U.S. Municipal Fixed Income

2nd Quarter 2008

Four Embarcadero Center, San Francisco, CA 94111 T:(415) 954-5400

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Overview

RCM has managed municipal bond portfolios for individual and institutional investors since 1977. Our strategy is to construct high-quality national or single state portfolios with intermediate duration targets, in order to produce a high level of after-tax income, while preserving principal. We have extensive experience in managing capital gains to meet specific client tax objectives, including sector allocation for those clients sensitive to the alternative minimum tax.

Portfolio Construction

• Incorporate tax, accounting, and regulatory concerns in the portfolio construction process
• Top-down analysis of the interest rate cycle in conjunction with analysis of municipal bond market valuation and trends
• Focus on liquid bond insurers and perform in-house credit analysis to ensure that all investments meet stability and fundamental quality criteria

The RCM Advantage

• Unique dual research platform
• Institutionalized investment culture
• Consultative client relationships

Performance**

Representative Account Characteristics† - Supplemental Information Strategy Duration Range 3-6 yrs Average Duration 4.38 yrs Effective Maturity 4.98 yrs Average Yield To Worst 3.51% Average Moody/S&P Bond Quality Rating Aa1/AA+ Income Yield 4.63%

Representative Account Distribution Type† - Supplemental Information

Performance Composite Statistics

Period	Composite Gross Return (%)	Composite Net Return (%)	PCG Municipal Bond Benchmark (%)	No. of Clients/ Accounts‡	Composite Dispersion (%)	Period-End Total Assets (US$ M)	Total Firm Assets (US$ M)
2007	5.45	5.04	4.79	4	N/A♦	45	168,131
2006	4.14	3.74	3.74	6	0.09	48	164,876
2005	1.51	1.19	1.68	9	0.16	58	147,527
2004	2.70	2.43	2.94	16	0.13	329	128,432
2003	4.20	3.94	4.41	19	0.19	362	123,142
2002	9.70	9.41	8.60	21	0.36	352	111,780
2001	5.68	5.46	5.52	24	0.52	374	141,056
2000	9.52	9.27	8.01	23	0.58	355	82,483
1999	0.49	0.25	0.54	31	0.49	293	84,715
1998	6.23	5.93	5.95	32	0.49	266	64,825

*Grassroots^SM Research is a division of RCM.  Research data, used by Grassroots^SM Research to generate recommendations, are received from reporters and field force investigators who work as independent contractors for broker-dealers. These broker-dealers supply research to RCM and certain of its affiliates in connection with brokerage services that is paid for by commissions generated by orders executed on behalf of RCM's clients.

 

** Past performance is no guarantee of future results. Individual performance will vary. Gross returns were calculated on a total return basis, including all dividends and interest, accrued income, realized and unrealized gains or losses, and are net of all brokerage commissions and execution costs, and do not give effect to investment advisory fees which would reduce such returns. Net returns were calculated on a total return basis, including all dividends and interest, accrued income, realized and unrealized gains or losses, and are net of all brokerage commissions, execution cost, and investment advisory fees. Unless otherwise noted, index returns are presented as total returns, which reflect both price performance and income from dividend payments, if any, but do not reflect fees, brokerage commissions or other expenses of investing. It is not possible to invest directly in an index.

 

* The U.S. Municipal Fixed Income benchmark is composed of the 1-10 year Lehman Municipal Index from 01/01/1998 to date and the Lehman 5 Year G.O. Index from 01/01/1980 through 12/31/1997. Prior to 01/01/1980, there were no published benchmarks that provided a suitable comparison. The Lehman Brothers Municipal 1-10 Year Blended Index is a total return benchmark designed for tax-exempt municipal assets. The index currently includes bonds with a minimum credit rating of BAA3, are issued as part of a deal of at least 50 million, have an amount outstanding of at least 5 million, have a maturity of between one and 12 years, and have been issued after December 31, 1990. The Lehman Brothers Municipal 5 Year G.O. Index is a total return benchmark designed for tax-exempt municipal assets. The index currently includes General Obligation bonds with a minimum credit rating of BAA3, are issued as part of a deal of at least 50 million, have an amount outstanding of at least 5 million, have a maturity of between one and 12 years, and have been issued after December 31, 1990.

 

^†   The Representative Account information is for illustrative purposes only and reflects one account within the composite.  Rounding may cause figures to vary from 100%.  Portfolio holdings and sector composition are subject to change without notice and should not be considered a recommendation of any particular securities or investment strategy. The representative account characteristics and sector composition data are supplemental to the composite returns in the GIPS compliant presentation shown above and are not covered by the report of the independent accountant.

 

♦ Standard deviation is not considered statistically meaningful when there are fewer than five accounts in the composite during the period.

 

RCM (the “Firm”) is a global investment advisory organization, consisting of separate affiliated firms, which operates under the brand name RCM. The affiliated firms that comprise the Firm include, among others, RCM Capital Management LLC (“RCM Capital”), an investment advisory firm registered with the Securities and Exchange Commission, which has been in operation since 1970, either directly or through its predecessors. RCM Capital presents the PCG Municipal Bond strategy in the United States. RCM has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). To obtain a list and description of all of the Firm’s composites, please call 415-954-5400 or write to RCM, Four Embarcadero Center, Suite 3000, San Francisco, CA 94111. For the periods ended December 31, 1998, 1999 and 2000, the composite presentation does not comply fully with GIPS, because RCM has not been able to confirm the total firm assets for those periods.

 

This composite, created in 2003, includes all fee-paying, discretionary fixed income accounts subject to the highest tax rate under the Internal Revenue Code. The investment emphasis is on U.S. tax-exempt municipal bonds with intermediate term maturities. This composite contains single asset segments that are carved out of multiple-asset portfolios. Multiple asset portfolio cash flows are allocated to the carve-out segments pro-rata. As of December 31, 2006, the carve-out segments represented 31.38% of the total assets under management in the composite. Performance results and valuation presented are in U.S. dollars. Composite performance is net of any applicable withholding taxes on dividends, interests and capital gains.

 

The dispersion of annual returns is measured by the standard deviation across equal-weighted account returns represented within the composite for the full year. Additional information regarding policies for calculating and reporting returns and a complete list and description of all of the firm’s composites are available upon request. Our standard fee for this product is as follows: 0.50% on the first $5 million, 0.40% on the next $5 million, 0.30% on the next $15 million, 0.25% on sums exceeding $25 million. Actual fees may vary depending on, among other things, the type of client and the amounts of assets under management. Advisory fees are described in Part II of our Form ADV.

 

As of December 31, 2000 reflects the number of accounts in the composite and prior to December 31, 2000 reflects the number of clients in the composite.

 

 

All data as of June 30, 2008, unless otherwise noted.