In contrast, sectors that were more exposed to economic cyclicality from the weakening U.S. and/or global economy, falling commodity prices, a flattening yield curve or the European debt situation were far weaker. Among the weakest sectors were consumer discretionary, industrials, financials, materials and energy, which were all down high teens to the low twenty percent levels.

For the Munder Large-Cap Value Fund, stock selection was flat to positive in seven of ten sectors. Holdings in the information technology sector had the best relative performance, down by low single digits vs. benchmark holdings that were down low double digits. In the sector, a few holdings with both strong business models and balance sheets, like Apple, Inc. (1.9% of the Fund) and Google, Inc. (0.7%), actually posted gains. Other technology holdings with generous dividend yields, like Microsoft Corp. (1.7%) and Intel Corp. (1.6%), also showed strong relative performance. The outperformance of the Fund’s holdings in the financials sector was due in part to a lack of exposure to Bank of America and the investment banking and brokerage segments, but also to the relative strength of the Fund’s regional banks and retail REITS holdings, as well as an underweighted position in life & health insurance holdings. In the utilities sector, strong positive performance from the gas utility Questar Corp. (1.3%) drove the relative outperformance of the sector. In the consumer discretionary sector, performance was boosted by apparel maker VF Corp. (1.7%). VF Corp. announced a very strong second quarter, which saw earnings estimates increase due to better than expected sales from all areas, but especially from jeanswear (Lee and Wrangler brands) and sportswear (The North Face and Vans).

Reversing last quarter’s outperformance, the Fund’s energy holdings lagged the corresponding benchmark sector during the quarter. Weak stock performance in the exploration & production segment, which was overweighted in the Fund, was the primary reason for relative weakness, as this higher beta segment suffered from the fall in oil prices during the quarter. Apache Corp. (2.0%), a large holding in the Fund, was the primary underperformer. An overweight in the equipment and services areas, along with an underweight of the more defensive integrated oil segment and the poor performance of some holdings in the segment, also hurt relative returns during the quarter. In the telecommunication services sector, shares of Sprint Nextel Corp. (0.7%) were negatively impacted by skepticism regarding the viability of its 4G network plan, due to spectrum availability and build-out costs. We believe both of these issues are manageable and resolution of each could be a meaningful catalyst for strong stock price performance, given the company’s attractive valuation.

With the Federal Reserve’s quantitative easing (QE2) expiring at the end of June and amid signs of global economic weakness, unrest in Europe, and the deficit and debt-ceiling debates in the U.S, the more defensive sectors of the Russell 1000® Value Index had the best performance during the quarter. Health care stocks were up high single digits, consumer staples and utilities stocks were up mid single digits and telecommunication services stocks were up low single digits. All four of these sectors, which had lagged the strong market in the prior quarter, benefited from above-average dividend yields. Consumer discretionary stocks also had positive performance but were up less than 1% during the quarter.

On the negative performance side, the financials and energy stocks in the Russell 1000® Value Index were down mid single digits, while industrials, information technology and materials stocks were down low single digits. Financial stocks battled a number of negative fundamental issues during the quarter, such as a flattening of the yield curve caused by falling longer-term interest rates, weaker capital markets and trading activity, and continued regulatory uncertainty for banks. Energy and materials stocks were pressured by falling commodity prices, while technology and industrial stocks were impacted by reduced global growth expectations.

For the Munder Large-Cap Value Fund, stock selection was positive in seven of the ten sectors. The Fund’s energy sector led the way as its exploration & production (E&P) holdings posted strong relative performance. QEP Resources, Inc. (1.5% of the Fund) was up slightly during the quarter. The stock had lagged other E&P companies during the prior quarter but rebounded this quarter after management raised earnings guidance for the year. The Fund’s holdings in the financials sector also outperformed due in large part to a lack of exposure to Bank of America, and positive contributions from two insurance holdings: ACE Ltd. (2.0%) and RenaissanceRe Holdings Ltd. (1.4%). While ACE Ltd. is a long time holding and favorite stock, we added RenaissanceRe to the Fund during the quarter as we believe the company will benefit from rising property catastrophe insurance pricing. In the materials sector, Celanese Corp. (0.7%) was up just over 20% for the quarter due to continued pricing power and new capacity growth, both of which contributed to an improved earnings outlook. The Fund’s technology holdings also outperformed, due to positive contributions from semiconductor producer Intel Corp. (1.1%), several software holdings and communications equipment maker QUALCOMM Inc. (1.5%).

The only sectors of the Fund that were impacted negatively from a stock selection standpoint were industrials, health care and utilities. In the industrials sector, weaker than expected results from the military segment of Oshkosh Corp. led to a significant decline in earnings estimates for the company. Accordingly, we decided to sell the stock. In the health care sector, strong performance from the life sciences tools & services and managed health care industries was more than offset by weak stock performance and an under-weighted position in the pharmaceuticals industry. More specifically, an underweight in strong performer Johnson & Johnson (2.0%) and weakness from Teva Pharmaceutical Industries Ltd. (0.7%) negatively impacted relative performance.

All ten sectors of the Russell 1000® Value Index posted gains for the quarter, with the strongest being the more commodity- or cyclically-oriented sectors. The energy sector had the strongest return, as an improving global economy (resulting in an increasing demand for energy) and unrest in the Middle East led to sharply higher crude oil prices. Continued strength in emerging economies and the potential for reconstruction demand from Japan led to positive gains for many materials stocks. Industrial companies were led by continued solid gains in the manufacturing sector. Despite concerns regarding the impact of inflation on consumer demand, the consumer discretionary sector was buoyed by better than expected employment trends.

As for the Munder Large-Cap Value Fund, the consumer discretionary, information technology and telecommunication services sectors had the largest negative impact on relative performance for the quarter. Among consumer discretionary holdings, Carnival Corp. (1.1% of the Fund) was hurt by an increase in fuel costs and the fighting around the Mediterranean Sea. An underweighted position in the media industry also hurt performance. Underperformance of a recently purchased stock was a negative factor for the relative performance of the information technology sector. We remain very confident about the stock’s outlook, however, given the many positive secular drivers the company possesses. An overweighted position in Qwest Communications International (2.1%) was the primary reason for the underperformance of the telecommunication services sector as the stock pulled back after its strong performance in the prior quarter. Most importantly Qwest’s merger with CenturyLink remains on schedule.

On the positive side for the quarter, the Fund’s utilities holdings slightly outperformed the corresponding benchmark sector, while holdings in the energy, financials, health care, and consumer staples sectors all performed in line with the benchmark. In the utilities sector, an underweighted position in companies with nuclear exposure was a positive after the tragic event in Japan. In the energy sector, overweighted positions in and strong stock performance from a number of the Fund’s equipment and services names was beneficial. Halliburton Co. (1.1%), which was purchased during the quarter, was up over 25% from the time of its purchase through the end of the quarter and seems especially well positioned for the expected increase in the production of oil in Saudi Arabia. Among financials holdings, the Fund’s large overweight in JPMorgan Chase & Co. (4.4%) paid off, as the company’s strong management, balance sheet and diversified earnings stream finally seemed to be recognized by the market. In addition, in March the company announced an increase in its dividend and a new $15 billion share buyback authority, after its capital plan was approved by the Federal Reserve. As for the health care sector, a number of holdings in the equipment & supplies and providers & services segments were up double-digits due to better than expected earnings and attractive valuations.