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MANAGEMENT INVESTMENT COMPANIES
BIRMINGHAM, MICHIGAN 48009
| (Name and Address of Agent for Service) | Copy to: | |
| STEPHEN SHENKENBERG 480 PIERCE STREET BIRMINGHAM, MICHIGAN 48009 | JANE KANTER DECHERT LLP 1775 I STREET, N.W. WASHINGTON, D.C. 20006 |
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DEAR MUNDER FUND SHAREHOLDERS:
The stock and bond markets parted ways during the last six months of 2005. The S&P 500® Index, a widely recognized measure of the performance of the U.S. stock market, generated a positive return of 5.77%, while the Lehman Brothers Aggregate Bond Index, which measures the performance of the investment-grade U.S. taxable bond market, posted a negative return of -0.08%. This was a significant contrast to the first half of the year, during which the S&P 500® posted a negative return of -0.81% while the Lehman Brothers Aggregate Bond Index earned 2.51%.
Other shifts were seen during the last half of 2005 as well. In the equity market, according to the Russell indexes, which measure the performance of various segments of nearly all of the U.S. equity market, growth stocks outperformed value stocks, while the reverse was true during the prior six months. In the fixed income market, longer-term yields declined during the first half of the year and then rose during the second half of 2005. We feel these crosscurrents in the market provide strong support for the value of portfolio diversification.
Given the continual shifts in the relative performance of various investment styles, our investment strategies, which have strong institutional roots, are designed to be applied consistently across market environments. Each Fund adheres to a clearly defined investment discipline representing a particular segment of the stock or bond market. Investment parameters are established to help manage risk. Although there is no guarantee that we will achieve our goal, this disciplined approach to investing is designed to reduce the variability of returns and to focus on security selection. We believe that the selection of securities is a key strength of our investment management teams.
On the following pages, you will find information and commentary on the relative and absolute performance of the Fund covered in this semi-annual report. 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 |
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Contents
ii | Management’s Discussion of Fund Performance | |
iv | 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 | |
19 | Notes to Financial Statements |
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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 December 31, 2005. The following pie chart illustrates the allocation of the Fund’s investments by sub-industry. A complete list of holdings as of December 31, 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 six months ended December 31, 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.
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Portfolio Management Team: Suresh Rajagopal and Thomas Wald
The Fund generated a 7.29% return for the six months ended December 31, 2005, compared to the 5.82% return for the Goldman Sachs Sector Index — Health Care and the 8.72% median return for the Lipper universe of health/biotechnology funds.
The Fund benefited during the period from a positive environment generally for health care investors, while also performing well on a relative basis compared to its Goldman Sachs benchmark. The largest positive contributions to the Fund’s relative return for the six-month period came from its pharmaceuticals, health care services and health care facilities investments.
In particular, an underweight in Pfizer, Inc. (2.2% of the Fund) and in Johnson & Johnson (5.2% of the Fund) boosted the relative return within pharmaceuticals. An overweighted position in Express Scripts, Inc., a provider of pharmacy benefit management and administration services (1.9% of the Fund), was primarily responsible for the strong performance of the Fund’s health care services holdings. The lack of a position in Tenet Healthcare Corp., Triad Hospitals, Inc. and Universal Health Systems, Inc., along with an underweight in HCA Inc. (0.8% of the Fund), helped to boost the relative return of the health care facilities segment of the Fund. All of these companies are involved in the operation of hospitals.
These positive factors were only partially offset by weak relative performance in the Fund’s biotechnology holdings. OSI Pharmaceuticals, Inc., which was eliminated from the Fund in September, was the primary detractor from relative returns in that sub-industry.
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 (GSSI Health Care Index) is a modified-capitalization weighted equity index designed to measure the performance of U.S. traded securities in the health care sector. 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 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.
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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 July 1, 2005 to December 31, 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 | ||||||||||||||
| 7/1/05 | 12/31/05 | 7/1/05-12/31/05 | Ratio | ||||||||||||||
Actual | |||||||||||||||||
| Class A | $1,000.00 | $ | 1,072.80 | $ | 9.30 | 1.78% | |||||||||||
| Class B | $1,000.00 | $ | 1,069.00 | $ | 13.19 | 2.53% | |||||||||||
| Class C | $1,000.00 | $ | 1,068.60 | $ | 13.19 | 2.53% | |||||||||||
| Class K | $1,000.00 | $ | 1,072.40 | $ | 9.30 | 1.78% | |||||||||||
| Class R | $1,000.00 | $ | 1,071.20 | $ | 10.60 | 2.03% | |||||||||||
| Class Y | $1,000.00 | $ | 1,073.80 | $ | 8.00 | 1.53% | |||||||||||
Hypothetical | |||||||||||||||||
| Class A | $1,000.00 | $ | 1,016.23 | $ | 9.05 | 1.78% | |||||||||||
| Class B | $1,000.00 | $ | 1,012.45 | $ | 12.83 | 2.53% | |||||||||||
| Class C | $1,000.00 | $ | 1,012.45 | $ | 12.83 | 2.53% | |||||||||||
| Class K | $1,000.00 | $ | 1,016.23 | $ | 9.05 | 1.78% | |||||||||||
| Class R | $1,000.00 | $ | 1,014.97 | $ | 10.31 | 2.03% | |||||||||||
| Class Y | $1,000.00 | $ | 1,017.49 | $ | 7.78 | 1.53% | |||||||||||
| * | 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 184/365 (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, December 31, 2005 (Unaudited) |
| Shares | Value | |||||||
| COMMON STOCKS — 99.4% | ||||||||
| Health Care — 98.8% | ||||||||
| Biotechnology — 19.5% | ||||||||
| 160,575 | Amgen, Inc. † | $ | 12,662,944 | |||||
| 43,825 | Biogen Idec Inc. † | 1,986,587 | ||||||
| 21,225 | Celgene Corporation †,(a) | 1,375,380 | ||||||
| 128,625 | Genentech, Inc. † | 11,897,812 | ||||||
| 65,525 | Genzyme Corporation † | 4,637,860 | ||||||
| 96,100 | Gilead Sciences, Inc. † | 5,057,743 | ||||||
| 39,875 | Millennium Pharmaceuticals, Inc. † | 386,788 | ||||||
| 20,075 | Neurocrine Biosciences, Inc. †,(a) | 1,259,305 | ||||||
| 12,650 | Protein Design Labs, Inc. †,(a) | 359,513 | ||||||
| 12,900 | Vertex Pharmaceuticals Incorporated †,(a) | 356,943 | ||||||
| 39,980,875 | ||||||||
| Health Care Distributors — 3.5% | ||||||||
| 28,850 | AmerisourceBergen Corporation | 1,194,390 | ||||||
| 57,825 | Cardinal Health, Inc. | 3,975,469 | ||||||
| 39,800 | McKesson Corporation | 2,053,282 | ||||||
| 7,223,141 | ||||||||
| Health Care Equipment — 17.7% | ||||||||
| 81,350 | Baxter International, Inc. | 3,062,827 | ||||||
| 24,525 | Becton, Dickinson and Company | 1,473,462 | ||||||
| 39,925 | Biomet, Inc. (a) | 1,460,057 | ||||||
| 14,025 | C.R. Bard, Inc. | 924,528 | ||||||
| 16,275 | Fisher Scientific International, Inc. † | 1,006,772 | ||||||
| 44,000 | Guidant Corporation | 2,849,000 | ||||||
| 206,650 | Medtronic, Inc. | 11,896,840 | ||||||
| 41,000 | ResMed, Inc. †,(a) | 1,570,710 | ||||||
| 26,325 | Respironics, Inc. † | 975,868 | ||||||
| 106,625 | St. Jude Medical, Inc. † | 5,352,575 | ||||||
| 66,975 | Stryker Corporation | 2,975,699 | ||||||
| 22,650 | Thermo Electron Corporation † | 682,445 | ||||||
| 32,125 | Zimmer Holdings, Inc. † | 2,166,510 | ||||||
| 36,397,293 | ||||||||
| Health Care Facilities — 1.9% | ||||||||
| 12,050 | Community Health Systems, Inc. † | 461,997 | ||||||
| 30,575 | HCA Inc. | 1,544,038 | ||||||
| 17,875 | Health Management Associates, Inc., Class A (a) | 392,535 | ||||||
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| Portfolio of Investments, December 31, 2005 (Unaudited) (continued) |
| Shares | Value | |||||||
| COMMON STOCKS (Continued) | ||||||||
| Health Care (Continued) | ||||||||
| Health Care Facilities (Continued) | ||||||||
| 7,700 | LifePoint Hospitals, Inc. †,(a) | $ | 288,750 | |||||
| 43,350 | VCA Antech, Inc. †,(a) | 1,222,470 | ||||||
| 3,909,790 | ||||||||
| Health Care Services — 5.5% | ||||||||
| 90,550 | Caremark Rx, Inc. † | 4,689,584 | ||||||
| 45,450 | Express Scripts, Inc. † | 3,808,710 | ||||||
| 27,025 | Medco Health Solutions, Inc. † | 1,507,995 | ||||||
| 26,525 | Quest Diagnostics Incorporated | 1,365,507 | ||||||
| 11,371,796 | ||||||||
| Health Care Supplies — 3.4% | ||||||||
| 46,300 | Alcon, Inc. | 6,000,480 | ||||||
| 13,550 | Millipore Corporation † | 894,842 | ||||||
| 6,895,322 | ||||||||
| Managed Health Care — 17.7% | ||||||||
| 72,725 | Aetna, Inc. | 6,858,695 | ||||||
| 16,075 | CIGNA Corporation | 1,795,577 | ||||||
| 43,400 | Coventry Health Care, Inc. † | 2,472,064 | ||||||
| 14,675 | Health Net, Inc., Class A † | 756,496 | ||||||
| 21,300 | Humana, Inc. † | 1,157,229 | ||||||
| 6,625 | Sierra Health Services, Inc. †,(a) | 529,735 | ||||||
| 205,762 | UnitedHealth Group, Inc. | 12,786,051 | ||||||
| 125,441 | WellPoint, Inc. † | 10,008,901 | ||||||
| 36,364,748 | ||||||||
| Pharmaceuticals — 29.6% | ||||||||
| 175,775 | Abbott Laboratories | 6,930,808 | ||||||
| 28,725 | Allergan, Inc. | 3,101,151 | ||||||
| 154,650 | Bristol-Myers Squibb Company | 3,553,857 | ||||||
| 156,500 | Eli Lilly and Company | 8,856,335 | ||||||
| 176,150 | Johnson & Johnson | 10,586,615 | ||||||
| 154,625 | Merck & Co. Inc. | 4,918,621 | ||||||
| 195,050 | Pfizer, Inc. | 4,548,566 | ||||||
| 31,975 | Roche Holding Ltd., ADR | 2,393,364 | ||||||
| 22,550 | Salix Pharmaceuticals, Ltd. †,(a) | 396,429 | ||||||
| 188,225 | Schering-Plough Corporation | 3,924,491 | ||||||
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| Shares | Value | |||||||
| Health Care (Continued) | ||||||||
| Pharmaceuticals (Continued) | ||||||||
| 19,050 | Sepracor, Inc. †,(a) | $ | 982,980 | |||||
| 228,975 | Wyeth | 10,548,879 | ||||||
| 60,742,096 | ||||||||
| Total Health Care | 202,885,061 | |||||||
| Industrials — 0.6% | ||||||||
| Environmental & Facilities Services — 0.6% | ||||||||
| 20,975 | Stericycle, Inc. †,(a) | 1,235,008 | ||||||
| TOTAL COMMON STOCKS | ||||||||
| (Cost $172,047,171) | 204,120,069 | |||||||
| WARRANTS — 0.0% | ||||||||
| Biotechnology — 0.0% | ||||||||
| 50,000 | Aphton Corporation, expires 09/18/2008 (exercise price: $8.12) †,(b) | 0 | ||||||
| 52,500 | Axonyx, Inc., expires 01/08/2009 (exercise price: $7.25) †,(b) | 0 | ||||||
| TOTAL WARRANTS | ||||||||
| (Cost $330,613) | 0 | |||||||
| Principal | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT — 1.3% | ||||||||
| (Cost $2,675,000) | ||||||||
| $ | 2,675,000 | Agreement with State Street Bank and Trust Company, 3.900% dated 12/30/2005, to be repurchased at $2,676,159 on 01/03/2006, collateralized by $2,715,000 FHLMC, 5.500% maturing 11/16/2015 (value $2,728,575) | 2,675,000 | |||||
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| Portfolio of Investments, December 31, 2005 (Unaudited) (continued) |
| Shares | Value | |||||||
| COLLATERAL FOR SECURITIES ON LOAN — 3.6% | ||||||||
| (Cost $7,392,330) | ||||||||
| 7,392,330 | State Street Navigator Securities Trust – Prime Portfolio(c) | $ | 7,392,330 | |||||
TOTAL INVESTMENTS | |||||||||
| (Cost $182,445,114) | 104.3 | % | 214,187,399 | ||||||
OTHER ASSETS AND LIABILITIES (Net) | (4.3 | ) | (8,847,827 | ) | |||||
NET ASSETS | 100.0 | % | $ | 205,339,572 | |||||
| † | Non-income producing security. |
| (a) | Security, or a portion thereof, is on loan. |
| (b) | Fair valued security as of December 31, 2005 (see Notes to Financial Statements, Note 2). |
| (c) | As of December 31, 2005, the market value of the securities on loan is $7,179,544. |
ABBREVIATIONS:
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| Statement of Assets and Liabilities, December 31, 2005 (Unaudited) |
ASSETS: | |||||||
| Investments, at value | |||||||
| See accompanying schedule: | |||||||
| Securities (including $7,179,544 of securities loaned) | $ | 211,512,399 | |||||
| Repurchase agreement | 2,675,000 | ||||||
| Total Investments | 214,187,399 | ||||||
| Cash | 6 | ||||||
| Interest receivable | 580 | ||||||
| Dividends receivable | 125,003 | ||||||
| Receivable for Fund shares sold | 62,930 | ||||||
| Prepaid expenses and other assets | 46,872 | ||||||
| Total Assets | 214,422,790 | ||||||
LIABILITIES: | |||||||
| Payable for Fund shares redeemed | 1,112,210 | ||||||
| Payable upon return of securities loaned | 7,392,330 | ||||||
| Transfer agency/record keeping fees payable | 175,894 | ||||||
| Investment advisory fees payable | 163,950 | ||||||
| Distribution and shareholder servicing fees payable — Class A, B, C and R Shares | 116,970 | ||||||
| Trustees’ fees and expenses payable | 48,530 | ||||||
| Administration fees payable | 23,053 | ||||||
| Custody fees payable | 800 | ||||||
| Shareholder servicing fees payable — Class K Shares | 18 | ||||||
| Accrued expenses and other payables | 49,463 | ||||||
| Total Liabilities | 9,083,218 | ||||||
NET ASSETS | $ | 205,339,572 | |||||
| Investments, at cost | $ | 182,445,114 | |||||
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NET ASSETS consist of: | ||||
| Accumulated net investment loss | $ | (1,472,395 | ) | |
| Accumulated net realized loss on investments sold | (151,557,943 | ) | ||
| Net unrealized appreciation of investments | 31,742,285 | |||
| Par value | 8,358 | |||
| Paid-in capital in excess of par value | 326,619,267 | |||
| $ | 205,339,572 | |||
NET ASSETS: | ||||
| Class A Shares | $ | 76,941,593 | ||
| Class B Shares | $ | 77,028,086 | ||
| Class C Shares | $ | 39,652,461 | ||
| Class K Shares | $ | 91,389 | ||
| Class R Shares | $ | 6,164 | ||
| Class Y Shares | $ | 11,619,879 | ||
SHARES OUTSTANDING: | ||||
| Class A Shares | 3,016,065 | |||
| Class B Shares | 3,228,734 | |||
| Class C Shares | 1,663,767 | |||
| Class K Shares | 3,588 | |||
| Class R Shares | 242 | |||
| Class Y Shares | 445,835 | |||
CLASS A SHARES: | ||||
| Net asset value and redemption price per share | $25.51 | |||
| Maximum sales charge | 5.50 | % | ||
| Maximum offering price per share | $26.99 | |||
CLASS B SHARES: | ||||
| Net asset value and offering price per share* | $23.86 | |||
CLASS C SHARES: | ||||
| Net asset value and offering price per share* | $23.83 | |||
CLASS K SHARES: | ||||
| Net asset value, offering price and redemption price per share | $25.47 | |||
CLASS R SHARES: | ||||
| Net asset value, offering price and redemption price per share | $25.42 | |||
CLASS Y SHARES: | ||||
| Net asset value, offering price and redemption price per share | $26.06 | |||
| * | Redemption price per share is equal to net asset value per share less any applicable contingent deferred sales charge (“CDSC”). |
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| Statement of Operations, For the Period Ended December 31, 2005 (Unaudited) |
INVESTMENT INCOME: | ||||||
| Interest | $ | 26,347 | ||||
| Dividends(a) | 901,189 | |||||
| Securities lending | 12,675 | |||||
| Total Investment Income | 940,211 | |||||
EXPENSES: | ||||||
| Distribution and shareholder servicing fees: | ||||||
| Class A Shares | 96,903 | |||||
| Class B Shares | 416,801 | |||||
| Class C Shares | 206,316 | |||||
| Class R Shares | 15 | |||||
| Shareholder servicing fees: | ||||||
| Class K Shares | 136 | |||||
| Investment advisory fees | 1,068,540 | |||||
| Transfer agency/record keeping fees | 268,357 | |||||
| Administration fees | 154,233 | |||||
| Printing and mailing fees | 48,961 | |||||
| Legal and audit fees | 38,578 | |||||
| Registration and filing fees | 23,778 | |||||
| Trustees’ fees and expenses | 20,296 | |||||
| Custody fees | 2,769 | |||||
| Other | 14,776 | |||||
| Total Expenses | 2,360,459 | |||||
NET INVESTMENT LOSS | (1,420,248 | ) | ||||
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: | ||||||
| Net realized gain/(loss) from: | ||||||
| Security transactions | 8,192,987 | |||||
| Foreign currency-related transactions | (24,838 | ) | ||||
| Net change in unrealized appreciation/(depreciation) of: | ||||||
| Securities | 7,570,767 | |||||
| Foreign currency-related transactions | 1,663 | |||||
| Net realized and unrealized gain on investments | 15,740,579 | |||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 14,320,331 | ||||
| (a) | Net of foreign withholding taxes of $1,054. |
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Munder Healthcare Fund
| Statements of Changes in Net Assets |
| Period Ended | |||||||||
| December 31, 2005 | Year Ended | ||||||||
| (Unaudited) | June 30, 2005(a) | ||||||||
| Net investment loss | $ | (1,420,248 | ) | $ | (4,467,566 | ) | |||
| Net realized gain from security and foreign currency-related transactions | 8,168,149 | 19,642,349 | |||||||
| Net change in unrealized appreciation/(depreciation) of securities and foreign currency-related transactions | 7,572,430 | (14,715,657 | ) | ||||||
| Net increase in net assets resulting from operations | 14,320,331 | 459,126 | |||||||
| Net increase/(decrease) in net assets from Fund share transactions: | |||||||||
| Class A Shares | (4,037,883 | ) | (22,676,528 | ) | |||||
| Class B Shares | (14,838,335 | ) | (30,992,138 | ) | |||||
| Class C Shares | (4,518,847 | ) | (14,310,980 | ) | |||||
| Class K Shares | (58,568 | ) | (26,443 | ) | |||||
| Class R Shares | — | 5,000 | |||||||
| Class Y Shares | (29,406 | ) | (395,450 | ) | |||||
| Short-term trading fees | 4,233 | 22,094 | |||||||
| Voluntary contribution from Advisor | 176,297 | — | |||||||
| Net decrease in net assets | (8,982,178 | ) | (67,915,319 | ) | |||||
NET ASSETS: | |||||||||
| Beginning of period | 214,321,750 | 282,237,069 | |||||||
| End of period | $ | 205,339,572 | $ | 214,321,750 | |||||
| Accumulated net investment loss | $ | (1,472,395 | ) | $ | (52,147 | ) | |||
| (a) | The Munder Healthcare Fund Class R Shares commenced operations on July 29, 2004. |
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| Statements of Changes in Net Assets — Capital Stock Activity |
| Period Ended | ||||||||
| December 31, 2005 | Year Ended | |||||||
| (Unaudited) | June 30, 2005(a) | |||||||
Amount | ||||||||
Class A Shares: | ||||||||
| Sold* | $ | 7,369,136 | $ | 18,041,279 | ||||
| Redeemed | (11,407,019 | ) | (40,717,807 | ) | ||||
| Net decrease | $ | (4,037,883 | ) | $ | (22,676,528 | ) | ||
Class B Shares: | ||||||||
| Sold | $ | 1,161,017 | $ | 4,509,314 | ||||
| Redeemed* | (15,999,352 | ) | (35,501,452 | ) | ||||
| Net decrease | $ | (14,838,335 | ) | $ | (30,992,138 | ) | ||
Class C Shares: | ||||||||
| Sold | $ | 955,764 | $ | 1,935,581 | ||||
| Redeemed | (5,474,611 | ) | (16,246,561 | ) | ||||
| Net decrease | $ | (4,518,847 | ) | $ | (14,310,980 | ) | ||
Class K Shares: | ||||||||
| Redeemed | $ | (58,568 | ) | $ | (26,443 | ) | ||
| Net decrease | $ | (58,568 | ) | $ | (26,443 | ) | ||
Class R Shares: | ||||||||
| Sold | $ | — | $ | 5,000 | ||||
| Net increase | $ | — | $ | 5,000 | ||||
Class Y Shares: | ||||||||
| Sold | $ | 168,398 | $ | 624,004 | ||||
| Redeemed | (197,804 | ) | (1,019,454 | ) | ||||
| Net decrease | $ | (29,406 | ) | $ | (395,450 | ) | ||
| * | 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
| Period Ended | ||||||||
| December 31, 2005 | Year Ended | |||||||
| (Unaudited) | June 30, 2005(a) | |||||||
Shares | ||||||||
Class A Shares: | ||||||||
| Sold* | 297,089 | 798,315 | ||||||
| Redeemed | (458,938 | ) | (1,848,840 | ) | ||||
| Net decrease | (161,849 | ) | (1,050,525 | ) | ||||
Class B Shares: | ||||||||
| Sold | 50,018 | 216,134 | ||||||
| Redeemed* | (688,179 | ) | (1,681,957 | ) | ||||
| Net decrease | (638,161 | ) | (1,465,823 | ) | ||||
Class C Shares: | ||||||||
| Sold | 40,808 | 92,830 | ||||||
| Redeemed | (235,465 | ) | (775,479 | ) | ||||
| Net decrease | (194,657 | ) | (682,649 | ) | ||||
Class K Shares: | ||||||||
| Redeemed | (2,354 | ) | (1,162 | ) | ||||
| Net decrease | (2,354 | ) | (1,162 | ) | ||||
Class R Shares: | ||||||||
| Sold | — | 242 | ||||||
| Net increase | — | 242 | ||||||
Class Y Shares: | ||||||||
| Sold | 6,718 | 27,492 | ||||||
| Redeemed | (7,688 | ) | (45,779 | ) | ||||
| Net decrease | (970 | ) | (18,287 | ) | ||||
| * | 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 | ||||||||||||||||||||||||
| Period Ended | Year | Year | Year | Year | Year | |||||||||||||||||||
| 12/31/2005(c) | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||
| (Unaudited) | 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 | $ | 23.78 | $ | 23.22 | $ | 17.67 | $ | 16.11 | $ | 25.31 | $ | 28.35 | ||||||||||||
Income/(loss) from investment operations: | ||||||||||||||||||||||||
| Net investment loss | (0.11) | (0.33 | ) | (0.36 | ) | (0.29 | ) | (0.32 | ) | (0.35 | ) | |||||||||||||
| Net realized and unrealized gain/(loss) on investments | 1.82 | 0.89 | 5.91 | 1.85 | (8.88 | ) | (1.93 | ) | ||||||||||||||||
| Total from investment operations | 1.71 | 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) | 0.00 | (e) | — | — | — | |||||||||||||||
| Voluntary contribution from Advisor | 0.02 | — | — | — | — | — | ||||||||||||||||||
| Net asset value, end of period | $ | 25.51 | $ | 23.78 | $ | 23.22 | $ | 17.67 | $ | 16.11 | $ | 25.31 | ||||||||||||
Total return(b) | 7.28 | %(g) | 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) | $ | 76,942 | $ | 75,570 | $ | 98,196 | $ | 67,456 | $ | 81,129 | $ | 167,514 | ||||||||||||
| Ratio of operating expenses to average net assets | 1.78 | %(f) | 1.92 | % | 1.91 | % | 2.14 | % | 1.63 | % | 1.55 | % | ||||||||||||
| Ratio of net investment loss to average net assets | (0.90) | %(f) | (1.46 | )% | (1.68 | )% | (2.02 | )% | (1.54 | )% | (1.28 | )% | ||||||||||||
| Portfolio turnover rate | 26 | % | 118 | % | 68 | % | 46 | % | 38 | % | 45 | % | ||||||||||||
| Ratio of operating expenses to average net assets without expense waivers and/or reimbursements | 1.78 | %(f) | 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. |
| (f) | Annualized. |
| (g) | If the Advisor had not made a voluntary capital contribution to the Fund, the total return would have been 7.19% for Class A Shares and 6.81% for Class B Shares. |
12
Table of Contents
| B Shares | ||||||||||||||||||||||||
| Period Ended | Year | Year | Year | Year | Year | |||||||||||||||||||
| 12/31/05(c) | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||
| (Unaudited) | 6/30/05(c) | 6/30/04(c) | 6/30/03(c) | 6/30/02(c) | 6/30/01(c) | |||||||||||||||||||
| $ | 22.32 | $ | 21.96 | $ | 16.84 | $ | 15.47 | $ | 24.48 | $ | 27.64 | |||||||||||||
| (0.19 | ) | (0.46 | ) | (0.49 | ) | (0.39 | ) | (0.45 | ) | (0.53 | ) | |||||||||||||
| 1.71 | 0.82 | 5.61 | 1.76 | (8.56 | ) | (1.87 | ) | |||||||||||||||||
| 1.52 | 0.36 | 5.12 | 1.37 | (9.01 | ) | (2.40 | ) | |||||||||||||||||
| — | — | — | — | — | (0.55 | ) | ||||||||||||||||||
| — | — | — | — | — | (0.21 | ) | ||||||||||||||||||
| — | — | — | — | — | (0.76 | ) | ||||||||||||||||||
| 0.00 | (e) | 0.00 | (e) | 0.00 | (e) | — | — | — | ||||||||||||||||
| 0.02 | — | — | — | — | — | |||||||||||||||||||
| $ | 23.86 | $ | 22.32 | $ | 21.96 | $ | 16.84 | $ | 15.47 | $ | 24.48 | |||||||||||||
| 6.90 | %(g) | 1.64 | % | 30.40 | %(d) | 8.86 | % | (36.78 | )% | (9.04 | )% | |||||||||||||
| $ | 77,028 | $ | 86,320 | $ | 117,126 | $ | 104,007 | $ | 119,253 | $ | 224,080 | |||||||||||||
| 2.53 | %(f) | 2.67 | % | 2.66 | % | 2.89 | % | 2.38 | % | 2.30 | % | |||||||||||||
| (1.66 | )%(f) | (2.21 | )% | (2.43 | )% | (2.77 | )% | (2.29 | )% | (2.03 | )% | |||||||||||||
| 26 | % | 118 | % | 68 | % | 46 | % | 38 | % | 45 | % | |||||||||||||
| 2.53 | %(f) | 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 | ||||||||||||||||||||||||
| Period Ended | Year | Year | Year | Year | Year | |||||||||||||||||||
| 12/31/05(c) | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||
| (Unaudited) | 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 | $ | 22.30 | $ | 21.94 | $ | 16.82 | $ | 15.45 | $ | 24.46 | $ | 27.62 | ||||||||||||
Income/(loss) from investment operations: | ||||||||||||||||||||||||
| Net investment loss | (0.19 | ) | (0.46 | ) | (0.49 | ) | (0.39 | ) | (0.45 | ) | (0.53 | ) | ||||||||||||
| Net realized and unrealized gain/(loss) on investments | 1.70 | 0.82 | 5.61 | 1.76 | (8.56 | ) | (1.87 | ) | ||||||||||||||||
| Total from investment operations | 1.51 | 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) | 0.00 | (e) | — | — | — | |||||||||||||||
| Voluntary contribution from Advisor | 0.02 | — | — | — | — | — | ||||||||||||||||||
| Net asset value, end of period | $ | 23.83 | $ | 22.30 | $ | 21.94 | $ | 16.82 | $ | 15.45 | $ | 24.46 | ||||||||||||
Total return(b) | 6.86 | %(g) | 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) | $ | 39,652 | $ | 41,443 | $ | 55,756 | $ | 49,725 | $ | 61,925 | $ | 122,087 | ||||||||||||
| Ratio of operating expenses to average net assets | 2.53 | %(f) | 2.67 | % | 2.66 | % | 2.89 | % | 2.38 | % | 2.30 | % | ||||||||||||
| Ratio of net investment loss to average net assets | (1.65 | )%(f) | (2.21 | )% | (2.43 | )% | (2.77 | )% | (2.29 | )% | (2.03 | )% | ||||||||||||
| Portfolio turnover rate | 26 | % | 118 | % | 68 | % | 46 | % | 38 | % | 45 | % | ||||||||||||
| Ratio of operating expenses to average net assets without expense waivers and/or reimbursements | 2.53 | %(f) | 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. |
| (f) | Annualized. |
| (g) | If the Advisor had not made a voluntary capital contribution to the Fund, the total return would have been 6.77% for Class C Shares and 7.16% for Class K Shares. |
14
Table of Contents
| K Shares | ||||||||||||||||||||||||
| Period Ended | Year | Year | Year | Year | Year | |||||||||||||||||||
| 12/31/05(c) | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||
| (Unaudited) | 6/30/05(c) | 6/30/04(c) | 6/30/03(c) | 6/30/02(c) | 6/30/01(c) | |||||||||||||||||||
| $ | 23.75 | $ | 23.18 | $ | 17.64 | $ | 16.09 | $ | 25.29 | $ | 28.31 | |||||||||||||
| (0.12 | ) | (0.33 | ) | (0.36 | ) | (0.29 | ) | (0.32 | ) | (0.34 | ) | |||||||||||||
| 1.82 | 0.90 | 5.90 | 1.84 | (8.88 | ) | (1.92 | ) | |||||||||||||||||
| 1.70 | 0.57 | 5.54 | 1.55 | (9.20 | ) | (2.26 | ) | |||||||||||||||||
| — | — | — | — | — | (0.55 | ) | ||||||||||||||||||
| — | — | — | — | — | (0.21 | ) | ||||||||||||||||||
| — | — | — | — | — | (0.76 | ) | ||||||||||||||||||
| 0.00 | (e) | 0.00 | (e) | 0.00 | (e) | — | — | — | ||||||||||||||||
| 0.02 | — | — | — | — | — | |||||||||||||||||||
| $ | 25.47 | $ | 23.75 | $ | 23.18 | $ | 17.64 | $ | 16.09 | $ | 25.29 | |||||||||||||
| 7.24 | %(g) | 2.41 | % | 31.46 | %(d) | 9.63 | % | (36.35 | )% | (8.32 | )% | |||||||||||||
| $ | 91 | $ | 141 | $ | 165 | $ | 184 | $ | 437 | $ | 990 | |||||||||||||
| 1.78 | %(f) | 1.92 | % | 1.91 | % | 2.14 | % | 1.63 | % | 1.55 | % | |||||||||||||
| (0.89 | )%(f) | (1.46 | )% | (1.68 | )% | (2.02 | )% | (1.54 | )% | (1.28 | )% | |||||||||||||
| 26 | % | 118 | % | 68 | % | 46 | % | 38 | % | 45 | % | |||||||||||||
| 1.78 | %(f) | 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 | ||||||||
| Period | ||||||||
| Ended | Period | |||||||
| 12/31/05(c) | Ended | |||||||
| (Unaudited) | 6/30/05(c) | |||||||
| Net asset value, beginning of period | $ | 23.73 | $ | 20.62 | ||||
Income/(loss) from investment operations: | ||||||||
| Net investment loss | (0.15 | ) | (0.35 | ) | ||||
| Net realized and unrealized gain/(loss) on investments | 1.82 | 3.46 | ||||||
| Total from investment operations | 1.67 | 3.11 | ||||||
Less distributions: | ||||||||
| Distributions from net realized gains | — | — | ||||||
| Distributions in excess of net realized gains | — | — | ||||||
| Total distributions | — | — | ||||||
| Short-term trading fees | 0.00 | (e) | 0.00 | (e) | ||||
| Voluntary contribution from Advisor | 0.02 | — | ||||||
| Net asset value, end of period | $ | 25.42 | $ | 23.73 | ||||
Total return(b) | 7.12 | %(g) | 15.08 | % | ||||
Ratios to average net assets/supplemental data: | ||||||||
| Net assets, end of period (in 000’s) | $ | 6 | $ | 6 | ||||
| Ratio of operating expenses to average net assets | 2.03 | %(f) | 2.17 | %(f) | ||||
| Ratio of net investment loss to average net assets | (1.19 | )%(f) | (1.70 | )%(f) | ||||
| Portfolio turnover rate | 26 | % | 118 | % | ||||
| Ratio of operating expenses to average net assets without expense waivers and/or reimbursements | 2.03 | %(f) | 2.17 | %(f) | ||||
| (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. |
| (g) | If the Advisor had not made a voluntary capital contribution to the Fund, the total return would have been 7.04% for Class R Shares and 7.29% for Class Y Shares. |
16
Table of Contents
| Y Shares | ||||||||||||||||||||||||
| Period | ||||||||||||||||||||||||
| Ended | Year | Year | Year | Year | Year | |||||||||||||||||||
| 12/31/05(c) | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||
| (Unaudited) | 06/30/05(c) | 6/30/04(c) | 6/30/03(c) | 6/30/02(c) | 6/30/01(c) | |||||||||||||||||||
| $ | 24.26 | $ | 23.64 | $ | 17.94 | $ | 16.32 | $ | 25.57 | $ | 28.56 | |||||||||||||
| (0.08 | ) | (0.28 | ) | (0.31 | ) | (0.26 | ) | (0.27 | ) | (0.29 | ) | |||||||||||||
| 1.86 | 0.90 | 6.01 | 1.88 | (8.98 | ) | (1.94 | ) | |||||||||||||||||
| 1.78 | 0.62 | 5.70 | 1.62 | (9.25 | ) | (2.23 | ) | |||||||||||||||||
| — | — | — | — | — | (0.55 | ) | ||||||||||||||||||
| — | — | — | — | — | (0.21 | ) | ||||||||||||||||||
| — | — | — | — | — | (0.76 | ) | ||||||||||||||||||
| 0.00 | (e) | 0.00 | (e) | 0.00 | (e) | — | — | — | ||||||||||||||||
| 0.02 | — | — | — | — | — | |||||||||||||||||||
| $ | 26.06 | $ | 24.26 | $ | 23.64 | $ | 17.94 | $ | 16.32 | $ | 25.57 | |||||||||||||
| 7.38 | %(g) | 2.66 | % | 31.77 | %(d) | 9.93 | % | (36.15 | )% | (8.14 | )% | |||||||||||||
| $ | 11,620 | $ | 10,841 | $ | 10,994 | $ | 7,031 | $ | 5,997 | $ | 9,640 | |||||||||||||
| 1.53 | %(f) | 1.67 | % | 1.66 | % | 1.89 | % | 1.38 | % | 1.30 | % | |||||||||||||
| (0.65 | )%(f) | (1.21 | )% | (1.43 | )% | (1.77 | )% | (1.29 | )% | (1.03 | )% | |||||||||||||
| 26 | % | 118 | % | 68 | % | 46 | % | 38 | % | 45 | % | |||||||||||||
| 1.53 | %(f) | 1.67 | % | 1.68 | % | 1.92 | % | 1.47 | % | 1.30 | % | |||||||||||||
17
Table of Contents
18
Table of Contents
| Notes to Financial Statements, December 31, 2005 (Unaudited) |
1. Organization
As of December 31, 2005, the Munder Funds (sometimes referred to as the “Funds”) consisted of 26 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. 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 has 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: Securities and other investments are generally valued using readily available market quotations, which may be obtained from various pricing sources approved by the Board of Trustees. Equity securities are generally valued at the last quoted sale price on the primary market or
19
Table of Contents
| Notes to Financial Statements, December 31, 2005 (Unaudited) (continued) |
exchange on which such securities are traded or the official close price of such exchange. Lacking any sales, equity securities (other than depositary receipts) are valued at the mean of the bid and asked prices, and depositary receipts are valued based on the underlying security’s value and relevant exchange rate. Securities for which market quotations are not readily available are valued using broker-dealer quotations or 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. Investment securities, other assets and liabilities, securities transactions, and items of income and expense denominated in foreign currencies are translated into U.S. dollars.
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.
Forward Foreign Currency Exchange and Spot Contracts: The Fund may engage in forward foreign currency exchange and spot contracts in an effort to
20
Table of Contents
| Notes to Financial Statements, December 31, 2005 (Unaudited) (continued) |
facilitate transactions in foreign securities and to reduce exposure to foreign currency exchange rates. The value of such contracts is translated into U.S. dollars. 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.
Loans of Portfolio Securities: The Fund may loan portfolio securities in an amount up to 25% of the value of its total assets to certain approved borrowers. Each loan is secured by collateral which is adjusted daily to have a market value at least equal to 100% of securities loaned at the close of business on the preceding business day. The Fund has the right under the lending agreement to recover the securities from the borrower on demand. If the borrower defaults or bankruptcy proceedings commence with respect to the borrower of the security, realization of the value of the securities loaned may be delayed or limited.
Security Transactions, Net Investment Income and Gains and Losses: For purposes of financial statement presentation, security transactions are recorded
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| Notes to Financial Statements, December 31, 2005 (Unaudited) (continued) |
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 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.
Short-Term Trading (Redemption) Fees: A short-term trading fee of 2% will be assessed on certain redemptions of Fund Shares made within 60 days of purchase as described in the Fund’s prospectus. 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 assets up to $250 million and 0.75% based on assets of $250 million or more. During the period ended December 31, 2005, the Fund paid an annual effective rate of 0.9993% for advisory services.
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
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| Notes to Financial Statements, December 31, 2005 (Unaudited) (continued) |
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, the Advisor is entitled to receive from the Fund an annual financial reporting fee in the amount of $8,000.
For the period ended December 31, 2005, the Advisor earned $154,233 before payment of sub-administration fees and $101,533 after payment of sub-administration fees for its administrative services to the Fund. During the period ended December 31, 2005, the Fund paid an annual effective rate of 0.1442% for administrative services.
The Advisor made a voluntary capital contribution to the Fund during the period ended December 31, 2005 of $176,297 after completing a review of the application of the Fund’s redemption fee policy in prior years.
During the period from the Fund’s inception through January 25, 2005, the Fund was managed by Framlington Overseas Investment Management Limited (the “Sub-Advisor”).
Comerica Incorporated (“Comerica”), through its wholly-owned subsidiary Comerica Bank, owns approximately 96% of the Advisor (87% on a fully diluted basis) as of December 31, 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 $446 for its sub-transfer agency and other related services provided to the Fund for the period ended December 31, 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. 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. A Board member who is Chairman of a committee (Audit Committee, Board Process and Governance Committee, and/or Nominating
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| Notes to Financial Statements, December 31, 2005 (Unaudited) (continued) |
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).
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 period ended December 31, 2005, the Fund paid $13 to Comerica Securities and $67 to Comerica Bank for shareholder services provided to Class A, Class B, Class C, Class K and Class R shareholders.
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| Notes to Financial Statements, December 31, 2005 (Unaudited) (continued) |
5. Securities Transactions
Cost of purchases and proceeds from sales of securities other than short-term investments and U.S. government securities were $55,045,492 and $78,063,088, respectively, for the period ended December 31, 2005.
At December 31, 2005, aggregate gross unrealized appreciation for all securities for which there was an excess of value over financial reporting cost was $37,925,585, aggregate gross unrealized depreciation for all securities for which there was an excess of financial reporting cost over value was $6,183,300 and net appreciation for financial reporting purposes was $31,742,285. At December 31, 2005, aggregate cost for financial reporting purposes was $182,445,114.
6. Investment Concentration
The Fund concentrates its investments in companies that are primarily engaged in activities within the health care sector and companies providing services primarily within the health care industries. By concentrating its investments, the Fund is subject to higher market risk and price volatility than funds with more broadly diversified investments. The value of stocks of health care and health care-related companies is particularly vulnerable to rapid changes in technology product cycles, government regulations and cost containment measures. In addition, adverse economic, business or political developments affecting the health care sector could have a major effect on the value of the Fund’s investments.
7. Revolving Line of Credit
Effective December 14, 2005, 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 13, 2006 on the daily amount of the unused commitment. During the period ended December 31, 2005, the Fund did not utilize the revolving line of credit. For the period ended December 31, 2005, total commitment fees for the Fund were $1,452.
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| Notes to Financial Statements, December 31, 2005 (Unaudited) (continued) |
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.
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.
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| Notes to Financial Statements, December 31, 2005 (Unaudited) (continued) |
10. Subsequent Event
Effective March 1, 2006, foreign currencies, investment securities and other assets and liabilities denominated in foreign currencies will be translated into U.S. dollars at the exchange rates generally determined as of 4:00 p.m. Eastern Time.
11. Quarterly Portfolio Schedule
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.
12. Proxy Voting Policies and Procedures
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
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.
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| 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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| SANNHC1205 |
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| By: | /s/ Enrique Chang | |||
| Enrique Chang | ||||
| President and Principal Executive Officer | ||||
| By: | /s/ Enrique Chang | |||
| Enrique Chang | ||||
| President and Principal Executive Officer | ||||
| By: | /s/ Peter K. Hoglund | |||
| Peter K. Hoglund | ||||
| Vice President and Principal Financial Officer | ||||