The municipal market outperformed the Treasury market for the quarter, as much of the panic that negatively impacted municipal securities in December has waned and investors took advantage of the relative value that the municipal market offered. While concerns still remain over municipalities’ ability to balance their budgets, we believe that the prediction of a spate of defaults in the municipal market was overblown. While an increase in municipal bond defaults would not be a surprise, they would be more likely to occur in the lower-rated and/or non-traditional sectors of the market, while highly rated, traditional municipal issuers should fare relatively well. The Fund’s philosophy is to buy these high quality, traditional issuers and to make trades, over time, that are designed to maximize after-tax income. Maximizing the income dividend payout to the Fund’s shareholders and preserving principle continue to be the Fund’s top priorities.

On a gross and net of fees basis, the Munder Tax-Free Short & Intermediate Bond Fund outperformed its custom benchmark (50%/50% blend of the Barclays Capital Municipal Managed Money Short Term and Barclays Capital Municipal Managed Money Short/Intermediate Term Indices) for the quarter. The Fund’s outperformance was a reversal from last quarter when the yield curve steepened (i.e. the gap between shorter-term and longer-term maturities widened), causing the Fund’s exposure to securities with maturities greater than 10 years to detract from the Fund’s relative performance. (The Fund’s benchmark does not hold securities with maturities beyond 10 years.) This quarter, however, the yield curve remained essentially unchanged, although flattening slightly in some areas, which helped the Fund’s relative performance. The Fund’s exposure to securities with maturities exceeding 10 years is part of the strategy to maximize yield, while limiting the Fund’s overall interest rate risk. As the yield curve remains near historically steep levels, we believe this strategy will continue to benefit the Fund going forward.

For the quarter, the Fund performed very well relative to both its Lipper and Morningstar peer groups of mutual funds, placing in the top quartile of both groups for the quarter, one-year, three-year and five-year time periods.*

Noteworthy News in the Municipal Market

State and local government units continue to grapple with their budgets, since, unlike the federal government, municipalities must balance their books. Whether through increasing revenues, cutting expenditures or a combination of the two, tough decisions are being made in addressing budgetary issues. We are also seeing some positive signs in the economy. The employment picture continues to improve. Twenty-eight states have increased net employment since the recession ended, and the national unemployment rate continues to fall. According to the U.S. Census Bureau, year-over-year state and local tax revenue in the fourth quarter of 2010 increased for the fifth consecutive quarter, and total tax revenue in 2010 was the second highest total on record, trailing only 2008. In spite of these positive signs, a struggling housing market, elevated unemployment and increasing pension and healthcare costs will continue to provide challenges to municipal issuers. The difficulty in balancing state and local budgets highlights the importance of a higher quality, traditional bias in constructing municipal portfolios.

The Fund underperformed its custom benchmark (50%/50% blend of the Barclays Capital Municipal Managed Money Short Term and Barclays Capital Municipal Managed Money Short/Intermediate Term Indexes) for the quarter. As rates increased and the yield curve steepened during the quarter, this segment of the market had a greater increase in yield compared to shorter maturity bonds, and therefore lagged in performance. The Fund’s strategy has been to benefit from a stable or flatter curve. As the yield curve steepened, the Fund’s relative performance was held back by both its exposure to bonds with maturities greater than ten years and its greater weighting of callable bonds. It is important to note that the Fund has benefited from the higher income yield that comes with owning callable securities. The Fund’s strategy has not changed, despite the negative impact during the quarter, because we expect this benefit to continue.

For the quarter, the Fund lagged the median total return of both its Morningstar and Lipper peer groups of mutual funds. However, the Fund was at the 37th percentile of its Morningstar peer group for the year as a whole and remains in the top 10% of its Morningstar peer group for the last three-year and five-year time periods, and in the top 25% of its Lipper peer group for the past three years.*

Noteworthy News in the Municipal Market

Without a doubt, the headlines, stories and analysts’ reviews regarding the safety of municipal bonds has reached an intense level. The concerns generally fall into one of the following categories:

• Credit Worthiness – While the bulk of the municipal defaults have taken place in the non-traditional market, many state and local governments are continuing to suffer lower general fund revenues, as revenues are cyclical. This was not unexpected. In many cases, expenses still need to be cut in order to balance state and local budgets. This is a difficult task for politicians on both sides of the aisle.

• Interest Rates – While many believe interest rates will rise, the timing and magnitude of any increase cannot be predicted. Those who have been sitting in cash because of expectations of rising rates have lost a significant amount of income.

•Other – Build America Bonds, changes to the income tax (the alternative minimum tax is still intact and the pain it inflicts will continue to grow) and the focus on the price declines of municipal ETFs relative to net asset values have rightfully been highlighted in the news. While the resulting volatility in the municipal market creates concern among many, it also creates opportunity for the astute investor.

On a gross of fees basis, the Munder Tax-Free Short & Intermediate Bond Fund performed in line with its custom benchmark (50%/50% blend of the Barclays Capital Municipal Managed Money Short Term and Barclays Capital Municipal Managed Money Short/Intermediate Term Indexes) for the quarter. However, after fees are accounted for, the Fund slightly underperformed its benchmark. The largest positive contribution to the Fund's relative performance came from the general obligation sector, the largest weighting in the Fund. Over the last several years, the Fund's purchases of longer-maturity securities have been in this sector and, during the quarter, longer-maturity bonds were the best performers. The bulk of the custom benchmark's return came from the revenue and general obligation sectors. These are the two largest weighted sectors in the benchmark and comprise nearly 85% of the benchmark. The Fund's overweight in securities with maturities of greater than ten years was a positive factor to relative performance, as the yield curve flattened during the quarter as the gap between shorter-term and longer-term securities narrowed.

For the quarter, the Fund outperformed the median return of both its Lipper and Morningstar peer groups of mutual funds.* Given the low interest rate environment, maximizing the after-tax income dividend payout to our shareholders continued to be a top priority. With a six-fold increase in the number of taxpayers subject to alternative minimum tax in 2010, we note that the Fund continued to hold no bonds subject to the alternative minimum tax.

Noteworthy News in the Municipal Market

• While state and local government units are struggling with lower revenues, unlike the federal government they must balance their budgets. While this does not make the budget process any less difficult, it does impose fiscal responsibility. News reports have been actively highlighting those government units that have been experiencing difficulty in balancing their budgets.

• Given the continued economic pressure, even high quality traditional issuers will need to make painful expense reductions in order to balance their budgets.

• While there is still concern over rising interest rates, recent sentiment is moving towards an extended low rate environment.

• The municipal yield curve remained at relatively steep levels as of September 30, 2010. The two-year to ten-year spread stood at 193 basis points (1.93 percentage points) at the end of the quarter, 36 basis points flatter than last quarter-end.

• The five-year municipal to treasury ratio ended the quarter where it began, at 96%, versus a ten-year average of 85%. This illustrates the attractiveness of municipal bonds relative to Treasuries.