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SECURITIES AND EXCHANGE COMMISSION
MANAGEMENT INVESTMENT COMPANIES
BIRMINGHAM, MICHIGAN 48009
(Name and Address of Agent for Service) | Copy to: | |
STEPHEN SHENKENBERG | JANE KANTER | |
480 PIERCE STREET | DECHERT LLP | |
BIRMINGHAM, MICHIGAN 48009 | 1775 I STREET, N.W. | |
WASHINGTON, D.C. 20006 |
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Table of Contents
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Dear Munder Fund Shareholders:
Both the stock and bond markets posted positive performance for the year ended June 30, 2005. The S&P 500® Index posted a 6.32% return for the year, while the Lehman Brothers Aggregate Bond Index generated a 6.80% return.
In the stock market, sector performance was generally positive across the board, with nine of the ten S&P 500® sectors generating positive returns for the year. The greatest strength came from the energy and utilities sectors, each of which earned a total return of over 35%. The total return for the S&P 500® health care sector was approximately 3%. Information technology was the only S&P 500® sector to post a negative return. Across the broad market, smaller-cap stocks significantly outperformed large-cap stocks. Compared to the 6.32% return for the large-cap S&P 500® Index, the S&P MidCap 400® Index posted a 14.03% return, while the S&P SmallCap 600® Index had a 13.45% return.
The Munder family of mutual funds offers a wide variety of equity, fixed income and money market mutual funds, which can be used to tailor a portfolio to a shareholder’s specific investment needs. Each Fund adheres to a clearly defined investment discipline representing a particular segment of the stock or bond market.
On January 26, 2005, Munder Capital assumed responsibility for day-to-day management of the Munder Healthcare Fund, which had previously been sub-advised by Framlington Overseas Investment Management Limited, an affiliate of Munder Capital. On the following pages, you will find information and commentary on the relative and absolute performance of the Munder Healthcare Fund, including information on the strategic changes that were made as a result of the change in management. If you have any questions about your current investments or any of The Munder Funds, please call your financial advisor. You may also contact the Funds at 1-800-4MUNDER (468-6337) or through our website at www.munder.com. Thank you for your confidence in The Munder Funds. We value the opportunity to work with you toward meeting your investment goals.
Very Truly Yours, | |
![]() | |
Enrique Chang | |
President and Principal Executive Officer, The Munder Funds | |
President and Chief Investment Officer, Munder Capital Management |
Contents
ii | Management’s Discussion of Fund Performance | |
vi | Hypothetical and Total Returns | |
x | Shareholder Fee Example | |
1 | Portfolio of Investments | |
6 | Statement of Assets and Liabilities | |
8 | Statement of Operations | |
9 | Statements of Changes in Net Assets | |
10 | Statements of Changes in Net Assets — Capital Stock Activity | |
12 | Financial Highlights | |
17 | Notes to Financial Statements | |
35 | Report of Independent Registered Public Accounting Firm |
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Fund Performance
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please visit www.munder.com.
The Fund concentrates its investments in health care-related securities and is therefore subject to higher market risk and price volatility than funds with more broadly diversified investments. Investors should also note that the Fund can invest all of its assets in foreign securities, and such investments involve additional risks due to currency fluctuations, economic and political conditions, and differences in financial reporting standards.
Fund holdings are subject to change and percentages shown below are based on net assets as of June 30, 2005. The following pie chart illustrates the allocation of the Fund’s investments by sub-industry. A complete list of holdings as of June 30, 2005 is contained in the Portfolio of Investments included in this report. The most currently available data regarding portfolio holdings can be found on our website, www.munder.com. You may also obtain currently available portfolio holdings data by calling (800) 438-5789.
SUB-INDUSTRY ALLOCATION
The performance data contained in the following commentary is based on Class Y Shares of the Fund for the year ended June 30, 2005. Performance of the other classes of shares will differ. The returns for the Fund reflect the reinvestment of dividends and capital gains, if any, and are reported after the deduction of all expenses. These returns do not, however, reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon redemption of Fund shares.
Prior to January 26, 2005, the Fund was sub-advised by Framlington Overseas Investment Management, Ltd., which was paid a fee for its services.
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MUNDER HEALTHCARE FUND
Portfolio Management Team: Suresh Rajagopal and Thomas Wald
The Fund generated a 2.66% return for the year ended June 30, compared to the 7.44% return for the Goldman Sachs Sector Index — Health Care, the 3.36% return for the Russell 2000 Healthcare Index and the 4.54% median return for the Lipper universe of health/biotechnology funds.
On January 26, 2005, Munder Capital Management assumed full responsibility for the day-to-day management of the Munder Healthcare Fund, which had been sub-advised by Framlington Overseas Investment Management Limited. As a result, several strategic changes were made to the Fund in February and March of 2005:
• | Holdings were reduced from approximately 130 to about 65 | |
• | Market capitalization was increased, with a reduction in the number of early-stage companies and a greater emphasis on larger-cap stocks | |
• | Biotechnology representation was scaled back to increase diversification | |
• | Positions in managed care, hospital management and pharmacy benefit management were increased, with the goal of increasing average earnings and cash flow growth |
For the nine month period ended March 30, 2005, the Fund’s sector benchmark was the Russell 2000 Healthcare Index. Reflecting an emphasis on companies with earnings and cash flow growth, the Fund’s sector benchmark was changed to the Goldman Sachs Sector Index — Health Care in April.
For the nine months ended March 31, 2005, the Fund earned a return of -3.00%, relative to the -5.00% return for the Russell 2000 Healthcare Index. Fund returns for the six months ended December 31, 2004 were relatively weak. This was due largely to the Fund’s underweight in health care services stocks compared to its Russell 2000 Healthcare benchmark, as well as a few disappointments in individual stocks, including Dyax Corp. and OraSure Technologies Inc. Both of these stocks have been eliminated from the Fund.
After lagging its sector benchmark during the third and fourth quarters of 2004, the Fund showed relative strength during the first quarter of 2005, with a return of - -5.25% relative to the -9.62% return for the Russell 2000 Healthcare benchmark. Genentech, Inc. (5.6% of the Fund), a biotechnology company, was the strongest contributor to the Fund’s relative performance. Other Fund holdings that made significant contributions to relative returns included UnitedHealth Group, Inc. (5.3% of the Fund) and WellPoint, Inc. (3.3% of the Fund), both of which raised earnings guidance during the quarter, as well as HCA Inc. (1.0% of the Fund) and Johnson & Johnson (5.3% of the Fund). UnitedHealth Group provides health care coverage and related services to employers, employee groups, insurers, health maintenance organization (HMO) operators and other providers. WellPoint is a provider of health benefit programs and services, including group life and disability insurance benefits,
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pharmacy benefit management and dental and vision benefits. The company also offers services for employer self-funded plans, including claims processing and actuarial services. HCA operates hospitals, outpatient surgery centers and diagnostic facilities. Johnson & Johnson manufactures and markets a range of health care products, including pharmaceuticals, medical devices and consumer products.
Positive factors for the first quarter more than offset the negative impact of the sharp decline in Biogen Idec Inc.’s (0.8% of the Fund) stock price. The company was forced to pull its multiple sclerosis drug from the market because of safety concerns. Two early-stage biotechnology companies, Axonyx, Inc. and Inspire Pharmaceuticals, Inc. also had weak relative returns. Both companies met with clinical failures. The entire position in Inspire Pharmaceuticals and the common stock of Axonyx were sold from the Fund; however, the Fund continues to hold warrants to purchase shares of Axonyx (0.0% of the Fund).
The Fund had a return of 5.84% for the second quarter of 2005, compared to the 6.34% return for the Goldman Sachs Sector Index — Health Care, the Fund’s new sector benchmark. The Fund’s overweighted positions in Roche Holding Ltd. (1.0% of the Fund), Express Scripts (1.5% of the Fund), Inc. and Henry Schein, Inc. (0.8% of the Fund) contributed positively to relative and absolute returns. Roche Holding is a research-based health care group active in the discovery, development and manufacturing of pharmaceuticals and diagnostic systems. Express Scripts provides pharmacy benefit management and administration services. Henry Schein distributes health care products and services, including X-ray products, dental chairs, generic pharmaceuticals, practice management software and software focused on patient treatment systems and billing. Overweighted positions in three biotechnology stocks, Genentech, Inc. (5.6% of the Fund), Gilead Sciences, Inc. (1.3% of the Fund) and Invitrogen Corporation (0.7% of the Fund) also boosted relative returns for the quarter. Offsetting these positive contributions to relative returns was disappointing performance from Martek Biosciences Corp. The company issued revised 2005 earnings guidance that was lower than anticipated. This stock was eliminated from the Fund. An underweight in Eli Lilly and Company (4.9% of the Fund), a pharmaceutical company, also detracted from relative returns.
Index and Lipper performance information was furnished by sources deemed reliable and is believed to be accurate, however, no warranty or representation is made as to the accuracy thereof and the information is subject to correction. The Goldman Sachs Sector Index — Health Care (GSSITM Health Care Index) is a modified-market cap weighted index designed to measure the performance of companies in the health care sector. The Russell 2000 Healthcare Index is an unmanaged index that measures the performance of healthcare sector companies in the bottom 2,000 companies (based on market capitalization) in the Russell 3000 Index, an index representing approximately 98% of the U.S. equity market. The Standard & Poor’s MidCap 400® Index is a capitalization-weighted index that measures the performance of the mid-cap sector of the U.S. stock market. The Standard & Poor’s SmallCap 600® Index is a
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capitalization-weighted index that measures the performance of the small-cap sector of the U.S. stock market. The Lehman Brothers Aggregate Bond Index is an unmanaged index designed to measure the U.S. investment-grade, fixed-rate bond market, which includes publicly issued, fixed-rate, non-convertible, dollar-denominated, taxable U.S. government, corporate, mortgage pass-through and asset-backed securities rated investment grade or higher. You cannot invest directly in an index, securities in the Fund will not match those in the index, and performance of the Fund will differ. Although reinvestment of dividend and interest payments is assumed, no expenses are netted against an index’s returns.
The Lipper universe of health/biotechnology funds represents the universe of existing mutual funds that are categorized by Lipper Analytical Services, Inc. under the same investment objective as the Fund. You cannot invest directly in a Lipper universe.
Sector funds such as these tend to be more volatile than funds that diversify across many sectors and companies.
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The following graph represents the performance of the Munder Healthcare Fund (the “Fund”) since the inception of its oldest class of shares, Class Y Shares. The table following the line graph sets forth performance information and the growth of a hypothetical $10,000 investment for each class of shares offered by the Fund. Differing sales charges and expenses of classes not shown in the line graph will have an effect on performance. In addition, the information contained in the graph and table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance is no guarantee of future results. Investment return and principal value of any investment will fluctuate so that an investor’s shares, upon redemption, may be worth more or less than original cost. Average annual total returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of dividends.
Munder Healthcare Fund
CLASS Y SHARE HYPOTHETICAL | |
A Hypothetical Illustration of a $10,000 Initial Investment |
![Graph](https://capedge.com/proxy/N-CSR/0000950124-05-005318/k98116ck9649501.gif)
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GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION | ||||||||||||||||||||||||
Lipper | ||||||||||||||||||||||||
Goldman | Health/ | |||||||||||||||||||||||
MSCI | S&P | Sachs | Biotechnology | |||||||||||||||||||||
Class and | With | Without | World | 500® | Sector Index - | Funds | ||||||||||||||||||
Inception Date | Load | Load | Index# | Index# | Health Care# | Median** | ||||||||||||||||||
CLASS A 2/14/97 | $ | 20,600 | * | $ | 21,803 | $ | 16,125 | $ | 17,254 | $ | 23,368 | $ | 24,850 | |||||||||||
CLASS B 1/31/97 | N/A | 21,004 | 16,125 | 17,254 | 23,368 | 24,850 | ||||||||||||||||||
CLASS C 1/13/97 | N/A | 22,236 | 16,322 | 18,325 | 25,302 | 26,217 | ||||||||||||||||||
CLASS K 4/1/97 | N/A | 26,040 | 16,257 | 17,858 | 24,713 | 26,301 | ||||||||||||||||||
CLASS R 7/29/04 | N/A | 11,508 | 11,429 | 10,994 | 11,461 | 11,083 | ||||||||||||||||||
CLASS Y 12/31/96 | N/A | 25,139 | 16,322 | 18,325 | 25,302 | 26,217 |
AVERAGE ANNUAL TOTAL RETURNS | ||||||||||||||||||||||||
One | One | Five | Five | Since | Since | |||||||||||||||||||
Class and | Year | Year | Years | Years | Inception | Inception | ||||||||||||||||||
Inception Date | w/load | w/out load | w/load | w/out load | w/load | w/out load | ||||||||||||||||||
CLASS A 2/14/97 | (3.22)% | * | 2.41% | (4.04)% | * | (2.95)% | 9.01% | * | 9.75% | |||||||||||||||
CLASS B 1/31/97 | (3.36)% | † | 1.64% | (4.04)% | † | (3.67)% | N/A | 9.22% | ||||||||||||||||
CLASS C 1/13/97 | 0.64% | † | 1.64% | N/A | (3.67)% | N/A | 9.90% | |||||||||||||||||
CLASS K 4/1/97 | N/A | 2.41% | N/A | (2.94)% | N/A | 12.30% | ||||||||||||||||||
CLASS R 7/29/04 | N/A | N/A | N/A | N/A | N/A | 15.08% | (a) | |||||||||||||||||
CLASS Y 12/31/96 | N/A | 2.66% | N/A | (2.70)% | N/A | 11.46% |
(a) | Not annualized. |
* | Reflects the deduction of the maximum sales charge of 5.50% for Class A Shares. |
† | Based on the declining contingent deferred sales charge (CDSC) schedule described in the prospectus. |
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# | The Morgan Stanley Capital International (MSCI) World Index is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance. The Standard & Poor’s 500 Composite Stock Price Index (“S&P 500® Index”) is a widely recognized unmanaged index that measures the performance of the large-cap sector of the U.S. stock market. Effective April 1, 2005, the Fund changed its comparative broad-based securities market index from the MSCI World Index to the S&P 500® Index, which more closely reflects the investment strategies of the Fund. The Goldman Sachs Sector Index — Health Care (“GSSITM Health Care Index”) is a modified-market cap weighted index designed to measure the performance of companies in the health care sector. Index since inception comparative returns for Class A, Class B, Class C, Class K, Class R, and Class Y Shares of the Fund are as of 2/1/97, 2/1/97, 1/1/97, 4/1/97, 8/1/04, and 1/1/97, respectively. |
** | The Lipper Health/ Biotechnology Funds Median represents the median performance of a universe of mutual funds that have been in existence since the Fund’s inception and are categorized by Lipper Analytical Services, Inc. under the same investment objective as the Fund. Lipper since inception comparative returns for Class A, Class B, Class C, Class K, Class R, and Class Y Shares of the Fund are as of 2/1/97, 2/1/97, 1/1/97, 4/1/97, 8/1/04, and 1/1/97, respectively. |
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Example
Fund shareholders may incur two types of costs: (1) transaction costs, including front-end sales charges (loads) on purchases, contingent deferred sales charges on redemptions, redemption fees, and exchange fees; and (2) ongoing costs, including management fees, 12b-1 distribution and service fees, non-12b-1 service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example below is based on an investment of $1,000 made at the beginning of the period and held for the entire period from January 1, 2005 to June 30, 2005.
Actual Expenses
The section of the table below entitled “Actual” provides information about actual account values and actual expenses for each class of the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), and multiply the result by the number in the section entitled “Actual” under the heading “Expenses Paid During Period” corresponding to the class you own. If your Class A, Class B, or Class C shares account balance was below the applicable minimum, your expenses may also have included a $6 quarterly small account fee. If your account is an IRA, your expenses may also have included a $10 annual fee. In either case, the amount of any fee paid through your account would increase the estimate of expenses you paid during the period and decrease your ending account value.
Hypothetical Example for Comparison Purposes
The section of the table below entitled “Hypothetical” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of the Fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of any class of the Fund. The hypothetical account values and expenses may not be used to estimate your actual ending account balance or the expenses you paid for the period. However, you may use this information to compare the ongoing costs of investing in the Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. As in the case of the actual expense example, if your account is subject to an additional small account fee or IRA fee, the amount of the fee paid through your account would increase the hypothetical expenses you would have paid during the period and decrease the hypothetical ending account value.
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Please note that the expenses shown in the table for the Fund and in similar tables for other funds are meant to highlight your ongoing costs only and do not reflect any applicable transactional costs, such as front-end sales charges (loads) on purchases, contingent deferred sales charges on redemptions, redemption fees or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If any applicable transactional costs were included, your costs would be higher.
Beginning | Ending | ||||||||||||||||
Account | Account | Expenses Paid | Annualized | ||||||||||||||
Value | Value | During Period* | Expense | ||||||||||||||
1/1/05 | 6/30/05 | 1/1/05-6/30/05 | Ratio | ||||||||||||||
Actual | |||||||||||||||||
Class A | $1,000.00 | $ | 1,001.30 | $ | 9.63 | 1.94% | |||||||||||
Class B | $1,000.00 | $ | 997.80 | $ | 13.32 | 2.69% | |||||||||||
Class C | $1,000.00 | $ | 997.80 | $ | 13.32 | 2.69% | |||||||||||
Class K | $1,000.00 | $ | 1,001.70 | $ | 9.63 | 1.94% | |||||||||||
Class R | $1,000.00 | $ | 1,000.40 | $ | 10.86 | 2.19% | |||||||||||
Class Y | $1,000.00 | $ | 1,002.90 | $ | 8.39 | 1.69% | |||||||||||
Hypothetical | |||||||||||||||||
Class A | $1,000.00 | $ | 1,015.17 | $ | 9.69 | 1.94% | |||||||||||
Class B | $1,000.00 | $ | 1,011.46 | $ | 13.42 | 2.69% | |||||||||||
Class C | $1,000.00 | $ | 1,011.46 | $ | 13.42 | 2.69% | |||||||||||
Class K | $1,000.00 | $ | 1,015.17 | $ | 9.69 | 1.94% | |||||||||||
Class R | $1,000.00 | $ | 1,013.93 | $ | 10.94 | 2.19% | |||||||||||
Class Y | $1,000.00 | $ | 1,016.41 | $ | 8.45 | 1.69% |
* | Expenses are calculated by multiplying the Fund’s annualized expense ratio listed above for the applicable class by the average account value over the period and multiplying that number by 181/365 (to reflect the one-half year period). |
The expenses shown in the table do not reflect any fees that may be charged to you by brokers, financial intermediaries or other financial institutions.
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Portfolio of Investments, June 30, 2005 |
Shares | Value | |||||||
COMMON STOCKS — 99.3% | ||||||||
Health Care — 99.3% | ||||||||
Biotechnology — 13.7% | ||||||||
109,800 | Amgen, Inc.† | $ | 6,638,508 | |||||
49,375 | Biogen Idec Inc.† | 1,700,969 | ||||||
149,100 | Genentech, Inc.† | 11,969,748 | ||||||
76,675 | Genzyme Corporation† | 4,607,401 | ||||||
65,275 | Gilead Sciences, Inc.† | 2,871,447 | ||||||
19,100 | Invitrogen Corporation† | 1,590,839 | ||||||
29,378,912 | ||||||||
Environmental & Facility Services — 0.6% | ||||||||
24,225 | Stericycle, Inc.† | 1,219,002 | ||||||
Health Care Distributors — 4.0% | ||||||||
16,175 | AmerisourceBergen Corporation | 1,118,501 | ||||||
63,575 | Cardinal Health, Inc. | 3,660,649 | ||||||
43,325 | Henry Schein, Inc.† | 1,798,854 | ||||||
44,875 | McKesson Corporation | 2,009,951 | ||||||
8,587,955 | ||||||||
Health Care Equipment — 21.2% | ||||||||
144,650 | Baxter International Inc. | 5,366,515 | ||||||
16,650 | Becton, Dickinson and Company | 873,626 | ||||||
39,925 | Biomet, Inc. | 1,383,002 | ||||||
37,625 | C.R. Bard, Inc. | 2,502,439 | ||||||
34,125 | Fisher Scientific International, Inc.† | 2,214,712 | ||||||
45,550 | Guidant Corporation | 3,065,515 | ||||||
7,150 | Kinetic Concepts, Inc.† | 429,000 | ||||||
206,650 | Medtronic, Inc. | 10,702,403 | ||||||
18,850 | ResMed, Inc.† | 1,243,912 | ||||||
34,900 | Respironics, Inc.† | 1,260,239 | ||||||
223,200 | Smith & Nephew PLC | 2,204,782 | ||||||
135,700 | St. Jude Medical, Inc.† | 5,917,877 | ||||||
99,650 | Stryker Corporation | 4,739,354 | ||||||
47,500 | Zimmer Holdings, Inc.† | 3,618,075 | ||||||
45,521,451 | ||||||||
Health Care Facilities — 1.7% | ||||||||
12,050 | Community Health Systems, Inc.† | 455,370 | ||||||
37,375 | HCA Inc. | 2,118,041 | ||||||
17,875 | Health Management Associates, Inc., Class A | 467,967 | ||||||
10,300 | LifePoint Hospitals, Inc.† | 520,356 | ||||||
3,561,734 | ||||||||
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Portfolio of Investments, June 30, 2005 (continued) |
Shares | Value | |||||||
COMMON STOCKS (Continued) | ||||||||
Health Care (Continued) | ||||||||
Health Care Services — 4.4% | ||||||||
61,825 | Caremark Rx, Inc.† | $ | 2,752,449 | |||||
63,900 | Express Scripts, Inc.† | 3,193,722 | ||||||
37,775 | Medco Health Solutions, Inc.† | 2,015,674 | ||||||
29,000 | Quest Diagnostics Incorporated | 1,544,830 | ||||||
9,506,675 | ||||||||
Health Care Supplies — 3.1% | ||||||||
56,375 | Alcon, Inc. | 6,164,607 | ||||||
7,650 | Millipore Corporation† | 428,884 | ||||||
6,593,491 | ||||||||
Managed Health Care — 14.1% | ||||||||
60,775 | Aetna, Inc. | 5,033,385 | ||||||
34,450 | CIGNA Corporation | 3,687,184 | ||||||
42,475 | Coventry Health Care, Inc.† | 3,005,106 | ||||||
218,850 | UnitedHealth Group, Inc. | 11,410,839 | ||||||
100,900 | WellPoint, Inc.† | 7,026,676 | ||||||
30,163,190 | ||||||||
Pharmaceuticals — 36.5% | ||||||||
221,700 | Abbott Laboratories | 10,865,517 | ||||||
19,225 | Allergan, Inc. | 1,638,739 | ||||||
51,600 | AstraZeneca PLC, ADR | 2,129,016 | ||||||
178,050 | Bristol-Myers Squibb Company | 4,447,689 | ||||||
189,400 | Eli Lilly and Company | 10,551,474 | ||||||
53,700 | Eon Labs, Inc.† | 1,645,368 | ||||||
176,150 | Johnson & Johnson | 11,449,750 | ||||||
154,625 | Merck & Co. Inc. | 4,762,450 | ||||||
44,875 | Novartis AG | 2,135,822 | ||||||
195,050 | Pfizer, Inc. | 5,379,479 | ||||||
34,500 | Roche Holding Ltd., ADR | 2,181,297 | ||||||
22,550 | Salix Pharmaceuticals, Ltd.† | 398,233 | ||||||
367,950 | Schering-Plough Corporation | 7,013,127 | ||||||
15,750 | Sepracor Inc.† | 945,158 | ||||||
64,275 | Teva Pharmaceutical Industries Limited, ADR | 2,001,523 | ||||||
241,600 | Wyeth | 10,751,200 | ||||||
78,295,842 | ||||||||
Total Health Care | 212,828,252 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $188,326,121) | 212,828,252 | |||||||
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Shares | Value | |||||||
WARRANTS — 0.0% | ||||||||
Health Care — 0.0% | ||||||||
Biotechnology — 0.0% | ||||||||
50,000 | Aphton Corporation, expires 09/18/2008 (exercise price: $8.12)†, (a) | $ | 0 | |||||
52,500 | Axonyx, Inc., expires 01/08/2009 (exercise price: $7.25)†, (a) | 0 | ||||||
TOTAL WARRANTS | ||||||||
(Cost $330,613) | 0 | |||||||
Principal | ||||||||
Amount | ||||||||
REPURCHASE AGREEMENT — 1.4% | ||||||||
(Cost $3,028,000) | ||||||||
$ | 3,028,000 | Agreement with State Street Bank and Trust Company, 2.550% dated 06/30/2005, to be repurchased at $3,028,215 on 07/01/2005, collateralized by $3,070,000 FHLMC, 4.500% maturing 11/15/2011 (value $3,093,025) | 3,028,000 | |||||
TOTAL INVESTMENTS | |||||||||
(Cost $191,684,734) | 100.7 | % | 215,856,252 | ||||||
OTHER ASSETS AND LIABILITIES (Net) | (0.7 | ) | (1,534,502 | ) | |||||
NET ASSETS | 100.0 | % | $ | 214,321,750 | |||||
† | Non-income producing security. |
(a) | Fair valued security as of June 30, 2005 (see Notes to Financial Statements, Note 2). |
ABBREVIATIONS:
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Portfolio of Investments, June 30, 2005 (continued) |
At June 30, 2005, the country diversification (based on the country in which the company’s headquarters is located) of the Munder Healthcare Fund was as follows (assume United States unless otherwise indicated):
% of | ||||||||
Net Assets | Value | |||||||
COMMON STOCKS: | ||||||||
United States | 91.5 | % | $ | 196,011,205 | ||||
Switzerland | 4.9 | 10,481,725 | ||||||
United Kingdom | 2.0 | 4,333,798 | ||||||
Israel | 0.9 | 2,001,524 | ||||||
TOTAL COMMON STOCKS | 99.3 | 212,828,252 | ||||||
WARRANTS | 0.0 | — | ||||||
REPURCHASE AGREEMENT | 1.4 | 3,028,000 | ||||||
TOTAL INVESTMENTS | 100.7 | 215,856,252 | ||||||
OTHER ASSETS AND LIABILITIES (Net) | (0.7 | ) | (1,534,502 | ) | ||||
NET ASSETS | 100.0 | % | $ | 214,321,750 | ||||
4
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5
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Statement of Assets and Liabilities, June 30, 2005 |
ASSETS: | |||||||
Investments, at value | |||||||
See accompanying schedule: | |||||||
Securities | $ | 212,828,252 | |||||
Repurchase agreement | 3,028,000 | ||||||
Total Investments | 215,856,252 | ||||||
Cash | 94 | ||||||
Interest receivable | 214 | ||||||
Dividends receivable | 227,597 | ||||||
Receivable for investment securities sold | 1,171,283 | ||||||
Receivable for Fund shares sold | 72,798 | ||||||
Prepaid expenses and other assets | 20,298 | ||||||
Total Assets | 217,348,536 | ||||||
LIABILITIES: | |||||||
Payable for investment securities purchased | 1,607,097 | ||||||
Payable for Fund shares redeemed | 802,256 | ||||||
Transfer agency/record keeping fees payable | 178,055 | ||||||
Investment advisory fees payable | 166,276 | ||||||
Distribution and shareholder servicing fees payable — Class A, B, C and R Shares | 122,508 | ||||||
Trustees’ fees and expenses payable | 39,756 | ||||||
Custody fees payable | 23,054 | ||||||
Administration fees payable | 22,425 | ||||||
Shareholder servicing fees payable — Class K Shares | 28 | ||||||
Accrued expenses and other payables | 65,331 | ||||||
Total Liabilities | 3,026,786 | ||||||
NET ASSETS | $ | 214,321,750 | |||||
Investments, at cost | $ | 191,684,734 | |||||
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Table of Contents
NET ASSETS consist of: | ||||
Accumulated net investment loss | $ | (52,147 | ) | |
Accumulated net realized loss on investments sold | (159,726,092 | ) | ||
Net unrealized appreciation of investments | 24,169,855 | |||
Par value | 9,356 | |||
Paid-in capital in excess of par value | 349,920,778 | |||
$ | 214,321,750 | |||
NET ASSETS: | ||||
Class A Shares | $ | 75,570,276 | ||
Class B Shares | $ | 86,319,910 | ||
Class C Shares | $ | 41,443,246 | ||
Class K Shares | $ | 141,091 | ||
Class R Shares | $ | 5,753 | ||
Class Y Shares | $ | 10,841,474 | ||
SHARES OUTSTANDING: | ||||
Class A Shares | 3,177,914 | |||
Class B Shares | 3,866,895 | |||
Class C Shares | 1,858,424 | |||
Class K Shares | 5,942 | |||
Class R Shares | 242 | |||
Class Y Shares | 446,805 | |||
CLASS A SHARES: | ||||
Net asset value and redemption price per share | $23.78 | |||
Maximum sales charge | 5.50 | % | ||
Maximum offering price per share | $25.16 | |||
CLASS B SHARES: | ||||
Net asset value and offering price per share* | $22.32 | |||
CLASS C SHARES: | ||||
Net asset value and offering price per share* | $22.30 | |||
CLASS K SHARES: | ||||
Net asset value, offering price and redemption price per share | $23.75 | |||
CLASS R SHARES: | ||||
Net asset value, offering price and redemption price per share | $23.73 | |||
CLASS Y SHARES: | ||||
Net asset value, offering price and redemption price per share | $24.26 | |||
* | Redemption price per share is equal to net asset value per share less any applicable contingent deferred sales charge (“CDSC”). |
7
Table of Contents
Statement of Operations, For the Year Ended June 30, 2005 |
INVESTMENT INCOME: | ||||||
Interest | $ | 47,234 | ||||
Dividends(a) | 1,021,229 | |||||
Total Investment Income | 1,068,463 | |||||
EXPENSES: | ||||||
Distribution and shareholder servicing fees: | ||||||
Class A Shares | 198,106 | |||||
Class B Shares | 978,095 | |||||
Class C Shares | 459,314 | |||||
Class R Shares | 25 | |||||
Shareholder servicing fees: | ||||||
Class K Shares | 346 | |||||
Investment advisory fees | 2,331,825 | |||||
Transfer agency/record keeping fees | 792,958 | |||||
Administration fees | 331,575 | |||||
Custody fees | 143,559 | |||||
Printing and mailing fees | 127,733 | |||||
Registration and filing fees | 62,589 | |||||
Legal and audit fees | 46,371 | |||||
Trustees’ fees and expenses | 28,424 | |||||
Other | 43,559 | |||||
Total Expenses | 5,544,479 | |||||
Fees waived by transfer agent | (8,450 | ) | ||||
Net Expenses | 5,536,029 | |||||
NET INVESTMENT LOSS | (4,467,566 | ) | ||||
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: | ||||||
Net realized gain/(loss) from: | ||||||
Security transactions | 19,701,435 | |||||
Foreign currency-related transactions | (59,086 | ) | ||||
Net change in unrealized appreciation/(depreciation) of: | ||||||
Securities | (14,713,491 | ) | ||||
Foreign currency-related transactions | (2,166 | ) | ||||
Net realized and unrealized gain on investments | 4,926,692 | |||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 459,126 | ||||
(a) | Net of foreign withholding taxes of $45,346. |
8
Table of Contents
Statements of Changes in Net Assets |
Year Ended | Year Ended | ||||||||
June 30, 2005(a) | June 30, 2004 | ||||||||
Net investment loss | $ | (4,467,566 | ) | $ | (5,636,572 | ) | |||
Net realized gain from security and foreign currency-related transactions | 19,642,349 | 1,034,567 | |||||||
Net change in unrealized appreciation/(depreciation) of securities and foreign currency-related transactions | (14,715,657 | ) | 71,930,720 | ||||||
Net increase from payments by affiliates and net loss realized on disposal of investments in violation of policies | — | 4,664 | |||||||
Net increase in net assets resulting from operations | 459,126 | 67,333,379 | |||||||
Net increase/(decrease) in net assets from Fund share transactions: | |||||||||
Class A Shares | (22,676,528 | ) | 10,086,822 | ||||||
Class B Shares | (30,992,138 | ) | (16,934,267 | ) | |||||
Class C Shares | (14,310,980 | ) | (8,154,520 | ) | |||||
Class K Shares | (26,443 | ) | (63,537 | ) | |||||
Class R Shares | 5,000 | — | |||||||
Class Y Shares | (395,450 | ) | 1,536,184 | ||||||
Short-term trading fees | 22,094 | 30,367 | |||||||
Net increase/(decrease) in net assets | (67,915,319 | ) | 53,834,428 | ||||||
NET ASSETS: | |||||||||
Beginning of year | 282,237,069 | 228,402,641 | |||||||
End of year | $ | 214,321,750 | $ | 282,237,069 | |||||
Accumulated net investment loss | $ | (52,147 | ) | $ | (120,099 | ) | |||
(a) | The Munder Healthcare Fund Class R Shares commenced operations on July 29, 2004. |
9
Table of Contents
Statements of Changes in Net Assets — Capital Stock Activity |
Year Ended | Year Ended | |||||||
June 30, 2005(a) | June 30, 2004 | |||||||
Amount | ||||||||
Class A Shares: | ||||||||
Sold * | $ | 18,041,279 | $ | 37,046,443 | ||||
Redeemed | (40,717,807 | ) | (26,959,621 | ) | ||||
Net increase/(decrease) | $ | (22,676,528 | ) | $ | 10,086,822 | |||
Class B Shares: | ||||||||
Sold | $ | 4,509,314 | $ | 9,321,713 | ||||
Redeemed* | (35,501,452 | ) | (26,255,980 | ) | ||||
Net decrease | $ | (30,992,138 | ) | $ | (16,934,267 | ) | ||
Class C Shares: | ||||||||
Sold | $ | 1,935,581 | $ | 4,992,963 | ||||
Redeemed | (16,246,561 | ) | (13,147,483 | ) | ||||
Net decrease | $ | (14,310,980 | ) | $ | (8,154,520 | ) | ||
Class K Shares: | ||||||||
Sold | $ | — | $ | — | ||||
Redeemed | (26,443 | ) | (63,537 | ) | ||||
Net decrease | $ | (26,443 | ) | $ | (63,537 | ) | ||
Class R Shares: | ||||||||
Sold | $ | 5,000 | $ | — | ||||
Net increase | $ | 5,000 | $ | — | ||||
Class Y Shares: | ||||||||
Sold | $ | 624,004 | $ | 1,991,947 | ||||
Redeemed | (1,019,454 | ) | (455,763 | ) | ||||
Net increase/(decrease) | $ | (395,450 | ) | $ | 1,536,184 | |||
* | May include amounts automatically converted from Class B Shares to Class A Shares. |
(a) | The Munder Healthcare Fund Class R shares commenced operations on July 29, 2004. |
10
Table of Contents
Year Ended | Year Ended | |||||||
June 30, 2005(a) | June 30, 2004 | |||||||
Shares | ||||||||
Class A Shares: | ||||||||
Sold * | 798,315 | 1,676,431 | ||||||
Redeemed | (1,848,840 | ) | (1,264,933 | ) | ||||
Net increase/(decrease) | (1,050,525 | ) | 411,498 | |||||
Class B Shares: | ||||||||
Sold | 216,134 | 452,389 | ||||||
Redeemed* | (1,681,957 | ) | (1,297,515 | ) | ||||
Net decrease | (1,465,823 | ) | (845,126 | ) | ||||
Class C Shares: | ||||||||
Sold | 92,830 | 238,461 | ||||||
Redeemed | (775,479 | ) | (653,543 | ) | ||||
Net decrease | (682,649 | ) | (415,082 | ) | ||||
Class K Shares: | ||||||||
Sold | — | — | ||||||
Redeemed | (1,162 | ) | (3,306 | ) | ||||
Net decrease | (1,162 | ) | (3,306 | ) | ||||
Class R Shares: | ||||||||
Sold | 242 | — | ||||||
Net increase | 242 | — | ||||||
Class Y Shares: | ||||||||
Sold | 27,492 | 95,139 | ||||||
Redeemed | (45,779 | ) | (21,948 | ) | ||||
Net increase/(decrease) | (18,287 | ) | 73,191 | |||||
* | May include amounts automatically converted from Class B Shares to Class A Shares. |
(a) | The Munder Healthcare Fund Class R shares commenced operations on July 29, 2004. |
11
Table of Contents
Financial Highlights, For a Share Outstanding Throughout Each Period |
A Shares | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
6/30/05(c) | 6/30/04(c) | 6/30/03(c) | 6/30/02(c) | 6/30/01(c) | ||||||||||||||||
Net asset value, beginning of period | $ | 23.22 | $ | 17.67 | $ | 16.11 | $ | 25.31 | $ | 28.35 | ||||||||||
Income/(loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.33 | ) | (0.36 | ) | (0.29 | ) | (0.32 | ) | (0.35 | ) | ||||||||||
Net realized and unrealized gain/(loss) on investments | 0.89 | 5.91 | 1.85 | (8.88 | ) | (1.93 | ) | |||||||||||||
Total from investment operations | 0.56 | 5.55 | 1.56 | (9.20 | ) | (2.28 | ) | |||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | — | — | — | — | (0.55 | ) | ||||||||||||||
Distributions in excess of net realized gains | — | — | — | — | (0.21 | ) | ||||||||||||||
Total distributions | — | — | — | — | (0.76 | ) | ||||||||||||||
Short-term trading fees | 0.00 | (e) | 0.00 | (e) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 23.78 | $ | 23.22 | $ | 17.67 | $ | 16.11 | $ | 25.31 | ||||||||||
Total return(b) | 2.41 | % | 31.41 | %(d) | 9.62 | % | (36.28 | )% | (8.38 | )% | ||||||||||
Ratios to average net assets/ supplemental data: | ||||||||||||||||||||
Net assets, end of period (in 000’s) | $ | 75,570 | $ | 98,196 | $ | 67,456 | $ | 81,129 | $ | 167,514 | ||||||||||
Ratio of operating expenses to average net assets | 1.92 | % | 1.91 | % | 2.14 | % | 1.63 | % | 1.55 | % | ||||||||||
Ratio of net investment loss to average net assets | (1.46 | )% | (1.68 | )% | (2.02 | )% | (1.54 | )% | (1.28 | )% | ||||||||||
Portfolio turnover rate | 118 | % | 68 | % | 46 | % | 38 | % | 45 | % | ||||||||||
Ratio of operating expenses to average net assets without expense waivers and/or reimbursements | 1.92 | % | 1.93 | % | 2.17 | % | 1.72 | % | 1.55 | % |
(a) | The Munder Healthcare Fund Class A Shares and Class B Shares commenced operations on February 14, 1997 and January 31, 1997, respectively. |
(b) | Total return represents aggregate total return for the period indicated and does not reflect any applicable sales charges. |
(c) | Per share numbers have been calculated using the average shares method. |
(d) | If the Sub-advisor had not reimbursed the Fund for the realized loss on the disposal of an investment in violation of policies, the total return would have been 31.30% for Class A Shares and 30.23% for Class B Shares. |
(e) | Amount is less than $0.01 per share. |
12
Table of Contents
B Shares | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
6/30/05(c) | 6/30/04(c) | 6/30/03(c) | 6/30/02(c) | 6/30/01(c) | ||||||||||||||||
$ | 21.96 | $ | 16.84 | $ | 15.47 | $ | 24.48 | $ | 27.64 | |||||||||||
(0.46 | ) | (0.49 | ) | (0.39 | ) | (0.45 | ) | (0.53 | ) | |||||||||||
0.82 | 5.61 | 1.76 | (8.56 | ) | (1.87 | ) | ||||||||||||||
0.36 | 5.12 | 1.37 | (9.01 | ) | (2.40 | ) | ||||||||||||||
— | — | — | — | (0.55 | ) | |||||||||||||||
— | — | — | — | (0.21 | ) | |||||||||||||||
— | — | — | — | (0.76 | ) | |||||||||||||||
0.00 | (e) | 0.00 | (e) | — | — | — | ||||||||||||||
$ | 22.32 | $ | 21.96 | $ | 16.84 | $ | 15.47 | $ | 24.48 | |||||||||||
1.64 | % | 30.40 | %(d) | 8.86 | % | (36.78 | )% | (9.04 | )% | |||||||||||
$ | 86,320 | $ | 117,126 | $ | 104,007 | $ | 119,253 | $ | 224,080 | |||||||||||
2.67 | % | 2.66 | % | 2.89 | % | 2.38 | % | 2.30 | % | |||||||||||
(2.21 | )% | (2.43 | )% | (2.77 | )% | (2.29 | )% | (2.03 | )% | |||||||||||
118 | % | 68 | % | 46 | % | 38 | % | 45 | % | |||||||||||
2.67 | % | 2.68 | % | 2.92 | % | 2.47 | % | 2.30 | % |
13
Table of Contents
Financial Highlights, For a Share Outstanding Throughout Each Period (continued) |
C Shares | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
6/30/05(c) | 6/30/04(c) | 6/30/03(c) | 6/30/02(c) | 6/30/01(c) | ||||||||||||||||
Net asset value, beginning of period | $ | 21.94 | $ | 16.82 | $ | 15.45 | $ | 24.46 | $ | 27.62 | ||||||||||
Income/(loss) from investment operations: | ||||||||||||||||||||
Net investment loss | (0.46 | ) | (0.49 | ) | (0.39 | ) | (0.45 | ) | (0.53 | ) | ||||||||||
Net realized and unrealized gain/(loss) on investments | 0.82 | 5.61 | 1.76 | (8.56 | ) | (1.87 | ) | |||||||||||||
Total from investment operations | 0.36 | 5.12 | 1.37 | (9.01 | ) | (2.40 | ) | |||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net realized gains | — | — | — | — | (0.55 | ) | ||||||||||||||
Distributions in excess of net realized gains | — | — | — | — | (0.21 | ) | ||||||||||||||
Total distributions | — | — | — | — | (0.76 | ) | ||||||||||||||
Short-term trading fees | 0.00 | (e) | 0.00 | (e) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 22.30 | $ | 21.94 | $ | 16.82 | $ | 15.45 | $ | 24.46 | ||||||||||
Total return(b) | 1.64 | % | 30.44 | %(d) | 8.80 | % | (36.77 | )% | (9.05 | )% | ||||||||||
Ratios to average net assets/ supplemental data: | ||||||||||||||||||||
Net assets, end of period (in 000’s) | $ | 41,443 | $ | 55,756 | $ | 49,725 | $ | 61,925 | $ | 122,087 | ||||||||||
Ratio of operating expenses to average net assets | 2.67 | % | 2.66 | % | 2.89 | % | 2.38 | % | 2.30 | % | ||||||||||
Ratio of net investment loss to average net assets | (2.21 | )% | (2.43 | )% | (2.77 | )% | (2.29 | )% | (2.03 | )% | ||||||||||
Portfolio turnover rate | 118 | % | 68 | % | 46 | % | 38 | % | 45 | % | ||||||||||
Ratio of operating expenses to average net assets without expense waivers and/or reimbursements | 2.67 | % | 2.68 | % | 2.92 | % | 2.47 | % | 2.30 | % |
(a) | The Munder Healthcare Fund Class C Shares and Class K Shares commenced operations on January 13, 1997 and April 1, 1997, respectively. |
(b) | Total return represents aggregate total return for the period indicated and does not reflect any applicable sales charges. |
(c) | Per share numbers have been calculated using the average shares method. |
(d) | If the Sub-advisor had not reimbursed the Fund for the realized loss on the disposal of an investment in violation of policies, the total return would have been 30.26% for Class C Shares and 31.24% for Class K Shares. |
(e) | Amount is less than $0.01 per share. |
14
Table of Contents
K Shares | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
6/30/05(c) | 6/30/04(c) | 6/30/03(c) | 6/30/02(c) | 6/30/01(c) | ||||||||||||||||
$ | 23.18 | $ | 17.64 | $ | 16.09 | $ | 25.29 | $ | 28.31 | |||||||||||
(0.33 | ) | (0.36 | ) | (0.29 | ) | (0.32 | ) | (0.34 | ) | |||||||||||
0.90 | 5.90 | 1.84 | (8.88 | ) | (1.92 | ) | ||||||||||||||
0.57 | 5.54 | 1.55 | (9.20 | ) | (2.26 | ) | ||||||||||||||
— | — | — | — | (0.55 | ) | |||||||||||||||
— | — | — | — | (0.21 | ) | |||||||||||||||
— | — | — | — | (0.76 | ) | |||||||||||||||
0.00 | (e) | 0.00 | (e) | — | — | — | ||||||||||||||
$ | 23.75 | $ | 23.18 | $ | 17.64 | $ | 16.09 | $ | 25.29 | |||||||||||
2.41 | % | 31.46 | %(d) | 9.63 | % | (36.35 | )% | (8.32 | )% | |||||||||||
$ | 141 | $ | 165 | $ | 184 | $ | 437 | $ | 990 | |||||||||||
1.92 | % | 1.91 | % | 2.14 | % | 1.63 | % | 1.55 | % | |||||||||||
(1.46 | )% | (1.68 | )% | (2.02 | )% | (1.54 | )% | (1.28 | )% | |||||||||||
118 | % | 68 | % | 46 | % | 38 | % | 45 | % | |||||||||||
1.92 | % | 1.93 | % | 2.17 | % | 1.72 | % | 1.55 | % |
15
Table of Contents
Financial Highlights, For a Share Outstanding Throughout Each Period (continued) |
R Shares | Y Shares | |||||||||||||||||||||||
Period | Year | Year | Year | Year | Year | |||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||
6/30/05(c) | 6/30/05(c) | 6/30/04(c) | 6/30/03(c) | 6/30/02(c) | 6/30/01(c) | |||||||||||||||||||
Net asset value, beginning of period | $ | 20.62 | $ | 23.64 | $ | 17.94 | $ | 16.32 | $ | 25.57 | $ | 28.56 | ||||||||||||
Income/(loss) from investment operations: | ||||||||||||||||||||||||
Net investment loss | (0.35 | ) | (0.28 | ) | (0.31 | ) | (0.26 | ) | (0.27 | ) | (0.29 | ) | ||||||||||||
Net realized and unrealized gain/(loss) on investments | 3.46 | 0.90 | 6.01 | 1.88 | (8.98 | ) | (1.94 | ) | ||||||||||||||||
Total from investment operations | 3.11 | 0.62 | 5.70 | 1.62 | (9.25 | ) | (2.23 | ) | ||||||||||||||||
Less distributions: | ||||||||||||||||||||||||
Distributions from net realized gains | — | — | — | — | — | (0.55 | ) | |||||||||||||||||
Distributions in excess of net realized gains | — | — | — | — | — | (0.21 | ) | |||||||||||||||||
Total distributions | — | — | — | — | — | (0.76 | ) | |||||||||||||||||
Short-term trading fees | 0.00 | (e) | 0.00 | (e) | 0.00 | (e) | — | — | — | |||||||||||||||
Net asset value, end of period | $ | 23.73 | $ | 24.26 | $ | 23.64 | $ | 17.94 | $ | 16.32 | $ | 25.57 | ||||||||||||
Total return(b) | 15.08 | % | 2.66 | % | 31.77 | %(d) | 9.93 | % | (36.15 | )% | (8.14 | )% | ||||||||||||
Ratios to average net assets/supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (in 000’s) | $ | 6 | $ | 10,841 | $ | 10,994 | $ | 7,031 | $ | 5,997 | $ | 9,640 | ||||||||||||
Ratio of operating expenses to average net assets | 2.17 | %(f) | 1.67 | % | 1.66 | % | 1.89 | % | 1.38 | % | 1.30 | % | ||||||||||||
Ratio of net investment loss to average net assets | (1.70 | )(f) | (1.21 | )% | (1.43 | )% | (1.77 | )% | (1.29 | )% | (1.03 | )% | ||||||||||||
Portfolio turnover rate | 118 | % | 118 | % | 68 | % | 46 | % | 38 | % | 45 | % | ||||||||||||
Ratio of operating expenses to average net assets without expense waivers and/or reimbursements | 2.17 | %(f) | 1.67 | % | 1.68 | % | 1.92 | % | 1.47 | % | 1.30 | % |
(a) | The Munder Healthcare Fund Class R Shares and Class Y Shares commenced operations on July 29, 2004 and December 31, 1996, respectively. |
(b) | Total return represents aggregate total return for the period indicated. |
(c) | Per share numbers have been calculated using the average shares method. |
(d) | If the Sub-advisor had not reimbursed the Fund for the realized loss on the disposal of an investment in violation of policies, the total return would have been 31.61% for Class Y Shares. |
(e) | Amount is less than $0.01 per share. |
(f) | Annualized. |
16
Table of Contents
Notes to Financial Statements, June 30, 2005 |
1. Organization
As of June 30, 2005, the Munder Funds (sometimes referred to as the “Funds”) consisted of 27 portfolios, each of which is a series of Munder Series Trust (“MST”), Munder Series Trust II (“MSTII”) or The Munder @Vantage Fund (“@Vantage”). Information presented in these financial statements pertains only to the Munder Healthcare Fund (the “Fund”), the only series of MSTII. Financial statements for the other Munder Funds are presented in separate reports.
MSTII is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and was organized as a Massachusetts business trust on October 30, 1996. Prior to February 18, 2005, MSTII was known as the Munder Framlington Funds Trust. The Fund is classified as a diversified management investment company under the 1940 Act. The Fund’s goal is to provide long-term capital appreciation. The Fund is authorized to issue an unlimited number of shares of beneficial interest, each with a par value of $0.001.
The Fund offers 6 classes of shares — Class A, Class B, Class C, Class K, Class R and Class Y Shares. Class A Shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B and Class C Shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (“CDSC”). Class B Shares automatically convert to Class A Shares on a date based on the initial purchase date of Class B Shares and the passage of a specified period of time since that date. Class K, Class R and Class Y Shares are sold only to certain eligible investors, as described in the Fund’s prospectus, without either a front-end sales charge or a CDSC. All classes of shares have identical rights and voting privileges.
2. Significant Accounting Policies
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets resulting from operations during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements:
Security Valuation: The Board of Trustees has approved one or more pricing services to provide prices for valuing portfolio securities. Equity securities, including depositary receipts, are generally valued at the last quoted
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Notes to Financial Statements, June 30, 2005 (continued) |
sale price on the primary market or exchange where such securities are traded or the official close price of such exchange. Depositary receipts for which the last quoted sale price is not available are valued based on the underlying security’s value and relevant exchange rate. Securities, other than depositary receipts, for which market quotations are not readily available are valued at fair value by a pricing committee in accordance with guidelines approved by the Board of Trustees. Securities that are primarily traded on foreign securities exchanges may also be subject to fair valuation by such pricing committee should a significant event occur subsequent to the close of the foreign securities exchanges. Fair valuations involve a review of relevant factors, including without limitation, movements in U.S. equity markets following the close of foreign markets, country-specific information, company-specific information, industry information and/or comparable, publicly-traded securities information. Debt securities with remaining maturities of 60 days or less at the time of purchase are valued on an amortized cost basis, which approximates current market value, unless the Board of Trustees determines that such valuation does not constitute fair value at that time.
Foreign Currency: The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates generally determined as of the close of regular trading on the London Stock Exchange. Purchases and sales of investment securities and items of income and expense denominated in foreign currencies are translated on the respective dates of such transactions.
Unrealized gains and losses resulting from changes in foreign currency exchange rates on all assets and liabilities denominated in foreign currencies other than investment securities are included in the net change in unrealized appreciation/(depreciation) of foreign currency-related transactions. Net realized gains and losses from foreign currency-related transactions include foreign currency gains and losses between trade date and settlement date on investment security, foreign currency and foreign interest and dividend income transactions.
Unrealized gains and losses resulting from changes in foreign currency exchange rates on investment securities denominated in foreign currencies are included in the net change in unrealized appreciation/(depreciation) of securities. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase trade date and subsequent sale trade date of securities denominated in foreign currencies is included in realized gains and losses from security transactions.
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Notes to Financial Statements, June 30, 2005 (continued) |
Forward Foreign Currency Exchange and Spot Contracts: The Fund may engage in forward foreign currency exchange and spot contracts in an effort to facilitate transactions in foreign securities and to reduce exposure to foreign currency exchange rates. The value of such contracts is based on exchange rates generally determined as of the close of regular trading on the London Stock Exchange. Forward foreign currency exchange and spot contracts are marked to market daily. The change in market value is recorded as unrealized appreciation/(depreciation) from foreign currency-related transactions. When the contract is closed, the Fund records a realized gain or loss from foreign currency-related transactions equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of forward foreign currency exchange and spot contracts does not eliminate fluctuations in the underlying prices of the Fund’s securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign currency exchange and spot contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts.
Repurchase Agreements: Each repurchase agreement entered into by the Fund provides that the seller must transfer to the Fund initial collateral at least equal to the total amount of the repurchase obligation, including interest, and transfer upon request additional collateral any time the value of the collateral falls below such level. Each repurchase agreement also provides that in the event of counterparty default, the Fund has the right to accelerate the seller’s repurchase obligation and/or use the collateral to satisfy the seller’s repurchase obligation. However, there could be potential loss to the Fund in the event the Fund is delayed or prevented from exercising its right to dispose of the collateral securities, including the risk of possible decline in the value of the collateral securities during the period in which the Fund seeks to assert its rights.
Security Transactions, Net Investment Income and Gains and Losses: For purposes of financial statement presentation, security transactions are recorded on a trade date basis. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Certain dividends from foreign securities are recorded as soon as the Fund is informed of the ex-dividend date if such information is obtained subsequent to the ex-dividend date. General expenses of the Munder Funds are allocated to the Fund based upon the relevant driver of
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Notes to Financial Statements, June 30, 2005 (continued) |
such expenses. General expenses, income and realized and unrealized gains and losses of the Fund are then prorated among the share classes based on the relative average net assets of each class.
Fees Waived by Transfer Agent: Pursuant to a contract with the transfer agent, which was terminated on September 30, 2004, the transfer agent had agreed to waive a portion of the fee it charged the Fund. The amount of the waiver was equal to the servicing fee it collected from Fund shareholders with account balances below a specified minimum. For the year ended June 30, 2005, such waivers were $8,450 and are reflected as fees waived by transfer agent in the accompanying Statement of Operations.
Short-Term Trading (Redemption) Fees: A short-term trading fee of 2% may be assessed on redemptions made within 60 days of purchase of Class A, Class B, or Class C shares of the Fund. For purchases of Class K, Class R or Class Y Shares of the Fund made after January 1, 2005, a short-term trading fee of 2% also may be assessed on redemptions made within 60 days of purchase. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital. These fees (if any) are shown in the accompanying Statements of Changes in Net Assets and Financial Highlights as short-term trading fees.
Dividends and Distributions to Shareholders: Dividends from net investment income are declared and paid annually (if available) by the Fund. The Fund’s net realized capital gains (including net short-term capital gains), if any, are declared and distributed at least annually. Dividends and distributions to shareholders are recorded on the ex-dividend date.
Federal Income Taxes: The Fund intends to continue to qualify as a regulated investment company by complying with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its earnings to its shareholders. Therefore, no Federal income or excise tax provision is required.
3. | Investment Advisor, Sub-Advisor, Administrator and Other Related Party Transactions |
For its advisory services, Munder Capital Management (the “Advisor”) is entitled to receive from the Fund a fee, computed daily and payable monthly, based on the average daily net assets of the Fund at an annual rate of 1.00% based on the first $250 million of assets and 0.75% based on assets exceeding $250 million. During the year ended June 30, 2005, the Fund paid an annual effective rate of 0.9986% for advisory services.
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The Advisor is also the administrator for the Munder Funds. In its capacity as administrator, the Advisor is entitled to receive from the Fund an administration fee, computed daily and payable monthly, based on the average daily net assets of the Fund at the following annual rates subject to a Fund minimum fee.
Fund Net Assets | Annual Fee | |||
First $100 million | 0.153% | |||
Next $150 million | 0.128% | |||
Next $250 million | 0.104% | |||
Next $500 million | 0.079% | |||
Thereafter | 0.055% |
In addition, beginning August 10, 2004, the Advisor is entitled to receive from the Fund an annual financial reporting fee in the amount of $8,000.
For the year ended June 30, 2005, the Advisor earned $331,575 before payment of sub-administration fees and $219,929 after payment of sub-administration fees for its administrative services to the Fund. During the year ended June 30, 2005, the Fund paid an annual effective rate of 0.1420% for administrative services.
Prior to January 26, 2005, pursuant to a sub-advisory agreement with the Advisor, Framlington Overseas Investment Management Limited (the “Sub-Advisor”) provided sub-advisory services to the Fund and was responsible for its management, including all decisions regarding purchases and sales of portfolio securities. For its services with regard to the Fund, the Advisor paid the Sub-Advisor a monthly fee equal on an annual basis to 40% of the net advisory revenues earned by the Advisor with respect to the Fund. The Advisor indirectly owns a 49% interest in the Sub-Advisor.
Comerica Inc. (“Comerica”), through its wholly-owned subsidiary Comerica Bank, owns approximately 95% of the Advisor (87% on a fully diluted basis) as of June 30, 2005. Comerica Bank provides certain sub-transfer agency and related services to the Fund. As compensation for the sub-transfer agency and related services provided to the Fund, Comerica Bank receives a fee of 0.01% of the average daily net assets of the Fund beneficially owned by Comerica Bank and its customers. Comerica Bank earned $1,130 for its sub-transfer agency and other related services provided to the Fund for the year ended June 30, 2005.
Each Trustee of MST and MSTII is paid quarterly an aggregate fee consisting of a $78,000 annual retainer ($114,000 for the Chairman) for services provided as a Board member, plus out-of-pocket expenses related to attendance at Board and Committee meetings. For quarters ending prior to
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Notes to Financial Statements, June 30, 2005 (continued) |
October 1, 2004, each Trustee of MST and MSTII was paid an aggregate fee, consisting of a $68,000 annual retainer ($90,000 for the Chairman and nominee for Chairman) for services provided as a Board member, plus out-of-pocket expenses related to attendance at Board and Committee meetings. Each Trustee of @Vantage is paid quarterly an annual retainer of $6,000 for services provided as a Board member, plus out-of-pocket expenses related to attendance at Board and Committee meetings. For quarters ending prior to October 1, 2004, each Trustee of @Vantage was paid an annual retainer of $4,000 for services provided as a Board member, plus out-of-pocket expenses related to attendance at Board and Committee meetings. A Board member who is Chairman of a committee (Audit Committee, Board Process and Governance Committee, and/or Nominating Committee) also receives an annual retainer of $3,000 for such service. Trustees may elect to defer all or a portion of the fees earned under a deferred compensation plan. Under this plan, amounts deferred are valued as if they are invested in one or more of the Munder Funds selected by the Trustee. These amounts are not, however, actually invested in shares of the Munder Funds, and the obligations of MST, MSTII and @Vantage to make payments of deferred amounts are unsecured general obligations of the Munder Funds. No officer, director or employee of the Advisor, Sub-Advisor, Comerica or any of Comerica’s affiliates receives any compensation from MST, MSTII or @Vantage.
4. Distribution and Service Plan
The Fund has a Distribution and Service Plan (the “Plan”) with respect to the Class A, Class B, Class C, Class R and Class K Shares, that was adopted pursuant to Rule 12b-1 under the 1940 Act except with respect to Class K Shares. Under the Plan, service fees are collected from the Fund primarily to pay securities dealers and other financial institutions and organizations (collectively, the “Service Organizations”) who provide shareholder services for the Fund. The Plan also permits payments with respect to Class B, Class C and Class R Shares to be made by the Fund to the Distributor or directly to other service providers in connection with the distribution of Fund shares to investors and provision of certain shareholder services (which include but are not limited to the payment of compensation, including compensation to Service Organizations to obtain various distribution-related services for the Fund).
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The maximum rates, as a percentage of average daily net assets, payable under the Plan are as follows:
Class A | Class B | Class C | Class R | Class K | ||||||||||||||
Shares | Shares | Shares | Shares | Shares | ||||||||||||||
12b-1 Fees | 12b-1 Fees | 12b-1 Fees | 12b-1 Fees | Service Fees | ||||||||||||||
0.25% | 1.00% | 1.00% | 1.00% | 0.25% |
For Class R Shares, the 12b-1 fees have been limited to 0.50% pursuant to the Fund’s contract with the Distributor. No payments are made under the Plan with regard to Class Y Shares.
Comerica Securities, Inc. (“Comerica Securities”), a wholly-owned subsidiary of Comerica Bank, and Comerica Bank are among the Service Organizations who may receive fees from the Fund under the Plan. For the year ended June 30, 2005, the Fund paid $44 to Comerica Securities and $207 to Comerica Bank for shareholder services provided to Class A, Class B, Class C, Class K and Class R shareholders.
5. Securities Transactions
Cost of purchases and proceeds from sales of securities other than short-term investments and U.S. Government securities were $273,473,214 and $338,882,199, respectively, for the year ended June 30, 2005.
At June 30, 2005, aggregate gross unrealized appreciation for all securities for which there was an excess of value over tax cost was $27,158,394 and aggregate gross unrealized depreciation for all securities for which there was an excess of tax cost over value was $4,619,669 and net appreciation for Federal income tax purposes was $22,538,725. At June 30, 2005, aggregate cost for Federal income tax purposes was $193,317,527.
6. Investment Concentration
The Fund invests primarily in companies that are principally engaged in activities within the health care sector and companies providing services primarily within the health care industries. Health care is particularly affected by rapidly changing technology and extensive government regulation, including cost containment measures. Adverse economic, business or political developments affecting that sector could have a major effect on the value of the Fund’s investments. The value of the Fund’s shares may fluctuate more than shares of a fund investing in a broader range of securities.
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Notes to Financial Statements, June 30, 2005 (continued) |
7. Revolving Line of Credit
Effective December 15, 2004, the Munder Funds renewed a one-year revolving line of credit with State Street Bank and Trust Company in which the Fund, and other Munder Funds, participate. Borrowings under the line may not exceed the lesser of $75,000,000 or 15% of the value of the total assets of the Fund. Interest is payable on outstanding borrowings at the Federal Funds Rate plus 0.50%. Additionally, the line of credit includes an annual commitment fee equal to 0.10% per annum through December 14, 2005 on the daily amount of the unused commitment. During the year ended June 30, 2005, the Fund did not utilize the revolving line of credit. For the year ended June 30, 2005, total commitment fees for the Fund were $3,793.
8. Indemnification Obligations
The Fund has a variety of indemnification obligations under contracts with its service providers. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
9. Income Tax Information
Income dividends and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund as a whole. The Fund also may utilize earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes.
As determined on June 30, 2005, permanent differences resulting primarily from different book and tax accounting for foreign currency gains and losses and net operating losses were reclassified at year end. The following reclassifications had no effect on net income, net assets or net asset value per share:
Undistributed | Accumulated | |||
Net Investment | Net Realized | Paid-In | ||
Loss | Loss | Capital | ||
$4,535,518 | $59,086 | $(4,594,604) |
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Notes to Financial Statements, June 30, 2005 (continued) |
At June 30, 2005, the components of distributable earnings on a tax basis were as follows:
Post October | ||||||||||
Loss/Capital Loss | Unrealized | |||||||||
Carryover | Appreciation | Total | ||||||||
$ | (158,114,977) | $ | 22,537,062 | $ | (135,577,915) |
The differences between book and tax distributable earnings are primarily due to wash sales and deferred trustees’ fees.
As determined at June 30, 2005, the Fund had available for Federal income tax purposes, $158,093,301 of unused capital losses of which $1,733,087, $112,683,011 and $43,677,203 expire in 2010, 2011 and 2012, respectively. In addition, the losses expiring in 2010, may be further limited as they were acquired in the reorganization with the Munder Bio(Tech)2 Fund that occurred on May 9, 2003.
Certain capital and net foreign currency losses realized after October 31 within the taxable year may be deferred and treated as occurring on the first day of the following tax year. The Fund has elected to defer net foreign currency losses arising between November 1, 2004 and June 30, 2005 of $21,676.
The Fund utilized capital loss carryforwards during the year ended June 30, 2005 in the amount of $18,574,161.
10. Tax Information (Unaudited)
For the fiscal year ended June 30, 2005, the Fund designated approximately $1,066,575 pursuant to the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
11. Quarterly Portfolio Schedule (Unaudited)
The Fund files with the Securities and Exchange Commission its complete schedule of portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Securities and Exchange Commission’s website at www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the Securities and Exchange Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most recent Form N-Q is available without charge, upon request, by calling (800) 438-5789. In addition, the most currently available list and the three most recently published lists of the Fund’s portfolio holdings are available on our website, www.munder.com.
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Notes to Financial Statements, June 30, 2005 (continued) |
12. Proxy Voting Policies and Procedures (Unaudited)
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 438-5789 or visiting our website at www.munder.com or the Securities and Exchange Commission’s website at www.sec.gov.
13. Proxy Voting Record (Unaudited)
The Fund files with the Securities and Exchange Commission its proxy voting record on Form N-PX for each 12-month period ending June 30. Form N-PX must be filed by the Fund each year by August 31. The most recent Form N-PX or voting record information is available without charge, upon request, by calling (800) 438-5789 or visiting our website at www.munder.com or the Securities and Exchange Commission’s website at www.sec.gov.
14. Approval of Investment Advisory Agreement (Unaudited)
The Advisor provides investment advisory services to the Fund under a Combined Investment Advisory Agreement dated June 13, 2003 and amended most recently as of May 17, 2005 (“Advisory Agreement”). The Board of Trustees last approved the continuation of the Advisory Agreement for an additional one-year period on May 17, 2005. In determining whether to approve the continuation of the Advisory Agreement, the Board requested, and received from the Advisor, the information that the Board believed to be reasonably necessary to reach its conclusion, including the information described below.
The Board considered many factors in evaluating whether the Advisory Agreement and the fees provided therein with respect to the Fund should be continued for an additional one-year period. The Board was advised by legal counsel to the Munder Funds and the “Non-Interested Trustees” were advised by their independent legal counsel with respect to their deliberations regarding the continuation of the Advisory Agreement. A Trustee is deemed to be a “Non-Interested Trustee” to the extent the Trustee is not an “interested person” of the Munder Funds (as that term is defined in Section 2(a)(19) of the 1940 Act).
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Notes to Financial Statements, June 30, 2005 (continued) |
Among other factors, the Board requested, considered and evaluated information regarding:
(a) The nature, extent and quality of the services provided by the Advisor to the Fund under the Advisory Agreement: With respect to this factor, the Board considered:
• | the qualifications of management of the Advisor and of persons providing portfolio management services to the Fund, as well as the Advisor’s efforts in hiring, promoting and retaining qualified investment personnel, including enhancements in the quality and depth in the Advisor’s investment, trading, and administrative services departments due to the recruiting and hiring of additional staff in 2004; | |
• | the Advisor’s extensive efforts in 2004 and on an ongoing basis to: (1) focus on determining the reasonableness of the investment advisory fees (including breakpoints) for each of the Munder Funds (including through the use of two independent, third-party industry consultants to assist the Advisor in analyzing the investment advisory fees of the Munder Funds as compared to comparable funds); (2) as appropriate, insert breakpoints in its investment advisory fees or to reduce its investment advisory fees across all asset classes (which resulted in an insertion of breakpoints or reduction in advisory fees for ten of the Munder Funds in 2004); (3) renegotiate the fee arrangements with certain of the other service providers for the Munder Funds in order to seek to reduce the expense ratios of the Munder Funds (and their classes of shares); and (4) seek to better allocate the costs of services across the Munder Funds; | |
• | the performance of the Fund and Advisor, both generally with respect to all the Munder Funds and more specifically with respect to the Fund, as further described below; | |
• | the information provided by the Advisor in its Form ADV and in response to a detailed series of questions submitted by counsel to the Munder Funds; | |
• | the terms of the Advisory Agreement; and | |
• | the general experience, business, operations and financial condition of the Advisor. |
Based on these and other factors, the Board concluded that the facts presented to and considered by the Board justified approval of the continuance of the Advisory Agreement. The Board placed particular significance in this
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Notes to Financial Statements, June 30, 2005 (continued) |
regard on the Advisor’s work with the independent consultants and its efforts to pass on benefits of economies of scale to shareholders.
(b) The investment performance of the Fund and the Advisor: The Board considered the one-, three- and five-year and since inception gross and total investment performance of the Class Y shares of the Fund (as well as of similar classes of other Munder Funds) as of December 31, 2004; the performance of the Fund’s benchmark index with the performance characteristics most similar to the Fund, as well as a more broad-based benchmark index; and the median performance of the Fund’s “peer group” as categorized by Lipper Analytical Services, Inc. (“Lipper”).
In addition, the Board considered the Fund’s one-, three- and five-year Lipper “ranking” within the Fund’s peer group on a numeric, percentile and quartile ranking basis, as well as the three- and five-year and overall “star” ratings of the Fund by Morningstar, Inc. The Board also considered the Fund’s one-, three- and five-year total return for Class A shares as of December 31, 2004 as compared to the performance of a small group of funds deemed most comparable to the Fund by the Advisor. In this regard, the Board considered that the Fund’s: (1) gross returns for Class Y shares trailed the performance of the Fund’s benchmarks for the one- and three-year periods and exceeded the performance of the Fund’s benchmarks for the five-year period and (2) total returns exceeded the median performance of the Fund’s Lipper peer group for the periods in question.
Based on these considerations and comparisons, the Board concluded that the investment performance of the Fund supported approval of the continuance of the Advisory Agreement.
(c) The costs of the services to be provided and profits to be realized by the Advisor and its affiliates from the relationship with the Fund: The Board considered detailed information provided by the Advisor as to the costs and profitability of the Advisor (and its corporate parent) over the 12 months ended on December 31, 2004 and projections by the Advisor as to the costs and profitability of the Advisor (and its corporate parent) over the 12 months ending on December 31, 2005, with respect to all services provided by the Advisor and its affiliates to the Fund and based on certain stated assumptions. Based on these facts, the Board concluded that the costs of the Advisor’s services and the profitability of the Advisor (and its corporate parent) under the Advisory Agreement were not unreasonable.
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Notes to Financial Statements, June 30, 2005 (continued) |
(d) The extent to which economies of scale may be realized as the Fund grows and whether fee levels reflect economies of scale: The Board considered the Advisor’s extensive review of advisory and other fees of all the Munder Funds in 2004 for reasonableness and market rate comparability, which culminated in a series of contract renegotiations and fee reductions in 2004. The Board considered the Advisor’s representation that it will seek to share economies of scale with the Fund’s shareholders through appropriate mechanisms in the future. The Board also considered the Advisor’s efforts to assist the Fund in renegotiating the fees of the Fund’s transfer agent and the Advisor’s efforts in changing the administration fee structure to better allocate costs across the Munder Funds and to more effectively share economies of scale with Munder Fund shareholders. Based on these facts, as well as the Advisor’s willingness to work with independent, third-party consultants in its review of the Fund’s advisory fee, the Board concluded that the Advisor’s efforts in this regard strongly supported approving continuance of the Advisory Agreement.
(e) A comparison of fee levels of the Fund with those of comparable funds: The Board considered the fee levels of the Fund, both as to advisory and to total fees, as compared to fee levels of comparable funds, as determined by independent, third-party consultants in the context of the advisory fees. The Board also considered the Fund’s total expense ratio (and certain components of the total expense ratio) in comparison on a class-by-class basis with those of similar classes of each comparable fund in the Fund’s Lipper peer group and in comparison to the average, median, high and low net effective advisory fees of the funds in the Fund’s Lipper peer group. Further, the Board considered certain information regarding recent mutual fund advisory fee decreases by certain large mutual fund advisors, and decided that such decreases were driven by factors not relevant to the Fund. Based on these facts, the Board concluded that the current fee levels of the Fund should not preclude approval of the continuance of the Advisory Agreement.
(f) Benefits derived or to be derived by the Advisor from the relationship with the Fund: The Board considered the Advisor’s representation that, beyond the fees earned by the Advisor and its affiliates for providing services to the Fund, the Advisor may benefit from its relationship with the Fund in the sense that separately managed account clients may view the additional assets under management resulting from managing the Munder Funds as a positive attribute. In addition, the Board noted that the Advisor also may obtain increased reputational prestige from managing a nationally recognized mutual fund family that shares the Advisor’s name. The Board also considered the Advisor’s representation that, although money managers may
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Notes to Financial Statements, June 30, 2005 (continued) |
benefit from the use of “soft dollars” obtained from broker-dealers through payment of commissions on trades in client accounts, the Advisor believes that soft dollars should be used for the benefit of clients to the maximum extent possible. Based on these facts, the Board concluded that these additional benefits should not preclude approval of the continuance of the Advisory Agreement.
Based upon its review and evaluation of the information requested and provided and the factors addressed above, among others, and following discussion and having reached certain conclusions as addressed above, the Board unanimously approved the Advisory Agreement for an additional annual period commencing on July 1, 2005.
15. Trustees and Executive Officers (Unaudited)
Information about the Trustees and Executive Officers of the Munder Funds as of June 30, 2005, including their business addresses, ages and principal occupations during the past five years, and other directorships of publicly traded companies or funds, are set forth in the table below.
Number of | ||||||||||
Portfolios | ||||||||||
Term of | Principal | in Fund | ||||||||
Office(1) and | Occupation(s) | Complex | ||||||||
Position(s) with | Length of | During Past | Overseen | Other Directorships | ||||||
Name, Address and Age | the Funds | Time Served(2) | 5 Years | by Trustee | Held by Trustee | |||||
Non-Interested Trustees | ||||||||||
Thomas D. Eckert c/o The Munder Funds 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 57 | Trustee and Chairman | Indefinite; Trustee since 2/93; Chairman since 11/04 | Director, President and Chief Executive Officer, Capital Automotive REIT (real estate investment trust specializing in retail automotive properties) (since 10/97). | 27 | Capital Automotive REIT (since 10/97); Fieldstone Investment Corporation (since 11/03). | |||||
John Rakolta, Jr. c/o The Munder Funds 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 58 | Trustee and Vice Chairman | Indefinite; since 2/93 | Chairman and Chief Executive Officer, Walbridge Aldinger Company (construction/real estate/manufacturing company) (since 1991). | 27 | None |
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Number of | ||||||||||
Portfolios | ||||||||||
Term of | Principal | in Fund | ||||||||
Office(1) and | Occupation(s) | Complex | ||||||||
Position(s) with | Length of | During Past | Overseen | Other Directorships | ||||||
Name, Address and Age | the Funds | Time Served(2) | 5 Years | by Trustee | Held by Trustee | |||||
David J. Brophy c/o The Munder Funds 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 68 | Trustee | Indefinite; since 5/93 | Professor of Finance, University of Michigan-Business School (since 8/66). | 27 | None | |||||
Joseph E. Champagne c/o The Munder Funds 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 67 | Trustee | Indefinite; since 11/89 | Vice President, Macomb College (since 7/01); Dean, Macomb College (since 9/97). | 27 | None | |||||
John Engler c/o The Munder Funds 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 56 | Trustee | Indefinite; since 2/03 | President and Chief Executive Officer, National Association of Manufacturers (public advocacy for manufacturing) (since 10/04); President of State and Local Government/Vice President of Government Solutions for North America, Electronic Data Systems Corp. (computer services) (1/03 to 8/04); Governor of the State of Michigan (1/91 to 1/03). | 27 | Universal Forest Products, Inc. (manufacturer and distributor of lumber products) (since 1/03); Northwest Airlines (since 4/03); Dow Jones & Company (financial news and information company) (since 5/05). |
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Notes to Financial Statements, June 30, 2005 (continued) |
Number of | ||||||||||
Portfolios | ||||||||||
Term of | Principal | in Fund | ||||||||
Office(1) and | Occupation(s) | Complex | ||||||||
Position(s) with | Length of | During Past | Overseen | Other Directorships | ||||||
Name, Address and Age | the Funds | Time Served(2) | 5 Years | by Trustee | Held by Trustee | |||||
Arthur T. Porter c/o The Munder Funds 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 49 | Trustee | Indefinite; since 2/01 | Executive Director, McGill University Health Centre (since 4/04); Chairman and Chief Executive Officer, University Radiation Oncology Physicians PC, Griffon Companies (10/03 to 4/04); President and Chief Executive Officer of the Detroit Medical Center (3/99 to 9/03). | 27 | Adherex Technologies, Inc. (biopharmaceutical company) (since 3/04). | |||||
Lisa A. Payne c/o The Munder Funds 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 46 | Trustee | Indefinite; Since 3/05 | Director, Vice Chairman and Chief Financial Officer of Taubman Centers, Inc. (real estate investment trust specializing in developing and operating regional shopping centers) (since 6/05); Director, Executive Vice President, Chief Financial Officer and Chief Administrative Officer of Taubman Centers, Inc. (1/97 to 6/05). | 26 | Taubman Centers, Inc. (since 1/97) |
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Notes to Financial Statements, June 30, 2005 (continued) |
Number of | ||||||||||
Portfolios | ||||||||||
Term of | Principal | in Fund | ||||||||
Office(1) and | Occupation(s) | Complex | ||||||||
Position(s) with | Length of | During Past | Overseen | Other Directorships | ||||||
Name, Address and Age | the Funds | Time Served(2) | 5 Years | by Trustee | Held by Trustee | |||||
Interested Trustee | ||||||||||
Michael T. Monahan(3) 3707 West Maple Rd. Suite 102 Bloomfield Hills, MI 48301 Age 66 | Trustee | Indefinite; since 8/00 | President of Monahan Enterprises, LLC (consulting company) (since 6/99); Chairman of Munder Capital Management (investment advisor) (10/99 to 12/00); Chairman and Chief Executive Officer of Munder Capital Management (10/99 to 12/99). | 27 | CMS Energy Corporation (energy company) (since 12/02). |
(1) | The Trustee may serve until his death, resignation, removal or retirement. Pursuant to the By-Laws, any Trustee shall retire as Trustee at the end of the calendar year in which he attains the age of 75 years. |
(2) | Length of time served is measured from the earliest date of service as a Trustee of any of the Munder Funds or their predecessors. |
(3) | Mr. Monahan is an “interested person” as defined in the 1940 Act. Mr. Monahan owns stock in Comerica, the indirect parent company of Munder Capital Management, the Fund’s advisor. Mr. Monahan also receives retirement and health benefits from Comerica. |
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Notes to Financial Statements, June 30, 2005 (continued) |
Term of | ||||||
Office(1) and | ||||||
Position(s) with | Length of | |||||
Name, Address and Age | the Funds | Time Served(2) | Principal Occupation(s) During Past 5 Years | |||
Officers | ||||||
Enrique Chang 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 42 | President & Principal Executive Officer | through 2/06; since 8/04 | President and Chief Investment Officer of Munder Capital Management (since 2/05); Executive Vice President, Investment Management of Comerica Bank (since 3/05); President, Chief Operating Officer and Chief Investment Officer of Munder Capital Management (8/04 to 2/05); President and Chief Investment Officer of Munder Capital Management (1/02 to 8/04); Chief Investment Officer- Equity of Munder Capital Management (5/00 to 1/02); Chief Investment Officer of Vantage Global Advisors (investment advisor) (11/97 to 5/00). | |||
Stephen J. Shenkenberg 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 47 | Vice President, Secretary, Chief Legal Officer & Chief Compliance Officer | through 2/06; since 8/00 | Managing Director, General Counsel, Chief Compliance Officer and Secretary of Munder Capital Management (since 2/05); Executive Vice President and General Counsel of Munder Capital Management (7/00 to 2/05); Deputy General Counsel of Strong Capital Management, Inc. (investment advisor) (12/92 to 7/00). | |||
Peter K. Hoglund 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 39 | Vice President & Principal Financial Officer | through 2/06; since 2/01 | Managing Director and Chief Administrative Officer of Munder Capital Management (since 2/05); Chief Administrative Officer of Munder Capital Management (5/00 to 2/05); Associate of Heartland Industrial Partners (a private equity group) (10/99 to 5/00); Sr. Portfolio Manager of Munder Capital Management (1/98 to 10/99). | |||
Cherie N. Ugorowski 480 Pierce Street Suite 300 Birmingham, MI 48009 Age 36 | Treasurer & Principal Accounting Officer | through 2/06; since 8/01 | Controller of Munder Capital Management (since 6/01); Corporate Accounting Manager, DaimlerChrysler Corporation (automotive manufacturer) (9/99 to 6/01); Manager, Audit and Business Advisory Practice, Arthur Andersen LLP (5/95 to 9/99). |
(1) | The officers are elected annually by the Board. |
(2) | Length of time served is measured from the earliest date of service as an officer of any of the Munder Funds or their predecessors. |
The Statement of Additional Information for the Fund includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 438-5789.
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Table of Contents
To the Shareholders of Munder Healthcare Fund
and Board of Trustees of Munder Series Trust II
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Munder Healthcare Fund (one of the portfolios comprising Munder Series Trust II) (formerly, the Munder Framlington Funds Trust) as of June 30, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2005, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Munder Healthcare Fund of Munder Series Trust II at June 30, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
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August 12, 2005
35
Table of Contents
Thomas D. Eckert, Chairman | |
John Rakolta, Jr., Vice Chairman | |
David J. Brophy | |
Joseph E. Champagne | |
John Engler | |
Michael T. Monahan | |
Lisa A. Payne | |
Arthur T. Porter |
Enrique Chang, President and Principal Executive Officer | |
Peter K. Hoglund, Vice President and Principal Financial Officer | |
Stephen J. Shenkenberg, Vice President, Secretary, Chief Legal Officer, and Chief Compliance Officer | |
Amy D. Eisenbeis, Assistant Secretary | |
Mary Ann Shumaker, Assistant Secretary | |
Melanie Mayo West, Assistant Secretary | |
Cherie N. Ugorowski, Treasurer and Principal Accounting Officer | |
Kevin R. Kuhl, Assistant Treasurer | |
David W. Rumph, Assistant Treasurer | |
Bradford E. Smith, Assistant Treasurer |
Munder Capital Management | |
Munder Capital Center | |
480 Pierce Street | |
Birmingham, MI 48009 |
PFPC Inc. | |
4400 Computer Drive | |
Westborough, MA 01581 |
State Street Bank and Trust Company | |
One Lincoln Street | |
Boston, MA 02111 |
Funds Distributor, Inc. | |
100 Summer Street | |
Boston, MA 02110 |
Dechert LLP | |
1775 I Street, N.W. | |
Washington, D.C. 20006 |
Ernst & Young LLP | |
200 Clarendon Street | |
Boston, MA 02116 |
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ANNHC605 |
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By: | /s/ Enrique Chang | |||
Enrique Chang | ||||
President and Principal Executive Officer | ||||
Date: | September 7, 2005 |
By: | /s/ Enrique Chang | |||
Enrique Chang | ||||
President and Principal Executive Officer | ||||
Date: | September 7, 2005 | |||
By: | /s/ Peter K. Hoglund | |||
Peter K. Hoglund | ||||
Vice President and Principal Financial Officer | ||||
Date: | September 7, 2005 |