a portfolio manager
anticipates; (2) imperfect correlation between the price of derivative
instruments and movements in the prices of the securities, interest rates
or currencies being 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 movement in an instrument can
result in a loss substantially greater that the Funds initial nvestment in
that instrument (in some leases, 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 that 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
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advisor or sub-advisor, and no underlying fund is required to hedge its
foreign currency positions.
Special Risks. Forward currency contracts are privately negotiated
transactions, and can have substantial price volatility. When used for
hedging purposes, they tend to limit any potential gain that may be
realized if the value of an underlying fund's foreign holdings increases
because of currency fluctuations.
Futures Contracts and Related Options. A futures contract is a type of
derivative instrument that obligates the holder to buy or sell an asset in the
future at an agreed upon price. When an underlying fund purchases an option on
a futures contract, it has the right to assume a position as a purchaser or
seller of a futures contract at a specified exercise price during the option
period. When an underlying fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the option is
exercised.
Investment Strategy. The underlying funds may invest in futures contracts
and options on futures contracts on domestic or foreign exchanges or boards
of trade. These instruments may be used for hedging purposes, to maintain
liquidity to meet potential shareholder redemptions, to invest cash
balances or dividends, or to minimize trading costs.
An underlying fund will not purchase or sell a futures contract unless,
after the transaction, the sum of the aggregate amount of margin deposits
on its existing futures positions and the amount of premiums paid for
related options used for non-hedging purposes is 5% or less of the
underlying fund's total assets.
Special Risks. Futures contracts and related options present the following
risks: imperfect correlation between the change in market value of an
underlying fund's securities and the price of futures contracts and
options; the possible inability to close a futures contract when desired;
losses due to unanticipated market movements, which are potentially
unlimited; and the possible inability of the advisor or sub-advisor to
correctly predict the direction of securities prices, interest rates,
currency exchange rates and other economic factors.
Illiquid Securities. Illiquid securities include private placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market.
Investment Strategy. Each underlying fund may invest up to 15% of its net
assets in securities that are illiquid.
Special Risks. To the extent that an underlying fund invests in illiquid
securities, the underlying fund risks not being able to sell the securities
at the time and the price that it would like. The underlying fund may have
to lower the price, sell substitute securities or forego an investment
opportunity, each of which may cause a loss to the underlying fund.
Options. An option is a type of derivative instrument that gives the holder the
right (but not the obligation) to buy (a "call") or sell (a "put") an asset in
the future at an agreed upon price prior to the expiration date of the option.
Investment Strategy. The underlying funds may write (sell) covered call
options, buy put options, buy call options and write secured put options
for hedging purposes. Options may relate to particular securities, foreign
or domestic securities indices, financial instruments or foreign
currencies.
Special Risks. The value of options can be highly volatile, and their use
can result in loss if the advisor or sub-advisor is incorrect in its
expectation of price fluctuations. The successful use of options for
hedging purposes also depends in part on the ability of the advisor or sub-
advisor to predict future price fluctuations and the degree of correlation
between the options and securities markets.
Securities Lending. In order to generate additional income, each underlying
fund may lend securities on a short-term basis to qualified institutions. By
reinvesting any cash collateral it receives in these transactions, the
underlying fund could realize additional income gains or losses.
Investment Strategy. Securities lending may represent no more than 25% of
the value of an underlying fund's total assets (including the loan
collateral).
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Special Risks. The main risk when lending securities is that if the
borrower fails to return the securities or the invested collateral has
declined in value, the underlying fund could lose money.
Stripped Securities. These securities are issued by the U.S. Government (or
agency or instrumentality), foreign governments or banks and other financial
institutions. They entitle the holder to receive either interest payments or
principal payments that have been "stripped" from a debt obligation. These
obligations include participations in trusts that hold U.S. Treasury or agency
securities.
Special Risks. Stripped securities are very sensitive to changes in
interest rates and to the rate of principal repayments. A rapid or
unexpected increase in mortgage prepayments could severely depress the
price of certain stripped mortgage-backed securities and adversely affect
an underlying fund's total returns.
Temporary Investments. Short-term obligations refer to U.S. Government
securities, high-quality money market instruments and repurchase agreements
with maturities of 13 months or less. Generally, these obligations are
purchased to provide stability and liquidity to a Fund or underlying fund.
Investment Strategy. Each Fund or underlying fund may invest a portion of
its assets in short-term obligations pending investment or to meet
anticipated redemption requests.
Special Risks. A Fund or underlying fund may not achieve its investment
objective when its asset are invested in short-term obligations.
Variable and Floating Rate Instruments. Variable and floating rate instruments
have interest rates that are periodically adjusted either at set intervals or
that float at a margin above a generally recognized index rate. These
instruments include variable amount master demand notes.
Special Risks. Variable and floating rate instruments are subject to the
same risks as fixed income investments, particularly interest rate and
credit risk. Because there is no active secondary market for certain
variable and floating rate instruments, they may be more difficult to sell
if the issuer defaults on its payment obligations or during periods when an
underlying fund is not entitled to exercise its demand rights. As a result,
the underlying fund could suffer a loss with respect to these instruments.
Zero Coupon Bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity.
Special Risks. The market prices of zero coupon bonds generally are more
volatile than the market prices of interest-bearing securities and are
likely to respond to a greater degree to changes in interest rates than
interest-bearing securities having similar maturities and credit quality.
An underlying fund's investments in zero coupon bonds may require the
underlying fund to sell some of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements.
Disclaimers
Disclaimers. The Institutional S&P 500 Index Equity Fund is not sponsored,
endorsed, sold or promoted by S&P, nor does S&P guarantee the accuracy and/or
completeness of the S&P 500(R) Index or any data included therein. S&P makes no
warranty, express or implied, as to the results to be obtained by the Fund,
owners of the Fund, any person or any entity from the use of the S&P 500(R)
Index or any data included therein. S&P makes no express or implied warranties
and expressly disclaims all such warranties of merchantability or fitness for a
particular purpose for use with respect to the S&P(R) Index or any data
included therein.
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Your Investment
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This section describes how to do business with the Funds.
How To Reach The Funds
By telephone: 1-800-438-5789
Call for account information.
By mail:The Munder Funds
c/o PFPC Global Fund Services
P.O. Box 60428
King of Prussia, PA 19406-0428
Purchasing Shares
Who May Purchase Shares
The following persons may purchase shares of the Funds:
. fiduciary and discretionary accounts of institutions;
. institutional investors (including: banks; savings institutions; credit
unions and other financial institutions; pension, profit sharing and
employee benefit plans and trusts; insurance companies; investment
companies; investment advisers, broker-dealers or financial advisors
acting for their own accounts or for the accounts of their clients);
. directors, trustees, officers and employees of the Munder Funds, the
advisor and the Funds' distributor;
. the advisor's investment advisory clients; and
. family members of employees of the advisor.
Each Fund also issues other classes of shares, which have different sales
charges, expense levels and performance. Call (800) 438-5789 to obtain more
information about the Funds' other classes of shares.
Purchase Price of Shares
Class Y shares of the Funds are sold at the NAV next determined after a
purchase order is received in proper form.
Broker-dealers or financial advisors (other than the Funds' distributor) may
charge you a fee for shares you purchase through them.
Policies for Purchasing Shares
Minimum initial investment
The minimum initial investment by fiduciary and discretionary accounts of
institutions and by institutional investors is $500,000. Other investors are
not subject to any minimum.
There is no minimum for subsequent investments.
Timing of orders
Purchase orders must be received by the Funds' distributor, transfer agent or
authorized dealer before the close of regular trading on the New York Stock
Exchange (normally, 4:00 p.m. Eastern time).
Methods for Purchasing Shares
You can purchase Class Y shares through the Fund's transfer agent or through
the Fund's distributor through arrangements with a broker-dealer, financial
advisor or financial institution.
. Through a Financial Institution. You may purchase shares through a financial
institution through procedures established with that institution.
Confirmations of share purchases will be sent to the institution.
. By Mail. You may open an account directly through the Fund's transfer agent
by completing, signing and mailing an account application form and a check or
other negotiable bank draft (payable to The Munder Funds) to: The Munder
Funds, c/o PFPC Gobal Fund Services, P.O. Box 60428, King of Prussia,
Pennsylvania 19406-0428. You can obtain an account application form by
calling (800) 438-5789. For additional investments, send a letter stating the
Fund and share class you wish to purchase, your name and your account number
with a check for $50 or more to the address listed above. We do not accept
third-party checks.
. By Wire. You may make additional investments in the Funds by wire. Wire
instructions must state the Fund name, share class, your registered name and
your account number. Your bank wire should be sent through the Federal
Reserve Bank Wire System to:
Boston Safe Deposit and Trust Company
Boston, MA
ABA# 011001234
DDA# 16-798-3
Account No.:
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Note that banks may charge fees for transmitting wires.
. You may purchase shares through the Automatic Investment Plan.
Exchanging Shares
Policies for Exchanging Shares
. You may exchange your Fund shares for Class Y shares of other Munder Funds
based on their relative net asset values.
. You must meet the minimum purchase requirements for the Munder Fund that you
purchase by exchange.
. A share exchange may be a taxable event and, accordingly, you may realize a
taxable gain or loss.
. Before making an exchange request, read the prospectus of the Munder Fund you
wish to purchase by exchange. You can obtain a prospectus for any Munder Fund
by contacting your broker or the Munder Funds at (800) 438-5789.
. Brokers or financial advisors may charge you a fee for handling exchanges.
. We may modify or terminate the exchange privilege at any time. You will be
given notice of any material modifications except where notice is not
required.
Redeeming Shares
Redemption Price
We will redeem shares at the NAV next determined after we receive the
redemption request in proper form.
Methods for Redeeming Shares
. You may redeem shares of all Funds through your broker-dealer or financial
institution.
Policies for Redeeming Shares
. Shares held by an institution on behalf of its customers must be redeemed in
accordance with instructions and limitations pertaining to the account at
that institution.
. If we receive a redemption order for a Fund before 4:00 p.m. (Eastern time),
we will normally wire payment to the redeeming institution on the next
business day.
Additional Policies For Purchases, Exchanges And Redemptions
. We consider requests to be in "proper form" when all required documents are
properly completed, signed and received.
. The Funds reserve the right to reject any purchase order.
. At any time, the Funds may change any of their purchase, redemption or
exchange practices, and may suspend the sale of their shares.
. The Funds may delay sending redemption proceeds for up to seven days, or
longer if permitted by the Securities and Exchange Commission.
. To limit the Funds' expenses, we no longer issue share certificates.
. We will typically send redemption amounts to you within seven business days
after you redeem shares. We may hold redemption amounts from the sale of
shares you purchased by check until the purchase check has cleared, which
may be as long as 15 days.
. A Fund may temporarily stop redeeming shares if:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists and the Fund cannot sell its assets or accurately
determine the value of its assets; or
. the Securities and Exchange Commission orders the Fund to suspend
redemptions.
. If accepted by a Fund, investors may purchase shares of the Fund with
securities which the Fund may hold. The advisor will determine if
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the securities are consistent with the Funds objectives and policies. If
accepted, the securities will be valued the same way the Fund values
portfolio securities it already owns. Call the Funds at (800) 438-5789 for
more information.
. The Funds reserve the right to make payment for redeemed shares wholly or
in part by giving the redeeming shareholder portfolio securities. The
shareholder may pay transaction costs to dispose of these securities.
. We record all telephone calls for your protection and take measures to
identify the caller. As long as the Fund's transfer agent takes reasonable
measures to authenticate telephone requests on an investor's account,
neither the Funds, the Fund's distributor nor the transfer agent will be
held responsible for any losses resulting from unauthorized transactions.
. We may redeem your account if its value falls below $250 as a result of
redemptions (but not as a result of a decline in net asset value). You will
be notified in writing and allowed 60 days to increase the value of your
account to the minimum investment level.
. If you purchased shares directly through the Funds' transfer agent, the
transfer agent will send you confirmations of the opening of an account and
of all subsequent purchases, exchanges or redemptions in the account.
Confirmations of transactions effected through an institution will be sent
to the institution.
. Financial institutions are responsible for transmitting orders and payments
for their customers on a timely basis.
Shareholder Privileges
Automatic Investment Plan (AIP). Under the AIP you may arrange for periodic
investments in a Fund through automatic deductions from a checking or savings
account. To enroll in the AIP you should complete the AIP application form or
call the Funds at (800) 438-5789. The minimum pre-authorized investment amount
is $50. You may discontinue the AIP at any time. We may discontinue the AIP on
30 days' written notice to you.
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Pricing Of Fund Shares
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Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
The Funds calculate NAV as of the close of regular trading on the New York
Stock Exchange, normally 4:00 p.m. (Eastern time). If the New York Stock
Exchange closes early, the Funds will accelerate calculation of NAV and
transaction deadlines to that time.
The NAV of each underlying fund is generally based on the market value of the
securities held in the underlying fund. If market values are not available, the
fair value of securities is determined in good faith by, or using procedures
approved by, the boards of directors/trustees of the underlying funds.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. An underlying fund values foreign
securities at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the New York Stock Exchange. Certain
foreign currency exchange rates may also be determined at the latest rate prior
to the closing of the New York Stock Exchange. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at current rates.
Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the New York
Stock Exchange. If the advisor believes that such events materially affect the
value of portfolio securities, these securities may be valued at their fair
market value as determined in good faith by, or using procedures approved by,
the underlying funds' boards of directors/trustees.
Distributions
--------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of a Fund's net income and
gains on its investments. Each Fund passes substantially all of its earnings
along to its shareholders as distributions. When a Fund earns dividends from
stocks and interest from debt securities and distributes these earnings to
shareholders, it is called a dividend distribution. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these
gains are distributed to shareholders, it is called a capital gain
distribution.
Each Fund pays dividends, if any, at least annually.
Each Fund distributes its net realized capital gains, if any, at least
annually.
It is possible that a Fund may make a distribution in excess of the Fund's
earnings and profits. You will treat such a distribution as a return of capital
which is applied against and reduces your basis in your shares. You will treat
the excess of any such distribution over your basis in your shares as gain from
a sale or exchange of the shares.
Each Fund will pay distributions in additional shares of the same class of that
Fund. If you wish to receive distributions in cash, either, indicate this
request on your account application form or notify the Funds at (800) 438-5789.
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Federal Tax Considerations
--------------------------------------------------------------------------------
Investments in a Fund may have tax consequences that you should consider. This
section briefly describes some of the more common federal tax consequences. A
more detailed discussion about the tax treatment of distributions from the
Funds and about other potential tax liabilities, including backup withholding
for certain taxpayers and about tax aspects of dispositions of shares of the
Funds, is contained in the Statement of Additional Information. You should
consult your tax adviser about your own particular tax situation.
Taxes On Distributions
You will generally have to pay federal income tax on all Fund distributions.
Distributions will be taxed in the same manner whether you receive the
distributions in cash or in additional shares of the Fund. Shareholders not
subject to tax on their income generally will not be required to pay any tax on
distributions.
Distributions that are derived from net long-term capital gains generally will
be taxed as long-term capital gains. Dividend distributions and short-term
capital gains generally will be taxed as ordinary income. The tax you pay on a
given capital gains distribution generally depends on how long the Fund held
the portfolio securities it sold. It does not depend on how long you held your
Fund shares.
Distributions are generally taxable to you in the year in which they are paid,
with one exception: distributions declared in October, November or December,
but not paid until January of the following year, are taxed as though they were
paid on December 31 in the year in which they were declared.
Shareholders generally are required to report all Fund distributions on their
federal income tax returns. Each year the Funds will send you information
detailing the amount of ordinary income and capital gains paid to you for the
previous year.
Taxes On Sales Or Exchanges
If you sell shares of a Fund or exchange them for shares of another Munder
Fund, you generally will be subject to tax on any taxable gain. Taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep account statements so that you or your tax preparer will
be able to determine whether a sale or an exchange will result in a taxable
gain.
Other Considerations
If you buy shares of a Fund just before the Fund makes any distribution, you
will pay the full price for the shares then receive back a portion of the money
you just invested in the form of a taxable distribution.
If you have not provided complete, correct taxpayer information by law, the
Funds must withhold a portion of your distributions and redemption proceeds to
pay federal income taxes.
24
<PAGE>
Management
--------------------------------------------------------------------------------
Investment Advisor
Munder Capital Management ("MCM"), 480 Pierce Street, Birmingham, Michigan
48009 is the investment advisor of each Fund and each underlying fund except
Institutional S&P 500 Index Equity Fund and International Equity Fund. The
advisors provide overall investment management for the Funds. As of March 31,
2000, MCM and its affiliates had approximately $62 billion in assets under
management, of which $34 billion were invested in equity securities, $7 billion
were invested in money market or other short-term instruments, $6 billion were
invested in other fixed income securities, $3 billion were invested in balanced
investments and $7 billion in non-discretionary assets.
World Asset Management ("World"), 255 East Brown Street, Birmingham, Michigan
48009, is the investment advisor of Institutional S&P 500 Index Equity Fund and
International Equity Fund. World is a wholly-owned subsidiary of the advisor.
As of March 31, 2000, World had approximately $22.7 billion in assets under
management, of which $17.6 billion were invested in domestic equity securities,
$4.5 billion were invested in international equity securities and $600 million
were invested in other fixed income securities.
Framlington Overseas Investment Management Limited, an affiliate of the
advisor, is the sub-advisor of the Framlington Emerging Markets Fund,
Framlington Global Financial Services Fund, Framlington Healthcare Fund and
Framlington International Growth Fund.
During the fiscal year ended June 30, 1999, the advisor voluntarily waived a
portion of the advisory fees for each Fund. Each Fund paid an advisory fee at
an annual rate of 0.10% of each Fund's average daily net assets (after
waivers). As a result, the payments shown above for the Funds were less than
the contractual advisory fees of .35% of each Fund's average daily net assets.
The advisor may, from time to time, make payments to banks, broker-dealers,
financial advisors or other financial institutions for certain services to the
Funds and/or their shareholders, including sub-administration, sub-transfer
agency and shareholder servicing. The advisor may make such payments out of its
own resources and there are no additional costs to the Funds or their
shareholders.
Please note that Comerica Bank, an affiliate of the advisor, receives a fee
from the Funds for providing shareholder services to its customers who own
shares of the Funds.
Portfolio Managers
A committee of professional portfolio managers employed by MCM makes investment
decisions for the Funds.
25
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The financial highlights table is intended to help shareholders understand each
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in a Fund (assuming reinvestment of all dividends and
distributions). The information has been audited by Ernst & Young LLP,
independent auditors, whose report, along with each Fund's financial
statements, are included in the annual reports of the Funds, and are
incorporated by reference into the Statement of Additional Information. The
information for the period ended December 31, 1999 is unaudited. You may obtain
the semi-annual and annual reports without charge by calling (800) 438-5789.
<TABLE>
<CAPTION>
Conservative Fund(a)
Class Y Shares
------------------------------------------
Period
Ended Period
12/31/99(d) Year Ended Year Ended Ended
(Unaudited) 6/30/99(d) 6/30/98(d) 6/30/97
----------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of pe-
riod............................ $8.97 $11.10 $10.55 $10.00
----- ------ ------ ------
Income from investment opera-
tions:
Net investment income............ 0.17 0.40 0.52 0.10
Net realized and unrealized gain
on investments.................. (0.00)(a) (0.47) 0.59 0.45
----- ------ ------ ------
Total from investment operations. 0.17 (0.07) 1.11 0.55
----- ------ ------ ------
Less distributions:
Dividends from net investment in-
come............................ (0.24) (1.40) (0.37) --
Distributions in excess of net
investment income............... -- -- -- --
Distributions from net realized
capital gains................... -- (0.66) (0.19) --
----- ------ ------ ------
Total distributions.............. (0.24) (2.06) (0.56) --
----- ------ ------ ------
Net asset value, end of period... $8.90 $ 8.97 $11.10 $10.55
===== ====== ====== ======
Total return(c).................. 1.97% (0.05)% 10.73% 5.50%
===== ====== ====== ======
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's).......................... $ 113 $143 $4,441 $ 105
Ratio of operating expenses to
average net assets.............. 0.42%(b) 0.41% 0.63% 0.55%(b)
Ratio of net investment income to
average net assets.............. 3.78%(b) 3.74% 4.76% 4.24%(b)
Portfolio turnover rate.......... 86% 167% 31% 18%
Ratio of operating expenses to
average net assets without ex-
penses reimbursed............... 10.74%(b) 5.96% 23.69% 97.07%(b)
</TABLE>
--------
(a) The Munder All-Season Conservative Fund Class Y Shares commenced operations
on April 3, 1997.
(b) Annualized.
(c) Total return represents aggregate total return for the period indicated.
(d) Per share numbers have been calculated using the average shares method.
26
<PAGE>
<TABLE>
<CAPTION>
Moderate Fund(a)
Class Y Shares
-------------------------------------------
Period
Ended Year Year Period
12/31/99(d) Ended Ended Ended
(Unaudited) 6/30/99(d) 6/30/98(d) 6/30/97
----------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $12.29 $11.91 $11.02 $10.00
------ ------ ------ ------
Income from investment opera-
tions:
Net investment income.......... 0.12 0.21 0.20 0.06
Net realized and unrealized
gain on investments........... 1.01 0.60 1.43 0.96
------ ------ ------ ------
Total from investment opera-
tions......................... 1.13 0.81 1.63 1.02
------ ------ ------ ------
Less distributions:
Dividends from net investment
income........................ (0.23) (0.26) (0.22) --
Distributions in excess of net
investment income............. -- (0.02) -- --
Distributions from net realized
capital gains................. (0.57) (0.15) (0.52) --
------ ------ ------ ------
Total distributions............ (0.80) (0.43) (0.74) --
------ ------ ------ ------
Net asset value, end of peri-
od............................ $12.62 $12.29 $11.91 $11.02
====== ====== ====== ======
Total return(c)................ 9.78% 7.03% 15.30% 10.20%
====== ====== ====== ======
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's)........................ $2,655 $2,308 $1,884 $ 113
Ratio of operating expenses to
average net assets............ 0.39%(b) 0.36% 0.58% 0.55%(b)
Ratio of net investment income
to average net assets......... 2.07%(b) 1.85% 1.68% 2.52%(b)
Portfolio turnover rate........ 18% 115% 54% 5%
Ratio of operating expenses to
average net assets without ex-
penses reimbursed............. 2.06%(b) 2.24% 10.77% 41.06%(b)
</TABLE>
--------
(a) The Munder All-Season Moderate Fund Class Y Shares commenced operations on
April 3, 1997.
(b) Annualized.
(c) Total return represents aggregate total return for the period indicated.
(d) Per share numbers have been calculated using the average shares method.
27
<PAGE>
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 Funds. In the Funds' annual report, you will find a
discussion of 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 herein by reference (is legally considered part of this
prospectus).
To Obtain Information:
-------------------------------------------------------------------------------
By telephone
Call 1-800-438-5789
By mail
Write to:
The Munder Funds
c/o PFPC Global Fund Services
P.O. Box 60428
King of Prussia, PA
19406-0428
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. 20549-0102. You may also obtain
information, after paying a duplicating fee, by electronic request at:
[email protected]
You may also find more information about the Fund on the Internet at:
http://www.munderfunds.com
-------------------------------------------------------------------------------
The Munder Funds, Inc.
SEC file number: 811-7346
PROLIFEY600
Investment Advisor: Munder Capital Management
Distributed by: Funds Distributor, Inc.
<PAGE>
MUNDER FUND OF FUNDS
(formerly The Munder All-Season Aggressive Fund)
480 Pierce Street
Birmingham, Michigan 48009
Telephone (800) 438-5789
STATEMENT OF ADDITIONAL INFORMATION
June 29, 2000
This Statement of Additional Information ("SAI"), which has been filed with
the Securities and Exchange Commission (the "SEC"), provides supplementary
information pertaining to the Class A, Class B, and Class Y shares representing
interests in the Munder Fund of Funds (formerly the Munder All-Season Aggressive
Fund) (the "Fund"). The Fund is a diversified series of shares issued by The
Munder Funds, Inc. (the "Company"), an open-end management investment company.
The Fund seeks its investment objective by investing in a portfolio of mutual
funds (the "Underlying Funds") offered by the Company, The Munder Framlington
Funds Trust ("Framlington"), The Munder Funds Trust (the "Trust") and St. Clair
Funds, Inc. ("St. Clair"). This SAI is not a prospectus, and should be read only
in conjunction with the Funds' Prospectus dated June 29, 2000. The contents of
this SAI are incorporated by reference in the Prospectus in their entirety. A
copy of the Prospectus may be obtained through Funds Distributor, Inc. (the
"Distributor"), or by calling (800) 438-5789. The financial statements for the
Company including the notes thereto, dated June 30, 1999 the unaudited financial
statements for the Company dated December 31, 1999, are incorporated by
reference into this SAI from the annual and semi-annual reports of the Company.
An investment in the Fund or an Underlying Fund is not a bank deposit and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other governmental agency.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
History and General Information..................................................... 3
Fund Investments.................................................................... 3
Risk Factors and Special Considerations--Institutional S&P 500 Index Equity Fund.... 15
Investment Limitations.............................................................. 17
Temporary Defensive Position........................................................ 18
Management of the Fund.............................................................. 19
Investment Advisory and Other Service Arrangements.................................. 21
Code of Ethics...................................................................... 25
Portfolio Transactions.............................................................. 25
Additional Purchase and Redemption Information...................................... 26
Net Asset Value..................................................................... 28
Performance Information............................................................. 28
Taxes............................................................................... 30
Additional Information Concerning Shares............................................ 33
Other Information................................................................... 34
Registration Statement.............................................................. 35
Financial Statements................................................................ 35
Appendix A.......................................................................... A-1
Appendix B.......................................................................... B-1
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this SAI or in the Prospectuses in connection
with the offering made by the Prospectuses and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or the Distributor. The Prospectuses do not constitute an offering
by the Fund or by the Distributor in any jurisdiction in which such offering may
not lawfully be made.
2
<PAGE>
HISTORY AND GENERAL INFORMATION
The Company was organized as a Maryland corporation on November 18, 1992
and is registered under the Investment Company Act of 1940 as an open-end
management investment company. The Munder Fund of Funds was formerly known as
the Munder All-Season Aggressive Fund. The Fund operates as a diversified series
of shares issued by the Company. The Company's principal office is located at
480 Pierce Street, Birmingham, Michigan 48009 and its telephone number is (800)
438-5789.
As stated in each Prospectus, the investment advisor of the Fund, and each
of the Underlying Funds (other than the Institutional S&P 500 Index Equity Fund
and the International Equity Fund), is Munder Capital Management (the
"Advisor"). The investment advisor for the Institutional S&P 500 Index Equity
Fund and the International Equity Fund is World Asset Management ("World"), a
Delaware limited liability company. World is a wholly-owned subsidiary of the
Advisor. The principal partners of the Advisor are Munder Group LLC ,WAM
Holdings, Inc. ("WAM") and WAM Holdings II, Inc. ("WAM II"). WAM and WAM II are
indirect, wholly owned subsidiaries of Comerica Incorporated which owns or
controls approximately 95% of the partnership interests in the Advisor.
Framlington Overseas Investment Management Limited serves as sub-advisor
("Sub-Advisor") to the Framlington Emerging Markets Fund, Framlington Global
Financial Services Fund, Framlington Healthcare Fund and the Framlington
International Growth Fund, (collectively, the "Framlington Funds"), which are
the four series of Framlington. The Sub-Advisor is a subsidiary of Framlington
Group Limited, incorporated in England and Wales which, through its
subsidiaries, provides a wide range of investment services. Framlington Group
Limited is a wholly-owned subsidiary of Framlington Holdings Limited which is,
in turn, owned 49% by the Advisor and 51% by Credit Commercial de France S.A., a
French banking corporation listed on the Societe des Bourses Francaises.
Capitalized terms used in this SAI and not otherwise defined have the same
meanings as are given to them in the Prospectuses.
Assets of the Fund will be allocated among the Underlying Funds within the
ranges set forth in the Prospectuses. In addition, the Fund may hold cash, and
may invest cash balances in repurchase agreements and other money market
instruments in an amount to meet redemptions or for day-to-day operating
expenses
INVESTMENT OBJECTIVES AND POLICIES
The Fund seeks to provide long-term capital appreciation. The Fund seeks
its objective by concentrating its investments in Underlying Funds that invest
primarily in equity securities.
FUND INVESTMENTS
The following supplements the information contained in each Prospectus
concerning the investment objectives and policies of the Underlying Funds. With
the exception of Multi-Season Growth Fund and the Real Estate Equity Investment
Fund, each Underlying Fund's investment objective is a non-fundamental policy
and may be changed without authorization of the holders of a majority of such
Underlying Fund's outstanding shares. There can be no assurance that the 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, Equity Income Fund, Growth Opportunities Fund,
Institutional S&P 500 Index Equity Fund, International Equity Fund,
International NetNet Fund, Micro-Cap Equity Fund, Multi-Season Growth Fund (the
"Multi-Season Fund"), NetNet Fund, Real Estate Equity Investment Fund (the "Real
Estate Fund"), Small-Cap Value Fund, Small Company Growth Fund and the
Framlington Funds are referred to as the "Equity Funds." The Cash Investment
Fund, Institutional Money Market Fund and U.S. Treasury Money Market Fund are
referred to as the "Money Market Funds." If you require more detailed
information about an Underlying Fund, please call the Distributor at (800) 438-
5789 to obtain the complete prospectus and statement of additional information
for that fund.
3
<PAGE>
Borrowing. The Underlying Funds are authorized to borrow money in amounts
up to 5% of the value of their total assets at the time of such borrowings for
temporary purposes, and are authorized to borrow money in excess of the 5% limit
as permitted by the Investment Company Act of 1940, as amended (the "1940 Act"),
to meet redemption requests. This borrowing may be unsecured. The 1940 Act
requires the Underlying Funds to maintain continuous asset coverage of 300% of
the amount borrowed. If the 300% asset coverage should decline as a result of
market fluctuations or other reasons, the Underlying Funds may be required to
sell some of their portfolio holdings within three days to reduce the debt and
restore the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. Borrowed funds are
subject to interest costs that may or may not be offset by amounts earned on the
borrowed funds. The Underlying Funds may also be required to maintain minimum
average balances in connection with such borrowing or to pay a commitment or
other fees to maintain a line of credit; either of these requirements would
increase the cost of borrowing over the stated interest rate. The Underlying
Funds may, in connection with permissible borrowings, transfer as collateral,
securities owned by the Funds.
Additionally, each Underlying Fund may borrow funds for temporary or
emergency purposes by selling portfolio securities to financial institutions
such as banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). Reverse repurchase
agreements involve the risk that the market value of the securities sold by an
Underlying Fund may decline below the repurchase price. An Underlying Fund will
pay interest on amounts obtained pursuant to a reverse repurchase agreement.
While reverse repurchase agreements are outstanding, an Underlying Fund will
maintain in a segregated account, cash, U.S. Government securities or other
liquid portfolio securities of an amount at least equal to the market value of
the securities, plus accrued interest, subject to the agreement.
Foreign Securities. Each Equity Fund (except NetNet Fund, Real Estate
Fund, International Equity Fund, Framlington Emerging Markets Fund, Framlington
Global Financial Services Fund, Framlington Healthcare Fund and Framlington
International Growth Fund), and each of the Cash Investment Fund and the
Institutional Money Market Fund may invest up to 25% of its assets in foreign
securities. Under normal market conditions, the International Equity Fund and
Framlington International Growth Fund each will invest at least 65% of its
assets in securities of issuers located in at least three other countries, one
of which may be the United States. Framlington Global Financial Services Fund
will invest at least 65% of its assets in securities of issuers located in at
least three countries other than the United States. The Framlington Emerging
Markets Fund will invest at least 65% of its assets in companies in emerging
market countries. There is no limit on the Framlington Healthcare Fund's
investments in foreign securities. The Future Technology Fund, International
NetNet Fund, Multi-Season Fund and the NetNet Fund typically will only purchase
foreign securities which are represented by American Depositary Receipts
("ADRs") listed on a domestic securities exchange or included in the NASDAQ
National Market System, or foreign securities listed directly on a domestic
securities exchange or included in the NASDAQ National Market System. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying foreign securities. Certain institutions issuing
ADRs may not be sponsored by the issuer. A non-sponsored depositary may not
provide the same shareholder information that a sponsored depositary is required
to provide under its contractual arrangements with the issuer.
Income and gains on foreign securities may be subject to foreign
withholding taxes. Investors should consider carefully the substantial risks
involved in securities of companies and governments of foreign nations, which
are in addition to the usual risks inherent in domestic investments. There may
be less publicly available information about foreign companies comparable to the
reports and ratings published about companies in the United States. Foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to United States companies. Foreign markets
have substantially less trading volume than the New York Stock Exchange and
securities of some foreign companies are less liquid and more volatile than
securities of comparable United States companies. Commission rates in foreign
countries, which are generally fixed rather than subject to negotiation as in
the United States, are likely to be higher. In many foreign countries there is
less government supervision and less regulation of stock exchanges, brokers, and
listed companies than in the United States. Such concerns are particularly
heightened for emerging markets and Eastern European countries.
4
<PAGE>
Investments in companies domiciled in developing countries may be subject
to potentially higher risks than investments in developed countries. These
risks include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict an
Underlying Fund's investment opportunities, including restrictions on investment
in issuers or industries deemed sensitive to national interest; (iv) foreign
taxation; (v) the absence of developed legal structures governing private or
foreign investment or allowing for judicial redress for injury to private
property; (vi) the absence, until recently in certain Eastern European
countries, of a capital market structure or market-oriented economy; and (vii)
the possibility that recent favorable economic developments in Eastern Europe
may be slowed or reversed by unanticipated political or social events in such
countries.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, an Underlying Fund could lose a
substantial portion of any investments it has made in the affected countries.
Further, no accounting standards exist in Eastern European countries. Finally,
even though certain Eastern European currencies may be convertible into United
States dollars, the conversion rates may be artificial rather than their actual
market values and they may be adverse to an Underlying Fund.
The Advisor, World or the Sub-Advisor endeavors to buy and sell foreign
currencies on as favorable a basis as practicable. Some price spread on
currency exchange (to cover service charges) may be incurred, particularly when
an Underlying Fund changes investments from one country to another or when
proceeds of the sale of Fund shares in U.S. dollars are used for the purchase of
securities in foreign countries. Also, some countries may adopt policies which
would prevent an Underlying Fund from transferring cash out of the country or
withhold portions of interest and dividends at the source. Certain European
currencies are being converted into the Euro. This conversion, which is under
way, is scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase the volatility in world markets and
affect European markets in particular. There is the possibility of
expropriation, nationalization or confiscatory taxation, withholding and other
foreign taxes on income or other amounts, foreign exchange controls (which may
include suspension of the ability to transfer currency from a given country),
default in foreign government securities, political or social instability or
diplomatic developments that could affect investments in securities of issuers
in foreign nations.
Foreign securities markets have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of an Underlying Fund are uninvested and no return
is earned thereon. The inability of an Underlying Fund to make intended
security purchases due to settlement problems could cause the Fund to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to
an Underlying Fund due to subsequent declines in value of the portfolio security
or, if the fund has entered into a contract to sell the security, could result
in possible liability to the purchaser.
An Underlying Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Changes in foreign currency exchange rates will
influence values within an Underlying Fund from the perspective of U.S.
investors, and may also affect the value of dividends and interest earned, gains
and losses realized on the sale of securities, and net investment income and
gains, if any, to be distributed to shareholders by a Fund. The rate of
exchange between the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors.
The Advisor, World or the Sub-Advisor will attempt to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where, from time to time, it places a Fund's investments.
5
<PAGE>
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
Forward Currency Transactions. In order to protect against a possible loss
on investments resulting from a decline or appreciation in the value of a
particular foreign currency against the U.S. dollar or another foreign currency,
the Equity Funds (excluding the Real Estate Fund), and the Fixed Income Funds
are authorized to enter into forward currency exchange contracts ("forward
currency contracts"). These contracts involve an obligation to purchase or sell
a specified currency at a future date at a price set at the time of the
contract. Forward currency contracts do not eliminate fluctuations in the
values of portfolio securities but rather allow an Underlying Fund to establish
a rate of currency exchange for a future point in time.
When entering into a contract for the purchase or sale of a security, an
Underlying Fund may enter into a forward currency contract for the amount of the
purchase or sale price to protect against variations, between the date the
security is purchased or sold and the date on which payment is made or received,
in the value of the foreign currency relative to the U.S. dollar or other
foreign currency.
When the Advisor, World or the Sub-Advisor anticipates that a particular
foreign currency may decline substantially relative to the U.S. dollar or other
leading currencies, in order to reduce risk, an Underlying Fund may enter into a
forward contract to sell, for a fixed amount, the amount of foreign currency
approximating the value of some or all of the Underlying Fund's securities
denominated in such foreign currency. Similarly, when the obligations held by
an Underlying Fund create a short position in a foreign currency, the Fund may
enter into a forward contract to buy, for a fixed amount, an amount of foreign
currency approximating the short position. With respect to any forward currency
contract, it will not generally be possible to match precisely the amount
covered by that contract and the value of the securities involved due to the
changes in the values of such securities resulting from market movements between
the date the forward contract is entered into and the date it matures. In
addition, while forward contracts may offer protection from losses resulting
from declines or appreciation in the value of a particular foreign currency,
they also limit potential gains which might result from changes in the value of
such currency. An Underlying Fund will also incur costs in connection with
forward currency contracts and conversions of foreign currencies and U.S.
dollars.
Cash or liquid securities equal to the amount of an Underlying Fund's
assets that could be required to consummate forward contracts will be designated
on the records of the Underlying Funds or those of the Underlying Fund's
custodian except to the extent the contracts are otherwise "covered." For the
purpose of determining the adequacy of the securities in the account, the
deposited securities will be valued at market or fair value. If the market or
fair value of such securities declines, additional cash or securities will be
placed in the account daily so that the value of the account will equal the
amount of such commitments by the Underlying Fund. A forward contract to sell a
foreign currency is "covered" if an Underlying Fund owns the currency (or
securities denominated in the currency) underlying the contract, or holds a
forward contract (or call option) permitting the fund to buy the same currency
at a price no higher than the fund's price to sell the currency. A forward
contract to buy a foreign currency is "covered" if an Underlying Fund holds a
forward contract (or call option) permitting the fund to sell the same currency
at a price as high as or higher than the fund's price to buy the currency.
Futures Contracts and Related Options. The Equity Funds may purchase and
sell futures contracts on interest-bearing securities or securities indices, and
may purchase and sell call and put options on futures contracts. For a detailed
description of futures contracts and related options, see Appendix B to this
SAI.
Illiquid Securities. Each of the Equity Funds may invest up to 15%, and
each of the Money Market Funds may invest up to 10%, of the value of its net
assets (determined at time of acquisition) in securities that are illiquid.
Illiquid securities would generally include securities for which there is a
limited trading market, repurchase agreements and time deposits with
notice/termination dates in excess of seven days, and certain securities that
are subject to trading restrictions because they are not registered under the
Securities Act of 1933, as amended (the "Act"). If, after the time of
acquisition, events cause this limit to be exceeded, the Underlying Fund will
take steps to reduce the aggregate amount of illiquid securities as soon as
reasonably practicable in accordance with the policies of the SEC.
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Each Underlying Fund (except U.S. Treasury Money Market Fund) may invest in
commercial obligations issued in reliance on the "private placement" exemption
from registration afforded by Section 4(2) of the Act ("Section 4(2) paper").
An Underlying Fund may also purchase securities that are not registered under
the Act, but which can be sold to qualified institutional buyers in accordance
with Rule 144A under the Act, ("Rule 144A securities"). Section 4(2) paper is
restricted as to disposition under the Federal securities laws, and generally is
sold to institutional investors who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors through or with the assistance of the
issuer or investment dealers which make a market in the Section 4(2) paper, thus
providing liquidity. Rule 144A securities generally must be sold only to other
qualified institutional buyers. If a particular investment in Section 4(2)
paper or Rule 144A securities is not determined to be liquid, that investment
will be included within the Underlying Fund's limitation on investment in
illiquid securities. The Advisor, World or the Sub-Advisor will determine the
liquidity of such investments pursuant to guidelines established by the Boards
of Directors/Trustees. It is possible that unregistered securities purchased by
the Underlying Fund in reliance upon Rule 144A could have the effect of
increasing the level of the Underlying Fund's illiquidity to the extent that
qualified institutional buyers become, for a period, uninterested in purchasing
these securities.
Investment Company Securities. The Underlying Funds may invest in
securities issued by other investment companies. As a shareholder of another
investment company, an Underlying Fund would bear its pro rata portion of the
other investment company's expenses, including advisory fees. These expenses
would be in addition to the expenses each Underlying Fund bears directly in
connection with its own operations. Each Underlying Fund currently intends to
limit its investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made: (i)
not more than 5% of the value of the Underlying Fund's total assets will be
invested in the securities of any one investment company; (ii) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group; and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Underlying Fund.
Lending of Portfolio Securities. To enhance the return on its portfolio,
each of the Underlying Funds may lend securities in its portfolio (subject to a
limit of 25% of each Fund's total assets, other than the Institutional Money
Market Fund; and 33 1/3% of the Institutional Money Market Fund's total assets)
to securities firms and financial institutions, provided that each loan is
secured continuously by collateral in the form of cash, high quality money
market instruments or short-term U.S. Government securities adjusted daily to
have a market value at least equal to the current market value of the securities
loaned. These loans are terminable at any time, and the Underlying Funds will
receive any interest or dividends paid on the loaned securities. In addition,
it is anticipated that an Underlying Fund may share with the borrower some of
the income received on the collateral for the loan or the Fund will be paid a
premium for the loan. The risk in lending portfolio securities, as with other
extensions of credit, consists of the possibility of loss to a Fund due to (i)
the inability of the borrower to return securities, (ii) a delay in recovery of
the securities, or (iii) loss of rights in the collateral should the borrower
fail financially. In determining whether the Underlying Funds will lend
securities, the Advisor, World or the Sub-Advisor will consider all relevant
facts and circumstances. The Underlying Funds will only enter into loan
arrangements with broker-dealers, banks or other institutions which the Advisor,
World or the Sub-Advisor has determined are creditworthy under guidelines
established by the Boards of Directors/Trustees.
Lower-Rated Debt Securities. It is expected that each Underlying Fund
(other than the Money Market Funds, Institutional S&P 500 Index Equity 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 Investor
Services, 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. Such securities are also known as junk bonds. The yields on lower-
rated debt and comparable unrated securities generally are higher than the
yields available on higher-rated securities. However, investments in lower-
rated debt and comparable unrated securities generally involve greater
volatility of price and risk of loss of income and principal, including the
possibility of default by or bankruptcy of the issuers of such securities.
Lower-rated debt and comparable unrated securities (a) will likely have some
quality and protective characteristics that, in the judgment of the rating
organization, are outweighed by large uncertainties or major risk exposures to
adverse conditions and (b) are predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation. Accordingly, it is possible that these types of factors
could, in certain instances, reduce the value of securities held in each
Underlying Fund's portfolio, with a commensurate effect on the value of each of
the Fund's shares. Therefore, an investment in the Funds should not be
considered as a complete investment program and may not be appropriate for all
investors.
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While the market values of lower-rated debt and comparable unrated
securities tend to react more to fluctuations in interest rate levels than the
market values of higher-rated securities, the market values of certain lower-
rated debt and comparable unrated securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
higher-rated securities. In addition, lower-rated debt securities and
comparable unrated securities generally present a higher degree of credit risk.
Issuers of lower-rated debt and comparable unrated securities often are highly
leveraged and may not have more traditional methods of financing available to
them so that their ability to service their debt obligations during an economic
downturn or during sustained periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is significantly greater because
lower-rated debt and comparable unrated securities generally are unsecured and
frequently are subordinated to the prior payment of senior indebtedness. The
Underlying Funds may incur additional expenses to the extent that they are
required to seek recovery upon a default in the payment of principal or interest
on their portfolio holdings. The existence of limited markets for lower-rated
debt and comparable unrated securities may diminish each of the Underlying
Fund's ability to (a) obtain accurate market quotations for purposes of valuing
such securities and calculating its net asset value and (b) sell the securities
at fair value either to meet redemption requests or to respond to changes in the
economy or in financial markets.
Lower-rated debt securities and comparable unrated securities may have call
or buy-back features that permit their issuers to call or repurchase the
securities from their holders. If an issuer exercises these rights during
periods of declining interest rates, the Underlying Funds may have to replace
the security with a lower yielding security, thus resulting in a decreased
return to the Funds. A description of applicable credit ratings is set forth in
Appendix A of this SAI.
Money Market Instruments. The Fund and the Underlying Funds may invest
from time to time in "money market instruments," a term that includes, among
other things, bank obligations, commercial paper, variable amount master demand
notes and corporate bonds with remaining maturities of 397 days or less.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Fund and the Underlying Funds will invest in
obligations of foreign banks or foreign branches of U.S. banks only where the
Advisor, World or the Sub-Advisor deems the instrument to present minimal credit
risks, such investments may nevertheless entail risks that are different from
those of investments in domestic obligations of U.S. banks due to differences in
political, regulatory and economic systems and conditions. All investments in
bank obligations are limited to the obligations of financial institutions having
more than $1 billion in total assets at the time of purchase.
Investments by the Fund or an Underlying Fund in commercial paper will
consist of issues rated at the time A-1 and/or P-1 by S&P or Moody's. In
addition, the Fund and the Underlying Funds may acquire unrated commercial paper
and corporate bonds that are determined by the Advisor, World or the Sub-Advisor
at the time of purchase to be of comparable quality to rated instruments that
may be acquired by such Fund as previously described.
The Fund and the Underlying Funds may also purchase variable amount master
demand notes which are unsecured instruments that permit the indebtedness
thereunder to vary and provide for periodic adjustments in the interest rate.
Although the notes are not normally traded and there may be no secondary market
in the notes, an investor may demand payment of the principal of the instrument
at any time. The notes are not typically rated by credit rating agencies, but
issuers of variable amount master demand notes must satisfy the same criteria as
set forth above for issuers of commercial paper. If an issuer of a variable
amount master demand note defaulted on its payment obligation, an Underlying
Fund might be unable to dispose of the note because of the absence of a
secondary market and might, for this or other reasons, suffer a loss to the
extent of the default. The Fund and the Underlying Funds invest in variable
amount master notes only when the Advisor, World or the Sub-Advisor deems the
investment to involve minimal credit risk.
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Mortgage-Related Securities. Subject to applicable credit criteria, the
Cash Investment Fund may purchase asset-backed securities (i.e., securities
backed by mortgages, installment sales contracts, credit card receivables or
other assets). There are a number of important differences among the agencies
and instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related securities
guaranteed by the Government National Mortgage Association ("GNMA") include GNMA
Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are
guaranteed as to the timely payment of principal and interest by GNMA and such
guarantee is backed by the full faith and credit of the United States. GNMA is a
wholly-owned U.S. Government corporation within the Department of Housing and
Urban Development. GNMA certificates also are supported by the authority of GNMA
to borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States, but are
supported by the right of the issuer to borrow from the Treasury. FNMA is a
government-sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation
("FHLMC") include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the United
States, created pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or
by any Federal Home Loan Banks and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder
to timely payment of interest, which is guaranteed by the FHLMC. FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When FHLMC does not guarantee timely
payment of principal, FHLMC may remit the amount due on account of its guarantee
of ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Municipal Obligations. Opinions relating to the validity of municipal
obligations and to the exemption of interest thereon from regular Federal income
tax are rendered by bond counsel or counsel to the respective issuers at the
time of issuance. Neither the Trust, St. Clair nor the Advisor will review
the proceedings relating to the issuance of municipal obligations or the bases
for such opinions.
An issuer's obligations under its municipal obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its municipal obligations may be
materially adversely affected by litigation or other conditions.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal obligations. For example, under the Tax Reform Act of
1986 interest on certain private activity bonds must be included in an
investor's Federal alternative minimum taxable income, and corporate investors
must include all tax-exempt interest in their Federal alternative minimum
taxable income. The Trust cannot predict what legislation, if any, may be
proposed in Congress in the future as regards the Federal income tax status of
interest on municipal obligations in general, or which proposals, if any, might
be enacted. 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 Institutional Money Market Fund each may,
when deemed appropriate by the Advisor in light of the Underlying Fund's
investment objective, invest in high quality municipal obligations issued by
state and local governmental issuers, the interest on which may be taxable or
tax-exempt for Federal income tax purposes, provided that such obligations carry
yields that are competitive with those of other types of money market
instruments of comparable quality. Neither the Cash Investment Fund nor the
Institutional Money Market Fund expects to invest more than 5% of its net assets
in such municipal obligations during the current fiscal year.
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Non-Domestic Bank Obligations. Non-domestic bank obligations include
Eurodollar Certificates of Deposit ("ECDs"), which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs"), which are U.S.
U.S. dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs"), which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank and held in
the United States; and Yankee Bankers' Acceptances ("Yankee BAs"), which are
U.S. dollar-denominated bankers' acceptances issued by a U.S. branch of a
foreign bank and held in the United States.
Options. The Underlying Funds may write covered call options, buy put
options, buy call options and write secured put options. For risks associated
with options on foreign currencies, see Appendix B of this SAI.
Real Estate Securities. The Real Estate Fund may invest without limit in
shares of real estate investment trusts ("REITs"). The Equity Funds and the
Balanced Fund may also invest in REITs. REITs pool investors' funds for
investment primarily in income producing real estate or real estate loans or
interests. A REIT is not taxed on income distributed to shareholders if it
complies with several requirements relating to its organization, ownership,
assets, and income and a requirement that it distribute to its shareholders at
least 95% of it taxable income (other than net capital gains) for each taxable
year. REITs can generally be classified as Equity REITs, Mortgage REITs and
Hybrid REITs. Equity REITs, which invest the majority of their assets directly
in real property, derive their income primarily from rents. Equity REITs can
also realize capital gains by selling properties that have appreciated in value.
Mortgage REITs, which invest the majority of their assets in real estate
mortgages, derive their income primarily from interest payments. Hybrid REITs
combine the characteristics of both Equity REITs and Mortgage REITs. The Funds
will not invest in real estate directly, but only in securities issued by real
estate companies. However, the Funds may be subject to risks similar to those
associated with the direct ownership of real estate (in addition to securities
markets risks) because of its policy of concentration in the securities of
companies in the real estate industry. These include declines in the value of
real estate, risks related to general and local economic conditions, dependency
on management skill, heavy cash flow dependency, possible lack of availability
of mortgage funds, overbuilding, extended vacancies of properties, increased
competition, increases in property taxes and operating expenses, changes in
zoning laws, losses due to costs resulting from the clean-up of environmental
problems, liability to third parties for damages resulting from environmental
problems, casualty or condemnation losses, limitations on rents, changes in
neighborhood values, the appeal of properties to tenants and changes in interest
rates.
In addition to these risks, Equity REITs may be affected by changes in the
value of the underlying property owned by the trusts, while Mortgage REITs may
be affected by the quality of any credit extended. Further, Equity and Mortgage
REITs are dependent upon management skills and generally may not be diversified.
Equity and Mortgage REITs are also subject to heavy cash flow dependency,
defaults by borrowers and self-liquidation. In addition, Equity and Mortgage
REITs could possibly fail to qualify for the beneficial tax treatment available
to real estate investment trusts under the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), or to maintain their exemptions from
registration under the 1940 Act. The above factors may also adversely affect a
borrower's or a lessee's ability to meet its obligations to the REIT. In the
event of a default by a borrower or lessee, the REIT may experience delays in
enforcing its rights as a mortgagee or lessor and may incur substantial costs
associated with protecting investments.
Repurchase Agreements. The Fund and the Underlying Funds may agree to
purchase securities from financial institutions such as member banks of the
Federal Reserve System, any foreign bank or any domestic or foreign
broker/dealer that is recognized as a reporting government securities dealer,
subject to the seller's agreement to repurchase them at an agreed-upon time and
price ("repurchase agreements"). The Advisor, World or the Sub-
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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, St. Clair'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 the Fund or
Underlying Fund under the 1940 Act.
Reverse Repurchase Agreements. Each Underlying Fund may borrow funds for
temporary or emergency purposes by selling portfolio securities to financial
institutions such as banks and broker/dealers and agreeing to repurchase them at
a mutually specified date and price ("reverse repurchase agreements"). Reverse
repurchase agreements involve the risk that the market value of the securities
sold by an Underlying Fund may decline below the repurchase price. An
Underlying Fund will pay interest on amounts obtained pursuant to a reverse
repurchase agreement. While reverse repurchase agreements are outstanding, an
Underlying Fund will maintain cash, U.S. Government securities or other liquid
high-grade securities designated on the books of the Underlying Fund's custodian
an amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement.
Rights and Warrants. The Equity Funds may purchase warrants, which are
privileges issued by corporations enabling the owners to subscribe to and
purchase a specified number of shares of the corporation at a specified price
during a specified period of time. Subscription rights normally have a short
life span to expiration. The purchase of warrants involves the risk that an
Underlying Fund could lose the purchase value of a warrant if the right to
subscribe to additional shares is not exercised prior to the warrant's
expiration. Also, the purchase of warrants involves the risk that the effective
price paid for the warrant added to the subscription price of the related
security may exceed the value of the subscribed security's market price such as
when there is no movement in the level of the underlying security.
Short Sales. The Global Financial Services Fund may make short sales of
securities. A short sale is a transaction in which the Underlying Fund sells a
security it does not own in anticipation that the market price of that security
will decline. When the Underlying Fund makes a short sale, it must borrow the
security sold short and deliver it to the broker-dealer through which it made
the short sale as collateral for its obligation to deliver the security upon
conclusion of the sale. The Underlying Fund may also sell securities that it
owns or has the right to acquire at no additional cost but does not intend to
deliver to the buyer, a practice known as selling short "against-the-box." The
Underlying Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.
The Underlying Fund's obligation to replace the borrowed security will be
secured by collateral deposited with the broker-dealers, usually cash, U.S.
Government securities or other highly liquid securities similar to those
borrowed. The Underlying Fund will also be required to deposit similar
collateral with its custodian or custodian to the extent necessary so that the
value of both collateral deposits in the aggregate is at all times equal to as
least 100% of the current market value of the security sold short. Depending on
arrangements made with the broker-dealer from which it borrowed the security
regarding payment over any received by the Underlying Fund on such security, the
Fund may not received any payments (including interest) on its collateral
deposited with such broker-dealer. The Underlying Fund will incur transaction
costs, including interest expenses, in connection with opening, maintaining, and
closing short sales.
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If the price of the security sold short increases between the time of the
short sale and the time the Underlying Fund replaces the borrowed security, the
Fund will incur a loss; conversely, if the price declines, the Fund will realize
a capital gain. Any gain is limited to the price at which it sold the security
short; its potential loss is theoretically unlimited.
Stand-by Commitments. The Cash Investment Fund and the Institutional Money
Market Fund may enter into stand-by commitments with respect to municipal
obligations held by it. Under a stand-by commitment, a dealer agrees to
purchase at the Underlying Fund's option a specified municipal obligation at its
amortized cost value to the Fund plus accrued interest, if any. Stand-by
commitments may be exercisable by an Underlying Fund at any time before the
maturity of the underlying municipal obligations and may be sold, transferred or
assigned only with the instruments involved.
The Trust and St. Clair expect that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Cash Investment Fund may pay for a stand-by
commitment either separately in cash or by paying a higher price for municipal
obligations which are acquired subject to the commitment (thus reducing the
yield to maturity otherwise available for the same securities). The total
amount paid in either manner for outstanding stand-by commitments held by the
Underlying Fund will not exceed 1/2 of 1% of the value of the Underlying Fund's
total assets calculated immediately after each stand-by commitment is acquired.
The Cash Investment Fund and the Institutional Money Market Fund intend to
enter into stand-by commitments only with dealers, banks and broker/dealers
which, in the Advisor's opinion, present minimal credit risks. The acquisition
of a stand-by commitment will not affect the valuation of the underlying
municipal obligation. The actual stand-by commitment will be valued at zero in
determining net asset value. Accordingly, where an Underlying Fund pays
directly or indirectly for a stand-by commitment, its cost will be reflected as
an unrealized loss for the period during which the commitment is held by an
Underlying Fund and will be reflected in realized gain or loss when the
commitment is exercised or expires.
Stock Index Futures, Options on Stock and Bond Indices and Options on Stock
and Bond Index Futures Contracts. The Equity Funds may purchase and sell stock
index futures, options on stock and bond indices and options on stock and bond
index futures contracts as a hedge against movements in the equity and bond
markets.
A stock index futures contract is an agreement in which one party agrees to
deliver to the other an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of securities is made.
Options on stock and bond indices are similar to options on specific
securities, described above, except that, rather than the right to take or make
delivery of the specific security at a specific price, an option on a stock or
bond index gives the holder the right to receive, upon exercise of the option,
an amount of cash if the closing level of that stock or bond index is greater
than, in the case of a call option, or less than, in the case of a put option,
the exercise price of the option. This amount of cash is equal to such
difference between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount. Unlike options on specific securities, all settlements of options
on stock or bond indices are in cash, and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stocks.
If the Advisor, World or the Sub-Advisor expects general stock or bond
market prices to rise, it might purchase a stock index futures contract, or a
call option on that index, as a hedge against an increase in prices of
particular securities it ultimately wants to buy. If in fact the index does
rise, the price of the particular securities intended to be purchased may also
increase, but that increase would be offset in part by the increase in the value
of the Underlying Funds' futures contract or index option resulting from the
increase in the index. If, on the other hand, the Advisor, World or the Sub-
Advisor, as the case may be, expects general stock or bond market prices to
decline, it might sell a futures contract, or purchase a put option, on the
index. If that index does in fact decline, the
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value of some or all of the securities in the Underlying Funds' portfolio may
also be expected to decline, but that decrease would be offset in part by the
increase in the value of the Underlying Funds' position in such futures contract
or put option.
The Underlying Funds may purchase and write call and put options on stock
index futures contracts and each such Underlying Fund and the International Bond
Fund may purchase and write call and put options on bond index futures
contracts. Each such Underlying Fund may use such options on futures contracts
in connection with its hedging strategies in lieu of purchasing and selling the
underlying futures or purchasing and writing options directly on the underlying
securities or indices. For example, such Underlying Funds may purchase put
options or write call options on stock and bond index futures (only bond index
futures in the case of the International Bond Fund), rather than selling futures
contracts, in anticipation of a decline in general stock or bond market prices
or purchase call options or write put options on stock or bond index futures,
rather than purchasing such futures, to hedge against possible increases in the
price of securities which such Underlying Funds intend to purchase.
In connection with transactions in stock or bond index futures, stock or
bond index options and options on stock or bond index futures, such Underlying
Funds will be required to deposit as "initial margin" an amount of cash and
short-term U.S. Government securities equal to between 5% to 8% of the contract
amount. Thereafter, subsequent payments (referred to as "variation margin") are
made to and from the broker to reflect changes in the value of the option or
futures contract. No such Underlying Fund may at any time commit more than 5%
of its total assets to initial margin deposits on futures contracts, index
options and options on futures contracts.
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 Fund and the Underlying Funds may
purchase obligations issued or guaranteed by the U.S. Government and, except in
the case of the U.S. Treasury Money Market Fund, U.S. Government agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of the
U.S. Government, such as those of the GNMA, are supported by the full faith and
credit of the U.S. Treasury. Others, such as those of the Export-Import Bank of
the United States, are supported by the right of the issuer to borrow from the
U.S. Treasury; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the agency or instrumentality
issuing the obligation. No assurance can be given that the U.S. Government
would provide financial support to U.S. Government-sponsored instrumentalities
if it is not obligated to do so by law. Examples of the types of U.S.
Government obligations that may be acquired by the Funds include U.S. Treasury
Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home
Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, FNMA, GNMA, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, FHLMC, Federal Intermediate Credit Banks and Maritime
Administration.
Variable and Floating Rate Instruments. Debt instruments may be structured
to have variable or floating interest rates. Variable and floating rate
obligations purchased by an Underlying Fund may have stated maturities in excess
of an Underlying Fund's maturity limitation if the Underlying Fund can demand
payment of the principal of the instrument at least once during such period on
not more than thirty days' notice (this demand feature is not required if the
instrument is guaranteed by the U.S. Government or an agency thereof). These
instruments may include variable amount master demand notes that permit the
indebtedness to vary in addition to providing for periodic adjustments in the
interest rates. The Advisor, World or the Sub-Advisor, as the case may be, will
consider 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
13
<PAGE>
applicable to an Underlying Fund, the issuer's obligation to pay the principal
of the instrument will be backed by an unconditional bank letter or line of
credit, guarantee or commitment to lend. The Money Market Funds will invest in
variable and floating rate instruments only when the Advisor deems the
investment to involve minimal credit risk.
In determining average weighted portfolio maturity of the Underlying Funds,
an instrument will usually be deemed to have a maturity equal to the longer of
the period remaining until the next interest rate adjustment or the time the
Underlying Fund involved can recover payment of principal as specified in the
instrument. Variable rate U.S. Government obligations held by the Underlying
Funds, however, will be deemed to have maturities equal to the period remaining
until the next interest rate adjustment.
The absence of an active secondary market for certain variable and floating
rate notes could make it difficult to dispose of the instruments, and an
Underlying Fund could suffer a loss if the issuer defaulted or during periods
that an Underlying Fund is not entitled to exercise its demand rights.
Variable and floating rate instruments held by an Underlying Fund will be
subject to the Fund's limitation on illiquid investments when the Fund may not
demand payment of the principal amount within seven days absent a reliable
trading market.
Guaranteed Investment Contracts. The Fixed Income Funds, the Cash
Investment Fund and the Institutional Money Market Fund may make limited
investments in guaranteed investment contracts ("GICs") issued by U.S. insurance
companies. Pursuant to such contracts, an Underlying Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the Underlying Fund on a monthly basis
interest which is based on an index (in most cases this index is expected to be
the Salomon Brothers CD Index), but is guaranteed not to be less than a certain
minimum rate. A GIC is normally a general obligation of the issuing insurance
company and not funded by a separate account. The purchase price paid for a GIC
becomes part of the general assets of the insurance company, and the contract is
paid from the company's general assets. An Underlying Fund will only purchase
GICs from insurance companies which, at the time of purchase, have assets of $1
billion or more and meet quality and credit standards established by the Advisor
pursuant to guidelines approved by the Boards of Directors/Trustees. Generally,
GICs are not assignable or transferable without the permission of the issuing
insurance companies, and an active secondary market in GICs does not currently
exist. Therefore, GICs will normally be considered illiquid investments, and
will be acquired subject to the limitation on illiquid investments.
When-Issued Purchases and Forward Commitments (Delayed-Delivery
Transactions). When-issued purchases and forward commitments (known as delayed-
delivery transactions) are commitments by an Underlying Fund to purchase or sell
particular securities with payment and delivery to occur at a future date
(perhaps one or two months later). These transactions permit the Underlying
Fund to lock-in a price or yield on a security, regardless of future changes in
interest rates.
When an Underlying Fund agrees to purchase securities on a when-issued or
forward commitment basis, the Fund will designate cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the Underlying Fund will earmark portfolio securities to satisfy a
purchase commitment, and in such a case the Underlying Fund may be required
subsequently to designate additional assets in order to ensure that the value of
the account remains equal to the amount of the Underlying Fund's commitments.
It may be expected that the market value of the Underlying Fund's net assets
will fluctuate to a greater degree when it designates portfolio securities to
cover such purchase commitments than when it designates cash. Because an
Underlying Fund's liquidity and ability to manage its portfolio might be
affected when it sets aside cash or portfolio securities to cover such purchase
commitments, the Advisor, World or the Sub-Advisor expects that its commitments
to purchase when-issued securities and forward commitments will not exceed 25%
of the value of an Underlying Fund's total assets absent unusual market
conditions.
An Underlying Fund will purchase securities on a when-issued or forward
commitment basis only with the intention of completing the transaction and
actually purchasing the securities. If deemed advisable as a matter of
investment strategy, however, an Underlying Fund may dispose of or renegotiate a
commitment after it is entered
14
<PAGE>
into, and may sell securities it has committed to purchase before those
securities are delivered to the Underlying Fund on the settlement date. In these
cases the Underlying Fund may realize a taxable capital gain or loss.
When an Underlying Fund engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such party to do so may result in the Underlying Fund's incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the market value of
an Underlying Fund starting on the day the Fund agrees to purchase the
securities. The Underlying Fund does not earn interest on the securities it has
committed to purchase until they are paid for and delivered on the settlement
date.
Yields and Ratings. The yields on certain obligations, including the money
market instruments in which the Fund and Underlying Fund may invest (such as
commercial paper and bank obligations), are dependent on a variety of factors,
including general money market conditions, conditions in the particular market
for the obligation, the financial condition of the issuer, the size of the
offering, the maturity of the obligation and the ratings of the issue. The
ratings of S&P, Moody's, Duff & Phelps Credit Rating Co., Thomson Bank Watch,
Inc., and other (NRSROs) represent their respective opinions as to the quality
of the obligations they undertake to rate. Ratings, however, are general and
are not absolute standards of quality. Consequently, obligations with the same
rating, maturity and interest rate may have different market prices.
With respect to each of the Money Market Funds, securities (other than U.S.
Government securities) must be rated (generally, by at least two NRSROs) within
the two highest rating categories assigned to short-term debt securities. In
addition, each of the Cash Investment Fund and the Institutional Money Market
Fund will not invest more than 5% of its total assets in securities rated in the
second highest rating category by such NRSROs and will not invest more than 1%
of its total assets in such securities of any one issuer. The Cash Investment
Fund and the Institutional Money Market Fund intend to limit investments in the
securities of any single issuer (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) to not more than 5% of
the Underlying Fund's total assets at the time of purchase, provided that the
Underlying Fund may invest up to 25% of its total assets in the securities of
any one issuer rated in the highest rating category by an NRSRO for a period of
up to three business days. Unrated and certain single rated securities (other
than U.S. Government securities) may be purchased by the Money Market Funds, but
are subject to a determination by the Advisor, in accordance with procedures
established by the Boards of Trustees and Directors, that the unrated and single
rated securities are of comparable quality to the appropriate rated securities.
Other. Subsequent to its purchase by an Underlying Fund, a rated security
may cease to be rated or its rating may be reduced below the minimum rating
required for purchase by the Underlying Fund. The Boards of Trustees and
Directors, as applicable, or the Advisor, World or the Sub-Advisor, pursuant to
guidelines established by the Boards, will consider such an event in determining
whether the Underlying Fund involved should continue to hold the security in
accordance with the interests of the Fund and applicable regulations of the SEC.
RISK FACTORS AND SPECIAL CONSIDERATIONS -- INSTITUTIONAL S&P 500 INDEX EQUITY
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 Institutional
S&P 500 Index Equity 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
15
<PAGE>
able to construct and maintain the Fund's investment portfolio so that it
reasonably tracks the performance of the S&P 500. World will compare the
industry sector diversification of the stocks the Fund would acquire solely on
the basis of their weighted capitalizations with the industry sector
diversification of all issuers included in the S&P 500. This comparison is made
because World believes that, unless the Fund holds all stocks included in the
S&P 500, the selection of stocks for purchase by the Fund solely on the basis of
their weighted market capitalizations would tend to place heavier concentration
in certain industry sectors that are dominated by the larger corporations, such
as communications, automobile, oil and energy. As a result, events
disproportionately affecting such industries could affect the performance of the
Fund differently than the performance of the S&P 500. Conversely, if smaller
companies were not purchased by the Fund, the representation of industries
included in the S&P 500 that are not dominated by the most heavily market-
capitalized companies would be reduced or eliminated.
For these reasons, World will identify the sectors which are (or, except
for sector balancing, would be) most underrepresented in the Fund's portfolio
and will purchase balancing securities in these sectors until the portfolio's
sector weightings closely match those of the S&P 500. This process continues
until the portfolio is fully invested (except for cash holdings).
Redemptions of a substantial number of shares of the Fund could reduce the
number of issuers represented in the Fund's investment portfolio, which could,
in turn, adversely affect the accuracy with which the Fund tracks the
performance of the S&P 500.
If an issuer drops in ranking, or is eliminated entirely from the S&P 500,
World may be required to sell some or all of the common stock of such issuer
then held by the Fund. Such sales of portfolio securities may be made at times
when, if World were not required to effect purchases and sales of portfolio
securities in accordance with the S&P 500, such securities might not be sold.
These sales may result in lower prices for such securities than may have been
realized or in losses that may not have been incurred if World were not required
to effect the purchases and sales. The failure of an issuer to declare or pay
dividends, the institution against an issuer of potentially materially adverse
legal proceedings, the existence or threat of defaults materially and adversely
affecting an issuer's future declaration and payment of dividends, or the
existence of other materially adverse credit factors will not necessarily be the
basis for the disposition of portfolio securities, unless such event causes the
issuer to be eliminated entirely from the S&P 500. However, although World does
not intend to screen securities for investment by the Fund by traditional
methods of financial and market analysis, World will monitor the Fund's
investment with a view towards removing stocks of companies which exhibit
extreme financial distress or which may impair for any reason the Fund's ability
to achieve its investment objective.
The Fund will invest primarily in the common stocks that constitute the S&P
500 in accordance with their relative capitalization and sector weightings as
described above. It is possible, however, that the Fund will from time to time
receive, as part of a "spin-off" or other corporate reorganization of an issuer
included in the S&P 500, securities that are themselves outside the S&P 500.
Such securities will be disposed of by the Fund in due course consistent with
the Fund's investment objective.
In addition, the 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
16
<PAGE>
contracts may be desirable to hedge against a price movement in the S&P 500 at
times when the Fund is not fully invested in stocks that are included in the S&P
500. For example, by purchasing a futures contract, the Fund may be able to
reduce the potential that cash inflows will disrupt its ability to track the S&P
500, since the futures contracts may serve as a temporary substitute for stocks
which may then be purchased in an orderly fashion. Similarly, because futures
contracts only require a small initial margin deposit, the Fund may be able, as
an effective matter, to be fully invested in the S&P 500 while keeping a cash
reserve to meet potential redemptions. See Appendix B to this SAI.
Disclaimer. The Institutional S&P 500 Index Equity 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 Institutional S&P 500 Index Equity Fund
or any member of the public regarding the advisability of investing in
securities generally or in the Institutional S&P 500 Index Equity 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 Institutional
S&P 500 Index Equity Fund. S&P has no obligation to take the needs of the Trust
or the owners of the Institutional S&P 500 Index Equity 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 Institutional S&P 500 Index Equity Fund or the timing of the
issuance or sale of the Institutional S&P 500 Index Equity Fund or in the
determination or calculation of the equation by which the Institutional S&P 500
Index Equity Fund is to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading of the
Institutional S&P 500 Index Equity 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 Institutional
S&P 500 Index Equity 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 Institutional S&P 500 Index Equity Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability of
investing in the Institutional S&P 500 Index Equity Fund.
INVESTMENT LIMITATIONS
The Fund is subject to the investment limitations enumerated in this
section which may be changed with respect to the Fund only by a vote of the
holders of a majority of such Fund's outstanding shares (as defined under
"Miscellaneous -- Shareholder Approvals").
The Fund may not:
1. Invest more than 25% of its total assets in any one industry
(securities issued or guaranteed by the United States Government, its
agencies or instrumentalities are not considered to represent
industries); this limitation does not apply to investment by the Fund
in investment companies;
2. With respect to 75% of the Fund's assets invest more than 5% of the
Fund's assets (taken at market value at the time of purchase) in the
outstanding securities of any single issuer or own more than 10% of
the outstanding voting securities of any one issuer, in each case
other than securities issued by other investment companies or
securities issued or guaranteed by the United States Government, its
agencies or instrumentalities;
3. 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 not exceeding 5% of its
total assets and (ii) borrow money to meet redemption requests, in
amounts (when aggregated with amounts borrowed under clause (i)) not
exceeding 33 1/3% of its total assets;
4. Issue any senior security (as defined in Section 18(f) of the 1940
Act) except as permitted under the 1940 Act;
5. Make loans of securities to other persons in excess of 25% of the
Fund's total assets; provided the Funds may invest without limitation
in short-term debt obligations (including repurchase agreements) and
publicly distributed debt obligations;
17
<PAGE>
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; or
7. Purchase or sell real estate or any interest therein, including
interests in real estate limited partnerships, except securities
issued by companies (including real estate investment trusts) that
invest in real estate or interests therein.
Additional investment restrictions adopted by the Fund, which may be
changed by the Board of Directors of the Company without shareholder vote,
provide that the Fund may not invest more than 15% of its net assets (taken at
market value at the time of purchase) in securities which cannot be readily
resold because of legal or contractual restrictions and which are not otherwise
marketable.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
the Fund's investments will not constitute a violation of such limitation,
except that any borrowing by the Fund that exceeds the fundamental investment
limitations stated above must be reduced to meet such limitations within the
period required by the 1940 Act (currently three days). Otherwise, the Fund may
continue to hold a security even though it causes the Fund to exceed a
percentage limitation because of fluctuation in the value of the Fund's assets.
TEMPORARY DEFENSIVE POSITION
During periods of unusual economic or market conditions or for temporary
defensive purposes or liquidity, each Underlying Fund may invest without limit
in cash and in U.S. dollar-denominated high quality money market and other
short-term instruments. These investments may result in a lower yield than
would be available from investments with a lower quality or longer term.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, and their business
addresses, ages and principal occupations during the past five years, are:
<TABLE>
<CAPTION>
Positions Principal Occupation
Name, Address and Age With Company+ During Past Five Years
--------------------- ------------- ----------------------
<S> <C> <C>
Charles W. Elliott Director and Chairman of the Senior Advisor to the President,
1024 Essex Circle Board of Directors Western Michigan University (since
Kalamazoo, MI 49008 July 1995 through December 1998);
DOB: 1/7/32 Executive Vice President,
Administration & Chief Financial
Officer, Kellogg Company (January
1987 through June 1995). Board of
Directors, Steelcase Financial
Corporation.
John Rakolta, Jr. Director and Vice Chairman of the Chairman and Chief Executive
1876 Rathmor Board of Directors Officer, Walbridge Aldinger
Bloomfield Hills, MI 48304 Company (construction company).
DOB: 5/26/47
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C>
Thomas B. Bender Director Director, Disciplined Growth
5033 Wood Ridge Road Investors (investment management
Glen Arbor, MI 49636 firm since December 1999);
DOB: 7/14/33 Partner, Financial & Investment
Management Group (April 1991 to
December 1999).
David J. Brophy Director Professor, University of Michigan.
1025 Martin Place Director, River Place Financial
Ann Arbor, MI 48104 Corporation.
DOB: 8/7/36
Dr. Joseph E. Champagne Director Dean, University Center, Macomb
319 East Snell Road College (since September 1997);
Rochester, MI 48306 Corporate and Executive Consultant
DOB: 5/19/39 (since September 1993);
Chancellor, Lamar University
(September 1994 to September
1995); Chairman of Board of
Directors, Ross Controls of Troy,
Michigan.
Thomas D. Eckert Director President and Chief Executive
10726 Falls Pointe Drive Officer, Capital Automotive REIT
Great Falls, VA 22066 (real estate investment trust
DOB: 1/26/39 specializing in retail automotive
properties) (since November 1997);
President, Mid-Atlantic Region of
Pulte Home Corporation (developer
of residential land and
construction of housing units)
(1983 to 1997). Director, Celotex
Corporation (a building products
manufacturer).
Michael Monahan Vice President Chairman of the Advisor (Janaury
480 Pierce Street 2000 to present); Chief Executive
Suite 300 Officer of the Advisor (October
Birmingham, MI 48009 1999 to December 1999); President
DOB: 1/26/39 of Monhan Enterprises, LLC
(consulting company) (June 1999 to
present); president of Comerica
Incorporated (1994 to June 1999).
Elyse G. Essick Vice President Vice President and Director of
480 Pierce Street Communications and Client Services
Suite 300 of the Advisor (since January
Birmingham, MI 48009 1995).
DOB: 4/6/58
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C>
James C. Robinson President Chief Executive Officer of the
480 Pierce Street Advisor (January 2000 to present);
Suite 300 Executive Vice President of the
Birmingham, MI 48009 Advisor (February 1998 to December
DOB: 4/24/61 1999); and Chief Investment
Officer/Fixed Income of the
Advisor (since January 1995 to
December 1999).
Leonard J. Barr Vice President Vice President and Director of
480 Pierce Street Core Equity Research of the
Suite 300 Advisor (since January 1995 );
Birmingham, MI 48009 Director and Senior Vice
DOB: 6/16/44 President, Old MCM (since 1988);
Director of LPM (since June 1994).
Therese Hogan Assistant Secretary Director, State Regulation
101 Federal Street Department, PFPC Inc. (formerly
Boston, MA 02110 First Data Investor Services
DOB: 2/27/62 Group) (since June 1994).
Libby Wilson Assistant Secretary Director of Mutual Fund Operations
480 Pierce Street of the Advisor (since July 1999);
Suite 300 Global Portfolio Client Associate
Birmingham, MI 48009 of Invesco Global Asset Management
DOB: 2/24/69 (investment 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).
Bradford E. Smith Assistant Treasurer Manager of Mutual Fund Operatons
480 Pierce Street of the Advisor (March 2000 to
Suite 300 present; Administrator of Mutual
Birmingham, MI 48009 Fund Operations of the Advisor
DOB: 4/19/72 (August 1999 to February 2000);
Assistant Vice President, Madison
Mosiac Funds, LLC (advisor to the
Mosiac Funds) (September 1998 -
July 1999); Assistant Director of
Shareholder Services, Madison
Mosiac, LLC (april 1997 to August
1998); Cash Manager, GIT Funds
(n.k.a. Mosiac Funds); June 1996
to March 1997); and Registered
Representative. GIT Investment
Services, Inc. (January 1995 to
May 1996.)
Mary Ann Shumaker Assistant Secretary Associate General Counsel of the
480 Pierce Street Advisor (since July 1997); and
Suite 300 Counsel, Miro Weiner & Kramer (law
Birmingham, MI 48009 firm) (1991 to 1997).
DOB: 7/31/54
</TABLE>
______________________________
+ Individual holds same position with the Trust, Framlington and St. Clair.
20
<PAGE>
Directors of the Company receive an aggregate fee from the Company, the
Trust, Framlington and St. Clair for service on those organizations respective
Boards comprised of an annual retainer fee of $35,000, and a fee of $3,500 for
each Board meeting attended; and are reimbursed for all out-of-pocket expenses
relating to attendance at meetings.
The following table summarizes the compensation paid by the Trust,
Framlington, the Company and St. Clair to their respective Directors/Trustees
for the year ended June 30, 1999.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Charles W. Elliot John Rakolta, Jr. Thomas B. David J. Dr. Joseph E. Thomas D.
Chairman Vice Chairman Bender Brophy Champagne Eckert
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggregate Compensation
from the Company $ 8,908 $ 8,908 $ 8,908 $ 8,908 $ 8,908 $ 8,908
(comprised of 15 funds)
-----------------------------------------------------------------------------------------------------------------------
Aggregate Compensation
from the Trust $29,448 $29,448 $29,448 $29,448 $29,448 $29,448
(comprised of 14 funds)
-----------------------------------------------------------------------------------------------------------------------
Aggregate Compensation
from Framlington $ 713 $ 713 $ 713 $ 713 $ 713 $ 713
(comprised of 4 funds)
-----------------------------------------------------------------------------------------------------------------------
Aggregate Compensation
from St. Clair $ 931 $ 931 $ 931 $ 931 $ 931 $ 931
(comprised of 11 funds)
-----------------------------------------------------------------------------------------------------------------------
Pension Retirement
Benefits Accrued as
Part of Fund Expenses None None None None None None
-----------------------------------------------------------------------------------------------------------------------
Estimated Annual
Benefits upon Retirement None None None None None None
-----------------------------------------------------------------------------------------------------------------------
Total from the Fund
Complex $40,000 $40,000 $40,000 $40,000 $40,000 $40,000
------------------------------------------------------------------------------------------------------------------------
</TABLE>
No officer, director or employee of the Advisor, Comerica Incorporated
("Comerica"), the Custodian, the Distributor, the Administrator or the Transfer
Agent currently receives any compensation from the Company. As of June 1, 2000,
the Directors and officers of the Company, as a group, owned less than 1% of all
classes of outstanding shares of the Fund of the Company.
The initial sales charge on Class A shares of the Fund 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.
INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS
Investment Advisor. The Advisor of the Fund is Munder Capital Management,
a Delaware general partnership. The Advisor replaced Woodbridge Capital
Management, Inc. ("Woodbridge") as investment advisor to the investment
portfolios of the Company and replaced Munder Capital Management, Inc. as the
investment advisor to the investment portfolios of the Company on January 31,
1995, upon the closing agreement (the "Joint Venture Agreement") among Old MCM,
Inc., Comerica, Woodbridge and WAM, pursuant to which Old MCM, Inc. contributed
its investment advisory business and Comerica contributed the investment advisor
business of its indirect subsidiaries, Woodbridge and World Asset Management, to
the Advisor. The principal partners of the Advisor are Munder Group LLC, WAM
and WAM II WAM and WAM II are wholly-owned subsidiaries of Comerica Bank -
Detroit, which in turn. is a wholly-owned subsidiary of Comerica Incorporated, a
publicly-held bank holding company.
21
<PAGE>
The Fund has entered into an Investment Advisory Agreement (the "Advisory
Agreement") with the Advisor which have been approved by the shareholders of the
Fund.
The Advisory Agreement will continue in effect for a period of two years
from its effective date. If not sooner terminated, the Advisory Agreement will
continue in effect for successive one year periods thereafter, provided that
each continuance is specifically approved annually by (a) the vote of a majority
of the Board of Directors who are not parties to the Advisory Agreement or
interested persons (as defined in the 1940 Act), cast in person at a meeting
called for the purpose of voting on approval, and (b) either (i) the vote of a
majority of the outstanding voting securities of the affected Fund, or (ii) the
vote of a majority of the Board of Directors. The Advisory Agreement is
terminable with respect to the Fund by vote of the Board of Directors, or by the
holders of a majority of the outstanding voting securities of the Fund, at any
time without penalty, on 60 days' written notice to the Advisor. The Advisor
may also terminate its advisory relationship with respect to the Fund without
penalty on 90 days' written notice to the Company. The Advisory Agreement
terminates automatically in the event of its assignment (as defined in the 1940
Act).
Under the terms of the Advisory Agreement, the Advisor furnishes continuing
investment supervision to the Fund and is responsible for the management of the
Fund's portfolios. The responsibility for making decisions to buy, sell or hold
a particular security rests with the Advisor, subject to review by the Company's
Board of Directors. For the advisory services provided to the Fund and expenses
assumed by it, the Advisor has agreed to receive no management fee from the
Fund.
For the period of commencement of operations through June 30, 1998, the
Advisor received fees, after waivers, of $177,410 for the Fund. In addition,
for the period ended June 30, 1998, the Advisor reimbursed expenses of $90,291
the Fund.
For the fiscal year ended June 30, 1999, the Advisor received fees, after
waivers of $99,281 for the Fund. In addition the Advisor reimbursed expenses of
$54,595 for the Fund.
The Advisor serves as investment advisor to each of the Underlying Funds
(other than the Institutional S&P 500 Index Equity Fund and the International
Equity Fund), and for the advisory services provided and expenses assumed by it,
the Advisor has agreed to a fee from each Underlying Fund. The Advisor expects
to voluntarily reimburse expenses during the Company's and Framlington's current
fiscal year with respect to the Future Technology Fund, Growth Opportunities
Fund, the Micro-Cap Equity Fund, the NetNet Fund, the Framlington Emerging
Markets Fund, the Framlington Global Financial Services Fund, the Framlington
Healthcare Fund and the Framlington International Growth Fund. The Advisor may
discontinue such fee waivers and/or expense reimbursements at any time, in its
sole discretion. World, the investment advisor for the Institutional S&P 500
Index Equity Fund and the International Equity Fund, has agreed to a fee from
each of these Underlying Funds. See "Management" in the Prospectus for a
description of the advisory fees received by the Advisor from the Underlying
Funds.
Pursuant to a sub-advisory agreement with the Advisor, Framlington Overseas
Investment Management Limited provides sub-advisory services to the Framlington
Funds, and receives a fee from the Advisor for such sub-advisory services. See
"Management" in the Prospectus for a description of the sub-advisory services
and fees received by the Sub-Advisor.
For the fiscal year ended June 30, 1999, the Advisor received fees, after
waivers, if any, at an effective rate of .75% of average daily net assets for
each of the Focus Growth Fund, the Framlington Global Financial Services Fund,
Equity Income Fund, Growth Opportunities Fund, International Equity Fund, Multi-
Season Fund, Small-Cap Value Fund and Small Company Growth Fund; .50% of average
daily nets each of the Bond Fund, Intermediate Bond Fund, International Bond
Fund and U.S. Government Income Fund; 1.00% of average daily net assets for each
of the Micro-Cap Equity Fund, NetNet Fund, Framlington International Growth Fund
and Framlington Healthcare Fund; .74% of average daily net assets for each of
the Real Estate Fund; .20% of average daily net assets of the Institutional
Money Market Fund; .35% of average daily net assets of each of the Cash
Investment Fund and U.S. Treasury Money Market Fund; .07% of average daily net
assets of the Institutional S&P 500 Index Equity Fund; and 1.25% of average
daily net assets of the Framlington Emerging Markets Fund.
22
<PAGE>
Distribution Agreement. The Company has entered into a distribution
agreement under which the Distributor, as agent, sells shares of the Fund on a
continuous basis. The Distributor has agreed to use appropriate efforts to
solicit orders for the purchase of shares of the Fund, although it is not
obligated to sell any particular amount of shares. The Distributor pays the
cost of printing and distributing prospectuses to persons who are not holders of
shares of the Fund (excluding preparation and printing expenses necessary for
the continued registration of the shares) and of printing and distributing all
sales literature. The Distributor's principal offices are located at 60 State
Street, Boston, Massachusetts 02109.
Distribution Services Arrangements. The Fund has adopted a Service Plan
with respect to its Class A shares pursuant to which it uses its assets to
finance activities relating to the distribution of Class A shares to investors
and the provision of certain services to holders of Class A shares. Under such
Plan, the Distributor is paid an annual service fee at the rate of 0.25% of the
value of average daily net assets of the Class A shares of the Fund and an
annual distribution fee at the rate of 0.05% of the value of average daily net
assets of the Class A shares of the Fund. The Fund has adopted a Service and
Distribution Plan with respect to its Class B shares, pursuant to which it uses
its assets to finance activities relating to the distribution of Class B shares
to investors and the provision of certain services to the holders of Class B
shares. Under the terms of the Service and Distribution Plan (collectively, the
"Plans"), the Distributor is paid an annual service fee of 0.25% of the value of
average daily net assets of the Class B shares of the Fund and an annual
distribution fee at the rate of 0.75% of the value of average daily net assets
of the Class B shares of the Fund.
Under the terms of the Plans, each Plan continues from year to year,
provided such continuance is approved annually by vote of the Board of
Directors, including a majority of the Board of Directors who are not interested
persons of the Company, as applicable, and who have no direct or indirect
financial interest in the operation of that Plan (the "Non-Interested Plan
Directors"). The Plans may not be amended to increase the amount to be spent
for the services provided by the Distributor without shareholder approval, and
all amendments of the Plans also must be approved by the Directors in the manner
described above. Each Plan may be terminated at any time, without penalty, by
vote of a majority of the Non-Interested Plan Directors or, with respect to the
Fund, by a vote of a majority of the outstanding voting securities of the
relevant class of that Fund (as defined in the 1940 Act) upon not more than 30
days' written notice to the Distributor to the Plan. Pursuant to each Plan, the
Distributor will provide the Board of Directors periodic reports of amounts
expended under the Plan and the purposes for which such expenditures were made.
The Directors have determined that the Plans will benefit the Company, the
Fund, and its shareholders by (i) providing an incentive for broker or bank
personnel to provide continuous shareholder servicing after the time of sale;
(ii) facilitating portfolio management flexibility through cash flow into the
Fund; and (iii) maintaining a competitive sales structure in the mutual fund
industry.
With respect to Class A and Class B shares of the Fund, the Distributor
expects to pay sales commissions to dealers authorized to sell the Fund's Class
A and Class B shares at the time of sale. The Distributor will use its own
funds (which may be borrowed) to pay such commissions pending reimbursement
pursuant to the Service and Distribution Plan. In addition, the Advisor may use
its own resources to make payments to the Distributor or dealers authorized to
sell the Fund's shares to support their sales efforts.
For the period from commencement of operations through June 30, 1997, the
following fees were paid to the Distributor pursuant to the Class A and Class B
Service and Distribution Plans.
Class A Service and Class B Service and
Distribution Plan Distribution Plan**
----------------- -------------------
$0 $0
_________________
** Prior to June 30, 1997, Class B of the Funds had not commenced operations.
For the fiscal year ended June 30, 1998, the following fees were paid to
the Distributor pursuant to the Class A and Class B Service and Distribution
Plans.
Class A Service and Class B Service and CDSC
Distribution Plan Distribution Plan Class B
----------------- ----------------- -------
$227 $673* $0
_________________
* Commenced operations on January 9, 1998.
23
<PAGE>
For the fiscal year ended June 30, 1999, the following fees were paid to
the Distributor pursuant to the Class A and Class B Service and Distribution
Plans.
Class A Service and Class B Service and CDSC
Distribution Plan Distribution Plan Class B
----------------- ----------------- -------
$627 $2,388 $1,919
The following amounts were paid by the Fund under its Class A and Class B
Service and Distribution Plans during the period from commencement of operations
through June 30, 1999:
<TABLE>
<CAPTION>
Printing and
Mailing of Interest
Prospectuses Carrying or
to other than Compensation Compensation Other
Current Compensation to to Sales Financing
Advertising Shareholders to Underwriters Dealers Personnel Charges
----------- ------------ --------------- ------- --------- -------
Class Class Class Class Class Class Class Class Class Class Class Class
A B A B A B A B A B A B
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0 $0 $0 $0 $0 $0 $602 $26 $0 $0 $0 $795
--------------------------------------------------------------------------------------------------------
</TABLE>
Administrator. State Street Bank and Trust Company ("State Street" or the
"Administrator"), whose principal business address is 225 Franklin Street,
Boston, Massachusetts, 02110, serves as administrator for the Company pursuant
to administration agreements (an "Administration Agreement"). State Street has
agreed to maintain office facilities for the Company; oversee the computation of
the Fund's net asset value, net income and realized capital gains, if any;
furnish statistical and research data, clerical services, and stationery and
office supplies; prepare and file various reports with the appropriate
regulatory agencies; and prepare various materials required by the SEC. 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
Fund.
The Administration Agreement provides that the Administrator performing
services thereunder shall not be liable under the Agreement except for its bad
faith, negligence or willful misconduct in the performance of its duties and
obligations thereunder.
Prior to November 1, 1997, PFPC Inc. (formerly First Data Investor Services
Group, Inc.) "PFPC" or the "Transfer Agent") located at 4400 Computer Drive,
Westborough, MA 01581 served as administrator to the Funds.
For the period from commencement of operations through June 30, 1997,
administration fees of PFPC accrued were $7,479 for the Fund.
For the period July 1, 1997 through October 31, 1997, administration fees
to PFPC accrued were $10,110 for the Fund.
For the period November 1, 1997 through June 30, 1998, administration fees
of State Street accrued were $17,901 for the Fund.
For the fiscal year ended June 30, 1999, administration fees of State
Street were $57,372 for the Fund.
Custodian. State Street serves as the custodian (the "Custodian") to the
Fund pursuant to a custodian agreement ("Custodian Contract") among the Company
and State Street. State Street is also the custodian with respect to the
custody of foreign securities held by the Fund. State Street has in turn
entered into additional agreements with financial institutions located in
foreign countries with respect to the custody of such securities. Under the
Custodian Contract, the Custodian (i) maintains a separate account in the name
of each Fund, (ii) holds and transfers portfolio securities on account of the
Fund, (iii) accepts receipts and makes disbursements of money on behalf of the
Fund, (iv) collects and receives all income and other payments and distributions
on account of the Fund's securities and (v) makes periodic reports to the Board
of Directors concerning the Fund's operations.
24
<PAGE>
Transfer and Dividend Disbursing Agent. PFPC serves as the transfer and
dividend disbursing agent for the Fund pursuant to transfer agency agreements
(the "Transfer Agency Agreement") with the Company, under which PFPC (i) issues
and redeems shares of the Fund, (ii) addresses and mails all communications by
the Fund to its record owners, including reports to shareholders, dividend and
distribution notices and proxy materials for its meetings of shareholders, (iii)
maintains shareholder accounts, (iv) responds to correspondence by shareholders
of the Fund and (v) makes periodic reports to the Board of Directors concerning
the operations of the Fund.
Other Information pertaining to Administration, Custodian and Transfer
Agency Agreements. Except as noted in this SAI the Fund's service contractors
bear all expenses in connection with the performance of their services and the
Fund bear the expenses incurred in their operations. These expenses include,
but are not limited to, fees paid to the Advisor, Administrator, Custodian and
Transfer Agent; fees and expenses of officers and Board of Directors; taxes;
interest; legal and auditing fees; brokerage fees and commissions; certain fees
and expenses in registering and qualifying the Fund and its shares for
distribution under Federal and state securities laws; expenses of preparing
prospectuses and statements of additional information and of printing and
distributing prospectuses and statements of additional information to existing
shareholders; the expense of reports to shareholders, shareholders' meetings and
proxy solicitations; fidelity bond and directors' and officers' liability
insurance premiums; the expense of using independent pricing services; and other
expenses which are not assumed by the Administrator. Any general expenses of
the Company that are not readily identifiable as belonging to a particular
investment portfolio of the Company are allocated among all investment
portfolios of the Company by or under the direction of the Board of Directors in
a manner that the Board of Directors determine to be fair and equitable. The
Advisor, Administrator, Custodian and Transfer Agent may voluntarily waive all
or a portion of their respective fees from time to time.
CODE OF ETHICS
The Company, the Advisor, the 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 Advisor, the Sub-Advisor and the
Distributor from engaging in deceptive, manipulative or fraudulent activities in
connection with securities held or to be acquired by the Fund (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 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 Directors, the Advisor makes
decisions with respect to and places orders for all purchases and sales of
portfolio securities for the Fund. The Fund purchases only Class Y shares of
the Underlying Funds, which are sold without an initial or contingent deferred
sales charge to the Fund.
For the period from commencement of operations through June 30, 1997, the
Fund did not pay any brokerage commissions.
For the fiscal year ended June 30, 1998, the Fund did not pay any brokerage
commissions.
For the fiscal year ended June 30, 1999, the Fund did not pay any brokerage
commissions.
Over-the-counter issues, including corporate debt and government
securities, are normally traded through dealers on a "net" basis (i.e., without
commission), or directly with the issuer. With respect to over-the-counter
transactions, the Advisor will normally deal directly with dealers who make a
market in the instruments involved except in those circumstances where more
favorable prices and execution are available elsewhere. The cost of securities
purchased from underwriters includes an underwriting commission or concession,
and the prices at which securities are purchased from and sold to dealers
include a dealer's mark-up or mark-down.
The portfolio turnover rate of the Fund and an Underlying Fund is
calculated by dividing the lesser of such Fund's annual sales or purchases of
portfolio securities (exclusive of purchases or sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of the securities held by the fund during the year. The Fund's
and each Underlying Fund's portfolio turnover rate is included in its respective
Prospectuses under the section entitled "Financial Highlights." Purchases and
sales are made for the Fund and Underlying Fund whenever necessary, in
management's opinion, to meet such fund's investment objective. The Underlying
Funds may engage in short-term trading to achieve their investment objectives.
Portfolio turnover may vary greatly from year to year as well as within a
particular year.
25
<PAGE>
In the Advisory Agreement, the Advisor agrees to select broker-dealers in
accordance with guidelines established by the Board of Directors from time to
time and in accordance with applicable law. In assessing the terms available
for any transaction, the Advisor shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. In addition, the Advisory Agreement authorizes the
Advisor, subject to the prior approval of the Company's Board of Directors, to
cause the Fund to pay a broker-dealer which furnishes brokerage and research
services a higher commission than that which might be charged by another broker-
dealer for effecting the same transaction, provided that the Advisor determines
in good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Fund. Such brokerage and research services might consist of
reports and statistics on specific companies or industries, general summaries of
groups of bonds and their comparative earnings and yields, or broad overviews of
the securities markets and the economy.
Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable to the Advisor by the Fund. It is possible that
certain of the supplementary research or other services received will primarily
benefit one or more other investment companies or other accounts for which
investment discretion is exercised. Conversely, the Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company.
Portfolio securities will not be purchased from or sold to the Advisor, the
Distributor or any affiliated person (as defined in the 1940 Act) of the
foregoing entities except to the extent permitted by SEC exemptive order or by
applicable law.
Investment decisions for the Fund, the Underlying Funds, and for other
investment accounts managed by the Advisors (Sub-Advisor with respect to the
Framlington Funds) are made independently of each other in the light of
differing conditions. However, the same investment decision may be made for two
or more of such accounts. In such cases, simultaneous transactions are
inevitable. Purchases or sales are then averaged as to price and allocated as
to amount in a manner deemed equitable to each such account. While in some
cases this practice could have a detrimental effect on the price or value of the
security as far as the Fund or Underlying Fund is concerned, in other cases it
is believed to be beneficial to the Fund or Underlying Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund or Underlying Fund with those to be sold or purchased for
other investment companies or accounts in executing transactions.
The Fund will not purchase securities while the Advisor or any affiliated
person (as defined in the 1940 Act) is a member of any underwriting or selling
group for such securities except pursuant to procedures adopted by the Company's
Board of Directors in accordance with Rule 10f-3 under the 1940 Act.
The Fund are required to identify the securities of their regular brokers
or dealers (as defined in Rule 10b-1 under the 1940 Act) or their parent
companies held by them as of the close of their most recent fiscal year. As of
June 30, 1999, the Fund held no such securities.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. As described in the Prospectuses, shares of the Fund may be
purchased in a number of different ways. Such alternative sales arrangements
permit an investor to choose the method of purchasing shares that is more
beneficial depending on the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances. An
investor may place orders directly through the Transfer Agent or the Distributor
or through arrangements with his/her authorized broker.
Retirement Plans. Shares of the Fund may be purchased in connection with
various types of tax deferred retirement plans, including individual retirement
accounts ("IRAs"), qualified plans, deferred compensation for public schools and
charitable organizations (403(b) plans) and simplified employee pension IRAs.
An individual or
26
<PAGE>
organization considering the establishment of a retirement plan should consult
with an attorney and/or an accountant with respect to the terms and tax aspects
of the plan. A $10.00 annual custodial fee is also charged on IRAs. This
custodial fee is due by December 15 of each year and may be paid by check or
shares liquidated from a shareholder's account.
Redemptions. The redemption price for Fund shares is the net asset value
next determined after receipt of the redemption request in proper order. The
redemption proceeds will be reduced by the amount of any applicable contingent
deferred sales charge ("CDSC").
Contingent Deferred Sales Charge - Class B Shares. Class B Shares redeemed
within six years of purchase are subject to a CDSC. The CDSC is based on the
original net asset value at the time of investment or the net asset value at the
time of redemption, whichever is lower.
Other Redemption Information. Redemption proceeds are normally paid in
cash; however, the 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 Fund is 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 Fund reserves 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 the Fund not
reasonably practicable.
The Fund may involuntarily redeem an investor's shares if the net asset
value of such shares is less than $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.
Exchanges. In addition to the method of exchanging shares described in the
Fund's 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 Fund at (800) 438-5789. Telephone exchange
instructions must be received by the Transfer Agent by 4:00 p.m., Eastern time.
The Fund, the Distributor and the Transfer Agent reserve the right at any time
to suspend or terminate the expedited exchange procedure or to impose a fee for
this service. During periods of unusual economic or market changes,
shareholders may experience difficulties or delays in effecting telephone
exchanges. Neither the Fund 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.
27
<PAGE>
NET ASSET VALUE
Securities traded on a national securities exchange or on NASDAQ for which
there were no sales on the date of valuation and securities traded on other
over-the-counter markets, including listed securities for which the primary
market is believed to be over-the-counter, are valued at the mean between the
most recently quoted bid and asked prices. Options will be valued at market
value or fair value if no market exists. Futures contracts will be valued in
like manner, except that open futures contract sales will be valued using the
closing settlement price or, in the absence of such a price, the most recently
quoted asked price. Restricted securities and securities and assets for which
market quotations are not readily available are valued at fair value by the
Advisor under the supervision of the Board of Directors. Debt securities with
remaining maturities of 60 days or less are valued at amortized cost, unless the
Board of Directors determines that such valuation does not constitute fair value
at that time. Under this method, such securities are valued initially at cost on
the date of purchase (or the 61st day before maturity).
In determining the approximate market value of portfolio investments, the
Company may employ outside organizations, which may use matrix or formula
methods that take into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula methods not been used. All cash, receivables and current payables are
carried on the Company's books at their face value. Other assets, if any, are
valued at fair value as determined in good faith under the supervision of the
Board Members.
PERFORMANCE INFORMATION
Yield and Performance of the Fund
Yield. The Fund's 30-day (or one month) standard yield described in the
Prospectus is calculated for the Fund in accordance with the method prescribed
by the SEC for mutual funds:
YIELD = 2[( a - b + 1)/6/ - 1]
------
cd
Where:
a = dividends and interest earned by the 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), the
Fund computes the yield to maturity of such instrument based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual accrued interest).
Such yield is then divided by 360 and the quotient is multiplied by the market
value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is in the portfolio. It is assumed in the above
calculation that each month contains 30 days. The maturity of a debt obligation
with a call provision is deemed to be the next call date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. For the
purpose of computing yield on equity securities held by the 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
28
<PAGE>
period (variable "b" in the formula) include all recurring fees charged by the
Fund to all shareholder accounts in proportion to the length of the base period
and the Fund's mean (or median) account size. Undeclared earned income will be
subtracted from the offering price per share (variable "d" in the formula).
Total Return of the Fund
Total Return. The Fund that advertises its "average annual total return"
computes such return by determining the average annual compounded rate of return
during specified periods that equates the initial amount invested to the ending
redeemable value of such investment according to the following formula:
T = (ERV)/1/n/ - 1
----
P
Where:
P = hypothetical initial payment of $1,000;
T = average annual total return;
n = period covered by the computation, expressed in years;
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10 year (or other) periods at the end of the
applicable period (or a fractional portion thereof).
The 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.
Based on the foregoing calculation, set forth below are the average annual
total return figures for the Class A, Class B and Class Y Shares of the Fund for
the period from commencement of operations through June 30, 1999:
<TABLE>
<CAPTION>
12 month period Inception through
ended June 30, 1999 June 30,1999
------------------- ------------
with load w/o load w/ load w/o load
--------- -------- ------- --------
<S> <C> <C> <C> <C>
Class A - 10/8/97 0.58% 6.41% (0.38)% 2.94%
Class B - 1/9/98 1.40% 6.40% 8.67 % 11.27%
Class Y - 4/3/97 6.63% 6.63% 15.89 % 15.89%
</TABLE>
The performance of any investment is generally a function of portfolio
quality and maturity, type of investment and operating expenses.
From time to time, in advertisements or in reports to shareholders, the
Fund's yields or total returns may be quoted and compared to those of other
mutual funds with similar investment objectives or compared to stock or other
relevant indices. Hypothetical examples showing the difference between a
taxable and a tax-free investment may also be provided to shareholders.
29
<PAGE>
TAXES
The following summarizes certain additional Federal income tax
considerations generally affecting the Funds and their shareholders that are not
described in the Fund's Prospectuses. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the 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. The 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, the Fund generally is exempt from federal
income tax on its net investment income and realized capital gains which it
distributes to shareholders, provided that it distributes an amount equal to the
sum of (a) at least 90% of its investment company taxable income (net investment
income and the excess of net short-term capital gain over net long-term capital
loss), if any, for the year and (b) at least 90% of its net tax-exempt interest
income, if any, for the year (the "Distribution Requirement") and satisfies
certain other requirements of the 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, the Fund must
derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement"). Interest
(including original issue discount and accrued market discount) received by the
Fund at maturity or on disposition of a security held for less than three months
will not be treated (in contrast to other income which is attributable to
realized market appreciation) as gross income from the sale or other disposition
of securities held for less than three months for this purpose.
In addition to the foregoing requirements, at the close of each quarter of
its taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of its total assets in securities of such
issuer and as to which the Fund does not hold more than 10% of the outstanding
voting securities of such issuer) and no more than 25% of the value of the
Fund's total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which such Fund controls and which are
engaged in the same or similar trades or businesses.
Distributions of net investment income received by the Fund from
investments in debt securities and any net realized short-term capital gains
distributed by the Fund will be taxable to shareholders as ordinary income and
will not be eligible for the dividends-received deduction for corporations.
The Fund intends to distribute to shareholders any excess of net long-term
capital gain over net short-term capital loss ("net capital gain") for each
taxable year. Such gain is distributed as a capital gain dividend and is
taxable to shareholders as gain from the sale or exchange of a capital asset
held for more than one year, regardless of the length of time a shareholder has
held his or her Fund shares and regardless of whether the distribution is paid
in cash or reinvested in additional Fund shares. The Fund expect that capital
gain dividends will be taxable to shareholders as long-term capital gain.
Capital gains dividends are not eligible for the dividends-received deduction
for corporations.
30
<PAGE>
In the case of corporate shareholders, distributions of the Fund for any
taxable year generally qualify for the dividends-received deduction to the
extent of the gross amount of "qualifying dividends" received by 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 the Fund does not qualify as a regulated investment
company, all of its taxable income will be subject to tax at regular corporate
rates without any deduction for distributions to shareholders. In such event,
all distributions (whether or not derived from exempt-interest income) would be
taxable as ordinary income and would be eligible for the dividends-received
deduction in the case of corporate shareholders to the extent of 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 Fund each year.
The Internal Revenue Code imposes a non-deductible 4% excise tax on
regulated investment companies that fail to distribute in each calendar year an
amount equal to specified percentages of their ordinary taxable income and
capital gain net income (excess of capital gains over capital losses). The Fund
intends to make sufficient distributions or deemed distributions of its ordinary
taxable income and capital gain net income each calendar year to avoid liability
for this excise tax.
The Company will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable distributions, including gross proceeds
realized upon sale or other dispositions paid to any shareholder (i) who has
provided either an uncertified or incorrect tax identification number or no
number at all, (ii) who is subject to backup withholding by the Internal Revenue
Service for failure to report the receipt of taxable interest or dividend income
properly, or (iii) who has failed to certify to the Company that he is not
subject to backup withholding or that he is an "exempt recipient."
If an Underlying Fund derives dividends from domestic corporations, a
portion of the income distributions of the Fund which invests in that Underlying
Fund may be eligible for the 70% deduction for dividends received by
corporations. Shareholders will be informed of the portion of dividends which
so qualify. The dividends-received deduction is reduced to the extent the
shares held by the Underlying Fund with respect to which the dividends are
received are treated as debt-financed under federal income tax law and is
eliminated if either those shares or the shares of the Underlying Fund or the
Fund are deemed to have been held by the Underlying Fund, the Fund or the
shareholders, as the case may be, for less than 46 days.
Income received by an Underlying Fund from sources within a foreign country
may be subject to withholding and other taxes imposed by that country. If more
than 50% of the value of an Underlying Fund's total assets at the close of its
taxable year consists of stock or securities of foreign corporations, the
Underlying Fund will be eligible and may elect to "pass-through" to its
shareholders, including the Fund, the amount of foreign income and similar taxes
paid by the Underlying Fund. Pursuant to this election, the Fund would be
required to include in gross income (in addition to taxable dividends actually
received), its pro rata share of foreign income and similar taxes in computing
its taxable income or to use it as a foreign tax credit against its U.S. federal
income taxes, subject to limitations. The Fund, would not, however, be eligible
to elect to "pass-through" to its shareholders the ability to claim a deduction
or credit with respect to foreign income and similar taxes paid by the
Underlying Fund.
Disposition of Shares. Upon a redemption, sale or exchange of his or her
shares, a shareholder will realize a taxable gain or loss depending upon his or
her basis in the shares. Such gain or loss will be treated as capital gain or
loss if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, generally, depending upon the shareholder's holding
period for the shares. Any loss realized on a redemption, sale or exchange will
be disallowed to the extent the shares disposed of are replaced (including
through reinvestment of dividends) within a period of 61 days beginning 30 days
before and ending 30 days after the shares are disposed of. In such a case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a shareholder on the sale of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received or treated as
having been received by the
31
<PAGE>
shareholder with respect to such shares and treated as long-term capital gain.
Furthermore, a loss realized by a shareholder on the redemption, sale or
exchange of shares of the Fund with respect to which exempt-interest dividends
have been paid will, to the extent of such exempt-interest dividends, be
disallowed if such shares have been held by the shareholder for six months or
less.
In some cases, shareholders will not be permitted to take sales charges
into account for purposes of determining the amount of gain or loss realized on
the disposition of their stock. This prohibition generally applies where (1)
the shareholder incurs a sales charge in acquiring the stock of the 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 the Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all Federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, the Fund may be subject
to the tax laws of such states or localities.
Taxation of the Underlying Funds. Each Underlying Fund intends to elect
and qualify to be taxed as a regulated investment company under the Internal
Revenue Code. In any year in which an Underlying Fund qualifies as a regulated
investment company and timely distributes all of its taxable income, the
Underlying Fund generally will not pay any federal income or excise tax.
Distributions of an Underlying Fund's investment company taxable income are
taxable as ordinary income to the Fund which invests in the Underlying Fund.
Distributions of the excess of an Underlying Fund's net long-term capital gain
over its net short-term capital loss, which are properly designated as "capital
gain dividends," should be taxable as mid-term or long-term capital gain to the
Fund which invests in the Underlying Fund, regardless of how long the Fund held
the Underlying Fund's shares, and are not eligible for the corporate dividends-
received deduction. Upon the sale or other disposition by the Fund of shares of
an Underlying Fund, the Fund generally will realize a capital gain or loss which
will be long-term or short-term, generally depending upon the holding period for
the shares.
Original Issue Discount. The Fund 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 Fund 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.
Other Taxation
The foregoing discussion relates only to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and domestic
corporations, partnerships, trusts and estates). Distributions by the Fund and
distributions of Fund shares also may be subject to state and local taxes, and
their treatment under state and local income tax laws may differ from the U.S.
federal income tax treatment. Shareholders should consult their tax advisers
with respect to particular questions of U.S. federal, state and local taxation.
Shareholders who are not U.S. persons should consult their tax advisers
regarding U.S. and foreign tax consequences of ownership of shares of the Fund,
including the likelihood that distributions to them would be subject to
withholding of U.S. federal income tax
32
<PAGE>
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 Company is a Maryland corporation. The Company's Articles of
Incorporation authorize the Board of Directors to classify or reclassify any
unissued shares of the Company into one or more classes by setting or changing,
in any one or more respects, their respective designations, preferences,
conversion or other rights, voting powers, restrictions, limitations,
qualifications and terms and conditions of redemption. Pursuant to the
authority of the Company's Articles of Incorporation, the Directors have
authorized the issuance of shares of common stock representing interests in the
Focus Growth Fund, Future Technology Fund, Growth Opportunities Fund,
International NetNet Fund, Micro-Cap Equity Fund, Multi-Season Fund, NetNet
Fund, Real Estate Fund, Small-Cap Value Fund, International Bond Fund,
Institutional Money Market Fund, All-Season Conservative Fund, All-Season
Moderate Fund and Munder Fund of Funds (formerly All-Season Aggressive Fund),
respectively. The Fund is offered in three separate classes: Class A, Class B
and Class Y shares.
The Directors adopted a plan pursuant to Rule 18f-3 under the 1940 Act
("Multi-Class Plan") on behalf of the Fund. The Multi-Class Plan provides that
shares of each class of the Fund are identical, except for one or more expense
variables, certain related rights, exchange privileges, class designation and
sales loads assessed due to differing distribution methods.
In the event of a liquidation or dissolution of each of the Company or an
individual portfolio of the Company, shareholders of a particular portfolio
would be entitled to receive the assets available for distribution belonging to
such portfolio, and a proportionate distribution, based upon the relative net
asset values of the Company's respective portfolios, of any general assets not
belonging to any particular portfolio which are available for distribution.
Shareholders of a portfolio are entitled to participate in the net distributable
assets of the particular portfolio involved on liquidation, based on the number
of shares of the portfolio that are held by each shareholder.
Holders of all outstanding shares of a particular Fund will vote together
in the aggregate and not by class on all matters, except that only Class A
shares of the Fund will be entitled to vote on matters submitted to a vote of
shareholders pertaining to the Fund's Class A Plan, and only Class B shares will
be entitled to vote on matters submitted to a vote of shareholders pertaining to
the Fund's Class B Plan. Further, shareholders of all of the funds of the
Company, as well as those of any other fund now or hereafter offered by the
Company, will vote together in the aggregate and not separately on a portfolio-
by-portfolio basis, except as required by law or when permitted by the Board of
Directors. Rule 18f-2 under the 1940 Act provides that any matter required to
be submitted to the holders of the outstanding voting securities of an
investment company such as the Company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each portfolio affected by the matter. A portfolio is
affected by a matter unless it is clear that the interests of each portfolio in
the matter are substantially identical or that the matter does not affect any
interest of the portfolio. Under the Rule, the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a Fund only if approved by a majority of
the outstanding shares of such portfolio. However, the Rule also provides that
the ratification of the appointment of independent auditors, the approval of
principal underwriting contracts and the election of directors may be
effectively acted upon by shareholders of the Company voting together in the
aggregate without regard to a particular portfolio.
Shares of the Company have noncumulative voting rights and, accordingly,
the holders of more than 50% of each of the Company's outstanding shares
(irrespective of class) may elect all of the directors. Shares have no
preemptive rights and only such conversion and exchange rights as the Board may
grant in its discretion. When issued for payment as described in the
Prospectus, shares will be fully paid and non-assessable by the Company.
Shareholder meetings to elect Directors will not be held unless and until
such time as required by law. At that time, the Directors then in office will
call a shareholders' meeting to elect Directors. Except as set forth above, the
Directors will continue to hold office and may appoint successor Directors.
Meetings of the shareholders of the
33
<PAGE>
Company shall be called by the Directors upon the written request of
shareholders owning at least 10% of the outstanding shares entitled to vote.
OTHER INFORMATION
Counsel. The law firm of Dechert Price & Rhoads, 1775 Eye Street, N.W.,
Washington, D.C. 20006, has passed upon certain legal matters in connection with
the shares offered by the Funds and serves as counsel to the Company.
Independent Auditors. Ernst & Young LLP, 200 Clarendon Street, Boston, MA
02116, serves as the Company's independent auditors.
Control Persons and Principal Holders of Securities. As of June 1, 2000,
the following persons were beneficial owners of 5% of more of the outstanding
shares of the Fund because they possessed voting or investment power with
respect to such shares:
Percent of
Total Shares
Name of Fund - Class Name and Address Outstanding
-------------------- ---------------- -----------
Class A Bradley D. Host 27.112%
Laura W. Host
639 Pieritos
Birmingham, MI 48009-4635
State Street Bank & Trust Co. 6.318%
FBO Richard Smith
1500 Henrietta
Birmingham, MI 48009
Richard C. Smith 5.689%
Mary C. Smith JTROWS
1500 Henrietta
Birmingham, MI 48009
Merrill Lynch Pierce Fenner & Smith 5.185%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
Class B Merrill Lynch Pierce Fenner & Smith 28.397%
FBO The sole benefit of its customers
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246-6484
34
<PAGE>
Shareholder Approvals. As used in this SAI, a "majority of the outstanding
shares" of the Fund or investment portfolio means the lesser of (a) 67% of the
shares of the Fund or portfolio represented at a meeting at which the holders of
more than 50% of the outstanding shares of the Fund or portfolio are present in
person or by proxy, or (b) more than 50% of the outstanding shares of the Fund
or portfolio.
REGISTRATION STATEMENT
This SAI and the Funds' 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 the Fund's Prospectuses as to the
contents of any contract of other documents referred to are not necessarily
complete, and, in such instance, reference is made to the copy of such contract
or other documents filed as an exhibit to the Fund's registration statement,
each such statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The financial statements of the Fund, including the notes thereto, dated
June 30, 1999 have been audited by Ernst & Young LLP and are incorporated by
reference into this SAI from the Annual Report of the Funds dated as of June 30,
1999. Such financial statements are included or incorporated by reference
herein in reliance upon Ernst & Young LLP's report given upon the authority of
such firm as experts in accounting and auditing. The financial statement of the
Fund, including the notes thereto, dated December 31, 1999 are unaudited and are
incorporated by reference into this SAI from the Semi-Annual Report of the Fund
dated as of December 31, 1999.
35
<PAGE>
APPENDIX A
----------
- Rated Investments -
Corporate Bonds
---------------
From Moody's Investors Services, Inc. ("Moody's") description of its bond
ratings:
"Aaa":
Bonds that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
"Aa":
Bonds that are rated "Aa" are judged to be of high-quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as "high-grade" bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than in "Aaa" securities.
"A":
Bonds that are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
"Baa":
Bonds that are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
"Ba":
Bonds that are rated "Ba" are judged to have speculative elements;
their future cannot be considered well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
"B":
Bonds that are rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
"Caa":
Bonds that are rated "Caa" are of poor standing. These issues may be
in default or present elements of danger may exist with respect to
principal or interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated "Aa" through "B". The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.
A-1
<PAGE>
From Standard & Poor's Corporation ("S&P") description of its bond ratings:
"AAA":
Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
"AA":
Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from "AAA" issues by a small degree.
"A":
Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
"BBB":
Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.
"BB", "B" and "CCC":
Bonds rated "BB" and "B" are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligations. "BB" represents a lower
degree of speculation than "B" and "CCC" the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
To provide more detailed indications of credit quality, the "AA" or "A"
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Commercial Paper
----------------
The rating "Prime-1" is the highest commercial paper rating assigned by
Moody's. These issuers (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Instruments rated "Prime-2" are offered by issuers (or related supporting
institutions) which have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of "Prime-1" rated issues, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more suspectible to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted "A-1+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1."
A-2
<PAGE>
APPENDIX B
As stated in the Prospectus, the Underlying Funds may enter into certain
futures transactions and options for hedging purposes. The Underlying Funds may
also write covered call options, buy put options, buy call options and write
secured put options. Such transactions are described in this Appendix.
I. Interest Rate Futures Contracts
-------------------------------
Use of Interest Rate Futures Contracts. Bond prices are established in
-----------------------------------------
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Funds may use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes and
not for speculation. As described below, this would include the use of futures
contract sales to protect against expected increases in interest rates and
futures contract purchases to offset the impact of interest rate declines.
The Funds presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because
of the liquidity that is often available in the futures market, the protection
is more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Funds, through using futures contracts.
Description of Interest Rate Futures Contracts. An interest rate futures
----------------------------------------------
contract sale would create an obligation by a Fund, as seller, to deliver the
specific type of financial instrument called for in the contract at a specific
future time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until or at near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without making or taking of delivery of securities.
Closing out a futures contract sale is effected by the Fund's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of the sale
exceeds the price of the offsetting purchase, the Fund is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by the Fund entering
into a futures contract sale. If the offsetting sale price exceeds the purchase
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. The Funds would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. The Funds may trade in any interest rate futures contracts
for which there exists a public market, including, without limitation, the
foregoing instruments.
B-1
<PAGE>
Example of Futures Contract Sale. The Funds would engage in an interest
--------------------------------
rate futures contract sale to maintain the income advantage from continued
holding of a long-term bond while endeavoring to avoid part or all of the loss
in market value that would otherwise accompany a decline in long-term securities
prices. Assume that the market value of a certain security held by a particular
Fund tends to move in concert with the futures market prices of long-term United
States Treasury bonds ("Treasury Bonds"). The adviser wishes to fix the current
market value of the portfolio security until some point in the future. Assume
the portfolio security has a market value of 100, and the adviser believes that,
because of an anticipated rise in interest rates, the value will decline to 95.
The fund might enter into futures contract sales of Treasury bonds for an
equivalent of 98. If the market value of the portfolio security does indeed
decline from 100 to 95, the equivalent futures market price for the Treasury
bonds might also decline from 98 to 93.
In that case, the five point loss in the market value of the portfolio
security would be offset by the five point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example might
incur a loss of 2 points (which might be reduced by an offsetting transaction
prior to the settlement date). In each transaction, transaction expenses would
also be incurred.
Example of Futures Contract Purchase. The Funds would engage in an
------------------------------------
interest rate futures contract purchase when they are not fully invested in
long-term bonds but wish to defer for a time the purchase of long-term bonds in
light of the availability of advantageous interim investments, e.g., shorter
term securities whose yields are greater than those available on long-term
bonds. A Fund's basic motivation would be to maintain for a time the income
advantage from investing in the short-term securities; the Fund would be
endeavoring at the same time to eliminate the effect of all or part of an
expected increase in market price of the long-term bonds that the Fund may
purchase.
For example, assume that the market price of a long-term bond that the Fund
may purchase, currently yielding 10% , tends to move in concert with futures
market prices of Treasury bonds. The adviser wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example) when it may purchase the bond. Assume the long-term bond
has a market price of 100, and the adviser believes that, because of an
anticipated fall in interest rates, the price will have risen to 105 (and the
yield will have dropped to about 91/2%) in four months. The Fund might enter
into futures contracts purchases of Treasury bonds for an equivalent price of
98. At the same time, the Fund would assign a pool of investments in short-term
securities that are either maturing in four months or earmarked for sale in four
months, for purchase of the long-term bond at an assumed market price of 100.
Assume these short-term securities are yielding 15%. If the market price of the
long-term bond does indeed rise from 100 to 105, the equivalent futures market
price for Treasury bonds might also rise from 98 to 103. In that case, the 5
point increase in the price that the Fund pays for the long-term bond would be
offset by the 5 point gain realized by closing out the futures contract
purchase.
The adviser could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or below,
it is possible that the Fund would continue with its purchase program for long-
term bonds. The market price of available long-term bonds would have decreased.
The benefit of this price decrease, and thus yield increase, will be reduced by
the loss realized on closing out the futures contract purchase.
B-2
<PAGE>
If, however, short-term rates remained above available long-term rated, it
is possible that the Fund would discontinue its purchase program for long-term
bonds. The yield on short-term securities in the portfolio, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued
incremental income will be reduced by the loss realized on closing out the
futures contract purchase. In each transaction, expenses would also be
incurred.
II. Index Futures Contracts
-----------------------
General. A bond index assigns relative values of the bonds included in the
-------
index and the index fluctuates with changes in the market values of the bonds
included. The Chicago Board of Trade has designed a futures contract based on
the Bond Buyer Municipal Bond Index. This Index is composed of 40 term revenue
and general obligation bonds and its composition is updated regularly as new
bonds meeting the criteria of the Index are issued and existing bonds mature.
The Index is intended to provide an accurate indicator of trends and changes in
the municipal bond market. Each bond in the Index is independently priced by
six dealer-to-dealer municipal bond brokers daily. The 40 prices then are
averaged and multiplied by a coefficient. The coefficient is used to maintain
the continuity of the Index when its composition changes.
A stock index assigns relative values to the stocks included in the index
and the index fluctuates with changes in the market values of the stocks
included. Some stock index futures contracts are based on broad market indexed,
such as the Standard & Poor's 500 or the New York Stock Exchange Composite
Index. In contrast, certain exchanges offer futures contracts on narrower
market indexes, such as the Standard & Poor's 100 or indexes based on an
industry or market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated by the
Commodity Futures Trading Commission. Transactions on such exchanges are
cleared through a clearing corporation, which guarantees the performance of the
parties to each contract.
A Fund will sell index futures contracts in order to offset a decrease in
market value of its portfolio securities that might otherwise result from a
market decline. A Fund will purchase index futures contracts in anticipation of
purchases of securities. In a substantial majority of these transactions, a
Fund will purchase such securities upon termination of the long futures
position, but a long futures position may be terminated without a corresponding
purchase of securities.
In addition, a Fund may utilize index futures contracts in anticipation of
changes in the composition of its portfolio holdings. For example, in the event
that a Fund expects to narrow the range of industry groups represented in its
holdings it may, prior to making purchases of the actual securities, establish a
long futures position based on a more restricted index, such as an index
comprised of securities of a particular industry group. A Fund may also sell
futures contracts in connection with this strategy, in order to protect against
the possibility that the value of the securities to be sold as part of the
restructuring of the portfolio will decline prior to the time of sale.
Examples of Stock Index Futures Transactions. The following are examples
--------------------------------------------
of transactions in stock index futures (net of commissions and premiums, if
any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future Hedge Objective: Protect Against
Increasing Price
Portfolio Futures
-----------------
<TABLE>
<S> <C>
-Day Hedge is Placed-
Anticipate buying $62,500 in Equity Securities
Buying 1 Index Futures at 125
Value of Futures = $62,500/Contract
-Day Hedge is Lifted-
Buy Equity Securities with Actual Cost = $65,000
</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
Portfolio Futures
-----------------
<TABLE>
<S> <C>
-Day Hedge is Placed-
Anticipate Selling $1,000,000 in Equity Securities
Sell 16 Index Futures at 125
Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Securities - Own Stock
Loss in Portfolio Value = $40,000
Buy 16 Index Futures at 120 with Value =
$960,000
Value of Futures = $960,000
Gain on Futures = $40,000
</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 Custodian an amount of cash or cash equivalents, known as initial
margin, based on the value of the contract. The nature of initial margin in
futures transactions is different from that of margin in securities transactions
in that futures contract margin does not involve the borrowing of funds by the
customer to finance the transactions. Rather, the initial margin is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract assuming all
contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying instruments fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
marking to the market. For example, when a particular Fund has purchased a
futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and
the Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where the Fund has purchased a
futures contract and the price of the futures contract has declined in response
to a decrease in the underlying instruments, the position would be less valuable
and the Fund would be required to make a variation margin payment to the broker.
At any time prior to expiration of the futures contract, the adviser may elect
to close the position by taking an opposite position, subject to the
availability of a secondary market, which will operate to terminate the Fund's
position in the futures contract. A final determination of variation margin is
then made, additional cash is required to be paid by or released to the Fund,
and the Fund realizes a loss or gain.
B-4
<PAGE>
IV. Risks of Transactions in Futures Contracts
------------------------------------------
There are several risks in connection with the use of futures by the
Underlying Funds as hedging devices. One risk arises because of the imperfect
correlation between movements in the price of futures and movements in the price
of the instruments which are the subject of the hedge. The price of futures may
move more than or less than the price of the instruments being hedged. If the
price of futures moves less than the price of the instruments which are the
subject of the hedge, the hedge will not be fully effective but, if the price of
the instruments being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price of
the instruments being hedged has moved in a favorable direction, this advantage
will be partially offset by the loss on the futures. If the price of the
futures moves more than the price of the hedged instruments, the Fund involved
will experience either a loss or gain on the futures which will not be
completely offset by movements in the price of the instruments which are the
subject of the hedge. To compensate for the imperfect correlation of movements
in the price of instruments being hedged and movements in the price of futures
contracts, the Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of instruments being hedged if the volatility over a
particular time period of the prices of such instruments has been greater than
the volatility over such time period of the futures, or if otherwise deemed to
be appropriate by the Adviser. Conversely, the Funds may buy or sell fewer
futures contracts if the volatility over a particular time period of the prices
of the instruments being hedged is less than the volatility over such time
period of the futures contract being used, or if otherwise deemed to be
appropriate by the Adviser. It is also possible that, when the Fund sells
futures to hedge its portfolio against a decline in the market, the market may
advance and the value of instruments held in the Fund may decline. If this
occurrs, the Fund would lose money on the futures and also experience a decline
in value in its portfolio securities.
Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest its cash at that time because
of concern as to possible further market decline or for other reasons, the Funds
will realize a loss on the futures contract that is not offset by a reduction in
the price of the securities that were to be purchased.
In instances involving the purchase of futures contracts by the Funds, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Custodian and/or
in a margin account with a broker to collateralize the position and thereby
insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced, thus producing distortions. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of general
market trends or interest rate movements by the adviser may still not result in
a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. When there is no liquid market, it may not
be possible to close a futures investment position, and in the event of adverse
price movements,
B-5
<PAGE>
the Funds would continue to be required to make daily cash payments of variation
margin. However, in the event futures contracts have been used to hedge
portfolio securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodities exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Funds is also subject to the adviser's
ability to predict correctly movements in the direction of the market. For
example, if a particular Fund has hedged against the possibility of a decline in
the market adversely affecting securities held by it and securities prices
increase instead, the Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. The Funds may have to
sell securities at a time when it may be disadvantageous to do so.
V. Options on Futures Contracts
----------------------------
The Underlying Funds may purchase and write options on the futures
contracts described above. A futures option gives the holder, in return for the
premium paid, the right to buy from (call) or sell to (put) the writer of the
option a futures contract at a specified price at any time during the period of
the option. Upon exercise, the writer of, the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer,
of an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. A Fund will be required to deposit initial margin and variation
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. Net option
premiums received will be included as initial margin deposits.
Investments in futures options involve some of the same considerations that
are involved in connection with investments in future contracts (for example,
the existence of a liquid secondary market). In addition, the purchase or sale
of an option also entails the risk that changes in the value of the underlying
futures contract will not correspond to changes in the value of the option
purchased. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the securities
being hedged, an option may or may not be less risky than ownership of the
futures contract or such securities. In general, the market prices of options
can be expected to be more volatile than the market prices on underlying futures
contract. Compared to the purchase or sale of futures contracts, however, the
purchase of call or put options on futures contracts may frequently involve less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
VI. Currency Transactions
---------------------
The Fund may engage in currency transactions in order to hedge the value of
portfolio holdings denominated in particular currencies against fluctuations in
relative value. Currency transactions include forward
B-6
<PAGE>
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 the obligations
which have received) a credit rating of A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from a NRSRO or are determined
to be of equivalent credit quality by the Advisor.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure to an
extent greater after netting all transactions intended wholly or partially to
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging as described below.
The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar.
Proxy hedging entails entering into a commitment or option to sell a currency
whose changes in value are generally considered to be correlated to a currency
or currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. U.S. dollars. The amount of
the commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Advisor considers
that the Austrian schilling is correlated to the German mark (the "D-mark"), the
Fund holds securities denominated in shillings and the Advisor believes that the
value of the schillings will decline against the U.S. U.S. dollar, the Advisor
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the
Fund if the currency being hedged fluctuates in value to a degree or in a
direction that is not anticipated. Further, there is the risk that the
perceived correlation between various currencies may not be present or may not
be present during the particular time that the Fund is engaging in proxy
hedging. If a Fund enters into a currency hedging transaction, the Fund will
comply with the asset segregation requirements. Under such requirements, the
Fund will segregate liquid, high grade assets with the custodian to the extent
the Fund's obligations are not otherwise "covered" through ownership of the
underlying currency.
Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Buyers and sellers of currency futures are subject to the same risks
that apply to the use of futures generally. Further, settlement of a currency
futures contract for the purchase of most currencies must occur at a bank based
in the issuing nation. Trading options on currency futures is relatively new,
and the ability to establish and close to positions on such options is subject
to the maintenance of a liquid market which may not always be available.
Currency exchange rates may fluctuate based on factors extrinsic to that
country's economy.
B-7
<PAGE>
VII. Options.
-------
The Underlying Funds may write covered call options, buy put options, buy
call options and write secured put options. Such options may relate to
particular securities and may or may not be listed on a national securities
exchange and issued by the Options Clearing Corporation. Options trading is a
highly specialized activity which entails greater than ordinary investment risk.
Options on particular securities may be more volatile than the underlying
securities, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
securities themselves. For risks associated with options on foreign currencies,
see currencies transactions above.
A call option for a particular security gives the purchaser of the option
the right to buy, and the writer of the option the obligation to sell, the
underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is in consideration for undertaking the obligations
under the option contract. A put option for a particular security gives the
purchaser the right to sell, and the writer of the option the obligation to buy,
the underlying security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security.
The writer of an option that wishes to terminate its obligation may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after being notified of the exercise of an option. Likewise, an investor who is
the holder of an option may liquidate its position by effecting a "closing sale
transaction." The cost of such a closing purchase plus transaction costs may be
greater than the premium received upon the original option, in which event the
relevant Underlying Fund will have incurred a loss in the transaction. There is
no guarantee in any instance that either a closing purchase or a closing sale
transaction can be effected.
Effecting a closing transaction in the case of a written call option will
permit the Underlying Funds to write another call option on the underlying
security with either a different exercise price or expiration date or both, or
in the case of a written put option, will permit the Funds to write another put
option to the extent that the exercise price thereof is secured by deposited
cash or short-term securities. Also, effecting a closing transaction will
permit the cash or proceeds from the concurrent sale of any securities subject
to the option to be used for other Underlying Fund investments. If an
Underlying Fund desires to sell a particular security from its portfolio on
which it has written a call option, it will effect a closing transaction prior
to or concurrent with the sale of the security.
The Underlying Funds may write options in connection with buy-and-write
transactions; that is, the Underlying Funds may purchase a security and then
write a call option against that security. The exercise price of the call the
Underlying Funds determine to write will depend upon the expected price movement
of the underlying security. The exercise price of a call option may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option is written.
Buy-and-write transactions using in-the-money call options may be used when it
is expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when it is expected that the premiums
received from writing the call option plus the appreciation in the market price
of the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call options
are exercised in such transactions, the maximum gain to the relevant Underlying
Fund will be the premium received by it for writing the option, adjusted upwards
or downwards by the difference between the Fund's purchase price of the security
and the exercise price. If the options are not exercised and the price of the
underlying security declines, the amount of such decline will be offset in part,
or entirely, by the premium received.
In the case of writing a call option on a security, the option is
"covered" if an Underlying Fund owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or liquid
securities in such amount as are earmarked on the books of the Underlying Fund
or the Underlying Fund's custodian upon conversion or exchange
B-8
<PAGE>
of other securities held by it. For a call option on an index, the option is
covered if an Underlying Fund maintains with its custodian cash or liquid
securities equal to the contract value. A call option is also covered if an
Underlying Fund holds a call on the same security or index as the call written
where the exercise price of the call held is (i) equal to or less than the
exercise price of the call written, or (ii) greater than the exercise price of
the call written provided the difference in cash or liquid securities is
earmarked on the books of the Underlying Fund or the Underlying Fund's
custodian. Each of the Underlying Funds will limit its investment in uncovered
call options purchased or written by the Fund to 33 1/3% of the Fund's total
assets. The Underlying Funds will write put options only if they are "secured"
by cash or liquid securities earmarked on the books of the Underlying Fund or
the Underlying Fund's custodian in an amount not less than the exercise price of
the option at all times during the option period.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the relevant Underlying Fund's gain will be
limited to the premium received. If the market price of the underlying security
declines or otherwise is below the exercise price, the Underlying Fund may elect
to close the position or take delivery of the security at the exercise price and
the Fund's return will be the premium received from the put option minus the
amount by which the market price of the security is below the exercise price.
Each of the Underlying Funds may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in this way, an
Underlying Fund will reduce any profit it might otherwise have realized in the
underlying security by the amount of the premium paid for the put option and by
transaction costs. Each of the Underlying Funds may purchase call options to
hedge against an increase in the price of securities that it anticipates
purchasing in the future. The premium paid for the call option plus any
transaction costs will reduce the benefit, if any, realized by the relevant
Underlying Fund upon exercise of the option, and, unless the price of the
underlying security rises sufficiently, the option may expire worthless to the
Fund.
When an Underlying Fund purchases an option, the premium paid by it is
recorded as an asset of the Fund. When the Underlying Fund writes an option, an
amount equal to the net premium (the premium less the commission) received by
the Fund is included in the liability section of the Fund's statement of assets
and liabilities as a deferred credit. The amount of this asset or deferred
credit will be subsequently marked to market to reflect the current value of the
option purchased or written. The current value of the traded option is the last
sale price or, in the absence of a sale, the average of the closing bid and
asked prices. If an option purchased by the Underlying Fund expires unexercised
the Fund realizes a loss equal to the premium paid. If the Underlying Fund
enters into a closing sale transaction on an option purchased by it, the
Underlying Fund will realize a gain if the premium received by the Fund on the
closing transaction is more than the premium paid to purchase the option, or a
loss if it is less. If an option written by the Underlying Fund expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated. If an option written
by the Underlying Fund is exercised, the proceeds of the sale will be increased
by the net premium originally received and the Fund will realize a gain or loss.
There are several risks associated with transactions in options on
securities and indices. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. An option writer, unable to effect a closing purchase transaction,
will not be able to sell the underlying security (in the case of a covered call
option) or liquidate the earmarked securities (in the case of a secured put
option) until the option expires or the optioned security is delivered upon
exercise with the result that the writer in such circumstances will be subject
to the risk of market decline or appreciation in the security during such
period.
There is no assurance that an Underlying Fund will be able to close an
unlisted option position. Furthermore, unlisted options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to do so in
connection with the purchase or sale of options.
B-9
<PAGE>
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 times be adequate
to handle current trading volume; or one or more Exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that Exchange (or in that class or series of options)
would cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms.
Currency transactions, including options on currencies and currency
futures, are subject to risks different from those of other portfolio
transactions. Because currency control is of great importance to the issuing
governments and influences economic planning and policy, purchases and sales of
currency and related instruments can be negatively affected by government
exchange controls, blockages, and manipulations or exchange restrictions imposed
by governments. These can result in losses to the Underlying Fund if it is
unable to deliver or receive currency or funds in settlement of obligations and
could also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as the incurring of transaction costs. Buyers
and sellers of currency futures are subject to the same risks that apply to the
use of futures generally. Further, settlement of a currency futures contract
for the purchase of most currencies must occur at a bank based in the issuing
nation. Trading options on currency futures is relatively new, and the ability
to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to the issuing country's
economy.
VIII. Other Matters
-------------
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
B-10
<PAGE>
Munder All-Season Conservative Fund
Munder All-Season Moderate Fund
480 Pierce Street
Birmingham, Michigan 48009
Telephone (800) 438-5789
STATEMENT OF ADDITIONAL INFORMATION
June 29, 2000
This Statement of Additional Information ("SAI"), which has been filed with
the Securities and Exchange Commission (the "SEC"), provides supplementary
information pertaining to the Class A, Class B, and Class Y shares representing
interests in the Munder All-Season Conservative Fund (the "Conservative Fund")
and the Munder All-Season Moderate Fund (the "Moderate Fund") (each a "Fund,"
collectively the "Funds"). The Funds are two diversified series of shares issued
by The Munder Funds, Inc. (the "Company"), an open-end management investment
company. Each Fund seeks its investment objective by investing in a portfolio of
mutual funds (the "Underlying Funds") offered by the Company, The Munder
Framlington Funds Trust ("Framlington"), The Munder Funds Trust (the "Trust")
and St. Clair Funds, Inc. ("St. Clair"). This SAI is not a prospectus, and
should be read only in conjunction with the Funds' Prospectus dated June 29,
2000. The contents of this SAI are incorporated by reference in the Prospectus
in their entirety. A copy of the Prospectus may be obtained through Funds
Distributor, Inc. (the "Distributor"), or by calling (800) 438-5789. The
financial statements for the Company including the notes thereto, dated June 30,
1999 and the unaudited financial statements for the Company dated December 31,
1999 are incorporated by reference into this SAI from the annual and semi-annual
reports of the Company.
An investment in a Fund or the Underlying Fund is not a bank deposit and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other governmental agency.
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TABLE OF CONTENTS
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Page
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History and General Information................................................... 3
Fund Investments.................................................................. 3
Risk Factors and Special Considerations--Institutional S&P 500 Index Equity Fund.. 17
Investment Limitations............................................................ 19
Temporary Defensive Position...................................................... 20
Management of the Funds........................................................... 20
Investment Advisory and Other Service Arrangements................................ 24
Code of Ethics.................................................................... 28
Portfolio Transactions............................................................ 28
Additional Purchase and Redemption Information.................................... 29
Net Asset Value................................................................... 31
Performance Information........................................................... 31
Taxes............................................................................. 33
Additional Information Concerning Shares.......................................... 36
Other Information................................................................. 37
Registration Statement............................................................ 37
Financial Statements.............................................................. 38
Appendix A........................................................................ A-1
Appendix B........................................................................ B-1
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No person has been authorized to give any information or to make any
representations not contained in this SAI or in the Prospectuses in connection
with the offering made by the Prospectuses and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Funds or the Distributor. The Prospectuses do not constitute an offering
by the Funds or by the Distributor in any jurisdiction in which such offering
may not lawfully be made.
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HISTORY AND GENERAL INFORMATION
The Company was organized as a Maryland corporation on November 18, 1992
and is registered under the Investment Company Act of 1940 as an open-end
management investment company. The Munder All-Season Conservative Fund and
Munder All-Season Moderate Fund were formerly known as Munder All-Season
Maintenance Fund and Munder All-Season Development Fund, respectively. The
Funds operate as two diversified series of shares issued by the Company. The
Company's principal office is located at 480 Pierce Street, Birmingham, Michigan
48009 and its telephone number is (800) 438-5789.
As stated in each Prospectus, the investment advisor of each Fund, and each
of the Underlying Funds (other than the Institutional S&P 500 Index Equity Fund
and the International Equity Fund), is Munder Capital Management (the
"Advisor"). The investment advisor for the Institutional S&P 500 Index Equity
Fund and the International Equity Fund is World Asset Management ("World"), a
Delaware limited liability company. World is a wholly-owned subsidiary of the
Advisor. The principal partners of the Advisor are Munder Group LLC, WAM
Holdings, Inc. ("WAM") and WAM Holdings II, Inc. ("WAM II"). WAM and WAM II are
indirect, wholly owned subsidiaries of Comerica Incorporated which owns or
controls approximately 95% of the partnership interests in the Advisor.
Framlington Overseas Investment Management Limited serves as sub-advisor
("Sub-Advisor") to the Framlington Emerging Markets Fund, Framlington Global
Financial Services Fund, Framlington Healthcare Fund and the Framlington
International Growth Fund, (collectively, the "Framlington Funds"), which are
the four series of Framlington. The Sub-Advisor is a subsidiary of Framlington
Group Limited, incorporated in England and Wales which, through its
subsidiaries, provides a wide range of investment services. Framlington Group
Limited is a wholly-owned subsidiary of Framlington Holdings Limited which is,
in turn, owned 49% by the Advisor and 51% by Credit Commercial de France S.A., a
French banking corporation listed on the Societe des Bourses Francaises.
Capitalized terms used in this SAI and not otherwise defined have the same
meanings as are given to them in the Prospectuses.
Assets of the Funds will be allocated among the Underlying Funds within the
ranges set forth in the Prospectuses. In addition, each Fund may hold cash, and
may invest cash balances in repurchase agreements and other money market
instruments in an amount to meet redemptions or for day-to-day operating
expenses
INVESTMENT OBJECTIVES AND POLICIES
The Conservative Fund seeks to provide current income, with capital
appreciation as a secondary objective. The Fund seeks to achieve its objectives
by concentrating its investments in Underlying Funds that invest primarily in
fixed income securities.
The Moderate Fund seeks to provide high total return through capital
appreciation and current income. The Fund seeks to achieve its objective by
concentrating its investments in Underlying Funds that invest primarily in
equity securities and fixed income securities.
FUND INVESTMENTS
The following supplements the information contained in each Prospectus
concerning the investment objectives and policies of the Underlying Funds. With
the exception of Multi-Season Growth Fund and Real Estate Equity Investment
Fund, each Underlying Fund's investment objective is a non-fundamental policy
and may be changed without authorization of the holders of a majority of such
Underlying Fund's outstanding shares. 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, Equity Income Fund, Growth Opportunities Fund,
Institutional S&P 500 Index Equity Fund, International Equity Fund,
International NetNet Fund, Micro-Cap Equity Fund, Multi-Season Growth Fund
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(the "Multi-Season Fund"), NetNet Fund, Real Estate Equity Investment Fund (the
"Real Estate Fund"), Small-Cap Value Fund, Small Company Growth Fund and the
Framlington Funds are referred to as the "Equity Funds." The Bond Fund,
Intermediate Bond Fund, International Bond Fund and U.S. Government Income Fund
are referred to as the "Fixed Income Funds." The Cash Investment Fund,
Institutional Money Market Fund and U.S. Treasury Money Market Fund are referred
to as the "Money Market Funds." If you require more detailed information about
an Underlying Fund, please call the Distributor at (800) 438-5789 to obtain the
complete prospectus and statement of additional information for that fund.
Borrowing. The Underlying Funds are authorized to borrow money in amounts
up to 5% of the value of their total assets at the time of such borrowings for
temporary purposes, and are authorized to borrow money in excess of the 5% limit
as permitted by the Investment Company Act of 1940, as amended (the "1940 Act"),
to meet redemption requests. This borrowing may be unsecured. The 1940 Act
requires the Underlying Funds to maintain continuous asset coverage of 300% of
the amount borrowed. If the 300% asset coverage should decline as a result of
market fluctuations or other reasons, the Underlying Funds may be required to
sell some of their portfolio holdings within three days to reduce the debt and
restore the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. Borrowed funds are
subject to interest costs that may or may not be offset by amounts earned on the
borrowed funds. The Underlying Funds may also be required to maintain minimum
average balances in connection with such borrowing or to pay a commitment or
other fees to maintain a line of credit; either of these requirements would
increase the cost of borrowing over the stated interest rate. The Underlying
Funds may, in connection with permissible borrowings, transfer as collateral,
securities owned by the Funds.
Additionally, each Underlying Fund may borrow funds for temporary or
emergency purposes by selling portfolio securities to financial institutions
such as banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). Reverse repurchase
agreements involve the risk that the market value of the securities sold by an
Underlying Fund may decline below the repurchase price. An Underlying Fund will
pay interest on amounts obtained pursuant to a reverse repurchase agreement.
While reverse repurchase agreements are outstanding, an Underlying Fund will
maintain in a segregated account, cash, U.S. Government securities or other
liquid portfolio securities of an amount at least equal to the market value of
the securities, plus accrued interest, subject to the agreement.
Foreign Securities. Each Equity Fund (except NetNet Fund, Real Estate
Fund, International Equity Fund, Framlington Emerging Markets Fund, Framlington
Global Financial Services Fund, Framlington Healthcare Fund and Framlington
International Growth Fund), each Fixed Income Fund (except International Bond
Fund), each of the Cash Investment Fund and the Institutional Money Market Fund
may invest up to 25% of its assets in foreign securities. Under normal market
conditions, the International Equity Fund, Framlington International Growth Fund
and International Bond Fund each will invest at least 65% of its assets in
securities of issuers located in at least three other countries, one of which
may be the United States. Framlington Global Financial Services Fund will
invest at least 65% of its assets in securities of issuers located in at least
three countries other than the United States. The Framlington Emerging Markets
Fund will invest at least 65% of its assets in companies in emerging market
countries. There is no limit on the Framlington Healthcare Fund's investments
in foreign securities. The Future Technology Fund, International NetNet Fund,
Multi-Season Fund and the NetNet Fund typically will only purchase foreign
securities which are represented by American Depositary Receipts ("ADRs") listed
on a domestic securities exchange or included in the NASDAQ National Market
System, or foreign securities listed directly on a domestic securities exchange
or included in the NASDAQ National Market System. ADRs are receipts typically
issued by a United States bank or trust company evidencing ownership of the
underlying foreign securities. Certain institutions issuing ADRs may not be
sponsored by the issuer. A non-sponsored depositary may not provide the same
shareholder information that a sponsored depositary is required to provide under
its contractual arrangements with the issuer.
The International Bond Fund will primarily invest in foreign debt
obligations denominated in foreign currencies, including the European Currency
Unit ("ECU"), which are issued by foreign governments and 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
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securities and other debt securities including those convertible into foreign
stock. Certain European currencies are being converted into the Euro. This
conversion, which is under way, is scheduled to be completed in the year 2002.
However, problems with the conversion process and delays could increase
volatility in world markets and affect European markets in particular.
For the purposes of the 65% minimum with respect to the International Bond
Fund's designation as an international bond fund, the securities described in
this paragraph are considered "international bonds."
Income and gains on foreign securities may be subject to foreign
withholding taxes. Investors should consider carefully the substantial risks
involved in securities of companies and governments of foreign nations, which
are in addition to the usual risks inherent in domestic investments. There may
be less publicly available information about foreign companies comparable to the
reports and ratings published about companies in the United States. Foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to United States companies. Foreign markets
have substantially less trading volume than the New York Stock Exchange and
securities of some foreign companies are less liquid and more volatile than
securities of comparable United States companies. Commission rates in foreign
countries, which are generally fixed rather than subject to negotiation as in
the United States, are likely to be higher. In many foreign countries there is
less government supervision and less regulation of stock exchanges, brokers, and
listed companies than in the United States. Such concerns are particularly
heightened for emerging markets and Eastern European countries.
Investments in companies domiciled in developing countries may be subject
to potentially higher risks than investments in developed countries. These
risks include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict an
Underlying Fund's investment opportunities, including restrictions on investment
in issuers or industries deemed sensitive to national interest; (iv) foreign
taxation; (v) the absence of developed legal structures governing private or
foreign investment or allowing for judicial redress for injury to private
property; (vi) the absence, until recently in certain Eastern European
countries, of a capital market structure or market-oriented economy; and (vii)
the possibility that recent favorable economic developments in Eastern Europe
may be slowed or reversed by unanticipated political or social events in such
countries.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, an Underlying Fund could lose a
substantial portion of any investments it has made in the affected countries.
Further, no accounting standards exist in Eastern European countries. Finally,
even though certain Eastern European currencies may be convertible into United
States dollars, the conversion rates may be artificial rather than their actual
market values and they may be adverse to an Underlying Fund.
The Advisor, World or the Sub-Advisor endeavors to buy and sell foreign
currencies on as favorable a basis as practicable. Some price spread on
currency exchange (to cover service charges) may be incurred, particularly when
an Underlying Fund changes investments from one country to another or when
proceeds of the sale of Fund shares in U.S. dollars are used for the purchase of
securities in foreign countries. Also, some countries may adopt policies which
would prevent an Underlying Fund from transferring cash out of the country or
withhold portions of interest and dividends at the source. Certain European
currencies are being converted into the Euro. This conversion, which is under
way, is scheduled to be completed in the year 2002. However, problems with the
conversion process and delays could increase the volatility in world markets and
affect European markets in particular. There is the possibility of
expropriation, nationalization or confiscatory taxation, withholding and other
foreign taxes on income or other amounts, foreign exchange controls (which may
include suspension of the ability to transfer currency from a given country),
default in foreign government securities, political or social instability or
diplomatic developments that could affect investments in securities of issuers
in foreign nations.
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Foreign securities markets have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of an Underlying Fund are uninvested and no return
is earned thereon. The inability of an Underlying Fund to make intended
security purchases due to settlement problems could cause the Fund to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to an
Underlying Fund due to subsequent declines in value of the portfolio security
or, if the fund has entered into a contract to sell the security, could result
in possible liability to the purchaser.
An Underlying Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Changes in foreign currency exchange rates will
influence values within an Underlying Fund from the perspective of U.S.
investors, and may also affect the value of dividends and interest earned, gains
and losses realized on the sale of securities, and net investment income and
gains, if any, to be distributed to shareholders by a Fund. The rate of
exchange between the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors.
The Advisor, World or the Sub-Advisor will attempt to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where, from time to time, it places a Fund's investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
Forward Currency Transactions. In order to protect against a possible loss
on investments resulting from a decline or appreciation in the value of a
particular foreign currency against the U.S. dollar or another foreign currency,
the Equity Funds (excluding the Real Estate Fund), and the Fixed Income Funds
are authorized to enter into forward currency exchange contracts ("forward
currency contracts"). These contracts involve an obligation to purchase or sell
a specified currency at a future date at a price set at the time of the
contract. Forward currency contracts do not eliminate fluctuations in the
values of portfolio securities but rather allow an Underlying Fund to establish
a rate of currency exchange for a future point in time.
When entering into a contract for the purchase or sale of a security, an
Underlying Fund may enter into a forward currency contract for the amount of the
purchase or sale price to protect against variations, between the date the
security is purchased or sold and the date on which payment is made or received,
in the value of the foreign currency relative to the U.S. dollar or other
foreign currency.
When the Advisor, World or the Sub-Advisor anticipates that a particular
foreign currency may decline substantially relative to the U.S. dollar or other
leading currencies, in order to reduce risk, an Underlying Fund may enter into a
forward contract to sell, for a fixed amount, the amount of foreign currency
approximating the value of some or all of the Underlying Fund's securities
denominated in such foreign currency. Similarly, when the obligations held by
an Underlying Fund create a short position in a foreign currency, the Fund may
enter into a forward contract to buy, for a fixed amount, an amount of foreign
currency approximating the short position. With respect to any forward currency
contract, it will not generally be possible to match precisely the amount
covered by that contract and the value of the securities involved due to the
changes in the values of such securities resulting from market movements between
the date the forward contract is entered into and the date it matures. In
addition, while forward contracts may offer protection from losses resulting
from declines or appreciation in the value of a particular foreign currency,
they also limit potential gains which might result from changes in the value of
such currency. An Underlying Fund will also incur costs in connection with
forward currency contracts and conversions of foreign currencies and U.S.
dollars.
Cash or liquid securities equal to the amount of an Underlying Fund's
assets that could be required to consummate forward contracts will be designated
on the records of the Underlying Funds or those of the Underlying
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Fund's custodian except to the extent the contracts are otherwise "covered." For
the purpose of determining the adequacy of the securities in the account, the
deposited securities will be valued at market or fair value. If the market or
fair value of such securities declines, additional cash or securities will be
placed in the account daily so that the value of the account will equal the
amount of such commitments by the Underlying Fund. A forward contract to sell a
foreign currency is "covered" if an Underlying Fund owns the currency (or
securities denominated in the currency) underlying the contract, or holds a
forward contract (or call option) permitting the fund to buy the same currency
at a price no higher than the fund's price to sell the currency. A forward
contract to buy a foreign currency is "covered" if an Underlying Fund holds a
forward contract (or call option) permitting the fund to sell the same currency
at a price as high as or higher than the fund's price to buy the currency.
Futures Contracts and Related Options. The Equity and Fixed Income Funds
may purchase and sell futures contracts on interest-bearing securities or
securities indices, and may purchase and sell call and put options on futures
contracts. For a detailed description of futures contracts and related options,
see Appendix B to this SAI.
Illiquid Securities. Each of the Equity Funds and the Fixed Income Funds
may invest up to 15%, and each of the Money Market Funds may invest up to 10%,
of the value of its net assets (determined at time of acquisition) in securities
that are illiquid. Illiquid securities would generally include securities for
which there is a limited trading market, repurchase agreements and time deposits
with notice/termination dates in excess of seven days, and certain securities
that are subject to trading restrictions because they are not registered under
the Securities Act of 1933, as amended (the "Act"). If, after the time of
acquisition, events cause this limit to be exceeded, the Underlying Fund will
take steps to reduce the aggregate amount of illiquid securities as soon as
reasonably practicable in accordance with the policies of the SEC.
Each Underlying Fund (except U.S. Treasury Money Market Fund) may invest in
commercial obligations issued in reliance on the "private placement" exemption
from registration afforded by Section 4(2) of the Act ("Section 4(2) paper").
An Underlying Fund may also purchase securities that are not registered under
the Act, but which can be sold to qualified institutional buyers in accordance
with Rule 144A under the Act, ("Rule 144A securities"). Section 4(2) paper is
restricted as to disposition under the Federal securities laws, and generally is
sold to institutional investors who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors through or with the assistance of the
issuer or investment dealers which make a market in the Section 4(2) paper, thus
providing liquidity. Rule 144A securities generally must be sold only to other
qualified institutional buyers. If a particular investment in Section 4(2)
paper or Rule 144A securities is not determined to be liquid, that investment
will be included within the Underlying Fund's limitation on investment in
illiquid securities. The Advisor, World or the Sub-Advisor will determine the
liquidity of such investments pursuant to guidelines established by the Boards
of Directors/Trustees. It is possible that unregistered securities purchased by
the Underlying Fund in reliance upon Rule 144A could have the effect of
increasing the level of the Underlying Fund's illiquidity to the extent that
qualified institutional buyers become, for a period, uninterested in purchasing
these securities.
Interest Rate Swap Transactions. Each of the Fixed Income Funds may enter
into interest rate swap agreements for purposes of attempting to obtain a
particular desired return at a lower cost to those Underlying Funds than if the
Underlying Funds had invested directly in an instrument that yielded that
desired return. Interest rate swap transactions involve the exchange by a
Underlying Fund with another party of its commitments to pay or receive
interest, such as an exchange of fixed rate payments for floating rate payments.
Typically, the parties with which the Underlying Funds will enter into interest
rate swap transactions will be brokers, dealers or other financial institutions
known as "counterparties." Certain Federal income tax requirements may, however,
limit the Underlying Funds' ability to engage in certain interest rate
transactions. Gains from transaction in interest rate swaps distributed to
shareholders of the Underlying Funds will be taxable as ordinary income or, in
certain circumstances, as long-term capital gains to the shareholders.
Each of the Underlying Funds' obligations (or rights) under a swap
agreement will generally be equal only to the net amount to be paid or received
under the agreement based on the relative values of the positions held by each
party to the agreement (the "net amount"). Each of the Fixed Income Funds'
obligations under a swap
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agreement will be accrued daily (offset against any amounts owed to the
Underlying Fund). Accrued but unpaid net amounts owed to a swap counterparty
will be covered by designating cash, U.S. Government securities or other high-
grade debt securities on the books of the Underlying Fund's custodian, to avoid
any potential leveraging of each of the Underlying Funds' portfolio.
The Underlying Funds will not enter into any interest rate swap transaction
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the other party to the transaction is rated in one of the highest
four rating categories by at least one nationally-recognized statistical rating
organization ("NRSRO") or is believed by the Advisor to be equivalent to that
rating. If the other party to a transaction defaults, the Underlying Funds will
have contractual remedies pursuant to the agreements related to the
transactions.
The use of interest rate swaps is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Advisor is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of each of the Underlying Funds would be lower than it
would have been if interest rate swaps were not used. The swaps market has
grown substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swaps market has become relatively liquid
in comparison with other similar instruments traded in the interbank market.
The swaps market is a relatively new market and is largely unregulated. It is
possible that developments in the swaps market, including potential government
regulation, could adversely affect the Fixed Income Funds' ability to terminate
existing swap agreements or to realize amounts to be received under such
agreements.
Investment Company Securities. The Underlying Funds may invest in
securities issued by other investment companies. As a shareholder of another
investment company, an Underlying Fund would bear its pro rata portion of the
other investment company's expenses, including advisory fees. These expenses
would be in addition to the expenses each Underlying Fund bears directly in
connection with its own operations. Each Underlying Fund currently intends to
limit its investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made: (i)
not more than 5% of the value of the Underlying Fund's total assets will be
invested in the securities of any one investment company; (ii) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group; and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Underlying Fund.
Lending of Portfolio Securities. To enhance the return on its portfolio,
each of the Underlying Funds may lend securities in its portfolio (subject to a
limit of 25% of each Fund's total assets other than the Institutional Money
Market Fund; and 33 1/3% of the Institutional Money Market Fund's total assets)
to securities firms and financial institutions, provided that each loan is
secured continuously by collateral in the form of cash, high quality money
market instruments or short-term U.S. Government securities adjusted daily to
have a market value at least equal to the current market value of the securities
loaned. These loans are terminable at any time, and the Underlying Funds will
receive any interest or dividends paid on the loaned securities. In addition, it
is anticipated that an Underlying Fund may share with the borrower some of the
income received on the collateral for the loan or the Fund will be paid a
premium for the loan. The risk in lending portfolio securities, as with other
extensions of credit, consists of the possibility of loss to a Fund due to (i)
the inability of the borrower to return securities, (ii) a delay in recovery of
the securities, or (iii) loss of rights in the collateral should the borrower
fail financially. In determining whether the Underlying Funds will lend
securities, the Advisor, World or the Sub-Advisor will consider all relevant
facts and circumstances. The Underlying Funds will only enter into loan
arrangements with broker-dealers, banks or other institutions which the Advisor,
World or the Sub-Advisor has determined are creditworthy under guidelines
established by the Boards of Directors/Trustees.
Lower-Rated Debt Securities. It is expected that each Underlying Fund
(other than the Institutional Money Market Fund, Institutional S&P 500 Index
Equity 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
Investor Services, 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
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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
Underlying Fund's portfolio, with a commensurate effect on the value of each of
the Fund's shares. Therefore, an investment in the Funds should not be
considered as a complete investment program and may not be appropriate for all
investors.
While the market values of lower-rated debt and comparable unrated
securities tend to react more to fluctuations in interest rate levels than the
market values of higher-rated securities, the market values of certain lower-
rated debt and comparable unrated securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
higher-rated securities. In addition, lower-rated debt securities and
comparable unrated securities generally present a higher degree of credit risk.
Issuers of lower-rated debt and comparable unrated securities often are highly
leveraged and may not have more traditional methods of financing available to
them so that their ability to service their debt obligations during an economic
downturn or during sustained periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is significantly greater because
lower-rated debt and comparable unrated securities generally are unsecured and
frequently are subordinated to the prior payment of senior indebtedness. The
Underlying Funds may incur additional expenses to the extent that they are
required to seek recovery upon a default in the payment of principal or interest
on their portfolio holdings. The existence of limited markets for lower-rated
debt and comparable unrated securities may diminish each of the Underlying
Fund's ability to (a) obtain accurate market quotations for purposes of valuing
such securities and calculating its net asset value and (b) sell the securities
at fair value either to meet redemption requests or to respond to changes in the
economy or in financial markets.
Lower-rated debt securities and comparable unrated securities may have call
or buy-back features that permit their issuers to call or repurchase the
securities from their holders. If an issuer exercises these rights during
periods of declining interest rates, the Underlying Funds may have to replace
the security with a lower yielding security, thus resulting in a decreased
return to the Funds. A description of applicable credit ratings is set forth in
Appendix A of this SAI.
Money Market Instruments. The Funds and the Underlying Funds may invest
from time to time in "money market instruments," a term that includes, among
other things, bank obligations, commercial paper, variable amount master demand
notes and corporate bonds with remaining maturities of 397 days or less.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Funds and the Underlying Funds will invest
in obligations of foreign banks or foreign branches of U.S. banks only where the
Advisor, World or the Sub-Advisor deems the instrument to present minimal credit
risks, such investments may nevertheless entail risks that are different from
those of investments in domestic obligations of U.S. banks due to differences in
political, regulatory and economic systems and conditions. All investments in
bank obligations are limited to the obligations of financial institutions having
more than $1 billion in total assets at the time of purchase.
Investments by a Fund or an Underlying Fund in commercial paper will
consist of issues rated at the time A-1 and/or P-1 by S&P or Moody's. In
addition, the Funds and the Underlying Funds may acquire unrated commercial
paper and corporate bonds that are determined by the Advisor, World or the Sub-
Advisor at the time of purchase to be of comparable quality to rated instruments
that may be acquired by such Fund as previously described.
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The Funds and the Underlying Funds may also purchase variable amount master
demand notes which are unsecured instruments that permit the indebtedness
thereunder to vary and provide for periodic adjustments in the interest rate.
Although the notes are not normally traded and there may be no secondary market
in the notes, an investor may demand payment of the principal of the instrument
at any time. The notes are not typically rated by credit rating agencies, but
issuers of variable amount master demand notes must satisfy the same criteria as
set forth above for issuers of commercial paper. If an issuer of a variable
amount master demand note defaulted on its payment obligation, an Underlying
Fund might be unable to dispose of the note because of the absence of a
secondary market and might, for this or other reasons, suffer a loss to the
extent of the default. The Funds and the Underlying Funds invest in variable
amount master notes only when the Advisor, World or the Sub-Advisor deems the
investment to involve minimal credit risk.
Mortgage-Related Securities. Subject to applicable credit criteria, each
Fixed Income Fund and the Cash Investment Fund may purchase asset-backed
securities (i.e., securities backed by mortgages, installment sales contracts,
credit card receivables or other assets). There are a number of important
differences among the agencies and instrumentalities of the U.S. Government that
issue mortgage-related securities and among the securities that they issue.
Mortgage-related securities guaranteed by the Government National Mortgage
Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known
as "Ginnie Maes") which are guaranteed as to the timely payment of principal and
interest by GNMA and such guarantee is backed by the full faith and credit of
the United States. GNMA is a wholly-owned U.S. Government corporation within
the Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA and are not backed by or entitled to the full faith and
credit of the United States, but are supported by the right of the issuer to
borrow from the Treasury. FNMA is a government-sponsored organization owned
entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of the principal and interest by FNMA. Mortgage-related securities
issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC
Mortgage Participation Certificates (also known as "Freddie Macs" or "PCs").
FHLMC is a corporate instrumentality of the United States, created pursuant to
an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie
Macs are not guaranteed by the United States or by any Federal Home Loan Banks
and do not constitute a debt or obligation of the United States or of any
Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of
interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate
collection or timely payment of all principal payments on the underlying
mortgage loans. When FHLMC does not guarantee timely payment of principal,
FHLMC may remit the amount due on account of its guarantee of ultimate payment
of principal at any time after default on an underlying mortgage, but in no
event later than one year after it becomes payable.
Municipal Obligations. Opinions relating to the validity of municipal
obligations and to the exemption of interest thereon from regular Federal income
tax are rendered by bond counsel or counsel to the respective issuers at the
time of issuance. Neither the Trust, St. Clair nor the Advisor will review
the proceedings relating to the issuance of municipal obligations or the bases
for such opinions.
An issuer's obligations under its municipal obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its municipal obligations may be
materially adversely affected by litigation or other conditions.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal obligations. For example, under the Tax Reform Act of
1986 interest on certain private activity bonds must be included in an
investor's Federal alternative minimum taxable income, and corporate investors
must include all tax-exempt interest in their Federal alternative minimum
taxable income. The Trust cannot predict what legislation, if any, may be
proposed in Congress in the future as regards the Federal income tax status of
interest on municipal obligations in general, or which proposals, if
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any, might be enacted. 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 Institutional Money Market Fund each may,
when deemed appropriate by the Advisor in light of the Underlying Fund's
investment objective, invest in high quality municipal obligations issued by
state and local governmental issuers, the interest on which may be taxable or
tax-exempt for Federal income tax purposes, provided that such obligations carry
yields that are competitive with those of other types of money market
instruments of comparable quality. Neither the Cash Investment Fund nor the
Institutional Money Market Fund expects to invest more than 5% of its net assets
in such municipal obligations during the current fiscal year.
Non-Domestic Bank Obligations. Non-domestic bank obligations include
Eurodollar Certificates of Deposit ("ECDs"), which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs"), which are U.S.
U.S. dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs"), which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank and held in
the United States; and Yankee Bankers' Acceptances ("Yankee BAs"), which are
U.S. dollar-denominated bankers' acceptances issued by a U.S. branch of a
foreign bank and held in the United States.
Options. The Underlying Funds may write covered call options, buy put
options, buy call options and write secured put options. For risks associated
with options on foreign currencies, see Appendix B of this SAI.
Real Estate Securities. The Real Estate Fund may invest without limit in
shares of real estate investment trusts ("REITs"). The Equity Funds and the
Balanced Fund may also invest in REITs. REITs pool investors' funds for
investment primarily in income producing real estate or real estate loans or
interests. A REIT is not taxed on income distributed to shareholders if it
complies with several requirements relating to its organization, ownership,
assets, and income and a requirement that it distribute to its shareholders at
least 95% of it taxable income (other than net capital gains) for each taxable
year. REITs can generally be classified as Equity REITs, Mortgage REITs and
Hybrid REITs. Equity REITs, which invest the majority of their assets directly
in real property, derive their income primarily from rents. Equity REITs can
also realize capital gains by selling properties that have appreciated in value.
Mortgage REITs, which invest the majority of their assets in real estate
mortgages, derive their income primarily from interest payments. Hybrid REITs
combine the characteristics of both Equity REITs and Mortgage REITs. The Funds
will not invest in real estate directly, but only in securities issued by real
estate companies. However, the Funds may be subject to risks similar to those
associated with the direct ownership of real estate (in addition to securities
markets risks) because of its policy of concentration in the securities of
companies in the real estate industry. These include declines in the value of
real estate, risks related to general and local economic conditions, dependency
on management skill, heavy cash flow dependency, possible lack of availability
of mortgage funds, overbuilding, extended vacancies of properties, increased
competition, increases in property taxes and operating expenses, changes in
zoning laws, losses due to costs resulting from the clean-up of environmental
problems, liability to third parties for damages resulting from environmental
problems, casualty or condemnation losses, limitations on rents, changes in
neighborhood values, the appeal of properties to tenants and changes in interest
rates.
In addition to these risks, Equity REITs may be affected by changes in the
value of the underlying property owned by the trusts, while Mortgage REITs may
be affected by the quality of any credit extended. Further, Equity and Mortgage
REITs are dependent upon management skills and generally may not be diversified.
Equity and Mortgage REITs are also subject to heavy cash flow dependency,
defaults by borrowers and self-liquidation. In addition, Equity and Mortgage
REITs could possibly fail to qualify for the beneficial tax treatment available
to real estate investment trusts under the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), or to maintain their exemptions from
registration under the 1940 Act. The above factors may also adversely affect a
borrower's or a lessee's ability to meet its obligations to the REIT. In the
event of a default by a borrower or lessee,
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the REIT may experience delays in enforcing its rights as a mortgagee or lessor
and may incur substantial costs associated with protecting investments.
Repurchase Agreements. The Funds and the Underlying Funds may agree to
purchase securities from financial institutions such as member banks of the
Federal Reserve System, any foreign bank or any domestic or foreign
broker/dealer that is recognized as a reporting government securities dealer,
subject to the seller's agreement to repurchase them at an agreed-upon time and
price ("repurchase agreements"). The Advisor, World or the Sub-Advisor will
review and continuously monitor the creditworthiness of the seller under a
repurchase agreement, and will require the seller to maintain collateral in an
amount that is greater than the repurchase price. Default by, or bankruptcy, of
the seller would, however, expose a Fund to possible loss because of adverse
market action or delays in connection with the disposition of underlying
obligations except with respect to repurchase agreements secured by U.S.
Government securities. With respect to the Money Market Funds, the securities
held subject to a repurchase agreement may have stated maturities exceeding
thirteen months, provided the repurchase agreement itself matures in 397 days or
less.
The repurchase price under repurchase agreements generally equals the price
paid by a Fund plus interest negotiated on the basis of current short-term rates
(which may be more or less than the rate on the securities underlying the
repurchase agreement).
Securities subject to repurchase agreements will be held, as applicable, by
the Trust's, Framlington's or the Company's custodian in the Federal
Reserve/Treasury book-entry system or by another authorized securities
depositary. Repurchase agreements are considered to be loans by a Fund or
Underlying Fund under the 1940 Act.
Reverse Repurchase Agreements. Each Underlying Fund may borrow funds for
temporary or emergency purposes by selling portfolio securities to financial
institutions such as banks and broker/dealers and agreeing to repurchase them at
a mutually specified date and price ("reverse repurchase agreements"). Reverse
repurchase agreements involve the risk that the market value of the securities
sold by an Underlying Fund may decline below the repurchase price. An
Underlying Fund will pay interest on amounts obtained pursuant to a reverse
repurchase agreement. While reverse repurchase agreements are outstanding, an
Underlying Fund will maintain cash, U.S. Government securities or other liquid
high-grade securities designated on the books of the Underlying Fund's custodian
an amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement.
Rights and Warrants. The Equity Funds may purchase warrants, which are
privileges issued by corporations enabling the owners to subscribe to and
purchase a specified number of shares of the corporation at a specified price
during a specified period of time. Subscription rights normally have a short
life span to expiration. The purchase of warrants involves the risk that an
Underlying Fund could lose the purchase value of a warrant if the right to
subscribe to additional shares is not exercised prior to the warrant's
expiration. Also, the purchase of warrants involves the risk that the effective
price paid for the warrant added to the subscription price of the related
security may exceed the value of the subscribed security's market price such as
when there is no movement in the level of the underlying security.
Short Sales. The Global Financial Services Fund may make short sales of
securities. A short sale is a transaction in which the Underlying Fund sells a
security it does not own in anticipation that the market price of that security
will decline. When the Underlying Fund makes a short sale, it must borrow the
security sold short and deliver it to the broker-dealer through which it made
the short sale as collateral for its obligation to deliver the security upon
conclusion of the sale. The Underlying Fund may also sell securities that it
owns or has the right to acquire at no additional cost but does not intend to
deliver to the buyer, a practice known as selling short "against-the-box." The
Underlying Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.
The Underlying Fund's obligation to replace the borrowed security will be
secured by collateral deposited with the broker-dealers, usually cash, U.S.
Government securities or other highly liquid securities similar to those
borrowed. The Underlying Fund will also be required to deposit similar
collateral with its custodian or custodian to the extent necessary so that the
value of both collateral deposits in the aggregate is at all times equal to as
least 100% of the current market value of the security sold short.
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Depending on arrangements made with the broker-dealer from which it borrowed the
security regarding payment over any received by the Underlying Fund on such
security, the Fund may not received any payments (including interest) on its
collateral deposited with such broker-dealer. The Underlying Fund will incur
transaction costs, including interest expenses, in connection with opening,
maintaining, and closing short sales.
If the price of the security sold short increases between the time of the
short sale and the time the Underlying Fund replaces the borrowed security, the
Fund will incur a loss; conversely, if the price declines, the Fund will realize
a capital gain. Any gain is limited to the price at which it sold the security
short; its potential loss is theoretically unlimited.
Stand-by Commitments. The Cash Investment Fund and the Institutional Money
Market Fund may enter into stand-by commitments with respect to municipal
obligations held by it. Under a stand-by commitment, a dealer agrees to
purchase at the Underlying Fund's option a specified municipal obligation at its
amortized cost value to the Fund plus accrued interest, if any. Stand-by
commitments may be exercisable by an Underlying Fund at any time before the
maturity of the underlying municipal obligations and may be sold, transferred or
assigned only with the instruments involved.
The Trust and St. Clair expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Cash Investment Fund may pay for a stand-by
commitment either separately in cash or by paying a higher price for municipal
obligations which are acquired subject to the commitment (thus reducing the
yield to maturity otherwise available for the same securities). The total
amount paid in either manner for outstanding stand-by commitments held by the
Underlying Fund will not exceed 1/2 of 1% of the value of the Underlying Fund's
total assets calculated immediately after each stand-by commitment is acquired.
The Cash Investment Fund and the Institutional Money Market Fund intend to
enter into stand-by commitments only with dealers, banks and broker/dealers
which, in the Advisor's opinion, present minimal credit risks. The acquisition
of a stand-by commitment will not affect the valuation of the underlying
municipal obligation. The actual stand-by commitment will be valued at zero in
determining net asset value. Accordingly, where an Underlying Fund pays
directly or indirectly for a stand-by commitment, its cost will be reflected as
an unrealized loss for the period during which the commitment is held by an
Underlying Fund and will be reflected in realized gain or loss when the
commitment is exercised or expires.
Stock Index Futures, Options on Stock and Bond Indices and Options on Stock
and Bond Index Futures Contracts. The Equity and Fixed Income Funds (except the
International Bond Fund) may purchase and sell stock index futures, options on
stock and bond indices and options on stock and bond index futures contracts as
a hedge against movements in the equity and bond markets. The International
Bond Fund may purchase and sell options on bond index futures contracts as a
hedge against movements in the bond markets.
A stock index futures contract is an agreement in which one party agrees to
deliver to the other an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of securities is made.
Options on stock and bond indices are similar to options on specific
securities, described above, except that, rather than the right to take or make
delivery of the specific security at a specific price, an option on a stock or
bond index gives the holder the right to receive, upon exercise of the option,
an amount of cash if the closing level of that stock or bond index is greater
than, in the case of a call option, or less than, in the case of a put option,
the exercise price of the option. This amount of cash is equal to such
difference between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount. Unlike options on specific securities, all settlements of options
on stock or bond indices are in cash, and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stocks.
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If the Advisor, World or the Sub-Advisor expects general stock or bond
market prices to rise, it might purchase a stock index futures contract, or a
call option on that index, as a hedge against an increase in prices of
particular securities it ultimately wants to buy. If in fact the index does
rise, the price of the particular securities intended to be purchased may also
increase, but that increase would be offset in part by the increase in the value
of the Underlying Funds' futures contract or index option resulting from the
increase in the index. If, on the other hand, the Advisor, World or the Sub-
Advisor, as the case may be, expects general stock or bond market prices to
decline, it might sell a futures contract, or purchase a put option, on the
index. If that index does in fact decline, the value of some or all of the
securities in the Underlying Funds' portfolio may also be expected to decline,
but that decrease would be offset in part by the increase in the value of the
Underlying Funds' position in such futures contract or put option.
The Underlying Funds (except the International Bond Fund) may purchase and
write call and put options on stock index futures contracts and each such
Underlying Fund and the International Bond Fund may purchase and write call and
put options on bond index futures contracts. Each such Underlying Fund may use
such options on futures contracts in connection with its hedging strategies in
lieu of purchasing and selling the underlying futures or purchasing and writing
options directly on the underlying securities or indices. For example, such
Underlying Funds may purchase put options or write call options on stock and
bond index futures (only bond index futures in the case of the International
Bond Fund), rather than selling futures contracts, in anticipation of a decline
in general stock or bond market prices or purchase call options or write put
options on stock or bond index futures, rather than purchasing such futures, to
hedge against possible increases in the price of securities which such
Underlying Funds intend to purchase.
In connection with transactions in stock or bond index futures, stock or
bond index options and options on stock or bond index futures, such Underlying
Funds will be required to deposit as "initial margin" an amount of cash and
short-term U.S. Government securities equal to between 5% to 8% of the contract
amount. Thereafter, subsequent payments (referred to as "variation margin") are
made to and from the broker to reflect changes in the value of the option or
futures contract. No such Underlying Fund may at any time commit more than 5%
of its total assets to initial margin deposits on futures contracts, index
options and options on futures contracts.
Stripped Securities. Certain Funds may acquire U.S. Government
obligations and their unmatured interest coupons that have been separated
("stripped") by their holder, typically a custodian bank or investment brokerage
firm. Having separated the interest coupons from the underlying principal of
the U.S. Government obligations, the holder will resell the stripped securities
in custodial receipt programs with a number of different names, including
"Treasury Income Growth Receipts" ("TIGRs") and "Certificate of Accrual on
Treasury Securities" ("CATS"). The stripped coupons are sold separately from
the underlying principal, which is usually sold at a deep discount because the
buyer receives only the right to receive a future fixed principal payment on the
security and does not receive any rights to periodic interest (cash) payments.
The underlying U.S. Treasury bonds and notes themselves are held in book-entry
form at the Federal Reserve Bank or, in the case of bearer securities (i.e.,
unregistered securities which are ostensibly owned by the bearer or holder), in
trust on behalf of the owners. Counsel to the underwriters of these
certificates or other evidences of ownership of U.S. Treasury securities have
stated that, in their opinion, purchasers of the stripped securities most likely
will be deemed the beneficial holders of the underlying U.S. Government
obligations for federal tax and securities purposes. The Company is not aware
of any binding legislative, judicial or administrative authority on this issue.
Only instruments which are stripped by the issuing agency will be
considered U.S. Government obligations. Securities such as CATS and TIGRs which
are stripped by their holder do not qualify as U.S. Government obligations.
The Treasury Department has facilitated transfers of ownership of zero
coupon securities by accounting separately for the beneficial ownership of
particular interest coupon and principal payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, an Underlying Fund is able to have its beneficial ownership of
zero coupon
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securities recorded directly in the book-entry record-keeping system in lieu of
having to hold certificates or other evidences of ownership of the underlying
U.S. Treasury securities.
In addition, the Fixed Income Funds may invest in stripped mortgage-backed
securities ("SMBS"), which represent beneficial ownership interests in the
principal distributions and/or the interest distributions on mortgage assets.
SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions on a pool of mortgage assets. One
type of SMBS will have one class receiving some of the interest and most of the
principal from the mortgage assets, while the other class will receive most of
the interest and the remainder of the principal. In the most common case, one
class of SMBS will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the principal-
only or "PO" class). SMBS may be issued by FNMA or FHLMC.
The original principal amount, if any, of each SMBS class represents the
amount payable to the holder thereof over the life of such SMBS class from
principal distributions of the underlying mortgage assets, which will be zero in
the case of an IO class. Interest distributions allocable to a class of SMBS,
if any, consist of interest at a specified rate on its principal amount, if any,
or its notional principal amount in the case of an IO class. The notional
principal amount is used solely for purposes of the determination of interest
distributions and certain other rights of holders of such IO class and does not
represent an interest in principal distributions of the mortgage assets.
Yields on SMBS will be extremely sensitive to the prepayment experience on
the underlying mortgage loans, and there are other associated risks. For IO
classes of SMBS and SMBS that were purchased at prices exceeding their principal
amounts there is a risk that an Underlying Fund may not fully recover its
initial investment.
The determination of whether a particular government-issued IO or PO backed
by fixed-rate mortgages is liquid may be made under guidelines and standards
established by the Boards of Directors/Trustees. Such securities may be deemed
liquid if they can be disposed of promptly in the ordinary course of business at
a value reasonably close to that used in the calculation of an Underlying Fund's
net asset value per share.
Supranational Bank Obligations. Supranational banks are international
banking institutions designed or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., The World
Bank). Obligations of supranational banks may be supported by appropriated but
unpaid commitments of their member countries and there is no assurance these
commitments will be undertaken or met in the future.
U.S. Government Obligations. The Funds and the Underlying Funds may
purchase obligations issued or guaranteed by the U.S. Government and, except in
the case of the U.S. Treasury Money Market Fund, U.S. Government agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of the
U.S. Government, such as those of the GNMA, are supported by the full faith and
credit of the U.S. Treasury. Others, such as those of the Export-Import Bank of
the United States, are supported by the right of the issuer to borrow from the
U.S. Treasury; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the agency or instrumentality
issuing the obligation. No assurance can be given that the U.S. Government
would provide financial support to U.S. Government-sponsored instrumentalities
if it is not obligated to do so by law. Examples of the types of U.S.
Government obligations that may be acquired by the Funds include U.S. Treasury
Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home
Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, FNMA, GNMA, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, FHLMC, Federal Intermediate Credit Banks and Maritime
Administration.
Variable and Floating Rate Instruments. Debt instruments may be structured
to have variable or floating interest rates. Variable and floating rate
obligations purchased by an Underlying Fund may have stated maturities in excess
of an Underlying Fund's maturity limitation if the Underlying Fund can demand
payment of the principal of the instrument at least once during such period on
not more than thirty days' notice (this demand feature
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is not required if the instrument is guaranteed by the U.S. Government or an
agency thereof). These instruments may include variable amount master demand
notes that permit the indebtedness to vary in addition to providing for periodic
adjustments in the interest rates. The Advisor, World or the Sub-Advisor, as the
case may be, will consider the earning power, cash flows and other liquidity
ratios of the issuers and guarantors of such instruments and, if the instrument
is subject to a demand feature, will continuously monitor their financial
ability to meet payment on demand. Where necessary to ensure that a variable or
floating rate instrument is equivalent to the quality standards applicable to an
Underlying Fund, the issuer's obligation to pay the principal of the instrument
will be backed by an unconditional bank letter or line of credit, guarantee or
commitment to lend. The Money Market Funds will invest in variable and floating
rate instruments only when the Advisor deems the investment to involve minimal
credit risk.
In determining average weighted portfolio maturity of the Underlying Funds,
an instrument will usually be deemed to have a maturity equal to the longer of
the period remaining until the next interest rate adjustment or the time the
Underlying Fund involved can recover payment of principal as specified in the
instrument. Variable rate U.S. Government obligations held by the Underlying
Funds, however, will be deemed to have maturities equal to the period remaining
until the next interest rate adjustment.
The absence of an active secondary market for certain variable and floating
rate notes could make it difficult to dispose of the instruments, and an
Underlying Fund could suffer a loss if the issuer defaulted or during periods
that an Underlying Fund is not entitled to exercise its demand rights.
Variable and floating rate instruments held by an Underlying Fund will be
subject to the Fund's limitation on illiquid investments when the Fund may not
demand payment of the principal amount within seven days absent a reliable
trading market.
Guaranteed Investment Contracts. The Fixed Income Funds, the Cash
Investment Fund and the Institutional Money Market Fund may make limited
investments in guaranteed investment contracts ("GICs") issued by U.S. insurance
companies. Pursuant to such contracts, an Underlying Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the Underlying Fund on a monthly basis
interest which is based on an index (in most cases this index is expected to be
the Salomon Brothers CD Index), but is guaranteed not to be less than a certain
minimum rate. A GIC is normally a general obligation of the issuing insurance
company and not funded by a separate account. The purchase price paid for a GIC
becomes part of the general assets of the insurance company, and the contract is
paid from the company's general assets. An Underlying Fund will only purchase
GICs from insurance companies which, at the time of purchase, have assets of $1
billion or more and meet quality and credit standards established by the Advisor
pursuant to guidelines approved by the Boards of Directors/Trustees. Generally,
GICs are not assignable or transferable without the permission of the issuing
insurance companies, and an active secondary market in GICs does not currently
exist. Therefore, GICs will normally be considered illiquid investments, and
will be acquired subject to the limitation on illiquid investments.
When-Issued Purchases and Forward Commitments (Delayed-Delivery
Transactions). When-issued purchases and forward commitments (known as delayed-
delivery transactions) are commitments by an Underlying Fund to purchase or sell
particular securities with payment and delivery to occur at a future date
(perhaps one or two months later). These transactions permit the Underlying
Fund to lock-in a price or yield on a security, regardless of future changes in
interest rates.
When an Underlying Fund agrees to purchase securities on a when-issued or
forward commitment basis, the Fund will designate cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the Underlying Fund will earmark portfolio securities to satisfy a
purchase commitment, and in such a case the Underlying Fund may be required
subsequently to designate additional assets in order to ensure that the value of
the account remains equal to the amount of the Underlying Fund's commitments.
It may be expected that the market value of the Underlying Fund's net assets
will fluctuate to a greater degree when it designates portfolio securities to
cover such purchase commitments than when it designates cash. Because an
Underlying Fund's liquidity and ability to manage its portfolio might be
affected when it sets aside cash or portfolio securities to
16
<PAGE>
cover such purchase commitments, the Advisor, World or the Sub-Advisor expects
that its commitments to purchase when-issued securities and forward commitments
will not exceed 25% of the value of an Underlying Fund's total assets absent
unusual market conditions.
An Underlying Fund will purchase securities on a when-issued or forward
commitment basis only with the intention of completing the transaction and
actually purchasing the securities. If deemed advisable as a matter of
investment strategy, however, an Underlying Fund may dispose of or renegotiate a
commitment after it is entered into, and may sell securities it has committed to
purchase before those securities are delivered to the Underlying Fund on the
settlement date. In these cases the Underlying Fund may realize a taxable
capital gain or loss.
When an Underlying Fund engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such party to do so may result in the Underlying Fund's incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the market value of
an Underlying Fund starting on the day the Fund agrees to purchase the
securities. The Underlying Fund does not earn interest on the securities it has
committed to purchase until they are paid for and delivered on the settlement
date.
Yields and Ratings. The yields on certain obligations, including the money
market instruments in which each Fund and Underlying Fund may invest (such as
commercial paper and bank obligations), are dependent on a variety of factors,
including general money market conditions, conditions in the particular market
for the obligation, the financial condition of the issuer, the size of the
offering, the maturity of the obligation and the ratings of the issue. The
ratings of S&P, Moody's, Duff & Phelps Credit Rating Co., Thomson Bank Watch,
Inc., and other (NRSROs) represent their respective opinions as to the quality
of the obligations they undertake to rate. Ratings, however, are general and
are not absolute standards of quality. Consequently, obligations with the same
rating, maturity and interest rate may have different market prices.
With respect to each of the Money Market Funds, securities (other than U.S.
Government securities) must be rated (generally, by at least two NRSROs) within
the two highest rating categories assigned to short-term debt securities. In
addition, each of the Cash Investment Fund and the Institutional Money Market
Fund will not invest more than 5% of its total assets in securities rated in the
second highest rating category by such NRSROs and will not invest more than 1%
of its total assets in such securities of any one issuer. The Cash Investment
Fund and the Institutional Money Market Fund intend to limit investments in the
securities of any single issuer (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) to not more than 5% of
the Underlying Fund's total assets at the time of purchase, provided that the
Underlying Fund may invest up to 25% of its total assets in the securities of
any one issuer rated in the highest rating category by an NRSRO for a period of
up to three business days. Unrated and certain single rated securities (other
than U.S. Government securities) may be purchased by the Money Market Funds, but
are subject to a determination by the Advisor, in accordance with procedures
established by the Boards of Trustees and Directors, that the unrated and single
rated securities are of comparable quality to the appropriate rated securities.
Other. Subsequent to its purchase by an Underlying Fund, a rated security
may cease to be rated or its rating may be reduced below the minimum rating
required for purchase by the Underlying Fund. The Boards of Trustees and
Directors, as applicable, or the Advisor, World or the Sub-Advisor, pursuant to
guidelines established by the Boards, will consider such an event in determining
whether the Underlying Fund involved should continue to hold the security in
accordance with the interests of the Fund and applicable regulations of the SEC.
RISK FACTORS AND SPECIAL CONSIDERATIONS -
INSTITUTIONAL S&P 500 INDEX EQUITY 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 Institutional
17
<PAGE>
S&P 500 Index Equity 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 such securities than may have been
realized or in losses that may not have been incurred if World were not required
to effect the purchases and sales. The failure of an issuer to declare or pay
dividends, the institution against an issuer of potentially materially adverse
legal proceedings, the existence or threat of defaults materially and adversely
affecting an issuer's future declaration and payment of dividends, or the
existence of other materially adverse credit factors will not necessarily be the
basis for the disposition of portfolio securities, unless such event causes the
issuer to be eliminated entirely from the S&P 500. However, although World does
not intend to screen securities for investment by the Fund by traditional
methods of financial and market analysis, World will monitor the Fund's
investment with a view towards removing stocks of companies which exhibit
extreme financial distress or which may impair for any reason the Fund's ability
to achieve its investment objective.
The Fund will invest primarily in the common stocks that constitute the S&P
500 in accordance with their relative capitalization and sector weightings as
described above. It is possible, however, that the Fund will from time to time
receive, as part of a "spin-off" or other corporate reorganization of an issuer
included in the S&P 500, securities that are themselves outside the S&P 500.
Such securities will be disposed of by the Fund in due course consistent with
the Fund's investment objective.
In addition, the 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.
18
<PAGE>
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.
Disclaimer. The Institutional S&P 500 Index Equity 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 Institutional S&P 500 Index Equity Fund
or any member of the public regarding the advisability of investing in
securities generally or in the Institutional S&P 500 Index Equity 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 Institutional
S&P 500 Index Equity Fund. S&P has no obligation to take the needs of the Trust
or the owners of the Institutional S&P 500 Index Equity 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 Institutional S&P 500 Index Equity Fund or the timing of the
issuance or sale of the Institutional S&P 500 Index Equity Fund or in the
determination or calculation of the equation by which the Institutional S&P 500
Index Equity Fund is to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading of the
Institutional S&P 500 Index Equity 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 Institutional
S&P 500 Index Equity 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 Institutional S&P 500 Index Equity Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability of
investing in the Institutional S&P 500 Index Equity Fund.
INVESTMENT LIMITATIONS
Each Fund is subject to the investment limitations enumerated in this
section which may be changed with respect to a particular Fund only by a vote of
the holders of a majority of such Fund's outstanding shares (as defined under
"Miscellaneous -- Shareholder Approvals").
No Fund may:
19
<PAGE>
1. Invest more than 25% of its total assets in any one industry
(securities issued or guaranteed by the United States Government, its
agencies or instrumentalities are not considered to represent
industries); this limitation does not apply to investment by the Funds
in investment companies;
2. With respect to 75% of the Fund's assets invest more than 5% of the
Fund's assets (taken at market value at the time of purchase) in the
outstanding securities of any single issuer or own more than 10% of
the outstanding voting securities of any one issuer, in each case
other than securities issued by other investment companies or
securities issued or guaranteed by the United States Government, its
agencies or instrumentalities;
3. Borrow money or enter into reverse repurchase agreements except that
the Funds may (i) borrow money or enter into reverse repurchase
agreements for temporary purposes in amounts not exceeding 5% of its
total assets and (ii) borrow money to meet redemption requests, in
amounts (when aggregated with amounts borrowed under clause (i)) not
exceeding 33 1/3% of its total assets;
4. Issue any senior security (as defined in Section 18(f) of the 1940
Act) except as permitted under the 1940 Act;
5. Make loans of securities to other persons in excess of 25% of a Fund's
total assets; provided the Funds may invest without limitation in
short-term debt obligations (including repurchase agreements) and
publicly distributed debt obligations;
6. Underwrite securities of other issuers, except insofar as a Fund may
be deemed an underwriter under the Securities Act of 1933, as amended,
in selling portfolio securities; or
7. Purchase or sell real estate or any interest therein, including
interests in real estate limited partnerships, except securities
issued by companies (including real estate investment trusts) that
invest in real estate or interests therein.
Additional investment restrictions adopted by each Fund, which may be
changed by the Board of Directors of the Company without shareholder vote,
provide that a Fund may not invest more than 15% of its net assets (taken at
market value at the time of purchase) in securities which cannot be readily
resold because of legal or contractual restrictions and which are not otherwise
marketable.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
a Fund's investments will not constitute a violation of such limitation, except
that any borrowing by a Fund that exceeds the fundamental investment limitations
stated above must be reduced to meet such limitations within the period required
by the 1940 Act (currently three days). Otherwise, a Fund may continue to hold
a security even though it causes the Fund to exceed a percentage limitation
because of fluctuation in the value of the Fund's assets.
TEMPORARY DEFENSIVE POSITION
During periods of unusual economic or market conditions or for temporary
defensive purposes or liquidity, each Underlying Fund may invest without limit
in cash and in U.S. dollar-denominated high quality money market and other
short-term instruments. These investments may result in a lower yield than
would be available from investments with a lower quality or longer term.
MANAGEMENT OF THE FUNDS
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, and their business
addresses, ages and principal occupations during the past five years, are:
20
<PAGE>
<TABLE>
<CAPTION>
Positions Principal Occupation
Name, Address and Age With Company+ During Past Five Years
--------------------- ------------- ----------------------
<S> <C> <C>
Charles W. Elliott Director and Chairman of the Senior Advisor to the President,
1024 Essex Circle Board of Directors Western Michigan University (since
Kalamazoo, MI 49008 July 1995 through December 1998);
DOB: 1/7/32 Executive Vice President,
Administration & Chief Financial
Officer, Kellogg Company (January
1987 through June 1995). Board of
Directors, Steelcase Financial
Corporation.
John Rakolta, Jr. Director and Vice Chairman of Chairman and Chief Executive
1876 Rathmor the Board of Directors Officer, Walbridge Aldinger
Bloomfield Hills, MI 48304 Company (construction company).
DOB: 5/26/47
Thomas B. Bender Director Director, Disciplined Growth
5033 Wood Ridge Road Investors (investment management
Glen Arbor, MI 49636 firm since December 1999);
DOB: 7/14/33 Partner, Financial & Investment
Management Group (April 1991 to
December 1999).
David J. Brophy Director Professor, University of Michigan.
1025 Martin Place Director, River Place Financial
Ann Arbor, MI 48104 Corporation.
DOB: 8/7/36
Dr. Joseph E. Champagne Director Dean, University Center, Macomb
319 East Snell Road College (since September 1997);
Rochester, MI 48306 Corporate and Executive Consultant
DOB: 5/19/39 (since September 1993);
Chancellor, Lamar University
(September 1994 to September
1995); Chairman of Board of
Directors, Ross Controls of Troy,
Michigan.
Thomas D. Eckert Director President and Chief Executive
10726 Falls Pointe Drive Officer, Capital Automotive REIT
Great Falls, VA 22066 (real estate investment trust
DOB: 1/26/39 specializing in retail automotive
properties) (since November 1997);
President, Mid-Atlantic Region of
Pulte Home Corporation (developer
of residential land and
construction of housing units)
(1983 to 1997). Director, Celotex
Corporation (a building products
manufacturer).
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C>
Michael Monohan Vice President Chairman of the Advisor (January
480 Pierce Street 2000 to present); Chief Executive
Suite 300 Officer of the Advisor (October
Birmingham, MI 48009 1999 to December 1999); President
DOB: 1/26/39 of Monhan Enterprises, LLC
(consulting company) (June 1999 to
present); president of Comerica
Incorporated (1994 to June 1999).
Elyse G. Essick Vice President Vice President and Director of
480 Pierce Street Communications and Client Services
Suite 300 of the Advisor (since January
Birmingham, MI 48009 1995).
DOB: 4/6/58
James C. Robinson President Chief Executive Officer of the
480 Pierce Street Advisor (January 2000 to present);
Suite 300 Executive Vice President of the
Birmingham, MI 48009 Advisor (February 1998 to December
DOB: 4/24/61 1999); and Chief Investment
Officer/Fixed Income of the
Advisor (since January 1995 to
December 1999).
Leonard J. Barr Vice President Vice President and Director of
480 Pierce Street Core Equity Research of the
Suite 300 Advisor (since January 1995 );
Birmingham, MI 48009 Director and Senior Vice
DOB: 6/16/44 President, Old MCM (since 1988);
Director of LPM (since June 1994).
Therese Hogan Assistant Secretary Director, State Regulation
101 Federal Street Department, PFPC Inc. (formerly
Boston, MA 02110 First Data Investor Services
DOB: 2/27/62 Group) (since June 1994).
Libby Wilson Assistant Secretary Director of Mutual Fund Operations
480 Pierce Street of the Advisor (since July 1999);
Suite 300 Global Portfolio Client Associate
Birmingham, MI 48009 of Invesco Global Asset Management
DOB: 2/24/69 (investment 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).
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C>
Bradford E. Smith Assistant Treasurer Manager of Mutual Fund Operatons
480 Pierce Street of the Advisor (March 2000 to
Suite 300 present; Administrator of Mutual
Birmingham, MI 48009 Fund Operations of the Advisor
DOB: 4/19/72 (August 1999 to February 2000);
Assistant Vice President, Madison
Mosiac Funds, LLC (advisor to the
Mosiac Funds) (September 1998 -
July 1999); Assistant Director of
Shareholder Services, Madison
Mosiac, LLC (april 1997 to August
1998); Cash Manager, GIT Funds
(n.k.a. Mosiac Funds); June 1996
to March 1997); and Registered
Representative. GIT Investment
Services, Inc. (January 1995 to
May 1996.)
Mary Ann Shumaker Assistant Secretary Associate General Counsel of the
480 Pierce Street Advisor (since July 1997); and
Suite 300 Counsel, Miro Weiner & Kramer (law
Birmingham, MI 48009 firm) (1991 to 1997).
DOB: 7/31/54
</TABLE>
---------------
+ Individual holds same position with the Trust, Framlington and St. Clair.
Directors of the Company receive an aggregate fee from the Company, the
Trust, Framlington and St. Clair for service on those organizations respective
Boards comprised of an annual retainer fee of $35,000, and a fee of $3,500 for
each Board meeting attended; and are reimbursed for all out-of-pocket expenses
relating to attendance at meetings.
The following table summarizes the compensation paid by the Trust,
Framlington, the Company and St. Clair to their respective Directors/Trustees
for the year ended June 30, 1999.
<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
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Charles W. Elliot John Rakolta, Jr. Thomas B. David J. Dr. Joseph E. Thomas D.
Chairman Vice Chairman Bender Brophy Champagne Eckert
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Estimated Annual
Benefits upon Retirement None None None None None None
------------------------------------------------------------------------------------------------------------------------
Total from the Fund
Complex $40,000 $40,000 $40,000 $40,000 $40,000 $40,000
------------------------------------------------------------------------------------------------------------------------
</TABLE>
No officer, director or employee of the Advisor, Comerica Incorporated
("Comerica"), the Custodian, the Distributor, the Administrator or the Transfer
Agent currently receives any compensation from the Company. As of June 1, 2000,
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.
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.
INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS
Investment Advisor. The Advisor of each Fund is Munder Capital Management,
a Delaware general partnership. The Advisor replaced Woodbridge Capital
Management, Inc. ("Woodbridge") as investment advisor to the investment
portfolios of the Company and replaced Munder Capital Management, Inc. as the
investment advisor to the investment portfolios of the Company on January 31,
1995, upon the closing agreement (the "Joint Venture Agreement") among Old MCM
Inc., Comerica, Woodbridge and WAM, pursuant to which Old MCM, Inc. 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 and Munder
Group LLC. WAM and WAM II are wholly-owned subsidiaries of Comerica Bank -
Detroit, which in turn. is a wholly-owned subsidiary of Comerica Incorporated, a
publicly-held bank holding company.
The Funds have entered into an Investment Advisory Agreement (the "Advisory
Agreement") with the Advisor which have been approved by the shareholders of the
Funds.
The Advisory Agreement will continue in effect for a period of two years
from its effective date. If not sooner terminated, the Advisory Agreement will
continue in effect for successive one year periods thereafter, provided that
each continuance is specifically approved annually by (a) the vote of a majority
of the Board of Directors who are not parties to the Advisory Agreement or
interested persons (as defined in the 1940 Act), cast in person at a meeting
called for the purpose of voting on approval, and (b) either (i) the vote of a
majority of the outstanding voting securities of the affected Fund, or (ii) the
vote of a majority of the Board of Directors. The Advisory Agreement is
terminable with respect to a Fund by vote of the Board of Directors, or by the
holders of a majority of the outstanding voting securities of the Fund, at any
time without penalty, on 60 days' written notice to the Advisor. The Advisor
may also terminate its advisory relationship with respect to a Fund without
penalty on 90 days' written notice to the Company. Each Advisory Agreement
terminates automatically in the event of its assignment (as defined in the 1940
Act).
Under the terms of the Advisory Agreement, the Advisor furnishes continuing
investment supervision to the Funds and is responsible for the management of the
Funds' portfolios. The responsibility for making decisions to buy, sell or hold
a particular security rests with the Advisor, subject to review by the Company's
Board of Directors. For the advisory services provided to the Funds and
expenses assumed by it, the Advisor has agreed to a
24
<PAGE>
fee from each Fund, computed daily and payable monthly on a separate Fund-by-
Fund basis, at an annual rate of .35% of each Funds' average daily net assets.
For the period of commencement of operations through June 30, 1998, the
Advisor received fees, after waivers, of $2,026 for the Conservative Fund
and$4,169 for the Moderate Fund. In addition, for the period ended June 30,
1998, the Advisor reimbursed expenses of $108,993 to the Conservative Fund and
$117,059 to the Moderate Fund.
For the fiscal year ended June 30, 1999, the Advisor received fees, after
waivers of $2,941 for the Conservative Fund and $5,066 for the Moderate Fund.
In addition the Advisor reimbursed expenses of $55,192, $51,949 and $54,595 to
the Conservative Fund and $51,949 to the Moderate Fund.
The Advisor serves as investment advisor to each of the Underlying Funds
(other than the Institutional S&P 500 Index Equity Fund and the International
Equity Fund), and for the advisory services provided and expenses assumed by it,
the Advisor has agreed to a fee from each Underlying Fund. The Advisor expects
to voluntarily reimburse expenses during the Company's and Framlington's current
fiscal year with respect to the Future Technology Fund, Growth Opportunities
Fund, the Micro-Cap Equity Fund, the NetNet Fund, the Framlington Emerging
Markets Fund, the Framlington Global Financial Services Fund, the Framlington
Healthcare Fund and the Framlington International Growth Fund. The Advisor may
discontinue such fee waivers and/or expense reimbursements at any time, in its
sole discretion. World, the investment advisor for the Institutional S&P 500
Index Equity Fund and the International Equity Fund, has agreed to a fee from
each of these Underlying Funds. See "Management" in the Prospectus for a
description of the advisory fees received by the Advisor from the Underlying
Funds.
Pursuant to a sub-advisory agreement with the Advisor, Framlington Overseas
Investment Management Limited provides sub-advisory services to the Framlington
Funds, and receives a fee from the Advisor for such sub-advisory services. See
"Management" in the Prospectus for a description of the sub-advisory services
and fees received by the Sub-Advisor.
For the fiscal year ended June 30, 1999, the Advisor received fees, after
waivers, if any, at an effective rate of .75% of average daily net assets for
each of the Focus Growth Fund, the Framlington Global Financial Services Fund,
Equity Income Fund, Growth Opportunities Fund, International Equity Fund, Multi-
Season Fund, Small-Cap Value Fund and Small Company Growth Fund; .50% of average
daily nets each of the Bond Fund, Intermediate Bond Fund, International Bond
Fund and U.S. Government Income Fund; 1.00% of average daily net assets for each
of the Micro-Cap Equity Fund, NetNet Fund, Framlington International Growth Fund
and Framlington Healthcare Fund; .74% of average daily net assets for each of
the Real Estate Fund; .20% of average daily net assets of the Institutional
Money Market Fund; .35% of average daily net assets of each of the Cash
Investment Fund and U.S. Treasury Money Market Fund; .07% of average daily net
assets of the Institutional S&P 500 Index Equity Fund; and 1.25% of average
daily net assets of the Framlington Emerging Markets Fund.
Distribution Agreement. The Company has entered into a distribution
agreement under which the Distributor, as agent, sells shares of each Fund on a
continuous basis. The Distributor has agreed to use appropriate efforts to
solicit orders for the purchase of shares of each Fund, although it is not
obligated to sell any particular amount of shares. The Distributor pays the
cost of printing and distributing prospectuses to persons who are not holders of
shares of the Funds (excluding preparation and printing expenses necessary for
the continued registration of the shares) and of printing and distributing all
sales literature. The Distributor's principal offices are located at 60 State
Street, Boston, Massachusetts 02109.
Distribution Services Arrangements. Each Fund has adopted a Service Plan
with respect to its Class A shares pursuant to which it uses its assets to
finance activities relating to the distribution of Class A shares to investors
and the provision of certain services to holders of Class A shares. Under such
Plans, the Distributor is paid an annual service fee at the rate of 0.25% of the
value of average daily net assets of the Class A shares of the Fund and an
annual distribution fee at the rate of 0.05% of the value of average daily net
assets of the Class A shares of the Fund. Each Fund has adopted a Service and
Distribution Plan with respect to its Class B shares,
25
<PAGE>
pursuant to which it uses its assets to finance activities relating to the
distribution of Class B shares to investors and the provision of certain
services to the holders of Class B shares. Under the terms of the Service and
Distribution Plans (collectively, the "Plans"), the Distributor is paid an
annual service fee of 0.25% of the value of average daily net assets of the
Class B shares of each Fund and an annual distribution fee at the rate of 0.75%
of the value of average daily net assets of the Class B shares of each Fund.
Under the terms of the Plans, each Plan continues from year to year,
provided such continuance is approved annually by vote of the Board of
Directors, including a majority of the Board of Directors who are not interested
persons of the Company, as applicable, and who have no direct or indirect
financial interest in the operation of that Plan (the "Non-Interested Plan
Directors"). The Plans may not be amended to increase the amount to be spent
for the services provided by the Distributor without shareholder approval, and
all amendments of the Plans also must be approved by the Directors in the manner
described above. Each Plan may be terminated at any time, without penalty, by
vote of a majority of the Non-Interested Plan Directors or, with respect to a
Fund, by a vote of a majority of the outstanding voting securities of the
relevant class of that Fund (as defined in the 1940 Act) upon not more than 30
days' written notice to the Distributor to the Plan. Pursuant to each Plan, the
Distributor will provide the Board of Directors periodic reports of amounts
expended under the Plan and the purposes for which such expenditures were made.
The Directors have determined that the Plans will benefit the Company, each
Fund, and their shareholders by (i) providing an incentive for broker or bank
personnel to provide continuous shareholder servicing after the time of sale;
(ii) facilitating portfolio management flexibility through cash flow into the
Funds; and (iii) maintaining a competitive sales structure in the mutual fund
industry.
With respect to Class A and Class B shares of each Fund, the Distributor
expects to pay sales commissions to dealers authorized to sell the Fund's Class
A and Class B shares at the time of sale. The Distributor will use its own
funds (which may be borrowed) to pay such commissions pending reimbursement
pursuant to the Service and Distribution Plan. In addition, the Advisor may use
its own resources to make payments to the Distributor or dealers authorized to
sell the Fund's shares to support their sales efforts.
For the period from commencement of operations through June 30, 1997, the
following fees were paid to the Distributor pursuant to the Class A and Class B
Service and Distribution Plans.
<TABLE>
<CAPTION>
Class A Service and Class B Service and
Distribution Plan Distribution Plan**
------------------- -------------------
<S> <C> <C>
Conservative Fund $ 0* $0
Moderate Fund $98 $0
</TABLE>
____________
* Prior to June 30, 1997, Class A of the Conservative Fund had not commenced
operations.
** Prior to June 30, 1997, Class B of the Funds had not commenced operations.
For the fiscal year ended June 30, 1998, the following fees were paid to
the Distributor pursuant to the Class A and Class B Service and Distribution
Plans.
<TABLE>
<CAPTION>
Class A Service and Class B Service and CDSC
Distribution Plan Distribution Plan Class B
------------------- ------------------- -------
<S> <C> <C> <C>
Conservative Fund $ 1* $945** $247
Moderate Fund $763 $595** $ 36
</TABLE>
_____________
* Commenced operations on March 13, 1998.
** Commenced operations on January 14, 1998.
For the fiscal year ended June 30, 1999, the following fees were paid to
the Distributor pursuant to the Class A and Class B Service and Distribution
Plans.
26
<PAGE>
<TABLE>
<CAPTION>
Class A Service and Class B Service and CDSC
Distribution Plan Distribution Plan Class B
------------------- ------------------- -------
<S> <C> <C> <C>
Conservative Fund $ 177 $1,505 $1,187
Moderate Fund $1,059 $1,297 $ 1
</TABLE>
The following amounts were paid by each Fund under its Class A and Class B
Service and Distribution Plans during the period from commencement of operations
through June 30, 1999:
<TABLE>
<CAPTION>
Printing and
Mailing of
Prospectuses to
other than Interest Carrying
Current Compensation to Compensation to Compensation to or Other
Advertising Shareholders Underwriters Dealers Sales Personnel Financing Charges
---------------- --------------- ---------------- ----------------- --------------- -----------------
Class Class Class Class Class Class Class Class Class Class Class Class
A B A B A B A B A B A B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Conservative Fund $0 $0 $0 $0 $0 $0 $ 115 $ 2 $0 $0 $0 $922
Moderate Fund $0 $0 $0 $0 $0 $0 $1,449 $14 $0 $0 $0 $557
</TABLE>
Administrator. State Street Bank and Trust Company ("State Street" or the
"Administrator"), whose principal business address is 225 Franklin Street,
Boston, Massachusetts, 02110, serves as administrator for the Company pursuant
to administration agreements (an "Administration Agreement"). State Street has
agreed to maintain office facilities for the Company; oversee the computation of
each Fund's net asset value, net income and realized capital gains, if any;
furnish statistical and research data, clerical services, and stationery and
office supplies; prepare and file various reports with the appropriate
regulatory agencies; and prepare various materials required by the SEC. State
Street may enter into an agreement with one or more third parties pursuant to
which such third parties will provide administrative services on behalf of the
Funds.
The Administration Agreement provides that the Administrator performing
services thereunder shall not be liable under the Agreement except for its bad
faith, negligence or willful misconduct in the performance of its duties and
obligations thereunder.
Prior to November 1, 1997, PFPC Inc. (formerly First Data Investor Services
Group, Inc.) ("PFPC" or the "Transfer Agent") located at 4400 Computer Drive,
Westborough, MA 01581 served as administrator to the Funds.
For the period from commencement of operations through June 30, 1997,
administration fees of PFPC accrued were $7,479 for the Conservative Fund and
$7,480 for the Moderate Fund.
For the period July 1, 1997 through October 31, 1997, administration fees
to PFPC accrued were: $10,110 for the Conservative Fund and $10,110 for the
Moderate Fund.
For the period November 1, 1997 through June 30, 1998, administration fees
of State Street accrued were: $17,901 for the Conservative Fund and $17,901 for
the Moderate Fund.
For the fiscal year ended June 30, 1999, administration fees of State
Street were $27,550 for the- Conservative Fund and $28,281for the Moderate Fund.
Custodian. State Street serves as the custodian (the "Custodian") to the
Funds pursuant to a custodian agreement ("Custodian Contract") among the Company
and State Street. State Street is also the custodian with respect to the
custody of foreign securities held by the Funds. State Street has in turn
entered into additional agreements with financial institutions located in
foreign countries with respect to the custody of such securities. Under the
Custodian Contract, the Custodian (i) maintains a separate account in the name
of each Fund, (ii) holds and transfers portfolio securities on account of each
Fund, (iii) accepts receipts and makes disbursements of money
27
<PAGE>
on behalf of each Fund, (iv) collects and receives all income and other payments
and distributions on account of each Fund's securities and (v) makes periodic
reports to the Board of Directors concerning the Funds' operations.
Transfer and Dividend Disbursing Agent. PFPC serves as the transfer and
dividend disbursing agent for the Funds pursuant to transfer agency agreements
(the "Transfer Agency Agreement") with the Company, under which Investor
Services Group (i) issues and redeems shares of each Fund, (ii) addresses and
mails all communications by each Fund to its record owners, including reports to
shareholders, dividend and distribution notices and proxy materials for its
meetings of shareholders, (iii) maintains shareholder accounts, (iv) responds to
correspondence by shareholders of the Funds and (v) makes periodic reports to
the Board of Directors concerning the operations of each Fund.
Other Information pertaining to Administration, Custodian and Transfer
Agency Agreements. Except as noted in this SAI the Funds' service contractors
bear all expenses in connection with the performance of their services and the
Funds bear the expenses incurred in their operations. These expenses include,
but are not limited to, fees paid to the Advisor, Administrator, Custodian and
Transfer Agent; fees and expenses of officers and Board of Directors; taxes;
interest; legal and auditing fees; brokerage fees and commissions; certain fees
and expenses in registering and qualifying each Fund and its shares for
distribution under Federal and state securities laws; expenses of preparing
prospectuses and statements of additional information and of printing and
distributing prospectuses and statements of additional information to existing
shareholders; the expense of reports to shareholders, shareholders' meetings and
proxy solicitations; fidelity bond and directors' and officers' liability
insurance premiums; the expense of using independent pricing services; and other
expenses which are not assumed by the Administrator. Any general expenses of
the Company that are not readily identifiable as belonging to a particular
investment portfolio of the Company are allocated among all investment
portfolios of the Company by or under the direction of the Board of Directors in
a manner that the Board of Directors determine to be fair and equitable. The
Advisor, Administrator, Custodian and Transfer Agent may voluntarily waive all
or a portion of their respective fees from time to time.
CODE OF ETHICS
The Company, the Advisor, the 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 Advisor, the 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 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 Directors, the Advisor makes
decisions with respect to and places orders for all purchases and sales of
portfolio securities for each Fund. The Funds purchase only Class Y shares of
the Underlying Funds, which are sold without an initial or contingent deferred
sales charge to the Funds.
For the period from commencement of operations through June 30, 1997, the
Funds did not pay any brokerage commissions.
For the fiscal year ended June 30, 1998, the Funds did not pay any
brokerage commissions.
For the fiscal year ended June 30, 1999, the Funds did not pay any
brokerage commissions.
Over-the-counter issues, including corporate debt and government
securities, are normally traded through dealers on a "net" basis (i.e., without
commission), or directly with the issuer. With respect to over-the-counter
transactions, the Advisor will normally deal directly with dealers who make a
market in the instruments involved except in those circumstances where more
favorable prices and execution are available elsewhere. The cost of securities
purchased from underwriters includes an underwriting commission or concession,
and the prices at which securities are purchased from and sold to dealers
include a dealer's mark-up or mark-down.
The portfolio turnover rate of a Fund and an Underlying Fund is calculated
by dividing the lesser of such Fund's annual sales or purchases of portfolio
securities (exclusive of purchases or sales of securities whose maturities at
the time of acquisition were one year or less) by the monthly average value of
the securities held by the fund during the year. Each Fund's and each
Underlying Fund's portfolio turnover rate is included in its respective
Prospectuses under the section entitled "Financial Highlights." Purchases and
sales are made for each Fund and Underlying Fund whenever necessary, in
management's opinion, to meet such fund's investment objective. The
28
<PAGE>
Underlying Funds may engage in short-term trading to achieve their investment
objectives. Portfolio turnover may vary greatly from year to year as well as
within a particular year.
In the Advisory Agreement, the Advisor agrees to select broker-dealers in
accordance with guidelines established by the Board of Directors from time to
time and in accordance with applicable law. In assessing the terms available
for any transaction, the Advisor shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. In addition, the Advisory Agreement authorizes the
Advisor, subject to the prior approval of the Company's Board of Directors, to
cause the Funds to pay a broker-dealer which furnishes brokerage and research
services a higher commission than that which might be charged by another broker-
dealer for effecting the same transaction, provided that the Advisor determines
in good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Funds. Such brokerage and research services might consist of
reports and statistics on specific companies or industries, general summaries of
groups of bonds and their comparative earnings and yields, or broad overviews of
the securities markets and the economy.
Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable to the Advisor by the Funds. It is possible that
certain of the supplementary research or other services received will primarily
benefit one or more other investment companies or other accounts for which
investment discretion is exercised. Conversely, a Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company.
Portfolio securities will not be purchased from or sold to the Advisor, the
Distributor or any affiliated person (as defined in the 1940 Act) of the
foregoing entities except to the extent permitted by SEC exemptive order or by
applicable law.
Investment decisions for each Fund, the Underlying Funds, and for other
investment accounts managed by the Advisors (Sub-Advisor with respect to the
Framlington Funds) are made independently of each other in the light of
differing conditions. However, the same investment decision may be made for two
or more of such accounts. In such cases, simultaneous transactions are
inevitable. Purchases or sales are then averaged as to price and allocated as
to amount in a manner deemed equitable to each such account. While in some
cases this practice could have a detrimental effect on the price or value of the
security as far as a Fund or Underlying Fund is concerned, in other cases it is
believed to be beneficial to a Fund or Underlying Fund. To the extent permitted
by law, the Advisor may aggregate the securities to be sold or purchased for a
Fund or Underlying Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions.
A Fund will not purchase securities while the Advisor or any affiliated
person (as defined in the 1940 Act) is a member of any underwriting or selling
group for such securities except pursuant to procedures adopted by the Company's
Board of Directors in accordance with Rule 10f-3 under the 1940 Act.
The Funds are required to identify the securities of their regular brokers
or dealers (as defined in Rule 10b-1 under the 1940 Act) or their parent
companies held by them as of the close of their most recent fiscal year. As of
June 30, 1999, the Funds held no such securities.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. As described in the Prospectuses, shares of the Funds may be
purchased in a number of different ways. Such alternative sales arrangements
permit an investor to choose the method of purchasing shares that is more
beneficial depending on the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances. An
investor may place orders directly through the Transfer Agent or the Distributor
or through arrangements with his/her authorized broker.
29
<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.
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.
Exchanges. In addition to the method of exchanging shares described in the
Funds' Prospectus, a shareholder exchanging at least $1,000 of shares (for which
certificates have not been issued) and who has authorized expedited exchanges on
the application form filed with the Transfer Agent may exchange shares by
telephoning the Funds at (800) 438-5789. Telephone exchange instructions must
be received by the Transfer Agent by 4:00 p.m., Eastern time. The Funds, the
Distributor and the Transfer Agent reserve the right at any time to suspend or
terminate the expedited exchange procedure or to impose a fee for this service.
During periods of unusual economic or market changes, shareholders may
experience difficulties or delays in effecting telephone exchanges. Neither the
Funds nor the Transfer Agent will be responsible for any loss, damages, expense
or cost arising out of any telephone exchanges effected upon instructions
believed by them to be genuine. The Transfer Agent has instituted procedures
that it believes are reasonably designed to insure that exchange instructions
communicated by telephone are genuine, and could be liable for losses caused by
unauthorized or fraudulent instructions in the absence of such procedures. The
procedures currently include a recorded verification of the shareholder's name,
social security number and account number, followed by the mailing of a
statement confirming the transaction, which is sent to the address of record.
30
<PAGE>
NET ASSET VALUE
Securities traded on a national securities exchange or on NASDAQ for which
there were no sales on the date of valuation and securities traded on other
over-the-counter markets, including listed securities for which the primary
market is believed to be over-the-counter, are valued at the mean between the
most recently quoted bid and asked prices. Options will be valued at market
value or fair value if no market exists. Futures contracts will be valued in
like manner, except that open futures contract sales will be valued using the
closing settlement price or, in the absence of such a price, the most recently
quoted asked price. Restricted securities and securities and assets for which
market quotations are not readily available are valued at fair value by the
Advisor under the supervision of the Board of Directors. Debt securities with
remaining maturities of 60 days or less are valued at amortized cost, unless the
Board of Directors determines that such valuation does not constitute fair value
at that time. Under this method, such securities are valued initially at cost
on the date of purchase (or the 61st day before maturity).
In determining the approximate market value of portfolio investments, the
Company may employ outside organizations, which may use matrix or formula
methods that take into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula methods not been used. All cash, receivables and current payables are
carried on the Company's books at their face value. Other assets, if any, are
valued at fair value as determined in good faith under the supervision of the
Board Members.
PERFORMANCE INFORMATION
Yield and Performance of the Funds
Yield. The Funds' 30-day (or one month) standard yield described in the
Prospectus is calculated for each Fund in accordance with the method prescribed
by the SEC for mutual funds:
YIELD = 2[( a - b +1)/6/ -1]
-----
cd
Where:
a = dividends and interest earned by a Fund during the period
b = expenses accrued for the period (net of reimbursements and waivers)
c = average daily number of shares outstanding during the period entitled
to receive dividends
d = maximum offering price per share on the last day of the period
For the purpose of determining interest earned on debt obligations
purchased by a Fund at a discount or premium (variable "a" in the formula), each
Fund computes the yield to maturity of such instrument based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual accrued interest).
Such yield is then divided by 360 and the quotient is multiplied by the market
value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is in the portfolio. It is assumed in the above
calculation that each month contains 30 days. The maturity of a debt obligation
with a call provision is deemed to be the next call date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. For the
purpose of computing yield on equity securities held by a Fund, dividend income
is recognized by accruing 1/360 of the stated dividend rate of the security for
each day that the security is held by the Fund.
Interest earned on tax-exempt obligations that are issued without original
issue discount and that have a current market discount is calculated by using
the coupon rate of interest instead of the yield to maturity. In the case of
tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original issue discount (market discount), the yield to maturity
is the imputed rate based on the original issue discount calculation. On the
other hand, in the case of tax-
31
<PAGE>
exempt obligations that are issued with original issue discount but which have
the discounts based on current market value that are less than the then-
remaining portion of the original issue discount (market premium), the yield to
maturity is based on the market value.
With respect to mortgage- or other receivables-backed debt obligations
purchased at a discount or premium, the formula generally calls for amortization
of the discount or premium. The amortization schedule will be adjusted monthly
to reflect changes in the market value of such debt obligations. Expenses
accrued for the period (variable "b" in the formula) include all recurring fees
charged by a Fund to all shareholder accounts in proportion to the length of the
base period and the Fund's mean (or median) account size. Undeclared earned
income will be subtracted from the offering price per share (variable "d" in the
formula).
Total Return of the Funds
Total Return. Each Fund that advertises its "average annual total return"
computes such return by determining the average annual compounded rate of return
during specified periods that equates the initial amount invested to the ending
redeemable value of such investment according to the following formula:
T = (ERV)/1/n/ -1
----
P
Where:
P = hypothetical initial payment of $1,000;
T = average annual total return;
n = period covered by the computation, expressed in years;
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10 year (or other) periods at the end of the
applicable period (or a fractional portion thereof).
Each Fund that advertises its "aggregate total return" computes such
returns by determining the aggregate compounded rates of return during specified
periods that likewise equate the initial amount invested to the ending
redeemable value of such investment. The formula for calculating aggregate
total return is as follows:
(ERV) - 1
-----
Aggregate Total Return = P
The calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per share
existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all non-recurring charges at the end of the
measuring period.
Based on the foregoing calculation, set forth below are the average annual total
return figures for the Class A, Class B and Class Y Shares of each of the Funds
for the period from commencement of operations through June 30, 1999:
<TABLE>
<CAPTION>
12 month period Inception through
Fund-Inception Date ended June 30, 1999 June 30,1999
------------------- ---------------------------- --------------------------
with load w/o load w/ load w/o load
--------- -------- ------- --------
<S> <C> <C> <C> <C>
Conservative Fund
-----------------
Class A - 3/13/98 (6.45)% (0.98)% (4.33)% (0.06)%
Class B - 1/14/98 (5.20)% (1.17)% (0.44)% 1.84%
Class Y - 4/3/97 (0.05)% (0.05)% 7.15% 7.15%
Moderate Fund
-------------
Class A - 4/4/97 0.90% 6.74% 11.63% 14.48%
Class B - 1/14/98 1.06% 6.06% 6.37% 9.02%
Class Y - 4/3/97 7.03% 7.03% 14.72% 14.72%
</TABLE>
32
<PAGE>
The performance of any investment is generally a function of portfolio
quality and maturity, type of investment and operating expenses.
From time to time, in advertisements or in reports to shareholders, a
Fund's yields or total returns may be quoted and compared to those of other
mutual funds with similar investment objectives or compared to stock or other
relevant indices. Hypothetical examples showing the difference between a
taxable and a tax-free investment may also be provided to shareholders.
TAXES
The following summarizes certain additional Federal income tax
considerations generally affecting the Funds and their shareholders that are not
described in the Funds' Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Funds or their shareholders, and the
discussion here and in the applicable Prospectus is not intended as a substitute
for careful tax planning. This discussion is based upon present provisions of
the Internal Revenue Code, the regulations promulgated thereunder, and judicial
and administrative ruling authorities, all of which are subject to change, which
change may be retroactive. Prospective investors should consult their own tax
advisors with regard to the federal tax consequences of the purchase, ownership
and disposition of Fund shares, as well as the tax consequences arising under
the laws of any state, foreign country, or other taxing jurisdiction.
General. Each Fund intends to elect and qualify to be taxed separately as
a regulated investment company under Subchapter M of the Internal Revenue Code.
As a regulated investment company, each Fund generally is exempt from federal
income tax on its net investment income and realized capital gains which it
distributes to shareholders, provided that it distributes an amount equal to the
sum of (a) at least 90% of its investment company taxable income (net investment
income and the excess of net short-term capital gain over net long-term capital
loss), if any, for the year and (b) at least 90% of its net tax-exempt interest
income, if any, for the year (the "Distribution Requirement") and satisfies
certain other requirements of the Internal Revenue Code that are described
below. Distributions of investment company taxable income and net tax-exempt
interest income made during the taxable year or, under specified circumstances,
within twelve months after the close of the taxable year will satisfy the
Distribution Requirement.
In addition to satisfying the Distribution Requirement, each Fund must
derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement"). Interest
(including original issue discount and accrued market discount) received by a
Fund at maturity or on disposition of a security held for less than three months
will not be treated (in contrast to other income which is attributable to
realized market appreciation) as gross income from the sale or other disposition
of securities held for less than three months for this purpose.
In addition to the foregoing requirements, at the close of each quarter of
its taxable year, at least 50% of the value of each Fund's assets must consist
of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which a
Fund has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which a Fund does not hold more than 10% of
the outstanding voting securities of such issuer) and no more than 25% of the
value of each Fund's total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which such Fund controls and
which are engaged in the same or similar trades or businesses.
Distributions of net investment income received by a Fund from investments
in debt securities and any net realized short-term capital gains distributed by
a Fund will be taxable to shareholders as ordinary income and will not be
eligible for the dividends-received deduction for corporations.
33
<PAGE>
Each Fund intends to distribute to shareholders any excess of net long-term
capital gain over net short-term capital loss ("net capital gain") for each
taxable year. Such gain is distributed as a capital gain dividend and is
taxable to shareholders as gain from the sale or exchange of a capital asset
held for more than one year, regardless of the length of time a shareholder has
held his or her Fund shares and regardless of whether the distribution is paid
in cash or reinvested in additional Fund shares. The Funds expect that capital
gain dividends will be taxable to shareholders as long-term capital gain.
Capital gains dividends are not eligible for the dividends-received deduction
for corporations.
In the case of corporate shareholders, distributions of a Fund for any
taxable year generally qualify for the dividends-received deduction to the
extent of the gross amount of "qualifying dividends" received by such Fund for
the year and if certain holding period requirements are met. Generally, a
dividend will be treated as a "qualifying dividend" if it has been received from
a domestic corporation.
If for any taxable year any Fund does not qualify as a regulated investment
company, all of its taxable income will be subject to tax at regular corporate
rates without any deduction for distributions to shareholders. In such event,
all distributions (whether or not derived from exempt-interest income) would be
taxable as ordinary income and would be eligible for the dividends-received
deduction in the case of corporate shareholders to the extent of such Fund's
current and accumulated earnings and profits.
Shareholders will be advised annually as to the federal income tax
consequences of distributions made by the Funds each year.
The Internal Revenue Code imposes a non-deductible 4% excise tax on
regulated investment companies that fail to distribute in each calendar year an
amount equal to specified percentages of their ordinary taxable income and
capital gain net income (excess of capital gains over capital losses). Each
Fund intends to make sufficient distributions or deemed distributions of its
ordinary taxable income and capital gain net income each calendar year to avoid
liability for this excise tax.
The Company will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable distributions, including gross proceeds
realized upon sale or other dispositions paid to any shareholder (i) who has
provided either an uncertified or incorrect tax identification number or no
number at all, (ii) who is subject to backup withholding by the Internal Revenue
Service for failure to report the receipt of taxable interest or dividend income
properly, or (iii) who has failed to certify to the Company that he is not
subject to backup withholding or that he is an "exempt recipient."
If an Underlying Fund derives dividends from domestic corporations, a
portion of the income distributions of a Fund which invests in that Underlying
Fund may be eligible for the 70% deduction for dividends received by
corporations. Shareholders will be informed of the portion of dividends which
so qualify. The dividends-received deduction is reduced to the extent the
shares held by the Underlying Fund with respect to which the dividends are
received are treated as debt-financed under federal income tax law and is
eliminated if either those shares or the shares of the Underlying Fund or the
Fund are deemed to have been held by the Underlying Fund, the Fund or the
shareholders, as the case may be, for less than 46 days.
Income received by an Underlying Fund from sources within a foreign country
may be subject to withholding and other taxes imposed by that country. If more
than 50% of the value of an Underlying Fund's total assets at the close of its
taxable year consists of stock or securities of foreign corporations, the
Underlying Fund will be eligible and may elect to "pass-through" to its
shareholders, including a Fund, the amount of foreign income and similar taxes
paid by the Underlying Fund. Pursuant to this election, the Fund would be
required to include in gross income (in addition to taxable dividends actually
received), its pro rata share of foreign income and similar taxes in computing
its taxable income or to use it as a foreign tax credit against its U.S. federal
income taxes, subject to limitations. A Fund, would not, however, be eligible
to elect to "pass-through" to its shareholders the ability to claim a deduction
or credit with respect to foreign income and similar taxes paid by the
Underlying Fund.
34
<PAGE>
Disposition of Shares. Upon a redemption, sale or exchange of his or her
shares, a shareholder will realize a taxable gain or loss depending upon his or
her basis in the shares. Such gain or loss will be treated as capital gain or
loss if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, generally, depending upon the shareholder's holding
period for the shares. Any loss realized on a redemption, sale or exchange will
be disallowed to the extent the shares disposed of are replaced (including
through reinvestment of dividends) within a period of 61 days beginning 30 days
before and ending 30 days after the shares are disposed of. In such a case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a shareholder on the sale of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received or treated as
having been received by the shareholder with respect to such shares and treated
as long-term capital gain. Furthermore, a loss realized by a shareholder on the
redemption, sale or exchange of shares of a Fund with respect to which exempt-
interest dividends have been paid will, to the extent of such exempt-interest
dividends, be disallowed if such shares have been held by the shareholder for
six months or less.
In some cases, shareholders will not be permitted to take sales charges
into account for purposes of determining the amount of gain or loss realized on
the disposition of their stock. This prohibition generally applies where (1)
the shareholder incurs a sales charge in acquiring the stock of a Fund, (2) the
stock is disposed of before the 91st day after the date on which it was
acquired, and (3) the shareholder subsequently acquires the stock of the same or
another fund and the otherwise applicable sales charge is reduced under a
"reinvestment right" received upon the initial purchase of regulated investment
company shares. The term "reinvestment right" means any right to acquire stock
of one or more funds without the payment of a sales charge or with the payment
of a reduced sales charge. Sales charges affected by this rule are treated as
if they were incurred with respect to the stock acquired under the reinvestment
right. This provision may be applied to successive acquisitions of Fund shares.
Although each Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all Federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, each Fund may be subject
to the tax laws of such states or localities.
Taxation of the Underlying Funds. Each Underlying Fund intends to elect
and qualify to be taxed as a regulated investment company under the Internal
Revenue Code. In any year in which an Underlying Fund qualifies as a regulated
investment company and timely distributes all of its taxable income, the
Underlying Fund generally will not pay any federal income or excise tax.
Distributions of an Underlying Fund's investment company taxable income are
taxable as ordinary income to a Fund which invests in the Underlying Fund.
Distributions of the excess of an Underlying Fund's net long-term capital gain
over its net short-term capital loss, which are properly designated as "capital
gain dividends," should be taxable as mid-term or long-term capital gain to a
Fund which invests in the Underlying Fund, regardless of how long the Fund held
the Underlying Fund's shares, and are not eligible for the corporate dividends-
received deduction. Upon the sale or other disposition by a Fund of shares of
an Underlying Fund, the Fund generally will realize a capital gain or loss which
will be long-term or short-term, generally depending upon the holding period for
the shares.
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.
35
<PAGE>
Other Taxation
The foregoing discussion relates only to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and domestic
corporations, partnerships, trusts and estates). Distributions by the Funds and
distributions of Fund shares also may be subject to state and local taxes, and
their treatment under state and local income tax laws may differ from the U.S.
federal income tax treatment. Shareholders should consult their tax advisers
with respect to particular questions of U.S. federal, state and local taxation.
Shareholders who are not U.S. persons should consult their tax advisers
regarding U.S. and foreign tax consequences of ownership of shares of the Fund,
including the likelihood that distributions to them would be subject to
withholding of U.S. federal income tax at a rate of 30% (or at a lower rate
under a tax treaty). Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
ADDITIONAL INFORMATION CONCERNING SHARES
The Company is a Maryland corporation. The Company's Articles of
Incorporation authorize the Board of Directors to classify or reclassify any
unissued shares of the Company into one or more classes by setting or changing,
in any one or more respects, their respective designations, preferences,
conversion or other rights, voting powers, restrictions, limitations,
qualifications and terms and conditions of redemption. Pursuant to the
authority of the Company's Articles of Incorporation, the Directors have
authorized the issuance of shares of common stock representing interests in the
Focus Growth Fund, Future Technology Fund, Growth Opportunities Fund,
International NetNet Fund, Micro-Cap Equity Fund, Multi-Season Fund, Real Estate
Fund, Small-Cap Value Fund, International Bond Fund, NetNet Fund, Conservative
Fund, Moderate Fund and Munder Fund of Funds (formerly All-Season Aggressive
Fund), respectively. The Conservative Fund and Moderate Fund are offered in
three separate classes: Class A, Class B and Class Y shares.
The Directors adopted a plan pursuant to Rule 18f-3 under the 1940 Act
("Multi-Class Plan") on behalf of each Fund. The Multi-Class Plan provides that
shares of each class of a Fund are identical, except for one or more expense
variables, certain related rights, exchange privileges, class designation and
sales loads assessed due to differing distribution methods.
In the event of a liquidation or dissolution of each of the Company or an
individual portfolio of the Company, shareholders of a particular portfolio
would be entitled to receive the assets available for distribution belonging to
such portfolio, and a proportionate distribution, based upon the relative net
asset values of the Company's respective portfolios, of any general assets not
belonging to any particular portfolio which are available for distribution.
Shareholders of a portfolio are entitled to participate in the net distributable
assets of the particular portfolio involved on liquidation, based on the number
of shares of the portfolio that are held by each shareholder.
Holders of all outstanding shares of a particular Fund will vote together
in the aggregate and not by class on all matters, except that only Class A
shares of a Fund will be entitled to vote on matters submitted to a vote of
shareholders pertaining to the Fund's Class A Plan, and only Class B shares will
be entitled to vote on matters submitted to a vote of shareholders pertaining to
the Fund's Class B Plan. Further, shareholders of all of the funds of the
Company, as well as those of any other fund now or hereafter offered by the
Company, will vote together in the aggregate and not separately on a portfolio-
by-portfolio basis, except as required by law or when permitted by the Board of
Directors. Rule 18f-2 under the 1940 Act provides that any matter required to
be submitted to the holders of the outstanding voting securities of an
investment company such as the Company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each portfolio affected by the matter. A portfolio is
affected by a matter unless it is clear that the interests of each portfolio in
the matter are substantially identical or that the matter does not affect any
interest of the portfolio. Under the Rule, the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a Fund only if approved by a majority of
the outstanding shares of such portfolio. However, the Rule also provides that
the ratification of the appointment of independent auditors, the approval of
principal underwriting contracts and the election of directors may be
effectively acted upon by shareholders of the Company voting together in the
aggregate without regard to a particular portfolio.
36
<PAGE>
Shares of the Company have noncumulative voting rights and, accordingly,
the holders of more than 50% of each of the Company's outstanding shares
(irrespective of class) may elect all of the directors. Shares have no
preemptive rights and only such conversion and exchange rights as the Board may
grant in its discretion. When issued for payment as described in the
Prospectus, shares will be fully paid and non-assessable by the Company.
Shareholder meetings to elect Directors will not be held unless and until
such time as required by law. At that time, the Directors then in office will
call a shareholders' meeting to elect Directors. Except as set forth above, the
Directors will continue to hold office and may appoint successor Directors.
Meetings of the shareholders of the Company shall be called by the Directors
upon the written request of shareholders owning at least 10% of the outstanding
shares entitled to vote.
OTHER INFORMATION
Counsel. The law firm of Dechert Price & Rhoads, 1775 Eye Street, N.W.,
Washington, D.C. 20006, has passed upon certain legal matters in connection with
the shares offered by the Funds and serves as counsel to the Company.
Independent Auditors. Ernst & Young LLP, 200 Clarendon Street, Boston, MA
02116, serves as the Company's independent auditors.
Control Persons and Principal Holders. As of the date of this SAI, the
Distributor may be deemed to control the Funds, because it is the sole record
and beneficial owner of 100% of each class of each Fund. As a result, the
Distributor will be able to affect the outcome of matters presented for a vote
of each Fund's shareholders.
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 the Funds' Prospectuses do not contain all the information
included in the Funds' registration statement filed with the SEC under the 1933
Act with respect to the securities offered hereby, certain portions of which
have been omitted pursuant to the rules and regulations of the SEC. The
registration statement, including the exhibits filed therewith, may be examined
at the offices of the SEC in Washington, D.C. Text-only versions of fund
documents can be viewed online or downloaded from the SEC at http:/www.sec.gov.
Statements contained herein and in the Funds' Prospectuses as to the
contents of any contract of other documents referred to are not necessarily
complete, and, in such instance, reference is made to the copy of such contract
or other documents filed as an exhibit to the Funds' registration statement,
each such statement being qualified in all respects by such reference.
37
<PAGE>
FINANCIAL STATEMENTS
The financial statements of the Funds, including the notes thereto, dated
June 30, 1999 have been audited by Ernst & Young LLP and are incorporated by
reference into this SAI from the Annual Report of the Funds dated as of June 30,
1999. Such financial statements are included or incorporated by reference
herein in reliance upon Ernst & Young LLP's report given upon the authority of
such firm as experts in accounting and auditing. The financial statement of the
Funds, including the notes thereto, dated December 31, 1999 are unaudited and
are incorporated by reference into this SAI from the Semi-Annual Report of the
Funds dated as of December 31, 1999.
38
<PAGE>
APPENDIX A
----------
- Rated Investments -
Corporate Bonds
---------------
From Moody's Investors Services, Inc. ("Moody's") description of its bond
ratings:
"Aaa":
Bonds that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
"Aa":
Bonds that are rated "Aa" are judged to be of high-quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as "high-grade" bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than in "Aaa" securities.
"A":
Bonds that are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
"Baa":
Bonds that are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
"Ba":
Bonds that are rated "Ba" are judged to have speculative elements;
their future cannot be considered well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
"B":
Bonds that are rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
"Caa":
Bonds that are rated "Caa" are of poor standing. These issues may be
in default or present elements of danger may exist with respect to
principal or interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated "Aa" through "B". The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.
A-1
<PAGE>
From Standard & Poor's Corporation ("S&P") description of its bond ratings:
"AAA":
Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
"AA":
Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from "AAA" issues by a small degree.
"A":
Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
"BBB":
Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.
"BB", "B" and "CCC":
Bonds rated "BB" and "B" are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligations. "BB" represents a lower
degree of speculation than "B" and "CCC" the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
To provide more detailed indications of credit quality, the "AA" or "A"
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Commercial Paper
----------------
The rating "Prime-1" is the highest commercial paper rating assigned by
Moody's. These issuers (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Instruments rated "Prime-2" are offered by issuers (or related supporting
institutions) which have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of "Prime-1" rated issues, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more suspectible to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted "A-1+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1."
A-2
<PAGE>
APPENDIX B
As stated in the Prospectus, the Underlying Funds may enter into certain
futures transactions and options for hedging purposes. The Underlying Funds may
also write covered call options, buy put options, buy call options and write
secured put options. Such transactions are described in this Appendix.
I. Interest Rate Futures Contracts
-------------------------------
Use of Interest Rate Futures Contracts. Bond prices are established in
-----------------------------------------
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Funds may use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes and
not for speculation. As described below, this would include the use of futures
contract sales to protect against expected increases in interest rates and
futures contract purchases to offset the impact of interest rate declines.
The Funds presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because
of the liquidity that is often available in the futures market, the protection
is more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Funds, through using futures contracts.
Description of Interest Rate Futures Contracts. An interest rate futures
----------------------------------------------
contract sale would create an obligation by a Fund, as seller, to deliver the
specific type of financial instrument called for in the contract at a specific
future time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until or at near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without making or taking of delivery of securities.
Closing out a futures contract sale is effected by the Fund's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of the sale
exceeds the price of the offsetting purchase, the Fund is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by the Fund entering
into a futures contract sale. If the offsetting sale price exceeds the purchase
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. The Funds would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. The Funds may trade in any interest rate futures contracts
for which there exists a public market, including, without limitation, the
foregoing instruments.
B-1
<PAGE>
Example of Futures Contract Sale. The Funds would engage in an interest
--------------------------------
rate futures contract sale to maintain the income advantage from continued
holding of a long-term bond while endeavoring to avoid part or all of the loss
in market value that would otherwise accompany a decline in long-term securities
prices. Assume that the market value of a certain security held by a particular
Fund tends to move in concert with the futures market prices of long-term United
States Treasury bonds ("Treasury Bonds"). The adviser wishes to fix the current
market value of the portfolio security until some point in the future. Assume
the portfolio security has a market value of 100, and the adviser believes that,
because of an anticipated rise in interest rates, the value will decline to 95.
The fund might enter into futures contract sales of Treasury bonds for an
equivalent of 98. If the market value of the portfolio security does indeed
decline from 100 to 95, the equivalent futures market price for the Treasury
bonds might also decline from 98 to 93.
In that case, the five point loss in the market value of the portfolio
security would be offset by the five point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example might
incur a loss of 2 points (which might be reduced by an offsetting transaction
prior to the settlement date). In each transaction, transaction expenses would
also be incurred.
Example of Futures Contract Purchase. The Funds would engage in an
------------------------------------
interest rate futures contract purchase when they are not fully invested in
long-term bonds but wish to defer for a time the purchase of long-term bonds in
light of the availability of advantageous interim investments, e.g., shorter
term securities whose yields are greater than those available on long-term
bonds. A Fund's basic motivation would be to maintain for a time the income
advantage from investing in the short-term securities; the Fund would be
endeavoring at the same time to eliminate the effect of all or part of an
expected increase in market price of the long-term bonds that the Fund may
purchase.
For example, assume that the market price of a long-term bond that the Fund
may purchase, currently yielding 10% , tends to move in concert with futures
market prices of Treasury bonds. The adviser wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example) when it may purchase the bond. Assume the long-term bond
has a market price of 100, and the adviser believes that, because of an
anticipated fall in interest rates, the price will have risen to 105 (and the
yield will have dropped to about 91/2%) in four months. The Fund might enter
into futures contracts purchases of Treasury bonds for an equivalent price of
98. At the same time, the Fund would assign a pool of investments in short-term
securities that are either maturing in four months or earmarked for sale in four
months, for purchase of the long-term bond at an assumed market price of 100.
Assume these short-term securities are yielding 15%. If the market price of the
long-term bond does indeed rise from 100 to 105, the equivalent futures market
price for Treasury bonds might also rise from 98 to 103. In that case, the 5
point increase in the price that the Fund pays for the long-term bond would be
offset by the 5 point gain realized by closing out the futures contract
purchase.
The adviser could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or below,
it is possible that the Fund would continue with its purchase program for long-
term bonds. The market price of available long-term bonds would have decreased.
The benefit of this price decrease, and thus yield increase, will be reduced by
the loss realized on closing out the futures contract purchase.
B-2
<PAGE>
If, however, short-term rates remained above available long-term rated, it
is possible that the Fund would discontinue its purchase program for long-term
bonds. The yield on short-term securities in the portfolio, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued
incremental income will be reduced by the loss realized on closing out the
futures contract purchase. In each transaction, expenses would also be
incurred.
II. Index Futures Contracts
-----------------------
General. A bond index assigns relative values of the bonds included in the
-------
index and the index fluctuates with changes in the market values of the bonds
included. The Chicago Board of Trade has designed a futures contract based on
the Bond Buyer Municipal Bond Index. This Index is composed of 40 term revenue
and general obligation bonds and its composition is updated regularly as new
bonds meeting the criteria of the Index are issued and existing bonds mature.
The Index is intended to provide an accurate indicator of trends and changes in
the municipal bond market. Each bond in the Index is independently priced by
six dealer-to-dealer municipal bond brokers daily. The 40 prices then are
averaged and multiplied by a coefficient. The coefficient is used to maintain
the continuity of the Index when its composition changes.
A stock index assigns relative values to the stocks included in the index
and the index fluctuates with changes in the market values of the stocks
included. Some stock index futures contracts are based on broad market indexed,
such as the Standard & Poor's 500 or the New York Stock Exchange Composite
Index. In contrast, certain exchanges offer futures contracts on narrower
market indexes, such as the Standard & Poor's 100 or indexes based on an
industry or market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated by the
Commodity Futures Trading Commission. Transactions on such exchanges are
cleared through a clearing corporation, which guarantees the performance of the
parties to each contract.
A Fund will sell index futures contracts in order to offset a decrease in
market value of its portfolio securities that might otherwise result from a
market decline. A Fund will purchase index futures contracts in anticipation of
purchases of securities. In a substantial majority of these transactions, a
Fund will purchase such securities upon termination of the long futures
position, but a long futures position may be terminated without a corresponding
purchase of securities.
In addition, a Fund may utilize index futures contracts in anticipation of
changes in the composition of its portfolio holdings. For example, in the event
that a Fund expects to narrow the range of industry groups represented in its
holdings it may, prior to making purchases of the actual securities, establish a
long futures position based on a more restricted index, such as an index
comprised of securities of a particular industry group. A Fund may also sell
futures contracts in connection with this strategy, in order to protect against
the possibility that the value of the securities to be sold as part of the
restructuring of the portfolio will decline prior to the time of sale.
Examples of Stock Index Futures Transactions. The following are examples
--------------------------------------------
of transactions in stock index futures (net of commissions and premiums, if
any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future Hedge Objective: Protect Against
Increasing Price
<TABLE>
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
-Day Hedge is Lifted-
Buy Equity Securities with Actual Cost = $65,000
</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>
Portfolio Futures
-----------------
<S> <C>
-Day Hedge is Placed-
Anticipate Selling $1,000,000 in Equity Securities
Sell 16 Index Futures at 125
Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Securities - Own Stock
Loss in Portfolio Value = $40,000
Buy 16 Index Futures at 120 with Value
= $960,000
Value of Futures = $960,000
Gain on Futures = $40,000
</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 Custodian an amount of cash or cash equivalents, known as initial
margin, based on the value of the contract. The nature of initial margin in
futures transactions is different from that of margin in securities transactions
in that futures contract margin does not involve the borrowing of funds by the
customer to finance the transactions. Rather, the initial margin is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract assuming all
contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying instruments fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
marking to the market. For example, when a particular Fund has purchased a
futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and
the Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where the Fund has purchased a
futures contract and the price of the futures contract has declined in response
to a decrease in the underlying instruments, the position would be less valuable
and the Fund would be required to make a variation margin payment to the broker.
At any time prior to expiration of the futures contract, the adviser may elect
to close the position by taking an opposite position, subject to the
availability of a secondary market, which will operate to terminate the Fund's
position in the futures contract. A final determination of variation margin is
then made, additional cash is required to be paid by or released to the Fund,
and the Fund realizes a loss or gain.
B-4
<PAGE>
IV. Risks of Transactions in Futures Contracts
------------------------------------------
There are several risks in connection with the use of futures by the
Underlying Funds as hedging devices. One risk arises because of the imperfect
correlation between movements in the price of futures and movements in the price
of the instruments which are the subject of the hedge. The price of futures may
move more than or less than the price of the instruments being hedged. If the
price of futures moves less than the price of the instruments which are the
subject of the hedge, the hedge will not be fully effective but, if the price of
the instruments being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price of
the instruments being hedged has moved in a favorable direction, this advantage
will be partially offset by the loss on the futures. If the price of the
futures moves more than the price of the hedged instruments, the Fund involved
will experience either a loss or gain on the futures which will not be
completely offset by movements in the price of the instruments which are the
subject of the hedge. To compensate for the imperfect correlation of movements
in the price of instruments being hedged and movements in the price of futures
contracts, the Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of instruments being hedged if the volatility over a
particular time period of the prices of such instruments has been greater than
the volatility over such time period of the futures, or if otherwise deemed to
be appropriate by the Adviser. Conversely, the Funds may buy or sell fewer
futures contracts if the volatility over a particular time period of the prices
of the instruments being hedged is less than the volatility over such time
period of the futures contract being used, or if otherwise deemed to be
appropriate by the Adviser. It is also possible that, when the Fund sells
futures to hedge its portfolio against a decline in the market, the market may
advance and the value of instruments held in the Fund may decline. If this
occurrs, the Fund would lose money on the futures and also experience a decline
in value in its portfolio securities.
Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest its cash at that time because
of concern as to possible further market decline or for other reasons, the Funds
will realize a loss on the futures contract that is not offset by a reduction in
the price of the securities that were to be purchased.
In instances involving the purchase of futures contracts by the Funds, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Custodian and/or
in a margin account with a broker to collateralize the position and thereby
insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced, thus producing distortions. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of general
market trends or interest rate movements by the adviser may still not result in
a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. When there is no liquid market, it may not
be possible to close a futures investment position, and in the event of adverse
price movements,
B-5
<PAGE>
the Funds would continue to be required to make daily cash payments of variation
margin. However, in the event futures contracts have been used to hedge
portfolio securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodities exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Funds is also subject to the adviser's
ability to predict correctly movements in the direction of the market. For
example, if a particular Fund has hedged against the possibility of a decline in
the market adversely affecting securities held by it and securities prices
increase instead, the Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. The Funds may have to
sell securities at a time when it may be disadvantageous to do so.
V. Option Futures Contracts
------------------------
The Underlying Funds may purchase and write options on the futures
contracts described above. A futures option gives the holder, in return for the
premium paid, the right to buy from (call) or sell to (put) the writer of the
option a futures contract at a specified price at any time during the period of
the option. Upon exercise, the writer of, the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer,
of an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. A Fund will be required to deposit initial margin and variation
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. Net option
premiums received will be included as initial margin deposits.
Investments in futures options involve some of the same considerations that
are involved in connection with investments in future contracts (for example,
the existence of a liquid secondary market). In addition, the purchase or sale
of an option also entails the risk that changes in the value of the underlying
futures contract will not correspond to changes in the value of the option
purchased. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the securities
being hedged, an option may or may not be less risky than ownership of the
futures contract or such securities. In general, the market prices of options
can be expected to be more volatile than the market prices on underlying futures
contract. Compared to the purchase or sale of futures contracts, however, the
purchase of call or put options on futures contracts may frequently involve less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
VI. Currency Transactions
---------------------
The Fund may engage in currency transactions in order to hedge the value of
portfolio holdings denominated in particular currencies against fluctuations in
relative value. Currency transactions include forward
B-6
<PAGE>
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 the obligations
which have received) a credit rating of A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from a NRSRO or are determined
to be of equivalent credit quality by the Advisor.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure to an
extent greater after netting all transactions intended wholly or partially to
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging as described below.
The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar.
Proxy hedging entails entering into a commitment or option to sell a currency
whose changes in value are generally considered to be correlated to a currency
or currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. U.S. dollars. The amount of
the commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Advisor considers
that the Austrian schilling is correlated to the German mark (the "D-mark"), the
Fund holds securities denominated in shillings and the Advisor believes that the
value of the schillings will decline against the U.S. U.S. dollar, the Advisor
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the
Fund if the currency being hedged fluctuates in value to a degree or in a
direction that is not anticipated. Further, there is the risk that the
perceived correlation between various currencies may not be present or may not
be present during the particular time that the Fund is engaging in proxy
hedging. If a Fund enters into a currency hedging transaction, the Fund will
comply with the asset segregation requirements. Under such requirements, the
Fund will segregate liquid, high grade assets with the custodian to the extent
the Fund's obligations are not otherwise "covered" through ownership of the
underlying currency.
Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Buyers and sellers of currency futures are subject to the same risks
that apply to the use of futures generally. Further, settlement of a currency
futures contract for the purchase of most currencies must occur at a bank based
in the issuing nation. Trading options on currency futures is relatively new,
and the ability to establish and close to positions on such options is subject
to the maintenance of a liquid market which may not always be available.
Currency exchange rates may fluctuate based on factors extrinsic to that
country's economy.
B-7
<PAGE>
VII. Options.
-------
The Underlying Funds may write covered call options, buy put options, buy
call options and write secured put options. Such options may relate to
particular securities and may or may not be listed on a national securities
exchange and issued by the Options Clearing Corporation. Options trading is a
highly specialized activity which entails greater than ordinary investment risk.
Options on particular securities may be more volatile than the underlying
securities, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
securities themselves. For risks associated with options on foreign currencies,
see currencies transactions above.
A call option for a particular security gives the purchaser of the option
the right to buy, and the writer of the option the obligation to sell, the
underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is in consideration for undertaking the obligations
under the option contract. A put option for a particular security gives the
purchaser the right to sell, and the writer of the option the obligation to buy,
the underlying security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security.
The writer of an option that wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." The cost of such a closing purchase plus transaction costs may be
greater than the premium received upon the original option, in which event the
relevant Underlying Fund will have incurred a loss in the transaction. There is
no guarantee in any instance that either a closing purchase or a closing sale
transaction can be effected.
Effecting a closing transaction in the case of a written call option will
permit the Underlying Funds to write another call option on the underlying
security with either a different exercise price or expiration date or both, or
in the case of a written put option, will permit the Funds to write another put
option to the extent that the exercise price thereof is secured by deposited
cash or short-term securities. Also, effecting a closing transaction will
permit the cash or proceeds from the concurrent sale of any securities subject
to the option to be used for other Underlying Fund investments. If an
Underlying Fund desires to sell a particular security from its portfolio on
which it has written a call option, it will effect a closing transaction prior
to or concurrent with the sale of the security.
The Underlying Funds may write options in connection with buy-and-write
transactions; that is, the Underlying Funds may purchase a security and then
write a call option against that security. The exercise price of the call the
Underlying Funds determine to write will depend upon the expected price movement
of the underlying security. The exercise price of a call option may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option is written.
Buy-and-write transactions using in-the-money call options may be used when it
is expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when it is expected that the premiums
received from writing the call option plus the appreciation in the market price
of the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call options
are exercised in such transactions, the maximum gain to the relevant Underlying
Fund will be the premium received by it for writing the option, adjusted upwards
or downwards by the difference between the Fund's purchase price of the security
and the exercise price. If the options are not exercised and the price of the
underlying security declines, the amount of such decline will be offset in part,
or entirely, by the premium received.
In the case of writing a call option on a security, the option is "covered"
if an Underlying Fund owns the security underlying the call or has an absolute
and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or liquid
securities in such amount as are earmarked on the books of the Underlying Fund
or the Underlying Fund's custodian upon conversion or exchange
B-8
<PAGE>
of other securities held by it. For a call option on an index, the option is
covered if an Underlying Fund maintains with its custodian cash or liquid
securities equal to the contract value. A call option is also covered if an
Underlying Fund holds a call on the same security or index as the call written
where the exercise price of the call held is (i) equal to or less than the
exercise price of the call written, or (ii) greater than the exercise price of
the call written provided the difference in cash or liquid securities is
earmarked on the books of the Underlying Fund or the Underlying Fund's
custodian. Each of the Underlying Funds will limit its investment in uncovered
call options purchased or written by the Fund to 33 1/3% of the Fund's total
assets. The Underlying Funds will write put options only if they are "secured"
by cash or liquid securities earmarked on the books of the Underlying Fund or
the Underlying Fund's custodian in an amount not less than the exercise price of
the option at all times during the option period.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the relevant Underlying Fund's gain will be
limited to the premium received. If the market price of the underlying security
declines or otherwise is below the exercise price, the Underlying Fund may elect
to close the position or take delivery of the security at the exercise price and
the Fund's return will be the premium received from the put option minus the
amount by which the market price of the security is below the exercise price.
Each of the Underlying Funds may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in this way, an
Underlying Fund will reduce any profit it might otherwise have realized in the
underlying security by the amount of the premium paid for the put option and by
transaction costs. Each of the Underlying Funds may purchase call options to
hedge against an increase in the price of securities that it anticipates
purchasing in the future. The premium paid for the call option plus any
transaction costs will reduce the benefit, if any, realized by the relevant
Underlying Fund upon exercise of the option, and, unless the price of the
underlying security rises sufficiently, the option may expire worthless to the
Fund.
When an Underlying Fund purchases an option, the premium paid by it is
recorded as an asset of the Fund. When the Underlying Fund writes an option, an
amount equal to the net premium (the premium less the commission) received by
the Fund is included in the liability section of the Fund's statement of assets
and liabilities as a deferred credit. The amount of this asset or deferred
credit will be subsequently marked to market to reflect the current value of the
option purchased or written. The current value of the traded option is the last
sale price or, in the absence of a sale, the average of the closing bid and
asked prices. If an option purchased by the Underlying Fund expires unexercised
the Fund realizes a loss equal to the premium paid. If the Underlying Fund
enters into a closing sale transaction on an option purchased by it, the
Underlying Fund will realize a gain if the premium received by the Fund on the
closing transaction is more than the premium paid to purchase the option, or a
loss if it is less. If an option written by the Underlying Fund expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated. If an option written
by the Underlying Fund is exercised, the proceeds of the sale will be increased
by the net premium originally received and the Fund will realize a gain or loss.
There are several risks associated with transactions in options on
securities and indices. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. An option writer, unable to effect a closing purchase transaction,
will not be able to sell the underlying security (in the case of a covered call
option) or liquidate the earmarked securities (in the case of a secured put
option) until the option expires or the optioned security is delivered upon
exercise with the result that the writer in such circumstances will be subject
to the risk of market decline or appreciation in the security during such
period.
There is no assurance that an Underlying Fund will be able to close an
unlisted option position. Furthermore, unlisted options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to do so in
connection with the purchase or sale of options.
B-9
<PAGE>
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 times be adequate
to handle current trading volume; or one or more Exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that Exchange (or in that class or series of options)
would cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms.
Currency transactions, including options on currencies and currency
futures, are subject to risks different from those of other portfolio
transactions. Because currency control is of great importance to the issuing
governments and influences economic planning and policy, purchases and sales of
currency and related instruments can be negatively affected by government
exchange controls, blockages, and manipulations or exchange restrictions imposed
by governments. These can result in losses to the Underlying Fund if it is
unable to deliver or receive currency or funds in settlement of obligations and
could also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as the incurring of transaction costs. Buyers
and sellers of currency futures are subject to the same risks that apply to the
use of futures generally. Further, settlement of a currency futures contract
for the purchase of most currencies must occur at a bank based in the issuing
nation. Trading options on currency futures is relatively new, and the ability
to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to the issuing country's
economy.
VIII. Other Matters
-------------
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
B-10
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
--------
(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.
(5) 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.
(6) 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.
(7) 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.
(8) 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.
(9) 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.
<PAGE>
(10) 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.
(11) 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.
(12) 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.
(13) Articles Supplementary, dated August 17, 1999 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.
(14) Articles Supplementary, dated November 15, 1999, 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.
(15) Articles Supplementary, dated March 1, 2000, are incorporated by
reference to Post-Effective Amendment No. 43 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
March 21, 2000.
(16) Articles Supplementary, dated April 20, 2000, are incorporated by
reference to Post-Effective Amendment No. 46 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
May 22, 2000.
(17) Articles Supplementary, dated May 18, 2000, are incorporated by
reference to Post-Effective Amendment No. 46 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
May 22, 2000.
(18) Articles Supplementary, dated June 7, 2000, are incorporated
herein by reference to Post-Effective Amendment No. 47 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on June 16, 2000.
(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, Munder NetNet Fund, Munder Real Estate Equity
2
<PAGE>
Investment Fund, Munder Small-Cap Value Fund, Munder
International Bond Fund, Munder Money Market Fund, Munder All-
Season Conservative Fund, Munder All-Season Moderate Fund and
Munder All-Season Aggressive Fund is incorporated herein by
reference to Exhibit 5(a) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on August 28, 1998.
(2) Notice, dated May 4, 1999, to Investment Advisory Agreement
between Registrant and Munder Capital Management with respect to
the Munder Future Technology Fund is 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 incorporated by reference
to Post-Effective Amendment No. 43 to Registrant's Registration
Statement on Form N-1A filed with the Commission on March 21,
2000.
(4) Investment Sub-Advisory Agreement, dated April 6, 2000, among
Registrant, Munder Capital Management and Framlington Overseas
Management Investment Limited with respect to the Munder
International NetNet Fund is incorporated herein be reference to
Post-Effective Amendment No. 46 filed with the Commission on May
22, 2000.
(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
International Bond Fund is incorporated herein by reference to
Exhibit 6(c) to Post-Effective Amendment No. 16 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
June 25, 1996.
(3) 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.
(4) 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
3
<PAGE>
No. 35 to Registrant's Registration Statement on Form N-1A filed
with the Commission on August 28, 1998.
(5) 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.
(6) 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.
(7) 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.
(8) Distribution Agreement between Registrant and Funds Distributor,
Inc. with respect to the Munder International NetNet Fund is
incorporated by reference to Post-Effective Amendment No. 43 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on March 21, 2000.
(9) Notice, dated February 14, 2000, to the Underwriting Agreement,
between Registrant and Funds Distributor, Inc. with respect to
Munder Focus Growth Fund is incorporated by reference to Post-
Effective Amendment No. 43 to Registrant's Registration Statement
on Form N-1A filed with the Commission on March 21, 2000.
(10) Notice, dated February 14, 2000, to the Distribution Agreement,
between Registrant and Funds Distributor, Inc. with respect to
Munder Growth Opportunities Fund incorporated by reference to
Post-Effective Amendment No. 43 to Registrant's Registration
Statement on Form N-1A filed with the Commission on March 21,
2000.
(11) Notice, dated November 11, 1999, to the Distribution Agreement,
between Registrant and Funds Distributor, Inc. with respect to
Munder Future Technology Fund incorporated by reference to Post-
Effective Amendment No. 43 to Registrant's Registration Statement
on Form N-1A filed with the Commission on March 21, 2000.
(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
Money Market Fund, Munder Multi-Season Growth Fund, Munder NetNet
Fund, Munder Real Estate Equity Investment Fund and Munder Small-
Cap 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
Money Market Fund, Munder Multi-Season Growth Fund, Munder NetNet
Fund, Munder Real Estate Equity Investment Fund and Munder Small-
Cap Value 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 incorporated by reference to Post-
Effective Amendment No. 43 to Registrant's Registration Statement
on Form N-1A filed with the Commission on March 21, 2000.
(6) Transfer Agency and Registrar Agreement, dated June 19, 1995,
between Registrant and PFPC Inc. (formerly 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 May 6, 1996, to Transfer Agency and Registrar
Agreement between Registrant and PFPC Inc. (formerly 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.
(8) Notice, dated August 6, 1996, to Transfer Agency and Registrar
Agreement between Registrant and PFPC Inc. (formerly 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
Munder 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.
(9) Form of Amendment to the Transfer Agency and Registrar Agreement
between Registrant and PFPC Inc. (formerly 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.
(10) Form of Notice to the Transfer Agency and Registrar Agreement
between Registrant and PFPC Inc. (formerly 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.
(11) Form of Amendment to the Transfer Agency and Registrar Agreement
between Registrant and PFPC Inc. (formerly 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.
6
<PAGE>
(12) Notice, dated February 24, 1998, to the Transfer Agency and
Registrar Agreement between Registrant and PFPC Inc. (formerly
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.
(13) Amendment, dated January 2, 1997, to the Transfer Agency and
Registrar Agreement between the Registrant and PFPC Inc.
(formerly 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.
(14) Amendment, dated March 16, 1999, to the Transfer Agency and
Registrar Agreement between the Registrant and PFPC Inc.
(formerly 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.
(15) Amendment, dated March 26, 1999, to the Transfer Agency and
Registrar Agreement between the Registrant and PFPC Inc.
(formerly 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.
(16) Notice, dated May 4, 1999, to Transfer Agency and Registrar
Agreement between Registrant and PFPC Inc. (formerly 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.
(17) Amendment, dated October 1, 1999, to the Transfer Agency and
Registrar Agreement between the Registrant and PFPC Inc.
(formerly 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.
(18) Notice, dated February 14, 2000 to Transfer Agency and Registrar
Agreement between Registrant and PFPC Inc. (formerly First Data
Investor Services Group, Inc.) with respect to the Munder
International NetNet Fund is incorporated by reference to Post-
Effective Amendment No. 46 to Registrant's Registration Statement
on Form N-1A filed with the Commission on May 22, 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 Munder
International NetNet Fund is incorporated herein by reference to
Post-Effective Amendment No. 46 to Registrant's Registration
Statement on Form N-1A filed with the Commission on May 22, 2000.
(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 is incorporated herein by reference to
Post-Effective Amendment No. 46 to Registrant's Registration
Statement on Form N-1A filed with the Commission on May 22, 2000.
(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
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.
(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 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.
9
<PAGE>
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 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 and Distribution Plan, dated August
3, 1999, 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 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.
(20) 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 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 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.
10
<PAGE>
(22) 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.
(23) 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.
(24) 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.
(25) 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.
(26) 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.
(27) 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.
(28) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder 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.
(29) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Growth Opportunities 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.
(30) 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.
(31) Amended and Restated Service and Distribution Plan, dated August
3, 1999, for the Munder Growth Opportunities Fund Class C Shares
is incorporated herein by
11
<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.
(32) Service Plan for the Munder Growth Opportunities Fund Class K
Shares is incorporated herein by reference to Exhibit 15(nn) to
Post-Effective Amendment No. 35 to Registrant's Registration
Statement on Form N-1A filed with the Commission on August 28,
1998.
(33) 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.
(34) 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.
(35) 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.
(36) Amended and Restated Service Plan, dated August 3, 1999, for the
Munder Future Technology 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.
(37) 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.
(38) Service and Distribution Plan 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.
(39) Service Plan for the Munder International NetNet Fund Class A
Shares is incorporated by reference to Post-Effective Amendment
No. 43 to Registrant's Registration Statement on Form N-1A filed
with the Commission on March 21, 2000.
(40) Service and Distribution Plan for the Munder International NetNet
Fund Class B Shares is incorporated by reference to Post-
Effective Amendment No. 43 to Registrant's Registration Statement
on Form N-1A filed with the Commission on March 21, 2000.
(41) Service and Distribution Plan for the Munder International NetNet
Fund Class II Shares is incorporated by reference to Post-
Effective Amendment No. 43 to
12
<PAGE>
Registrant's Registration Statement on Form N-1A filed with the
Commission on March 21, 2000.
(42) Service and Distribution Plan for the Munder Focus Growth Fund
(formerly Munder Equity Selection Fund) Class II Shares is
incorporated by reference to Post-Effective Amendment No. 43 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on March 21, 2000.
(43) Service and Distribution Plan for the Munder Growth Opportunities
Fund Class II Shares is incorporated by reference to Post-
Effective Amendment No. 43 to Registrant's Registration Statement
on Form N-1A filed with the Commission on March 21, 2000.
(44) Amended and Restated Service Plan for Class K Shares is
incorporated herein by reference to Post-Effective Amendment No.
29 to Registrant's Registration Statement on Form N-1A filed with
the Commission on August 29, 1997.
(n) Seventh Amended and Restated Multi-Class Plan is incorporated herein
by reference to Post-Effective Amendment No. 46 to Registrant's
Registration Statement on Form N-1A filed with the Commission on May
22, 2000.
(p) (1) Sixth Amended and Restated Code of Ethics is incorporated herein
by reference to Post-Effective Amendment No. 46 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
May 22, 2000.
(2) Code of Ethics of Funds Distributor, Inc. is incorporated by
reference to Post-Effective Amendment No. 43 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
March 21, 2000.
(3) Code of Ethics of Munder Capital Management is incorporated by
reference to Post-Effective Amendment No. 43 to Registrant's
Registration Statement on Form N-1A filed with the Commission on
March 21, 2000.
(4) Code of Ethics of Framlington Overseas Management Limited is
incorporated by reference to Post-Effective Amendment No. 45 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on April 5, 2000.
Item 24. Persons Controlled by or under Common Control with Registrant.
--------------------------------------------------------------
Not Applicable.
13
<PAGE>
Item 25. Indemnification
---------------
Article VII, Section 7.6 of the Registrant's Articles of Incorporation
("Section 7.6") provides that the Registrant, including its successors
and assigns, shall indemnify its directors and officers and make
advance payment of related expenses to the fullest extent permitted,
and in accordance with the procedures required, by the General Laws of
the State of Maryland and the Investment Company Act of 1940. Such
indemnification shall be in addition to any other right or claim to
which any director, officer, employee or agent may otherwise be
entitled. In addition, Article VI of the Registrant's By-laws provides
that the Registrant shall indemnify its employees and/or agents in any
manner as shall be authorized by the Board of Directors and within
such limits as permitted by applicable law. The Board of Directors may
take such action as is necessary to carry out these indemnification
provisions and is expressly empowered to adopt, approve and amend from
time to time such resolutions or contracts implementing such
provisions or such further indemnification arrangements as permitted
by law. The Registrant may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of
the Registrant or is serving at the request of the Registrant as a
director, officer, partner, trustee, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or
other enterprise or employee benefit plan, against any liability
asserted against and incurred by such person in any such capacity or
arising out of such person's position, whether or not the Registrant
would have had the power to indemnify against such liability. The
rights provided by Section 7.6 shall be enforceable against the
Registrant by such person who shall be presumed to have relied upon
such rights in serving or continuing to serve in the capacities
indicated therein.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors,
officers and controlling persons of the Registrant by the Registrant
pursuant to the Fund's Articles of Incorporation, its By-Laws or
otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by directors, officers or controlling persons of the
Registrant in connection with the successful defense of any act, suit
or proceeding) is asserted by such directors, officers or controlling
persons in connection with shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issues.
Item 26. Business and Other Connections of Investment Advisor
----------------------------------------------------
Munder Capital Management
Name Position with Advisor
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
14
<PAGE>
Name Position with Advisor
Clark Durant Vice President and President of Munder
Charitable Gift Fund
Elyse G. Essick Vice President and Director of
Communications and Client Services
Sharon E. Fayolle Vice President and Director of Cash
Management
Otto G. Hinzmann Vice President and Director of Equity
Portfolio Management
Anne K. Kennedy Vice President and Director of
Portfolio Management
Ann F. Putallaz Vice President and Director of
Retirement Services Group
Peter G. Root Vice President and Chief Investment
Officer of Fixed Income
James C. Robinson Chief Executive Officer
Enrique Chang Chief Investment Officer of Equities
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
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.
J.P. Morgan Institutional Funds
J.P. 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>
St. Clair Funds, Inc.
The Skyline Funds
TD Waterhouse Family of Funds, Inc.
TD Waterhouse Trust.
(b) The following is a list of the executive officers, directors and
partners of Funds Distributor, Inc.
Director, President and Chief Executive -Marie E. Connolly
Officer
Director and Executive Vice President -George A. Rio
Executive Vice President and Chief -Gary S. MacDonald
Administrative Officer
Executive Vice President -William S. Nichols
Executive Vice President -Charles W. Carr
Senior Vice President, General Counsel, -Margaret W. Chambers
Chief Compliance Officer, Secretary and
Clerk
Senior Vice President and Treasurer -Joseph F. Tower, III
Senior Vice President and Chief -William J. Stetter
Financial Officer
Senior Vice President -Mary A. Nelson
Senior Vice President -Eric A. Liik
Senior Vice President -John Lehning
Senior Vice President -John Prosperi
Chairman and Director -William J. Nutt
(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) PFPC Inc. (formerly 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.
Item 30. Undertakings
------------
Not Applicable.
17
<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. 48 to the Registration Statement meets the
requirements for effectiveness pursuant to Rule 485(b) of the Securities Act of
1933, as amended and the Registrant has duly caused this Post-Effective
Amendment No. 48 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 29th day of June, 2000.
THE MUNDER FUNDS, INC.
By: *_________________________
James Robinson, 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:
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
*___________________ Director June 29, 2000
Charles W. Elliott
*___________________ Director June 29, 2000
Joseph E. Champagne
*___________________ Director June 29, 2000
Thomas B. Bender
*___________________ Director June 29, 2000
Thomas D. Eckert
*___________________ Director June 29, 2000
John Rakolta, Jr.
*___________________ Director June 29, 2000
David J. Brophy
*___________________ President June 29, 2000
James Robinson
</TABLE>
*By: /s/ Francine S. Hayes
----------------------
Francine S. Hayes
as Attorney-in-Fact
18
