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THE
MUNDER
FUNDS
Investments
for all seasons
Semi-Annual Report
DECEMBER 31, 1996
NETNET FUND
"What we are witnessing
is truly extraordinary as
entire industries are
being transformed to
employ the Internet as
their marketing, sales and
distribution medium."
NETNET FUND
Letter to shareholders
D E A R F E L L O W S H A R E H O L D E R S :
I am excited to share with you the first financial report for the
NetNet Fund. This exciting fund focuses on an emerging medium of communication
that we believe will significantly change the way in which people communicate.
Specifically, this is an investment vehicle that affords investors the
opportunity to capitalize on the growing importance of the Internet and
Intranet. As companies and individuals utilize Internet and Intranet-related
technologies, we believe that there is an opportunity to capitalize on the
growing interest in this communications vehicle.
The Fund purchase securities of companies which we believe stand
to benefit from the growing use and importance of the Internet and intranet.
These are not limited to technology companies. We invest in all types of
companies that develop innovative ways to use and benefit from the Internet.
What we are witnessing is truly extraordinary as entire industries are being
transformed to employ the Internet as their marketing, sales and distribution
medium. The NetNet Fund seeks to find the companies which we believe are most
agile at utilizing and leveraging off of the opportunities the Internet
provides.
Early in 1997, we will begin testing a new system to allow
shareholders to access their accounts via the Internet. This will include the
capability to purchase additional shares and obtain account information. The
privacy of this privileged information is of the utmost importance to us, we are
proceeding cautiously with our service providers. As this feature evolves, we
want to assure you regarding the security of all account information. We also
plan to use this Fund as our model for handling an increasing amount of our
shareholder requests via the Internet.
Thank you for the confidence you have demonstrated in The Munder
Funds.
Sincerly
/s/ Lee Munder
- --------------------
Lee Munder President
Management's Discussion of
Fund Performance
NETNET FUND
Fund Manager: The Munder NetNet Fund Committee
The Fund earned a return of 29.61% for the period from inception
(August 19, 1996) to December 31, 1996 relative to the 21.95% five month and
15.65% four month return of the Lipper Science and Technology Universe.
The relative performance of the Fund was due to the Fund's
emphasis on connectivity and integration service providers. These onramp
specialists are among the first to benefit from the growing acceptance and
adaptation of the Internet and intranet technologies in corporate information
system departments. As companies recognize the Internet as a strategic resource
for research, communication and marketing, the demand for Internet integration
specialists is expected to continue to grow.
It should also be noted that, while technology names are a
significant part of the Fund's holdings, the Fund is not just a technology fund.
Its investment theme is the Internet and, therefore, holdings include not only
technology companies but also companies that use Internet technology to their
advantage. These companies can come from sectors such as finance and commerce.
NETNET FUND
PORTFOLIO OF INVESTMENTS, DECEMBER 31, 1996 (UNAUDITED)
================================================================================
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 79.3%
ADVERTISING - 2.7%
1,300 CKS Group, Inc. + $ 36,238
----------
COMMERCIAL SERVICES - 1.7%
950 CUC International, Inc. + 22,562
----------
COMPUTER EQUIPMENT - 4.3%
600 Dell Computer Corporation + 31,875
800 Security Dynamics Technologies, Inc. + 25,200
----------
57,075
----------
COMPUTER SERVICES - 15.6%
1,500 Checkfree Corporation + 25,687
2,000 Forrester Research, Inc. + 51,500
800 Gartner Group, Inc. + 31,150
600 Oracle Corporation + 25,050
2,500 XLConnect Solutions Inc. + 71,875
----------
205,262
----------
COMPUTER SOFTWARE - 16.0%
600 Adobe Systems, Inc. 22,425
1,600 AXENT Technologies, Inc. + 24,000
1,400 Check Point Software Technologies Ltd. + 30,450
600 McAfee Associates, Inc. + 26,400
600 Microsoft Corporation + 49,575
800 Transaction Systems Architects, Inc. + 26,600
3,000 Trusted Information Systems, Inc. + 32,250
----------
211,700
----------
FINANCIAL SERVICES - 1.9%
800 Charles Schwab Corporation 25,600
----------
INTERNET CONTENT - 4.0%
1,800 C/NET, Inc. + 52,200
----------
INTERNET SOFTWARE - 5.4%
200 Netscape Communications Corporation + 11,375
2,000 OneWave, Inc. + 15,625
1,500 Open Market, Inc. + 20,250
700 Shiva Corporation + 24,412
----------
71,662
----------
NETWORK SOFTWARE - 7.3%
1,200 Applix, Inc. + 26,250
2,000 CyberMedia, Inc. + 31,500
300 INSO Corporation + 11,925
1,100 Objective Systems Integrators, Inc. + 26,262
----------
95,937
----------
See Notes to Financial Statements.
1
NETNET FUND
PORTFOLIO OF INVESTMENTS, DECEMBER 31, 1996 (UNAUDITED)
(Continued)
================================================================================
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (Continued)
NETWORKING PRODUCTS - 9.7%
1,200 BBN Corporation + $ 27,000
500 CISCO Systems, Inc. + 31,812
1,600 Information Resources Engineering, Inc. + 14,400
1,800 International Network Services + 54,338
----------
127,550
----------
TELECOMMUNICATIONS EQUIPMENT - 8.3%
500 Adtran, Inc. + 20,750
500 Ascend Communications, Inc. + 31,063
500 Cascade Communications Corporation + 27,563
1,000 PairGain Technologies, Inc. + 30,438
----------
109,814
----------
TELEPHONE - LONG DISTANCE - 2.4%
1,200 WorldCom, Inc. + 31,275
----------
TOTAL COMMON STOCKS
(Cost $973,558) 1,046,875
----------
PRINCIPAL
AMOUNT
- --------------
REPURCHASE AGREEMENT - 19.5%
(Cost $257,000)
$257,000 Agreement with Morgan (J.P.) & Company,
5.750% dated 12/31/1996 to be repurchased
at $257,082 on 01/02/1997, collateralized
by $208,000 U.S. Treasury Bond, 8.750%
due 08/15/2020 (value $269,837) 257,000
----------
TOTAL INVESTMENTS (Cost $1,230,558*) 98.8% 1,303,875
OTHER ASSETS AND LIABILITIES (Net) 1.2 16,420
----- ----------
NET ASSETS 100.0% 1,320,295
===== ==========
- ---------
*Aggregate cost for Federal tax purposes.
+Non-income producing security
See Notes to Financial Statements.
2
NETNET FUND
STATEMENT OF ASSETS AND LIABILITIES, PERIOD ENDED DECEMBER 31, 1996 (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (Cost $1,230,558)
See accompanying schedule:
Securities................................................. $ 1,046,875
Repurchase Agreement....................................... 257,000
-------------
Total investments................................................ 1,303,875
Cash............................................................. 860
Receivable for Fund shares sold.................................. 215
Interest receivable.............................................. 82
Prepaid expenses ................................................ 18,668
-------------
Total Assets................................. 1,323,700
-------------
LIABILITIES:
Legal and audit fees payable..................................... 1,793
Custodian fees payable .......................................... 939
Distribution and shareholder servicing fees payable ............. 268
Investment advisory fee payable ................................. 207
Administration fee payable ...................................... 121
Transfer agent fee payable ...................................... 39
Accrued Directors' fees and expenses ............................ 5
Accrued expenses and other payables.............................. 33
-------------
Total Liabilities .......................... 3,405
-------------
NET ASSETS....................................................... $ 1,320,295
=============
NET ASSETS consist of:
Net investment loss.............................................. $ (1,461)
Accumulated net realized gain on investments sold................ 59,329
Net unrealized appreciation of investments....................... 73,317
Par value........................................................ 1,044
Paid-in capital in excess of par value .......................... 1,188,066
-------------
$ 1,320,295
=============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($1,320,295 o 104,428 shares of common stock outstanding)... $ 12.64
=============
</TABLE>
See Notes to Financial Statements.
3
NETNET FUND
STATEMENT OF OPERATIONS, PERIOD ENDED DECEMBER 31, 1996(A) (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest......................................................... $ 3,461
Dividends........................................................ 65
-------------
Total investment income................. 3,526
-------------
EXPENSES:
Investment advisory fee ......................................... 3,325
Custodian fees .................................................. 1,486
Distribution and shareholder servicing fees ..................... 831
Administration fee .............................................. 377
Transfer agent fee .............................................. 62
Directors' fees and expenses .................................... 8
Other............................................................ 1,343
-------------
Total Expenses ........................... 7,432
Expenses reimbursed by investment advisor........................ (2,445)
-------------
Net Expenses.............................. 4,987
-------------
NET INVESTMENT LOSS.............................................. (1,461)
-------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain from security transactions..................... 89,712
Net change in unrealized appreciation of securities.............. 73,317
-------------
Net realized and unrealized gain on investments.................. 163,029
-------------
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS ............................ $ 161,568
=============
(a) NetNet Fund commenced operations on August 19, 1996.
</TABLE>
See Notes to Financial Statements.
4
NetNet Fund
Statement of Change in Net Assets
================================================================================
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/96(A)
(UNAUDITED)
------------
<S> <C>
Net investment loss.............................................. $ (1,461)
Net realized gain on investments sold............................ 89,712
Net change in unrealized appreciation of investments............. 73,317
-------------
Net increase in net assets resulting from operations............. 161,568
Distributions to shareholders from net realized gains............ (30,383)
Net increase in net assets from Fund share transactions.......... 1,189,110
-------------
Net increase in net assets....................................... 1,320,295
NET ASSETS:
Beginning of period.............................................. -
-------------
End of period (including net investment loss of $1,461).......... $ 1,320,295
=============
- -----------------
(a) NetNet Fund commenced operations on August 19, 1996.
</TABLE>
See Notes to Financial Statements.
5
NETNET FUND
FINANCIAL HIGHLIGHTS, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
================================================================================
PERIOD
ENDED
12/31/96(A)
(UNAUDITED)
-----------
Net asset value, beginning of period........................ $ 10.00
----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss......................................... (0.01)
Net realized and unrealized gain on investments............. 2.97
----------
Total from investment operations............................ 2.96
----------
LESS DISTRIBUTIONS:
Distributions from net realized gains.................... (0.32)
----------
Total distributions......................................... (0.32)
----------
Net asset value, end of period.............................. $ 12.64
===========
TOTAL RETURN (B)............................................ 29.61%
===========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................ $1,320
Ratio of operating expenses to average net assets........... 1.50%(c)
Ratio of net investment loss to average net assets.......... (0.44%)(c)
Portfolio turnover rate..................................... 71%
Ratio of operating expenses to average net assets
without expenses reimbursed ............................. 2.24%(c)
Net investment loss per share without expenses reimbursed ... ($0.04)
Average commission rate (d)................................. $0.0600
- ---------------------------------------------------------------
(a) NetNet Fund commenced operations on August 19, 1996.
(b) Total return represents aggregate total return for the period.
(c) Annualized.
(d) Average commission rate paid per share of securities purchased and sold by
the Fund.
See Notes to Financial Statements.
6
THE NETNET FUND
NOTES TO FINANCIAL STATEMENTS, DECEMBER 31, 1996 (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Munder Funds, Inc. ("MFI") is registered under the Investment Company
Act of 1940, as amended, (the "1940 Act"), as an open-end investment company,
which was organized as a Maryland corporation on November 18, 1992. MFI consists
of 9 portfolios currently in operation. Information presented in this financial
statement pertains to the NetNet Fund (the "Fund") which commenced operations on
August 19, 1996. The financial statements for the other remaining funds of MFI
are presented under separate covers.
The preparation of financial statements in accordance with 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 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: Portfolio securities (including financial futures, if
any) traded on a recognized stock exchange or on the NASDAQ National Market
System ("NASDAQ") are valued at the last sale price on the securities exchange
on which such securities are primarily traded or at the last sale price on the
national securities market as of the close of business on the date of the
valuation. Securities traded on a national securities exchange or on NASDAQ for
which there were no sales on the date of valuation and securities traded on
over-the-counter markets, including listed securities for which the primary
market is believed to be over-the-counter, are valued at the mean between the
most recently quoted bid and asked prices. Restricted securities and securities
and
assets for which market quotations are not readily available are valued
at fair value by the advisor, under the supervision of the Board of Directors.
Debt securities with remaining maturities of 60 days or less at the time of
purchase are valued on an amortized cost basis unless the Board
of Directors determines that such valuation does not constitute fair value at
that time. Under this method, such securities are valued initially at cost on
the date of purchase (or on the 61st day before maturity).
Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal, at all times, to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to satisfy the terms of the repurchase agreement. 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 a possible decline in the value of the collateral
securities during the period while the Fund seeks to assert its rights. The
Fund's investment advisor, acting under the supervision of the Board of
Directors, reviews the value of the collateral and the creditworthiness of those
banks and dealers with which a Fund enters into repurchase agreements to
evaluate potential risks.
Security Transactions and Investment Income: Security transactions are
recorded on the trade date. 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.
Dividends and Distributions to Shareholders: Dividends from net
investment income, if any, are declared and paid at least annually. The Fund's
net realized capital gains (including net short-term capital gains), if any, are
declared and distributed at least annually. Distributions to shareholders are
recorded on the ex-dividend date.
-7-
THE NETNET FUND
NOTES TO FINANCIAL STATEMENTS, DECEMBER 31, 1996 (UNAUDITED)
(Continued)
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by a Fund,
timing differences and differing characterization of distributions made by a
Fund as a whole.
Federal Income Taxes: The Fund intends to continue to qualify as a
regulated investment company by complying with the requirements of the Internal
Revenue Code of 1986, as amended, 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.
2. INVESTMENT ADVISOR, ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT AND
OTHER
RELATED PARTY TRANSACTIONS
Munder Capital Management (the "Advisor"), an independent investment
management firm, serves as the Fund's advisor. For its advisory services, the
Advisor is entitled to receive a fee, computed daily and payable monthly at an
annual rate of 1.00% of the value of its average daily net assets.
The Advisor has reimbursed certain expenses, payable by the Fund, for the
period ended December 31, 1996, as reflected in the Statement of Operations in
order to maintain the expense ratio as stated in the Fund's prospectus.
First Data Investor Services Group, Inc. ("First Data") (the
"Administrator"), serves as the Fund's administrator and assists in all aspects
of its administration and operations. First Data also serves as the Fund's
transfer agent and dividend disbursing agent ("Transfer Agent").
As compensation for its services, the Administrator and the Transfer Agent
are entitled to receive fees, based on the aggregate average daily net assets of
the Fund and certain other investment portfolios that are advised by the
Advisor, and for which First Data provides services, computed daily and payable
monthly, at the annual rates of: 0.12% of the first $2.8 billion of net assets,
plus 0.105% of the next $2.2 billion of net assets, plus 0.10% of all net assets
in excess of $5 billion with respect to the Administrator and 0.02% of the first
$2.8 billion of net assets, plus 0.015% of the next $2.2 billion of net assets,
and 0.01% of all net assets in excess of $5 billion with respect to the Transfer
Agent. Administration fees payable by the Fund and certain other investment
portfolios advised by the Advisor are subject to a minimum annual fee of $1.2
million to be allocated among each series and class thereof. The Transfer Agent
and Administrator are also entitled to reimbursement for out-of-pocket expenses.
The Administrator has entered into a Sub-Administration Agreement with Funds
Distributor, Inc. ("FDI" or the "Distributor") under which FDI provides certain
administrative services with respect to the Fund. The Administrator pays FDI a
fee for these services out of its own resources at no additional cost to the
Fund.
Comerica Bank ("Comerica") provides custodial services to the Fund. As
compensation for its services, Comerica is entitled to receive fees, based on
the aggregate average daily net assets of the Fund and certain other investment
portfolios advised by the Advisor for which Comerica provides services, computed
daily and payable monthly at an annual rate of 0.03% of the first $100 million
of average daily net assets, plus 0.02% of the next $500 million of net assets,
and 0.01% of net assets in excess of $600 million. Comerica also receives
certain transaction based fees. Comerica earned $1,486 for its services to the
Fund for the period ended December 31, 1996.
From MFI and other investment companies that are advised by the Advisor of
which they are a director or trustee, each Director of MFI is paid an aggregate
fee of $14,000 per year, consisting of a $2,500 quarterly retainer for services
in such capacity plus $1,000 for each meeting attended per year, plus
out-of-pocket expenses incurred as a Board member. The Directors are also
reimbursed for any expenses incurred by them in connection with their duties as
8
THE NETNET FUND
NOTES TO FINANCIAL STATEMENTS, DECEMBER 31, 1996 (UNAUDITED)
(Continued)
Directors. No officer, director or employee of the Advisor, Comerica, FDI or
First Data currently receives any compensation from MFI.
3. DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a Distribution and Service Plan (the "Plan") pursuant
to Rule 12b-1, adopted under the 1940 Act. The Plan permits payments to be made
by the Fund to the Distributor for expenditures incurred by the Distributor 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). Under the Plan the
Distributor is paid a distribution and service fee at an annual rate of up to
0.25% of the value of the Fund's average daily net assets.
4. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities other than
short-term investments and U.S. Government securities were $1,334,351 and
$450,505 for the period ended December 31, 1996.
At December 31, 1996, aggregate gross unrealized appreciation for all
securities for which there was an excess of value over tax cost was $140,171 and
aggregate gross unrealized depreciation for all securities for which there was
an excess of tax cost over value was $66,854.
5. COMMON STOCK
At December 31, 1996, fifty million (50,000,000) shares of $.01 par value
common stock were authorized for the Fund.
Changes in common stock for the Fund were as follows:
PERIOD ENDED
12/31/96
---------------------
Shares Amount
------ ------
Sold................................ 102,015 $1,159,141
Issued as reinvestment.............. 2,413 29,969
- ------------------------------------ ------------------ -----------------
Net increase........................ 104,428 $1,189,110
======= ==========
6. INDUSTRY CONCENTRATION
The Fund primarily invests in equity securities of foreign and domestic
companies engaged in Internet and Intranet related businesses. The value of Fund
shares will be especially susceptible to factors affecting companies engaged in
Internet and Intranet related activities. These industries may be subject to
greater governmental regulation than many other industries and changes in
governmental policies, and the need for regulatory approvals may have a material
effect on the products and services of these industries.
9
THE NETNET FUND
NOTES TO FINANCIAL STATEMENTS, DECEMBER 31, 1996 (UNAUDITED)
(Continued)
7. ORGANIZATIONAL COSTS
Expenses incurred in connection with the organization of the Fund,
including the fees and expenses of registering and qualifying its shares for
distribution under Federal securities regulations, will be amortized on a
straight-line basis over a period of 5 years from commencement of operations and
are included under Prepaid expenses on the Statement of Assets and Liabilities.
10
B O A R D O F D I R E C T O R S
Charles W. Elliott, Chairman
John Rakolta, Jr., Vice Chairman
Thomas B. Bender
David J. Brophy
Joseph E. Champagne
Thomas D. Eckert
Jack L. Otto
Arthur DeRoy Rodecker
O F F I C E R S
Lee Munder, President
Leonard J. Barr II, Vice President
Elyse G. Essick, Vice President
Terry H. Gardner, Vice President, CFO and Treasurer
Ann F. Putallaz, Vice President
James C. Robinson, Vice President
Gerald L. Seizert, Vice President
Paul D. Tobias, Vice President
Richard H. Rose, Assistant Treasurer
Lisa Anne Rosen, Secretary and Assistant Treasurer
Teresa M. R. Hamlin, Assistant Secretary
I N V E S T M E N T A D V I S O R
Munder Capital Management
Munder Capital Center
480 Pierce Street
Birmingham, MI 48009
A D M I N I S T R A T O R A N D T R A N S F E R A G E N T
First Data Investor Services Group, Inc.
53 State Street
Boston, MA 02109
D I S T R I B U T O R
Funds Distributor, Inc.
60 State Street
Boston, MA 02109
C U S T O D I A N
Comerica Bank
411 West Lafayette
Detroit, MI 48226
L E G A L C O U N S E L
Dechert Price & Rhoads
1500 K Street, N.W. Suite 500
Washington, D.C. 20005
INDEPENDENT AUDIORS
Ernst & Young
200 Clarendon Street
Boston, MA 02116
