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After a strong first quarter, the equity market corrected sharply during the second quarter of 2010, with the Russell 2000® Value
Index posting a double-digit negative return for the quarter. Contrary to the last twelve months of economic recovery, signs of global
economic growth have become mixed, and the risk of a double-dip recession began to be priced into the market. This has led to a
significant change in market leadership. Earlier in the recovery, performance was led by many of the riskiest assets, including lower
quality equities. During the quarter, however, higher profitability stocks took the lead, and this had a strong positive impact on the
relative performance of the Munder Small-Cap Value Fund. While the Fund’s absolute return reflected the negative tone of the stock
market, it significantly outperformed its Russell 2000® Value benchmark for the quarter.
In terms of the Russell 2000® Value sectors, the utilities, consumer staples and telecommunications services sectors had the best
absolute performance for the quarter. This is not surprising, as these sectors tend to be more defensive and less susceptible to an
economic slowdown. They therefore received a boost from investors’ growing skepticism about the strength of the economy. The
weakest sectors of the Russell 2000® Value Index were consumer discretionary, materials and energy.
Compared to the Russell 2000® Value benchmark, the sectors of the Small-Cap Value Fund that showed the strongest relative
performance were financials, energy and consumer discretionary. This was largely due to strong performance from Portfolio Recovery
Associates, Inc. (2.0% of the Fund) in the financials sector, Mariner Energy, Inc. (0.9%) in the energy sector, and Tempur-Pedic
International, Inc. (2.0%) and Monro Muffler Brake, Inc. (1.0%) in the consumer discretionary sector. The biggest detractors from the
Fund’s relative performance for the quarter were the materials and information technology sectors. Laggards within those sectors
included Thompson Creek Metals Company (0.7%) in the materials sector, and Diodes, Inc. (1.2%), Telvent GIT S.A. (0.5%) and
TeleCommunications Systems, Inc. (0.6%) in the information technology sector.
We remain very positive about the performance of the Small-Cap Value Fund over the next several quarters. Companies with good
balance sheets and high profitability levels started to outperform over the last few months. We would expect this leadership to
continue, as we believe that the early recovery phase of the economic cycle has likely ended. We continue to focus on the stocks of
small-cap companies that are profitable, well-managed, attractively valued and have strong balance sheets. We believe that these
companies, which demonstrate strong relative fundamentals, will be rewarded going forward.
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Past performance does not guarantee future results. The Fund's investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus and summary prospectus contain this and other important information about the Fund. To obtain a prospectus and summary prospectus, click here. Read the prospectus and summary prospectuses carefully before investing.
RISKS: The Fund invests in smaller company stocks, which are more volatile and less liquid than larger, more established company securities. Further, value-based investments are subject to the risk that the broad market may not recognize their intrinsic value. The Fund may invest a substantial portion of its assets in one or more economic sectors or industries that are more heavily weighted in the Fund's benchmark, including the financials sector and the real estate investment trust (REIT) industry. When the Fund's investments are concentrated in one or more sectors, market or economic factors affecting those sectors could have a significant effect on the Fund's value. REIT investments are subject to many of the risks of investing directly in real estate, such as declining real estate values, changing economic conditions and increasing interest rates. The Fund may invest up to 25% of its assets in foreign securities, which involve additional risks due to currency fluctuations, economic and political conditions, and differences in financial reporting standards.
Fund holdings mentioned in the Quarterly Commentary are as of 5.31.10 and the percentages shown are based on net assets as of that date. Fund holdings are subject to change and should not be considered purchase recommendations. There is no assurance that the securities mentioned remain in the Fund’s portfolio or that securities sold have not been repurchased.
The Russell 2000® Value Index is a capitalization-weighted index that measures the performance of those Russell 2000® Index companies with lower price-to-book ratios and lower forecasted growth rates. The Russell 2000® Index is a capitalization-weighted index that measures the performance of the smallest 2,000 companies in the Russell 3000® Index, an index representing approximately 98% of the investable U.S. equity market. You cannot invest directly in an index, securities in the Fund will not match those in the index, and performance of the Fund will differ. Although reinvestment of dividend and interest payments is assumed, no expenses are netted against an index’s returns.
Munder Funds are distributed by Funds Distributor, LLC 07/10
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Robert E. Crosby, CFA
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| Senior Portfolio Manager |
| BA in Economics from the University of Missouri |
| MS in Economics and Finance from Murray State University |
Joined Munder Capital Management in 1993
| Years of Experience:17 |
| Focus:Co-manages the Munder Small-Cap Value and Micro-Cap Equity funds as well as separately managed accounts in Munder Capital’s Small-Capitalization Value, Mid-Capitalization Value, Micro-Cap, Mid-Cap/Small-Cap Blend and Real Estate strategies. |
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Julie R. Hollinshead, CFA
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| Senior Portfolio Manager |
| BA (Cum Laude) in French from Tufts University |
| MA in International Economics & International Relations from Johns Hopkins University |
| Started with Comerica Bank in 1985. Joined Munder Capital in 1995 as a result of the merger with Comerica and its investment subsidiaries. |
| Years of Experience:16 |
| Focus:Co-manages the Munder Small-Cap Value and Micro-Cap Equity Funds, as well as separately managed accounts in Munder Capital’s Small-Capitalization Value, Mid-Capitalization Value, Mid-Cap/Small-Cap Blend and Micro-Cap strategies. |
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John P. Richardson, CFA
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| Director, Small-Cap Equity and Senior Portfolio Manager |
| BBA in Finance from Western Michigan University |
| MBA from Wayne State University |
Joined Munder Capital Management in 1985
| Years of Experience:35 |
| Focus:Co-manages all mutual funds and separately managed accounts in Munder Capital's Small-Capitalization Value, Mid-Capitalization Value, Micro-Cap and Mid-CapSmall-Cap Blend investment strategies. |
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| Munder Funds distributed by Funds Distributor, LLC. |
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