Investors continued to focus on the sovereign debt crisis in Europe and its impact on the banking system and economic growth in the region. Efforts to deal with the important fiscal and monetary issues stemming from this crisis appeared to be gaining some traction near the end of the year, but considerable skepticism remained. In the United States, there appeared to be some slightly better news on the economy, but the important and negative issues of weak housing, unemployment and the budget deficit remain largely unresolved. The fact that recent economic news has been more encouraging has led many analysts to significantly reduce the probability of recession over the next 12 to 18 months. Nonetheless, economic growth is expected to remain sluggish in even the most optimistic forecasts.

The Munder Mid-Cap Core Growth Fund earned a double-digit rate of return for the quarter, but trailed its Russell Midcap® benchmark. The relative performance of the Fund, however, was positive for 2011 as a whole. (Please note: The benchmark for the Munder Mid-Cap Core Growth Fund was changed from the S&P MidCap 400® Index to the Russell Midcap® Index as of April 1, 2011.)

The sectors of the Fund that had the strongest relative performance during the fourth quarter were financials, materials and energy. In the financials sector, three holdings with exposure to the capital markets reacted favorably to the rebound in the stock market: Affiliated Managers Group, Inc. (1.7% of the Fund), Invesco Ltd. (1.2%) and Lincoln National Corp. (1.2%). Commercial bank holdings were strong relative to their peers. Signature Bank of New York (1.5%) has been experiencing strong loan and deposit growth, while Fifth Third Bancorp (1.2%) rebounded sharply from depressed levels in the summer. Among the Fund’s real estate investment trust (REIT) holdings, The Macerich Company (2.1%), a shopping center REIT, and Digital Realty Trust, Inc. (1.5%), which focuses on enterprise data centers, have both reported solid operating trends. Each company also offers a dividend yield of over 4%, an attribute that investors find appealing in this low interest rate environment.

In the Fund’s materials sector, LyondellBasell Industries NV (1.5%) had a very strong total return. The company declared a large special dividend of about 15% of the share price, which helped propel the stock from depressed levels at the beginning of the quarter. Airgas, Inc. (1.6%) was also up sharply as the company reported a 33% earnings gain for its most recent reported quarter, well above expectations. Management also raised earnings guidance for 2012.

An overweighted position in energy, the strongest of the ten sectors of the Russell Midcap® Index for the quarter, also helped relative performance. Three of the Fund’s holdings in the sector had particularly strong gains. Complete Production Services, Inc. (1.1%) was the subject of a takeover bid by Superior Energy Services and that had a positive impact on the company’s stock price. Oil States International, Inc. (1.3%) reported excellent quarterly results and raised earnings guidance for 2012. Denbury Resources, Inc. (1.0%) rebounded from sharply depressed levels in the third quarter, while its earnings have also continued to recover over the past several quarters.

The biggest detractors from the Fund’s relative performance for the fourth quarter were the information technology and health care sectors, while the consumer discretionary sector was a modest detractor. In the technology sector, Solera Holdings, Inc. (1.3%) was hurt by concerns about weak driving trends in Europe. The company provides software products for the automobile insurance industry. Skyworks Solutions, Inc. (1.1%) has been weak due to the reduced content of its products in smart phones. BMC Software, Inc. was weak due to investors’ concerns that the company’s growth drivers have stalled near-term, despite beating earnings estimates in its most recent quarterly report. The stock was eliminated from the Fund in November. Teradata Corp. (1.3%), Cognizant Technology Solutions Corp. (1.7%) and Check Point Software Technologies Ltd. (1.1%) lagged the market due to their more defensive business models. Red Hat, Inc. (1.3%) was weak late in the quarter due to slightly disappointing billings trends, despite a very strong earnings report.

In the Fund’s health care sector, Catalyst Health Solutions, Inc. (1.1%), a pharmacy benefit manager, was down during the quarter, due to slightly reduced earnings guidance by management. Business trends, however, remained very strong for the company. The Cooper Companies, Inc. (0.9%) reacted negatively early in the quarter to increased FDA involvement in a product recall that had been announced in August, although the stock rallied later in the quarter due to an unexpectedly strong earnings report. ResMed, Inc. (1.0%) has been experiencing some competitive pricing pressures that resulted in disappointing earnings, which hurt its stock price. Cerner Corp. (0.9%), a supplier of health care information technology solutions, was down due to profit taking after very strong relative performance in the third quarter. The company is expected to be a beneficiary of government mandates related to health care reform.

Among the Fund’s consumer discretionary holdings, detractors from relative performance slightly outweighed the contributors. Cinemark Holdings, Inc. (1.3%) was flat because of slightly lower expectations for domestic box office receipts in the fourth quarter. Similarly, Fossil, Inc. (1.2%) was flat for the quarter due to margin pressures related to foreign currency translations, higher product sourcing costs in China, and store expansion costs, despite very strong revenue trends. On the plus side, two automotive-related holdings were strong due to favorable business trends: LKQ Corp. (1.9%) and Gentex Corp. (1.3%). LKQ supplies replacement parts to the auto repair industry, while Gentex is a supplier of auto-dimming rear view mirrors for new cars.