The sectors of the Fund that had the strongest relative performance during the second quarter were health care, information technology, consumer staples, and materials. A handful of stocks in the health care sector managed to show gains during the quarter, despite a double digit decline for the Russell Midcap® Index. BioMarin Pharmaceutical, Inc. (1.3% of the Fund) was strong due to investor enthusiasm for its drug pipeline, in addition to a strong earnings report. Kinetic Concepts, Inc. (1.1%) announced a buyout by a private equity firm in early July, propelling the stock price to new highs. Catalyst Health Solutions, Inc. (1.1%) showed good relative strength. The proposed merger of two of its larger competitors, Express Scripts and Medco, could result in customer fallout for the merged company and market share gains for Catalyst Health Solutions. The announcement of the merger also demonstrated to investors the attractiveness of the underlying pharmacy benefit management business. Cerner Corp. (0.9%) reported a strong quarter and the stock reacted positively on news that its health care information technology business is not expected to be hurt by proposed Medicare cutbacks. Intuitive Surgical, Inc. (1.3%) reported an extremely strong quarter for both revenues and earnings, beating already optimistic consensus estimates.

In the Fund’s information technology sector, there were a number of companies with solid relative performance. Teradata Corp. (1.5%) benefited from strong operating trends as its enterprise data warehousing business has experienced considerable momentum. Red Hat Inc. (0.7%) reported a strong quarter on both the top line (net sales) and bottom line (profit), as its core Linux business is expanding rapidly. Similarly, Cognizant Technology Solutions Corp. (1.6%) reported robust results and the company has good business momentum. Check Point Software Technologies Ltd. (1.1%) and MICROS Systems, Inc. (1.3%) held up better than the benchmark due to their defensive business characteristics, adding modestly to relative performance versus the benchmark.

Three holdings in the Fund’s consumer staples sector had favorable relative performance. TreeHouse Foods, Inc. (1.1%) was up due to a combination of speculation that it could become a takeout target and the belief that slower economic growth could benefit its private label food offerings. Hansen Natural Corp. (1.3%) has had strong business momentum all year, which has translated to above-average stock performance. Similarly, Church & Dwight, Inc. (1.4%) has shown good growth but at a more modest pace. Nonetheless, this has resulted in strong stock price performance in the latest quarter, as investors have shown a renewed interest in earnings stability, which is a characteristic of the company.

Among the Fund’s materials holdings, two stocks aided relative performance due to their stable and defensive business characteristics. Airgas, Inc. (1.3%), an industrial gas producer, is considered to have solid fundamentals and has recently been able to raise prices despite the difficult economic backdrop. Similarly, Ecolab, Inc. (1.4%), which makes cleaning and sanitizing products for a broad base of customers, is considered to have a stable revenue and earnings base that investors find attractive in the current market environment.

The biggest detractors from the Fund’s relative performance for the third quarter were the industrials and consumer discretionary sectors. Two stocks in the Fund’s industrials sector showed meaningful weakness compared to the benchmark: Terex Corp. (0.7%) and WABCO Holdings, Inc. (1.0%) Terex manufactures a wide range of heavy equipment for the construction and infrastructure markets, while WABCO sells advanced braking, stability, suspension, and transmission control systems for commercial vehicles, such as trucks and buses. Both companies have an above average sensitivity to economic growth, the prospects for which have deteriorated recently.

The consumer discretionary sector of the Fund was also a modest underperformer. Liberty Media Capital Corp. (1.5%) and Fossil, Inc. (1.3%) both experienced profit taking during the quarter as the market sold off. Each stock was very strong earlier in the year. BorgWarner, Inc. was weak in sympathy with concerns over slowing worldwide economic growth.

During the past quarter, the Fund’s performance profile has gradually shifted away from the defensive bias seen in the previous 24 months. After initial weakness early in the quarter, relative performance tended to be strong in both up and down markets. The environment has continued to favor stock selection, a difference from investors’ preference for high risk and low quality stocks during the initial year coming out of the bear market in 2009.

The sectors of the Fund that had the strongest relative performance during the second quarter were energy, consumer staples, consumer discretionary and financials. Although the energy sector was the weakest sector in the Russell Midcap® benchmark by a wide margin, two energy holdings in the Fund, Core Laboratories N.V. (1.2% of the Fund) and EQT Corp. (1.4%), were significant contributors to the Fund’s relative performance. Core Laboratories, a service company, is not as sensitive to oil prices as the average company in the group and a pick up in customer capital expenditures bodes well for future revenue growth. EQT benefited from improving natural gas prices and strong production growth, and continued to divest mid-stream assets to fund its more profitable exploration & production business.

In the consumer staples sector, two stocks had extremely strong absolute and relative performance: Herbalife Ltd. (1.7%) and Hansen Natural Corp. (1.2%). Herbalife reported stronger than expected earnings and raised earnings guidance significantly during the quarter. Hansen Natural is a global beverage company and derives the majority of its revenues from the fast growing energy drinks segment, with its flagship product being the Monster drinks lineup. Energy drinks continued to take market share within the wider soft drinks market, and Hansen also took market share within the energy segment.

Among the Fund’s consumer discretionary holdings, Fossil, Inc. (1.6%) and Tiffany & Co. (1.4%) were both very strong during the quarter. Fossil has been experiencing good growth in the United States that is projected to continue, and expectations are that its operations in the rest of the world will replicate the success that Fossil has shown domestically. Tiffany has experienced outstanding growth worldwide coming out of the recession and sales in Japan were surprisingly strong following the earthquake, tsunami and nuclear disaster.

Real estate investment trusts (REITs) were among the strongest holdings in the Fund’s financials sector, led by The Macerich Company (2.0%), which is benefiting from a recovery in the shopping mall segment of the market. EZCORP, Inc. (1.1%), a specialty consumer finance company and operator of pawn shops, was strong due to good growth prospects based on a vigorous store expansion program.

The sectors that had the largest (although relatively modest) negative impact on the Fund’s relative performance for the second quarter were information technology and health care. In health care, Mettler-Toledo International (1.1%) was weak due to management guidance indicating slower growth ahead, although we continue to like the stock. Healthsouth Corp. (1.1%) and Health Management Associates, Inc. (1.1%) were weak because of profit taking. In the information technology sector, Skyworks Solutions, Inc. (1.5%) was down sharply as a result of concerns that the company’s products may not be used as much in Apple mobile devices in the future.

Over the past twelve months, the market environment has shifted away from favoring low quality and high risk companies to a stance in which fundamentals are more important to investment success. In recent quarters, the volatility of the Fund (as measured by beta) has been gradually increased, and the Fund is now only slightly less volatile than its benchmark. Given this less defensive positioning, the Fund is participating to a greater extent in market upswings than had been true in the prior two years.

The sectors of the Fund that had the strongest relative performance during the first quarter were consumer discretionary and financials. In the consumer discretionary sector, the biggest contributors to relative performance were Tupperware Brands Corp. (1.2% of the Fund), Fossil Inc. (1.3%), Liberty Capital Group (1.3%), and Liberty Starz Group (1.1%). Tupperware Brands reported better than expected earnings during the quarter, raised earnings guidance for 2011, and announced a share buyback program. The stock rallied by 25% for the quarter. Fossil Inc. was strong due to a very robust earnings report in addition to favorable earnings guidance by management, including a description of its investment initiatives for 2011. Liberty Capital benefited from increased investor recognition of management’s strategies to unlock the underlying value of the company’s assets. Liberty Starz reported another quarter of earnings that was significantly higher than prior year results.

Several holdings in the financials sector helped to boost the Fund’s relative performance during the quarter, including EZCORP, Inc. NV (0.9%), Digital Realty Trust, Inc. (1.3%), Signature Bank of New York (1.3%), Lincoln National Corp, (1.8%), TD AMERITRADE Holding Corp. (1.9%) and Affiliated Managers Group, Inc. (2.1%). In addition to continued strong earnings growth, EZCORP, a pawn shop operator and payday lender, announced its intention to buy a controlling interest in a smaller competitor, resulting in a sharp advance in its stock price. Digital Realty Trust made a nice recovery from weak performance in the fourth quarter of 2010. That weakness had been based upon what we believed to be unwarranted bearish comments by an analyst. Signature Bank was strong due to a continued rebound in earnings per share coupled with a strong earnings outlook. Lincoln National, TD AMERITRADE, and Affiliated Managers Group were all beneficiaries of continued strength in the capital markets.

The biggest detractors from the Fund’s relative performance for the first quarter were concentrated in two sectors: information technology and health care. While both of these sectors had positive absolute performance, they lagged the corresponding sectors of the Fund’s S&P MidCap 400® benchmark. In the technology sector, Cree, Inc. (1.4%) and Akamai Technologies, Inc. were notable laggards. Cree, a manufacturer of LED lighting, reported an earnings shortfall versus estimates and lowered near-term earnings guidance because of weakness in Asia, partly due to excessive inventories. In our view, the company’s long-term outlook remains strong. Akamai Technologies reported a quarter that was in line with expectations, but guidance was reduced due to margin pressures and increased competition. The stock has been sold.

In the health care sector, the biggest detractors from relative performance were BioMarin Pharmaceutical, Inc. (1.4%) and ResMed, Inc. (1.3%). BioMarin experienced slower than anticipated revenue growth in its most recent quarter and management reduced near-term earnings guidance. We believe that the long-term outlook for the company remains promising. Similarly, ResMed’s stock price reacted negatively to concerns over slowing near-term growth, as the company is between product cycles. The company remains a dominant factor in the treatment of sleep apnea, which is a vastly under-treated condition.

The focus of the Munder Mid-Cap Core Growth Fund continues to be on earnings momentum and reasonable valuation relative to its S&P MidCap 400® benchmark. Over the past twelve months, earnings per share for the typical company held in the Fund grew at 23%, compared to 17% for the benchmark. Over the next twelve months, earnings growth of 26% is expected for the Fund, higher than the 21% growth expected for the S&P MidCap 400® Index.* Revenue growth over the past twelve months was 13% for the Fund and 9% for its benchmark. Return on equity, a basic measure of profitability, was 14% over the past twelve months for the Fund, compared to 12% for the S&P MidCap 400® Index. Despite these favorable fundamental characteristics, the valuation of the Fund was quite reasonable, with a price-to-earnings ratio on projected earnings over the next twelve months of 18 times earnings, only slightly higher than the S&P MidCap 400® multiple of 17 times earnings.* We believe this combination of fundamental strength and reasonable valuation positions the Munder Mid-Cap Core Growth Fund for strong competitive performance in the year ahead. These are the characteristics that have contributed to the Fund’s long-term record, and we firmly believe that they will continue to serve our investors well.