The Fund’s slight underperformance can be attributed primarily to stock selection in the information technology and materials sectors. Within technology, the Fund’s semiconductor holdings fell as slowing global growth is likely to hamper end-market demand. The Fund’s worst performers in that segment were Fairchild Semiconductor International (1.1% of the Fund) and Photronics, Inc. (0.7%), where we believe the market has overreacted and is now offering good value opportunities. In the materials sector of the Fund, Noranda Aluminum Holding Corp. (0.4%) declined as aluminum inventories have risen in the near-term. We feel that continued aluminum demand growth and Noranda’s position as a low cost producer within the industry will get them through this near-term issue. Additionally, Pioneer Drilling Co. (0.6%), an oil services firm, declined despite solid results, as investors fear that energy operators will retreat from projects due to increased uncertainty.

Stock selection in the Fund’s consumer staples and telecommunication services sectors was the strongest contributor to absolute performance. In the consumer staples sector, TreeHouse Foods, Inc. (1.0%), a manufacturer of private label food brands, was up over 13% as the weak macro environment should boost demand for their products as consumers shift away from restaurants in favor of grocery store purchases. Casey’s General Stores, Inc. (1.0%), a convenience store operator, outperformed as sales of grocery items and prepared foods have been robust. In the Fund’s telecommunications sector, PAETEC Holding Corp. (0.8%) rose 10% as the company agreed to sell itself to a larger peer for a premium. One of the Fund’s top performing stocks for the quarter was Children’s Place Retail Stores (1.0%) in the consumer discretionary sector. The company has new strategies in place to reduce markdown risk, lower input costs and improve merchandising.

The leading sectors of the Russell 2000® Value Index for the quarter were traditional defensive areas, such as health care and utilities, which posted positive mid-single digit returns. Conversely, economically sensitive sectors, led by industrials and energy, were down approximately 5%. Much of the sector performance stemmed from investors shifting gears on the risk trade.

The relative outperformance of the Munder Veracity Small-Cap Value Fund was keyed by positive stock selection in the materials sector and an overweight in health care. In the materials sector, a number of the Fund’s metal stocks were up double digits, led by Carpenter Technology (1.3% of the Fund) and RTI International Metals, Inc. (0.7%). Both companies are major producers of specialty alloys that are enjoying booming demand related to an upturn in commercial aerospace. In the health care sector, the Fund’s overweight relative to the benchmark was a positive, as investors moved away from economically cyclical groups. Digging deeper within health care, the Fund’s managed care stocks outperformed as earnings continued to surprise on the upside. Another highlight was stock selection in the oil services segment of the Fund where activity and pricing are improving.

Only partially offsetting these positive factors, relative performance was negatively impacted by stock selection in the Fund’s consumer discretionary and financials sectors. Within the consumer discretionary sector, many of the Fund’s retail stocks were hurt by rising commodity prices and slowing growth concerns. In financials, the Fund’s banks underperformed as regulatory uncertainty (capital clarity, the Durbin amendment on interchange) and stagnant loan growth preoccupied investors’ attention. We continue to find banks attractively valued as credit costs wane and there are early signs of loan growth building.

Despite increased tension in the Middle East, higher oil prices, poor weather and the natural disaster in Japan, equity markets looked past all this to produce solid absolute returns. Risk appetites have returned with every pause in the market, creating a buying opportunity buoyed by continued low interest rates, positive equity inflows and mergers and acquisitions. During this quarter of transition, the Fund lagged its Russell 2000® Value benchmark, although it outperformed the benchmark for the one-year time period ended March 31. 2011.

For the quarter, economically cyclical areas, such as energy and materials, posted some of the strongest returns as commodity prices continued to rise given political turmoil, easy money and inflation concerns. Health care in the small-cap space delivered double-digit returns as a divided House of Representatives after the fall election has translated into a potentially more benign regulatory environment. The consumer discretionary and financials sectors have lagged thus far. Consumer discretionary stocks were weighed down by poor weather and margin pressure from rising input costs (cotton). Macro factors, such as sluggish housing and employment, have weighed on financials, with tepid loan demand an additional issue impacting banks.

The information technology and materials sectors were the largest contributors to the Fund’s relative performance for the quarter. In addition, the Fund’s sector weightings were a modest source of positive performance, as an underweight in financials, which lagged for the quarter, proved to be the most significant sector bet. These positive factors, however, were offset by relative weakness in the Fund’s consumer discretionary and industrials sectors.

The relative performance of the consumer discretionary sector was negatively impacted by some of the Fund’s restaurant holdings, which were hurt by higher oil prices and extreme weather conditions. Additionally, OfficeMax, Inc. (0.6% of the Fund), one of the Fund’s retailers, offered tepid guidance as poor weather and weak employment trends have added more uncertainty to its story.

In the industrials sector, there were a number of strong performers, including The Greenbrier Companies (0.8%), Ceradyne, Inc. (0.9%) and Crane Co. (1.0%). Greenbrier benefited from increased optimism for improvements in rail car orders. Ceradyne has seen increased demand for its solar products and wins in its defense programs. Crane has profited from improvement in its aerospace segment and higher levels of general industrial production. The strong performance of these stocks, however, was offset by relative weakness in a number of other industrials holdings, including ArvinMeritor, Inc. (0.6%), BE Aerospace, Inc. (0.9%) and Republic Airways Holdings, Inc. Republic Airways was sold in January.

Turning to the factors having a positive impact on the Fund’s relative performance, semiconductors and software were the main sources of relative strength of the Fund’s information technology sector. Photronics, Inc. (0.8%) and Diodes, Inc. (0.9%), two semiconductor companies, and Lawson Software, Inc. (0.9%) were among the top performers. TTM Technologies, Inc. (0.8%), a manufacturer of circuit boards, also boosted the relative performance of the sector. In the materials sector, Innophos Holdings, Inc. (1.0%), a specialty chemical company, was the top contributor to relative strength.

The performance of the Fund also benefited from its positioning toward stocks with the highest momentum. This was a significant positive, as stocks with the highest momentum outperformed the ones with the lowest by more 3,200 basis points (32.00 percentage points). Having more stocks with a higher Price/Book, another category that outperformed during the quarter, was also a positive for relative performance.