reaching for yield intelligently

7/29/2019 Reaching for Yield Intelligently

1/28

PORTFOLIO STRATEGY & RESEARCH GROUP FEBRUARY 22,

This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or ofinancial instrument or to participate in any trading strategy. This is not a research report and was not prepared by the Research departments of Morgan StaSmith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets Inc. It was prepared by Morgan Stanley Smith Barney sales, trading or other non-resepersonnel. Past performance is not necessarily a guide to future performance. Please refer to important information, disclosures, and qualifications at the end of

material.

Reaching for Yield IntelligentlyFixed Income Strategy

Investment Themes

We have updated our Fixed Income Model Portfolios to reflect ourcurrent opinion of the market place and our specific security

recommendations. Please see page 4 for links to the Model Portfolios

or contact your Financial Advisor for further information.

On February 21, 2013, we made a change to our Asset Class HighYield Portfolio. Please click on the link on page 4 for more details onthe change or contact your Financial Advisor.

TIPS have taken the top spot as the worst-performing asset class tostart the year, posting a return of -1.54%, followed by emerging

markets with a -1.05% return; High Yield generated the best return

over the same time period of 1.41%.

While the Treasury Index is only down -0.70% the devil still lies inthe details, in our opinion. Looking deeper at the returns, the long

end of the Treasury curve, more specifically the 10 & 30 year, are

down -1.98% & -5.13%, respectively. In our opinion, investors in

long duration, risk-free securities may want to revisit their

holdings.

While spreads on the HY Index are still historically above thetights of 240bps in 2007, the yield-to-worst continues to sit below

6.00% at 5.82%. Currently, 72% of the Citigroup High Yield

Market Index is callable/puttable, which makes price appreciation

very challenging due to the negative convexity of the asset class.

With a callable bond, as interest rates fall, the incentive for the

issuer to call the bond at par increases; therefore, its price will not

rise as quickly as the price of a non-callable bond. Due to this call

constraint, prices could re-route high yield buyers into other asset

classes such as equities, in our view.

High Grade spreads continue to be range-bound to start 2013.Currently, the spread on the IG Index is 135 with the index trading

between 131 and 135. The two worst-performing IG sectors year to

date are Publishing -2.66% and Telecommunications, -2.37%, while

the two best-performing sectors are Securities, 1.18%, and Building

products, 0.60%.

KEITH E KNOOPMSSB North America - Morgan Stanley Smith Barney [email protected]+1 212 783-3315

DAVID HAIREMSSB North America - Morgan Stanley Smith Barney [email protected]+1 212 783-3308

OUR VIEWS FROM THE BLEACHERS

Treasurys - We believe interest rate volatility will continue2013 with sovereign debt and policy concerns driving interrate movements more than the U.S. economic recovery. Finvestors looking to invest in U.S. Treasuries, we recommendladdered maturity approach moving out on the curve with 3-, 7-, and 10-year maturities, rather than being pinned down low-yielding, shorter-dated securities.

Investment Grade - While the search for yield may be temptiwe would not recommend investors drop down in credit qualto reach for higher yields. In this uncertain market, we beliereturn of capital should be viewed as paramount versus retuon capital given the low-yielding interest rate environment. Fmoderate investors, we continue to see better value in BB

versus A- and AA-rated non-financials.

Preferred - In our opinion, the preferred market place wcontinue to attract money from investors looking for yield in hicredit quality securities, and until we see long-term interest ramoving higher, investors will likely continue to feel comfortaholding these long-duration securities. However, we remiinvestors that the upward price movement in this asset clacould come under pressure if a sell-off were to ensue, though obase case is for preferreds to continue to benefit from investoseeking high current yield with investment grade credit ratingsthis challenging, low-yield environment. Moreover, we wouldcautious on purchasing new issue preferred syndicate deals wlow coupon(i.e., below 6%) in a potentially rising interest ra

environment.High Yield - We continue to see a disconnect when lookingBBB and BB rated issuers. While only dropping a few notchescredit quality, investors can pick up significant yield or spread investing in high BB rated bonds. We have been of the opinithat the biggest contributor to high yield market returns in 20will be the clipping of coupons and credit selection. We continto recommend securities in the 2- to 7-year range for aggressiinvestors.


2/28

FIXED INCOME STRATEGY / FEBRUARY 22, 2013

Please refer to important information, disclosures and qualifications at the end of this material.

Table of ContentsFixed Income Model Portfolio Mission Statement Page 3

Multi-Asset Class Portfolios Page 3

Single-Asset Class Portfolios Page 4Model Portfolio Statistical Overview Page 5

Product Breakdown Page 5

Historical Yield to Worst Page 5

Broad Asset Class Breakdown Page 6

Yield to Worst Page 6

Spread Page 7

Historical Breakdown Page 7

Broad Asset Class Breakdown Returns Page 8

Year-to-date Returns Page 8

Month-to-date Returns Page 8

US Treasury Yields Page 9

Yield Curve Page 9

U.S. 10-year TIPS Breakeven Page 9

US Treasury Yields Returns Page 10

US Treasury CurveYear-to-date Returns Page 10

Range Maturities Year-to-date Returns Page 10

Yield and Spread Matrix Page 11

Investment Grade Sector Breakdown Page 12

Historical Metrics Page 13Investment Grade Sector Returns Page 14

High Yield Sector Breakdown Page 15

Historical Metrics Page 16

High Yield Sector Returns Page 17

Emerging Markets Breakdown Page 18

Historical Metrics Page 18

Emerging Markets Returns Page 19

U.S. Equities & Commodities Breakdown Page 20

Returns Page 20

Representative Fixed Income Indices (Graphs) Page 21

Index Definitions Page 22

Glossary Page 24

Fixed Income Risk Considerations Page 26

Disclosures Page 27


3/28



Fixed Income Model Portfolio Mission StatementThe goal of the fixed income model portfolios is to provide investment guidance for investors in the fixed income markets.

models are divided into two types: multi-asset class portfolios and single-asset class portfolios.

Multi-Asset Class PortfoliosThese model portfolios are actively monitored with the aim of producing a combination of income and total return. The mo

typically spread bond maturities over time to lessen the impact of interest rate changes on the value of the underlying bon

Individual security selection is based on the credit and macroeconomic research done by the Fixed Income Strategy Group (FI

using the resources of MSSBs Global Investment Committee (GIC), Morgan Stanley, Citigroup and outside provid

Implementing asset allocation and security selection, the portfolios aim to outperform their designated benchmark indices.

number of holdings will generally range from a minimum of 20 up to 30 securities. We will have a maximum allocation per cr

issuer of 5% of the par amount of the portfolio.

We believe that actively monitored model portfolios can help investors who are looking for ongoing guidance in their fixed inco

investments. The FISG will select securities based on the outlook for interest rates and the yield curve, as well as issuer credit

risk profile. Each portfolio has an allocation to T-Bills. We may use the T-Bill allocation to add securities to the portfolioopportunities arise in the market. Principal payments from maturing, called, or tendered securities will either be allocated to T-B

or used to purchase new securities for the portfolios. Interest payments will not be reinvested.

We will remove securities from the portfolios if, in our view, they are at risk of significant price declines due to either interest rat

credit risk. We may also remove securities if, in our view, they become fully valued and offer little upside relative to the risk. W

we remove a security from a model portfolio we may either reinvest the proceeds into another security or add the proceeds to ou

Bill allocation. Due to the over-the-counter nature of the bond market, the portfolios and all securities added to the portfolios

be priced on the offer side of the market using Bloombergs Generic Pricing service. All securities sold from the portfolios wil

priced on the bid side of the market.

We have three multi-asset class portfolios with various risk tolerances:

Conservative:The Conservative Portfolio is for investors who are primarily looking for income and principal preservation, witlower level of risk. The portfolio seeks to maintain a minimum overall credit rating of Baa3/BBB- or higher by Moodys

Standard & Poors (S&P) and may invest in securities including, but not limited to, U.S. Treasuries, government-related enterpri

(U.S. agencies), investment grade corporate bonds, high yield corporate bonds and preferred stock/hybrid debt securities.

benchmark is the BofA Merrill Lynch US Corporate/Government Master Index. We will allocate no more than 10% of the portf

to securities that are rated below investment grade with a minimum credit rating of Ba3/BB-.

Moderate: The Moderate Portfolio is for investors who are willing to subject a portion of their principal to increased risk in orde

generate a greater rate of return. The goal of this model is a combination of income and total return. The portfolio seeks to main

a minimum overall credit rating of Baa3/BBB- or higher by Moodys and S&P and may invest in securities including, but not limi

to, U.S. Treasuries, government-related enterprises (U.S. agencies), investment grade corporate bonds, high yield corporate bon

preferred stock/hybrid debt securities, emerging market debt and international non-US dollar securities. The benchmark inde

the BofA Merrill Lynch US Corporate/Government Master Index. We will allocate no more than 5% of the portfolio to securithat are rated below B3/B-.

Aggressive: The Aggressive Portfolio is for investors who are willing to subject a portion of their principal to increased risk in or

to generate a greater rate of return. The primary goal of this model is total return, with a secondary focus on income. This portf

may invest in securities including, but not limited to, U.S. Treasuries, government-related enterprises (U.S. agencies), investm

grade corporate bonds, high yield corporate bonds, preferred stock/hybrid debt securities, emerging market debt and internatio

non-US dollar securities. The benchmark index is the BofA Merrill Lynch US Corporate/Government Master Index. We

allocate no more than 10% of the portfolio to securities that are rated below B3/B-.


4/28



Single-Asset Class PortfoliosThese model portfolios are actively monitored to provide investors with investment guidance in a single-asset class within the fi

income universe. There are four separate portfolios representing the following asset classes: government, investment gr

corporate, high yield corporate, and preferred stock/hybrid debt securities. All securities in the multi-asset class portfolios thawithin these four single asset classes will be included in the single-asset class portfolios. The FISG may also include additio

securities in the single-asset class portfolios that are not in the multi-asset class portfolios.

The single-asset class portfolios are not designed to track a benchmark index. However, we will remove securities from th

portfolios if, in our view, they are at risk of significant price declines due to either interest rate or credit risk. We may also rem

securities if, in our view, they become fully valued and offer little upside relative to the risk.

Government: This portfolio only contains government securities such as U.S. Treasuries and government-related enterprises (U

agencies).

Investment Grade Corporate: This portfolio consists of investment grade corporate bonds. All securities in this portfolio m

have a minimum rating of Baa3/BBB- or higher by Moodys and S&P.

High Yield Corporate: This portfolio consists of high yield corporate bonds that are rated B3/B- or above by Moodys and S&P.

will allocate no more than 10% of the portfolio to securities that are rated below B3/B-.

Preferred Stock/Hybrid Debt Securities: This portfolio may include a variety of different investment structures, including,

not limited to, perpetual preferred stock, capital trust securities, $25 par senior unsecured bonds and $1000 hybrid debt securit

Securities in this portfolio may rank anywhere from just above common equity to as high as senior, unsecured debt. All securitie

this portfolio must be rated B3/B- or higher by Moodys and S&P.

Please click on the links below to access our most recently published Fixed Income Model Portfolio update

Fixed Income Model Portfolio: Conservative Multi-Asset Class Portfolio

Fixed Income Model Portfolio: Moderate Multi-Asset Class Portfolio

Fixed Income Model Portfolio: Aggressive Multi-Asset Class Portfolio

Fixed Income Model Portfolio: Asset Class - Government

Fixed Income Model Portfolio: Asset Class Corporate

Fixed Income Model Portfolio: Asset Class Preferred

In lieu of our latest Asset Class High Yield full report, please click on the link below to access our mostrecently published Asset Class High Yield Change note published on February 21, 2013.

Fixed Income Model Portfolio: Change - Asset Class High Yield
http://linkback.morganstanley.com/web/sendlink/webapp/f/oi45ckd4-3oje-g000-90d7-d8d3855ab100?store=1&d=UwBSZXNlYXJjaF9NU1NCADNEMkRBRjhBLUEwQTctNEY4OC04OEYzLURGQjk2QTEwQjE3MQ%3D%3D&user=2zi85vt1oo7zv-0&__gda__=1423138519_f9111e6a531d44120b5671d3bfafd668http://linkback.morganstanley.com/web/sendlink/webapp/f/ohi5af2i-3oje-g000-85bb-d8d3855a0300?store=1&d=UwBSZXNlYXJjaF9NU1NCAEIxNTYzQjNELUI3QTAtNDk3Ni1CMTUzLUEwMzIyQ0EzQzU3NA%3D%3D&user=2zi83q9mzy67m-0&__gda__=1423138459_07028ddbc2b5e64422b1b1c15ef2cb3bhttp://linkback.morganstanley.com/web/sendlink/webapp/f/ogrpkirc-3oje-g000-b510-d8d3855a0000?store=1&d=UwBSZXNlYXJjaF9NU1NCADNBNDZDOTc0LUNFOUItNDFDRS1BNEZBLTM2NkFCQTE3MTIwMg%3D%3D&user=2zi803j6plyo3-0&__gda__=1423138387_519fbd49ebb2090a98ad425211e40904http://linkback.morganstanley.com/web/sendlink/webapp/f/ogrpkirc-3oje-g000-b510-d8d3855a0000?store=1&d=UwBSZXNlYXJjaF9NU1NCADNBNDZDOTc0LUNFOUItNDFDRS1BNEZBLTM2NkFCQTE3MTIwMg%3D%3D&user=2zi803j6plyo3-0&__gda__=1423138387_519fbd49ebb2090a98ad425211e40904http://linkback.morganstanley.com/web/sendlink/webapp/f/oeo5nqko-3oje-g000-90d7-d8d3855ab100?store=1&d=UwBSZXNlYXJjaF9NU1NCADQ2MDA0ODNBLTdCNTQtNDRFRi1BQTUwLTY3ODRERDNGRUNFQw%3D%3D&user=2zi8s1vzvcufr-0&__gda__=1423138156_5492634fdc84e620b06b0158d8fa748chttp://linkback.morganstanley.com/web/sendlink/webapp/f/odkl41am-3oje-g000-b510-d8d3855a0000?store=1&d=UwBSZXNlYXJjaF9NU1NCADk1MUI0MDlCLUY2NUUtNEMxRS1COEE4LTEyOTM0MTNBMTE1Mg%3D%3D&user=2zi8osq75jch9-0&__gda__=1423138038_ece1731ff9d615ac77253262ed247265http://linkback.morganstanley.com/web/sendlink/webapp/f/ocgltl96-3oje-g000-90d7-d8d3855ab100?store=1&d=UwBSZXNlYXJjaF9NU1NCADVCMjk0N0U3LTA1MTQtNEZEMC1BOEM2LUU2RkYyM0VBMUVFRA%3D%3D&user=2zi8kjmjq0nvz-0&__gda__=1423137916_e77fb9e6ab153c2471e686a2f3211f33http://mssbcie.ms.com/ri/#lookup=ED6559BD-A76D-42BF-A456-E5906C1EC797;page=reportdetails;previousState=pageIndex~%40~1%7C*%7Cpage~%40~home%7C*%7Cregion~%40~NA%7C*%7Csource~%40~All%7C*%7CtabIndex~%40~1http://mssbcie.ms.com/ri/#lookup=ED6559BD-A76D-42BF-A456-E5906C1EC797;page=reportdetails;previousState=pageIndex~%40~1%7C*%7Cpage~%40~home%7C*%7Cregion~%40~NA%7C*%7Csource~%40~All%7C*%7CtabIndex~%40~1http://linkback.morganstanley.com/web/sendlink/webapp/f/ocgltl96-3oje-g000-90d7-d8d3855ab100?store=1&d=UwBSZXNlYXJjaF9NU1NCADVCMjk0N0U3LTA1MTQtNEZEMC1BOEM2LUU2RkYyM0VBMUVFRA%3D%3D&user=2zi8kjmjq0nvz-0&__gda__=1423137916_e77fb9e6ab153c2471e686a2f3211f33http://linkback.morganstanley.com/web/sendlink/webapp/f/odkl41am-3oje-g000-b510-d8d3855a0000?store=1&d=UwBSZXNlYXJjaF9NU1NCADk1MUI0MDlCLUY2NUUtNEMxRS1COEE4LTEyOTM0MTNBMTE1Mg%3D%3D&user=2zi8osq75jch9-0&__gda__=1423138038_ece1731ff9d615ac77253262ed247265http://linkback.morganstanley.com/web/sendlink/webapp/f/oeo5nqko-3oje-g000-90d7-d8d3855ab100?store=1&d=UwBSZXNlYXJjaF9NU1NCADQ2MDA0ODNBLTdCNTQtNDRFRi1BQTUwLTY3ODRERDNGRUNFQw%3D%3D&user=2zi8s1vzvcufr-0&__gda__=1423138156_5492634fdc84e620b06b0158d8fa748chttp://linkback.morganstanley.com/web/sendlink/webapp/f/ogrpkirc-3oje-g000-b510-d8d3855a0000?store=1&d=UwBSZXNlYXJjaF9NU1NCADNBNDZDOTc0LUNFOUItNDFDRS1BNEZBLTM2NkFCQTE3MTIwMg%3D%3D&user=2zi803j6plyo3-0&__gda__=1423138387_519fbd49ebb2090a98ad425211e40904http://linkback.morganstanley.com/web/sendlink/webapp/f/ohi5af2i-3oje-g000-85bb-d8d3855a0300?store=1&d=UwBSZXNlYXJjaF9NU1NCAEIxNTYzQjNELUI3QTAtNDk3Ni1CMTUzLUEwMzIyQ0EzQzU3NA%3D%3D&user=2zi83q9mzy67m-0&__gda__=1423138459_07028ddbc2b5e64422b1b1c15ef2cb3bhttp://linkback.morganstanley.com/web/sendlink/webapp/f/oi45ckd4-3oje-g000-90d7-d8d3855ab100?store=1&d=UwBSZXNlYXJjaF9NU1NCADNEMkRBRjhBLUEwQTctNEY4OC04OEYzLURGQjk2QTEwQjE3MQ%3D%3D&user=2zi85vt1oo7zv-0&__gda__=1423138519_f9111e6a531d44120b5671d3bfafd668


5/28



Exhibit 1. Model Portfolio Statistical Overview

Average CreditRating

Yield ToWorst(YTW)

CurrentYield (CY)

Yield toMaturity

(YTM)

WeightedAverageCoupon

EffectiveDuration

Total ParAmount Cost

EstimateIncome P

Year

Multi-Asset Class

Conservative Aa1 / AA 1.35 3.36 1.35 3.86 4.69 $1,000,000 $1,125,999 $37,494

Moderate A3 / A- 2.70 5.05 2.70 5.78 4.21 $1,005,000 $1,137,820 $56,789

Aggressive Baa1 / BBB 3.31 5.56 3.33 6.31 4.15 $1,005,000 $1,127,842 $62,019

Single Asset Class

Government Aaa / AA+ 1.09 3.21 1.09 3.66 5.64 $120,000 $135,311 $4,300

Corporate A3 / A- 2.68 4.51 2.68 5.19 5.70 $220,000 $241,382 $10,770

Preferred Baa2 / BBB+ 3.77 6.26 3.77 6.92 5.37 $140,000 $155,416 $9,661

High Yield Ba2 / BB 4.09 6.15 4.18 6.82 3.91 $90,000 $101,692 $6,133

Source: Morgan Stanley Smith Barney Fixed Income Strategy, as of January 31, 2013

Exhibit 2. Model Portfolio Product Breakdown

U.S.U.S. Treasury

GovernmentRelated

Enterprises (U.S.Agencies)U.S.

Agencies)Investment Grade

Corporate

Preferred Stock /Hybrid Debt

SecuritiesHigh YieldCorporate

Emerging MarketsDebt (USD)

InternationalNON-USD

Conservative 22.76% 41.09% 36.15%

Moderate 4.45% 14.91% 44.17% 12.63% 19.72% 4.14%

Aggressive 4.50% 34.72% 15.17% 35.01% 6.42% 4.18%

Government 31.48% 68.52%

Corporate 100.00%

Preferred 100.00%

High Yield 100.00%


Exhibit 3. Model Portfolio Historical Yield-to-Worst

Conservative Moderate Aggressive Government Corporate Preferred /Hybrid High Yield

anuary 2013 1.25 2.71 3.41 1.02 2.55 4.01 4.17

December 2012 1.18 2.77 3.58 0.92 2.53 4.00 4.68

November 2012 1.22 2.70 3.48 1.00 2.48 3.69 4.53

October 2012 1.22 2.77 3.35 0.93 2.52 3.77 4.64

September 2012 1.34 3.10 3.91 1.02 2.77 4.09 5.12

August 2012 1.29 3.15 3.82 0.95 2.74 4.11 5.59

uly 2012 1.52 3.19 3.83 1.11 3.11 4.38 5.23

une 2012 1.52 3.16 3.91 1.09 3.16 4.76 5.00

May 2012 1.61 3.11 3.81 1.24 3.13 4.45 4.50

April 2012 1.85 3.29 3.88 1.48 3.38 4.62 4.67

March 2012 1.65 3.13 3.64 1.32 3.04 4.53 4.54

February 2012 1.60 2.95 3.38 1.24 2.96 4.73 3.99

anuary 2012 1.80 3.22 3.68 1.42 3.28 4.89 4.33December 2011 2.03 3.53 4.09 1.55 3.73 4.98 4.82

October 2011 2.13 3.52 4.18 1.75 3.48 5.17 5.21


nternational investing entails greater risk, as well as greater potential rewards compared to U.S. investing. These risks include political and economic uncertaintieforeign countries as well as the risk of currency fluctuations. These risks are magnified in countries with emerging markets, since these countries may have relatunstable governments and less established markets and economies

The majority of preferred securities are "callable" meaning that the issuer may retire the securities at specific prices and dates prior to maturity. Interest/dividpayments on certain preferred issues may be deferred by the issuer for periods of up to 10 years. The investor would still have income tax liability even thopayments would not have been received. The initial rate on a floating rate or index-linked preferred security may be lower than that of a fixed-rate security ofsame maturity.


6/28



Exhibit 4. Broad Asset Class Breakdown Prior Close Data

ASSET CLASS Price Coupon YTW OAS Eff DurBroad Investment Grade (BIG) 108.055 3.52 1.71 51 5.03Treasury 105.836 2.15 0.91 NA 5.17Agency 109.542 2.88 0.90 15 4.09

Mortgage 107.221 4.31 2.02 50 3.43Corporate 112.317 4.93 2.75 135 6.95High Yield 105.041 7.89 5.91 509 4.13Emerging Markets 118.069 6.95 4.20 252 7.48

CREDIT RATING Price Coupon YTW OAS Eff DurAAA 104.297 2.31 0.92 25 3.86AA 106.751 3.10 1.38 24 4.46A 112.429 4.65 2.44 108 6.85BBB 113.793 5.66 3.30 180 7.21BB 107.665 6.88 4.55 359 4.57B 105.804 8.13 5.94 517 4.00CCC 96.778 9.47 9.24 860 3.46

INVESTMENT GRADE MATURITY Price Coupon YTW OAS Eff DurG 1-3 Years 105.450 4.00 0.99 71 1.91

G 3-7 Years 114.071 5.03 1.97 119 4.24G 7-10 Years 107.617 4.32 3.21 159 7.23G 10+ Years 119.551 6.06 4.61 183 13.62

HIGH YIELD MATURITY Price Coupon YTW OAS Eff DurHY 1-7 Years 105.092 8.36 5.82 536 2.69HY 7-10 Years 105.805 7.36 5.96 480 5.60HY 7+ Years 104.975 7.26 6.03 474 6.03HY 10+ Years 99.747 6.64 6.49 430 8.92

Source: MSSB Fixed Income Strategy; & Bloomberg. 2013 Citigroup Index LLC. All rights reserved. Data as of 2/21/13 and is subject to change at anytime.

Exhibit 5. Broad Asset Class Yield-to-Worst & EffectiveDuration

Exhibit 6. Broad Asset Class Option Adjusted Spread

1.71

0.91 0.90

2.02

2.75

5.91

4.20

0

1

2

3

4

5

6

7

8

Broad

Investment

Grade (BIG)

Trea sury Agency Mo rtga ge Cor po ra te H igh Yield Emer ging

Markets

Yield

To

W

orst

YTW

Yield To Worst Effective Duration

51

15

50

135

509

252

0

50

100

150

200

250

300

350

400

450

500

550

600

Broad

Investment

Grade (BIG)

T reas ur y A gency M or tg ag e Cor pora te H ig h Y ie ld Emerg in g

Markets

OAS


Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets.

Principal is returned on a monthly basis over the life of a mortgage-backed security. Principal prepayment can significantly affect the monthly income stream andmaturity of any type of MBS, including standard MBS, CMOs and Lottery Bonds. Yields and average lives are estimated based on prepayment assumptions andsubject to change based on actual prepayment of the mortgages in the underlying pools.


7/28



Exhibit 7. Historical Broad Asset Class Breakdown

As of 2/14/13 Close As of 2/22/12 Close Rolling 3 Year Averages Rolling 3 Year Highs Rolling 3 Year LowPrice YTW OAS Duration Price YTW OAS Price YTW OAS Price YTW OAS Price YTW O

Broad Investment Grade (BIG) 108.062 1.71 50 5.04 109.245 1.95 61 107.864 2.22 52 110.885 3.45 79 103.657 1.31Treasury 105.788 0.92 NA 5.17 108.534 1.05 NA 106.893 1.37 NA 111.299 2.50 NA 102.187 0.74 N

Agency 109.509 0.92 15 4.11 109.923 1.00 24 108.518 1.27 26 111.203 2.33 42 104.172 0.76Mortgage 107.282 2.01 48 3.42 107.968 2.20 44 106.885 2.45 31 109.024 4.00 72 103.440 0.86Corporate 112.328 2.76 135 6.96 112.277 3.27 185 110.772 3.54 171 116.002 4.57 255 105.705 2.60 1High Yield 105.468 5.82 499 4.04 99.478 7.73 698 100.883 7.48 619 106.265 9.81 882 92.043 5.57 4Emerging Markets 118.558 4.12 244 7.38 110.211 5.69 411 113.081 5.22 299 121.199 6.18 446 107.157 3.89 2


AAA 104.376 0.91 23 3.88 105.042 1.19 46 105.419 1.68 26 108.954 3.15 83 103.012 0.75AA 106.749 1.39 23 4.46 108.498 1.57 23 107.895 2.18 60 111.256 3.64 137 104.344 0.87A 112.396 2.46 109 6.86 112.037 3.05 168 110.555 3.31 155 116.253 4.36 252 105.518 2.30 1BBB 113.886 3.30 178 7.23 113.284 3.83 230 112.290 4.07 210 117.362 5.06 297 107.246 3.13 1BB 108.123 4.45 349 4.45 104.622 5.91 499 104.515 5.91 449 108.920 7.81 644 97.325 4.22 3B 106.218 5.84 505 3.94 99.254 7.95 728 101.589 7.59 634 107.072 10.31 931 91.741 5.57 4CCC 97.115 9.21 861 3.35 85.817 13.09 1261 90.125 11.51 1047 98.399 15.87 1528 76.150 8.99 7


G 1-3 Years 105.466 1.01 72 1.93 106.032 1.43 112 106.214 1.56 110 107.853 2.42 194 104.678 0.92G 3-7 Years 114.051 1.98 118 4.25 110.873 2.71 189 112.643 2.42 168 115.406 40891.00 260 107.207 1.89 1G 7-10 Years 107.479 3.23 158 7 .24 110.949 3.70 209 109.894 3.56 205 112.148 40780.00 269 107.138 2.92 1G 10+ Years 119.724 4.60 181 13.62 120.339 4.90 212 116.743 5.16 200 128.493 40350.00 262 104.899 4.25 1


HY 1-7 Years 105.228 5.76 528 2.63 9 9.821 7.78 742 101.254 7.44 656 105.772 10.07 943 93.617 5.49 4HY 7-10 Years 106.653 5.82 469 5.42 101.109 7.53 624 102.363 7.45 559 107.734 9.40 802 91.304 5.58 4HY 7+ Years 105.786 5.90 462 5.91 98.899 7.66 624 100.195 7.55 551 106.918 9.39 791 89.740 5.67 3HY 10+ Years 100.859 6.37 420 8.84 89.016 8.33 620 91.801 8.02 518 102.283 9.39 731 82.260 6.18 3


Exhibit 8. Historical Asset Class Yield-to-Worst (3 Years) Exhibit 9. Historical Asset Class Spread (3 Years)

0

1

2

3

4

5

6

7

8

9

10

11

12

BroadInvestmentGrade (BIG)

T reas ur y Ag ency Mo rt ga ge C or po ra te H igh Yield Emer gingMarkets

YieldtoW

orst(YTW

)

High Low Current Average

0

100

200

300

400

500

600

700

800

BroadInvestment

Grade (BIG)

T reasu ry Agency Mortgage C orporate H igh Yie ld EmergingMarkets

OAS

High Low Current Average



8/28



Exhibit 10. Broad Asset Class Breakdown Returns

ASSET CLASS 1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years ABroad Investment Grade (BIG) (0.06) 0.02 (0.71) 4.23 7.85 6.30

Treasury (0.09) (0.04) (0.82) 1.97 9.61 5.81TIPS (0.36) (0.71) (1.54) 7.18 14.01 6.46

Agency (0.04) 0.05 (0.44) 2.55 5.73 5.73Mortgage 0.03 0.10 (0.40) 2.60 6.38 5.50

Corporate (0.13) 0.04 (0.94) 9.97 8.26 9.13High Yield 0.23 0.12 1.41 12.11 5.52 14.32

Emerging Markets 0.16 0.07 (1.05) 12.98 8.46 12.01

CREDIT RATING 1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years A

AAA/AA (0.11) (0.01) (0.82) 5.99 6.81 5.99

A (0.10) 0.07 (0.97) 10.07 7.25 8.55BBB (0.14) (0.02) (0.95) 11.36 9.56 10.18

BBB/BB (0.12) (0.46) (0.45) 14.36 9.04 14.62BB 0.13 0.03 0.56 12.74 7.39 13.34

B 0.23 0.14 1.50 12.81 5.84 13.20CCC 0.48 0.33 3.30 15.87 (0.88) 19.57

INVESTMENT GRADE MATURITY 1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years A

G Corp 1-3 Years 0.01 0.11 0.23 3.95 1.65 3.95G Corp 3-7 Years (0.01) 0.20 0.15 9.55 5.33 8.16G Corp 7-10 Years (0.02) 0.10 (1.20) 12.16 9.50 10.88

G Corp 10+ Years (0.43) (0.35) (2.96) 13.18 16.32 11.60

HIGH YIELD MATURITY 1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years A

HY 1-7 Years 0.24 0.35 1.80 11.81 4.60 14.09

HY 7-10 Years 0.24 (0.13) 0.95 11.63 7.02 13.65HY 7+ Years 0.21 (0.18) 0.90 12.62 6.99 14.98

HY 10+ Years 0.00 (0.47) 0.53 18.34 6.11 18.75


Exhibit 11. Asset Class Year-to-Date Returns Exhibit 12. Asset Class Month-to-Date Returns

(0.71)

(0.82)

(1.54)

(0.44)

(0.40)

(0.94)

1.41

(1.05)

-1.75 -1.50 -1.25 -1.00 -0.75 -0.50 -0.25 0.00 0.25 0.50 0.75 1.00 1.25 1.50

Broad Investment Grade (BIG)

Treasury

TIPS

Agency

Mortgage

Corporate

High Yield

Emerging Markets

Total Return (%)

0.02

(0.04)

(0.71)

0.05

0.10

0.04

0.12

0.07

-1.00 -0.75 -0.50 -0.25 0.00 0.2

Broad Investment Grade (BIG)

Treasury

TIPS

Agency

Mortgage

Corporate

High Yield

Emerging Markets

Total Return (%)


Treasury Inflation Protection Securities (TIPS) coupon payments and underlying principal are automatically increased to compensate for inflation by trackingconsumer price index (CPI). While the real rate of return is guaranteed, TIPS tend to offer a low return. Because the return of TIPS is linked to inflation, TIPS significantly underperform versus conventional U.S. Treasuries in times of low inflation.


9/28



Exhibit 13. US Treasury Yields

US Interest Rates Current 5 Days Ago 1 Mon Ago 3 Mon Ago 6 Mon Ago 1 Year Ago 2 Years Ago 3 Years A3 Month 0.12 0.10 0.06 0.09 0.10 0.08 0.10 0.08

6 Month 0.13 0.12 0.09 0.14 0.13 0.12 0.15 0.181 Year 0.15 0.15 0.13 0.17 0.18 0.15 0.25 0.34

2 Year 0.25 0.27 0.24 0.27 0.26 0.30 0.69 0.883 Year 0.39 0.41 0.36 0.36 0.36 0.42 1.21 1.485 Year 0.83 0.86 0.76 0.68 0.69 0.86 2.13 2.447 Year 1.33 1.36 1.24 1.09 1.13 1.40 2.83 N/A10 year 1.97 2.00 1.84 1.68 1.69 2.00 3.45 3.80

30 Year 3.16 3.18 3.03 2.82 2.80 3.15 4.60 4.73Short Term Rates Current 5 Days Ago 1 Mon Ago 3 Mon Ago 6 Mon Ago 1 Year Ago 2 Years Ago 3 Years AFederal Reserve 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25Effective US Fed Fund Rate 0.16 0.14 0.14 0.16 0.13 0.10 0.15 0.131 Month LIBOR (USD) 0.20 0.20 0.20 0.21 0.24 0.24 0.26 0.233 Month LIBOR (USD) 0.29 0.29 0.30 0.31 0.43 0.49 0.31 0.253 Month US LIBOR less T-Bills (TED Spread) 0.17 0.19 0.24 0.22 0.33 0.41 N/A N/A

3 Month US LIBOR-OIS (Overnight Index Swap) 0.14 0.15 0.13 0.15 0.14 0.11 0.15 0.16US Inflation Related Current 5 Days Ago 1 Mon Ago 3 Mon Ago 6 Mon Ago 1 Year Ago 2 Years Ago 3 Years A5 Year Yields -1.66 -1.64 -1.60 -1.42 -1.22 -1.39 -0.35 0.265 Year US TIPS Breakeven 232 232 220 201 187 205 211 18410 Year Yields -0.58 -0.55 -0.74 -0.76 -0.58 -0.31 1.09 1.5310 Year US TIPS Breakeven 254 255 253 240 227 231 236 22620 Year Yields 0.17 0.21 0.02 -0.01 0.14 0.39 1.80 2.1720 Year US TIPS Breakeven 252 252 251 234 222 238 247 24230 Year Yields 0.59 0.59 0.42 0.38 0.50 0.72 2.07 2.18

5Y 5Y Forward Breakeven 2.75 2.75 3.02 2.89 2.74 2.52 2.42 2.51Consumer Price Index NSA 231 231 232 229 228 221 217

Consumer Price Index (CPI) - (YoY%) 1.60 1.70 2.20 1.40 2.90 1.60 2.60CPI ex-Food & Energy (YoY%) 1.90 1.90 2.00 2.10 2.30 1.00 1.60


Exhibit 14. US Treasury Yield Curve Exhibit 15. US 10-Year TIPS Breakeven (5 Years)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Y

i

e

l

dCurrent

1 Month Ago

1 Year Ago

2 Years Ago

6 mo 2 yr 5 yr 10 yr 30 yr

80

100

120

140

160

180

200

220

240

260

280

Feb-0

9

M

ay-0

9

A

ug-0

9

N

ov-0

9

Feb-10

M

ay-10

A

ug-10

N

ov-10

Feb-11

M

ay-11

A

ug-11

N

ov-11

Feb-12

M

ay-12

A

ug-12

N

ov-12

B

re

a

k

e

v

e

n

Average - 21 1

Current - 254


The table above represents an indication of the current US Treasury Yield Curve. The yield curve depicts the relationship between bond yields and maturnvestors should use the yield curve as a point of reference. The treasury yield curve is widely used as a benchmark for pricing many other fixed income securities

nterest income from zero coupon bonds is subject to annual taxation as ordinary income even though no interest payments will be received by the investor if heldtaxable account.


10/28



Exhibit 16. US Treasury Yields Returns

1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years Ago1 Month T-Bill 0.00 0.00 0.00 0.05 0.05 0.123 Month T-Bill 0.00 0.00 0.01 0.08 0.08 0.136 Month T-Bill 0.00 0.00 0.01 0.12 0.14 0.20

2 Year 0.00 0.02 0.02 0.38 1.47 2.295 Year (0.03) 0.11 (0.54) 1.78 9.16 6.9310 Year (0.14) 0.05 (1.98) 3.11 16.99 8.1030 Year (0.75) (0.86) (5.13) 2.44 35.45 8.71

1 Week MTD YTD 1 Year 2 Years Ago 3 Years Ago

Treasury 1-3 Years 0.00 0.01 0.03 0.52 1.47 2.33Treasury 3-7 Years (0.03) 0.08 (0.43) 1.78 7.99 6.57Treasury 7-10 Years (0.11) 0.06 (1.51) 3.28 15.54 9.40Treasury 10+ Years (0.57) (0.65) (4.18) 3.06 30.08 9.44Treasury 20+ Years (0.66) (0.79) (4.63) 3.15 33.81 9.40Treasury 1-10 Years (0.02) 0.05 (0.35) 1.46 6.33 5.22


Exhibit 17. US Treasury Curve Year-to-Date Returns Exhibit 18. Range Maturities Year-to-Date Returns

0.00

0.01

0.01

0.02

(0.54)

(1.98)

(5.13)

-5.50 -5.00 -4.50 -4.00 -3.50 -3.00 -2.50 -2.00 -1.50 -1.00 -0.50 0.00 0.50

1 Month T-Bill

3 Month T-Bill

6 Month T-Bill

2 Year

5 Year

10 Year

30 Year

Total Return (%)

0.03

(0.43)

(1.51)

(4.18)

(4.63)

(0.35)

-5.00 -4.50 -4.00 -3.50 -3.00 -2.50 -2.00 -1.50 -1.00 -0.50 0.00 0.5

Treasury 1-3 Years

Treasury 3-7 Years

Treasury 7-10 Years

Treasury 10+ Years

Treasury 20+ Years

Treasury 1-10 Years

Total Return (%)



11/28



Exhibit 19. Yield and Spread Matrix

Yield to Maturity 3 Month 6 Month 1 Year 2 Year 3 Year 5 Year 7 Year 10 Year 30 YeaTreasury 0.122 0.132 0.152 0.250 0.394 0.831 1.330 1.971 3.159CDs 0.200 0.300 0.400 0.550 0.750 1.200 1.700 2.300 -Agency 0.161 0.163 0.190 0.304 0.476 1.000 1.587 2.375 4.857

AA Rated 0.303 0.372 0.497 0.853 1.157 1.783 2.475 3.293 4.626A Rated 0.292 0.327 0.426 0.666 0.980 1.717 2.401 3.144 4.373BBB Rated 0.673 0.742 0.924 1.281 1.653 2.445 3.106 3.747 4.806

BB Rated 1.613 1.613 1.716 2.009 2.435 3.199 3.871 4.817 7.899B Rated 4.551 4.615 4.690 5.000 5.289 6.114 6.646 7.707 8.700

Spreads 3 Month 6 Month 1 Year 2 Year 3 Year 5 Year 7 Year 10 Year 30 YeaTreasury

CDs 0.08 0.17 0.25 0.30 0.36 0.37 0.37 0.33 -Agency 0.04 0.03 0.04 0.05 0.08 0.17 0.26 0.40 1.70AA Rated 0.18 0.24 0.34 0.60 0.76 0.95 1.15 1.32 1.47A Rated 0.17 0.20 0.27 0.42 0.59 0.89 1.07 1.17 1.21BBB Rated 0.55 0.61 0.77 1.03 1.26 1.61 1.78 1.78 1.65

BB Rated 1.49 1.48 1.56 1.76 2.04 2.37 2.54 2.85 4.74

B Rated 4.43 4.48 4.54 4.75 4.90 5.28 5.32 5.74 5.54

Spreads - 2 Year Curve Treasury CDs Agency AA Rated A Rated BBB Rated BB Rated B RatedTreasury -0.30 -0.05 -0.60 -0.42 -1.03 -1.76 -4.75CDs 0.30 0.25 -0.30 -0.12 -0.73 -1.46 -4.45Agency 0.05 -0.25 -0.55 -0.36 -0.98 -1.71 -4.70AA Rated 0.60 0.30 0.55 0.19 -0.43 -1.16 -4.15A Rated 0.42 0.12 0.36 -0.19 -0.62 -1.34 -4.33BBB Rated 1.03 0.73 0.98 0.43 0.62 -0.73 -3.72BB Rated 1.76 1.46 1.71 1.16 1.34 0.73 -2.99B Rated 4.75 4.45 4.70 4.15 4.33 3.72 2.99

Spreads - 5 Year Curve Treasury CDs Agency AA Rated A Rated BBB Rated BB Rated B RatedTreasury -0.37 -0.17 -0.95 -0.89 -1.61 -2.37 -5.28

CDs 0.37 0.20 -0.58 -0.52 -1.25 -2.00 -4.91Agency 0.17 -0.20 -0.78 -0.72 -1.45 -2.20 -5.11AA Rated 0.95 0.58 0.78 0.07 -0.66 -1.42 -4.33A Rated 0.89 0.52 0.72 -0.07 -0.73 -1.48 -4.40BBB Rated 1.61 1.25 1.45 0.66 0.73 -0.75 -3.67BB Rated 2.37 2.00 2.20 1.42 1.48 0.75 -2.91B Rated 5.28 4.91 5.11 4.33 4.40 3.67 2.91

Spreads - 10 Year Curve Treasury CDs Agency AA Rated A Rated BBB Rated BB Rated B RatedTreasury -0.33 -0.40 -1.32 -1.17 -1.78 -2.85 -5.74CDs 0.08 0.99 0.84 1.45 2.52 5.41Agency 0.40 -0.08 -0.92 -0.77 -1.37 -2.44 -5.33AA Rated 1.32 -0.99 0.92 0.15 -0.45 -1.52 -4.41A Rated 1.17 -0.84 0.77 -0.15 -0.60 -1.67 -4.56BBB Rated 1.78 -1.45 1.37 0.45 0.60 -1.07 -3.96BB Rated 2.85 -2.52 2.44 1.52 1.67 1.07 -2.89B Rated 5.74 -5.41 5.33 4.41 4.56 3.96 2.89


The yields represented herein are fair market yield curves and may not represent levels currently available.

Credit ratings are subject to change.

Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.

CD rates may vary due to a clients state of residence.

CDs sold prior to maturity are subject to market risk and therefore investors may receive more or less than the amount invested or the face value. Callable CDs acallable at the sole discretion of the issuer.


12/28



Exhibit 20. Investment Grade Sector Breakdown Prior Close Data

Price YTW OAS Duration

Industrial 112.138 2.81 131 7.44Aerospace 111.257 2.75 117 7.80Automotive Manu 110.921 3.44 224 5.86

Building Products 109.591 2.47 146 5.12Chemicals 111.688 2.55 120 6.68Cong / Div Manufacturing 111.415 2.49 97 7.79Electronics 109.010 2.46 126 6.10nfo/Data Tech 106.944 2.66 137 6.61Machinery 107.822 1.85 72 5.91Manufacturing 109.882 2.71 134 6.83Metals/Mining 109.234 3.38 175 7.84Paper & Forest Products 120.382 3.73 206 7.53Textiles/Apparel/Shoes 115.190 3.57 153 9.69Vehicle Parts 110.892 2.81 134 7.17

Price YTW OAS DurationService 112.722 2.83 126 7.81

Cable and Media 114.835 3.28 154 8.44Gaming/Lodging/Leisure 108.645 3.33 242 4.58Health Care Supply 109.845 2.25 111 5.78Pharma 112.153 2.45 93 7.72Publishing 110.631 3.98 243 7.21Restaurants 114.982 2.69 109 8.08Retails Stores 113.442 2.82 110 8.62Food/Drugs 113.569 3.27 162 7.86

Price YTW OAS DurationEnergy 114.092 3.10 150 7.80

Gas Pipelines 115.523 3.33 164 8.20Oil & Gas 113.552 2.92 137 7.58Oilfield Services 115.882 3.81 197 9.05

Price YTW OAS DurationConsumer 114.459 2.35 103 7.10

Beverage Bottling 112.798 1.94 76 6.48

Consumer Products 113.008 2.12 86 6.71Food Processors 114.985 2.71 127 7.60Tobacco 118.907 2.89 137 8.00Transportation 115.288 2.98 137 8.45Airlines 111.151 3.47 237 4.74Railroads 117.354 3.06 122 9.80

Price YTW OAS Duration

Utility 115.258 3.14 140 8.53Electric 117.226 2.98 111 9.47Telecommunications 113.626 3.27 168 7.55Natural Gas Distribution 112.570 3.21 150 8.53

Price YTW OAS DurationFinance 111.074 2.56 144 5.51

Banking 110.885 2.31 132 5.05

ndependent Finance 112.558 2.55 119 6.71Leasing 111.693 3.45 274 3.64Life Insurance 113.601 2.97 146 7.51Pty CasualtyInsurance 117.733 3.17 162 7.48REITs 111.076 2.65 151 5.54Securities 110.866 3.00 196 5.01


The value of fixed income securities will fluctuate and, upon a sale, may be worth more or less than their original cost or maturity value. Bonds are subject to interrate risk, call risk, reinvestment risk, liquidity risk, and credit risk of the issuer.


13/28



Exhibit 21. Historical Investment Grade Sector Metrics


Industrial 112.196 2.82 130 7.45 114.609 2.98 147 107.668 4.36 204 117.189 8.65 584 85.284 2.57 1Aerospace 111.240 2.74 115 7.78 112.725 2.84 127 110.235 3.84 150 118.011 7.12 439 95.701 2.38 8

Automotive Manu 109.640 2.49 146 5.14 107.863 2.38 135 107.416 3.94 243 114.859 13.59 1165 81.456 1.94 9Building Products 111.131 3.36 214 5.84 107.416 4.35 315 100.371 5.92 389 112.595 12.45 1073 73.008 3.30 1Chemicals 111.693 2.56 119 6.68 114.448 2.58 126 107.683 4.09 195 117.126 7.65 504 89.218 2.26 1Cong / Div Manufacturing 111.308 2.51 98 7.80 115.587 2.43 108 108.583 3.80 160 118.622 7.41 480 89.979 2.19 8Electronics 109.064 2.43 122 6.11 112.033 2.27 105 106.826 3.79 166 115.023 8.06 539 86.937 2.15 8nfo/Data Tech 107.711 1.89 74 5.92 110.893 2.57 125 105.366 4.05 196 113.772 9.07 675 84.538 2.30 10Machinery 111.240 2.74 115 7.78 113.993 1.96 80 108.146 3.47 159 115.367 7.85 581 89.835 1.67 6Manufacturing 109.926 2.71 133 6.84 112.472 2.81 145 106.397 4.30 215 114.183 8.90 657 85.259 2.57 1Metals/Mining 109.387 3.37 173 7.87 111.199 3.63 210 104.232 5.17 284 114.344 10.55 855 77.157 3.24 1Paper & Forest Products 120.697 3.73 204 7.55 116.916 4.39 268 106.833 5.99 360 124.412 11.88 997 76.807 3.50 1Textiles/Apparel/Shoes 114.987 3.61 156 9.72 116.820 3.56 136 105.118 5.33 210 123.695 9.95 621 68.385 3.00 8Vehicle Parts 110.714 2.84 136 7.17 110.894 2.88 133 102.593 4.69 246 114.300 11.53 975 74.307 2.36 8


Service 112.740 2.83 125 7.82 115.272 2.95 137 107.934 4.33 194 118.789 8.64 564 84.268 2.51 1Cable and Media 114.793 3.29 154 8.44 116.794 3.45 173 108.408 4.87 240 120.958 9.96 671 81.054 2.90 1Gaming/Lodging/Leisure 108.915 3.27 234 4.57 111.546 3.70 285 101.033 6.07 414 112.443 15.57 1419 66.333 3.01 1Health Care Supply 109.807 2.28 112 5.79 111.310 2 .47 123 105.881 4.03 193 114.152 8.68 571 85.395 2.02 9Pharma 112.186 2.44 91 7.72 115.451 2.53 99 109.711 3.71 126 119.698 7.14 371 88.361 2.13 7Publishing 110.928 3.93 236 7.22 1 14.213 3.86 246 106.837 5.20 321 119.847 11.90 1043 78.370 2.95 1Restaurants 114.954 2.70 109 8.09 117.759 2.92 120 109.114 4.24 173 121.389 8.32 519 85.244 2.28 7Retails Stores 113.422 2.84 110 8.63 116.092 2.86 114 107.251 4.17 172 121.444 8.50 587 81.707 2.51 7Food/Drugs 113.586 3.28 162 7.86 115.386 3.21 161 109.037 4.42 207 118.194 9.16 615 85.395 2.83 1


Energy 114.283 3.10 147 7.82 115.894 3.41 176 108.195 4.71 220 119.433 8.94 606 82.881 2.81 1Gas Pipelines 115.754 3.33 162 8.22 115.241 3.81 211 107.333 5.24 261 120.512 9.85 764 80.703 3.07 1Oil & Gas 113.746 2.91 133 7.60 116.223 3.13 152 108.301 4.45 196 119.057 8.53 543 82.991 2.62 1Oilfield Services 116.067 3.79 193 9 .07 118.689 3.90 190 110.264 4.99 234 120.922 8.33 574 85.549 3.49 1


Consumer 114.459 2.35 103 7.10 115.981 2.70 142 109.127 3.96 172 118.406 7.81 477 88.704 2.14 8Beverage Bottling 112.798 1.94 76 6.48 115.478 2.21 106 108.579 3.58 140 117.070 7.81 463 87.518 1.72 5Consumer Products 113.008 2.12 86 6.71 113.887 2.37 110 107.866 3.68 149 116.327 7.35 439 90.672 1.96 7Food Processors 114.985 2.71 127 7.60 115.265 3.09 168 108.435 4.09 183 117.683 8.03 505 88.599 2.46 9Tobacco 118.907 2.89 137 8.00 120.857 3.38 205 113.316 4.85 246 127.620 8.92 650 84.002 2.62 1Transportation 115.288 2.98 137 8.45 116.368 3.32 178 107.602 4.89 238 119.403 9.20 616 84.485 2.86 1Airlines 111.151 3.47 237 4.74 106.677 5.03 400 99.036 7.16 515 111.277 14.94 1362 72.811 3.46 2Railroads 117.354 3.06 122 9.80 119.106 3.28 150 109.566 4.59 190 122.038 8.33 509 85.268 2.88 1


Utility 115.269 3.16 141 8.56 116.452 3.41 168 114.512 3.61 162 120.518 4.41 219 107.620 2.88 1Electric 117.261 3.00 112 9.48 118.225 3.20 135 109.165 4.44 184 123.109 8.37 515 83.917 2.75 1

Telecommunications 113.603 3.30 169 7.59 115.328 3.61 198 108.651 4.74 238 120.185 9.98 711 81.512 2.99 1Natural Gas Distribution 112.817 3.18 146 8.54 112.779 3.63 194 106.500 4.77 253 118.315 9.88 848 82.081 2.89 1


Finance 111.074 2.56 144 5.51 104.955 4.15 313 107.136 3.71 216 112.919 4.78 366 101.740 2.47 1Banking 110.885 2.31 132 5.05 105.367 3.74 268 106.695 3.45 237 111.844 4.96 393 99.698 2.30 1ndependent Finance 112.558 2.55 119 6.71 110.240 3.17 175 108.689 3.27 160 116.068 4.79 256 101.362 2.45 1Leasing 111.693 3.45 274 3.64 105.882 5.54 476 105.084 5.43 453 112.875 9.85 910 91.368 3.25 2Life Insurance 113.601 2.97 146 7.51 111.668 3.80 229 109.493 4.09 216 116.220 5.35 338 101.488 2.88 2Pty CasualtyInsurance 117.733 3.17 162 7.48 112.266 3.82 227 115.991 3.50 206 119.418 4.00 260 110.674 3.14 1REITs 111.076 2.65 151 5.54 109.760 3.59 242 108.284 3.94 232 113.076 5.56 346 101.672 2.62 1Securities 110.866 3.00 196 5.01 104.375 4.53 350 106.463 4.30 269 111.547 5.75 456 98.654 2.88 1



14/28



Exhibit 22. Investment Grade Sector Returns

INVESTMENT GRADE SECTORS 1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years AgoIndustrial (0.18) (0.07) (1.38) 4.86 10.57 9.12

Aerospace (0.21) (0.14) (1.91) 4.86 10.04 7.80Automotive Manufacturer (0.07) 0.12 (0.10) 5.39 6.71 7.97

Building Products (0.25) 0.43 0.60 9.27 5.12 7.92Chemicals (0.13) (0.17) (1.09) 4.39 10.28 9.25Cong / Div Manufacturing (0.09) 0.20 (1.20) 3.79 10.76 8.92Electronics (0.12) 0.08 (0.64) 2.58 8.63 9.65nfo/Data Tech (0.15) (0.13) (1.72) 2.50 10.39 8.02Machinery (0.08) 0.01 (0.56) 3.11 9.03 8.08Manufacturing (0.18) (0.04) (1.07) 4.06 9.17 9.02Metals/Mining (0.39) (0.25) (1.38) 4.29 6.93 10.22Paper & Forest Products (0.43) (0.18) (1.23) 9.52 11.39 10.07Textiles/Apparel/Shoes (0.16) (0.21) (2.23) 3.31 17.09 9.59Vehicle Parts 0.53 0.19 (0.46) 4.06 11.66 12.80

1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years AgoService (0.19) (0.14) (1.59) 4.79 11.07 9.24

Cable and Media (0.12) (0.04) (1.89) 5.33 10.49 10.01

Gaming/Lodging/Leisure 0.00 (0.10) 0.01 7.11 9.11 12.46Health Care Supply (0.10) (0.05) (1.39) 3.92 10.10 7.90Pharma (0.22) (0.16) (1.52) 4.64 11.02 9.05Publishing (0.14) (1.39) (2.66) 5.24 3.82 10.02Restaurants (0.13) (0.30) (1.71) 4.31 13.47 9.58Retails Stores (0.22) (0.24) (1.79) 4.21 12.93 8.46Food/Drugs (0.19) 0.23 (0.73) 4.16 11.06 8.95

1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years AgoEnergy (0.22) (0.00) (1.62) 6.07 11.51 8.86

Gas Pipelines (0.13) 0.22 (1.37) 7.85 10.80 10.03Oil & Gas (0.25) (0.10) (1.74) 5.24 11.91 8.44Oilfield Services (0.22) 0.04 (1.53) 6.54 11.30 8.06

1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years AgoConsumer (0.14) (0.11) (1.16) 4.80 10.61 9.05

Beverage Bottling (0.17) (0.11) (1.30) 3.85 9.95 8.63

Consumer Products 0.06 0.15 (0.83) 3.80 11.34 7.86Food Processors (0.22) (0.35) (1.37) 5.62 11.02 8.72Tobacco (0.13) 0.06 (0.80) 6.69 10.46 11.72Transportation (0.18) (0.02) (1.39) 5.63 11.83 10.41Airlines 0.11 0.29 1.08 9.47 4.36 15.45Railroads (0.23) (0.07) (2.07) 5.34 14.33 9.67

1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years AgoUtility (0.22) (0.32) (1.59) 5.11 12.01 8.62

Electric (0.20) 0.24 (1.01) 4.89 14.30 9.40Telecommunications (0.24) (0.97) (2.37) 5.19 9.68 7.83Natural Gas Distribution (0.17) (0.08) (1.12) 6.72 12.83 9.98

1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years AgoFinance (0.00) 0.37 0.08 10.30 3.44 9.35

Banking 0.08 0.43 0.22 11.23 1.65 8.05

ndependent Finance (0.16) 0.23 (0.80) 7.97 6.45 11.28Leasing (0.12) 0.04 1.90 12.77 (3.42) 0.00Life Insurance (0.19) 0.20 (0.62) 9.18 7.47 13.63Pty CasualtyInsurance 0.00 0.65 0.09 10.73 9.93 10.29REITs (0.01) 0.53 0.61 9.08 7.31 14.82Securities 0.12 0.44 1.18 12.78 1.71 11.13



15/28



Exhibit 23. High Yield Sector Breakdown Prior Close Data

Price YTW OAS Eff DurAerospace 105.652 5.32 449 4.16Airlines 105.862 5.27 476 2.48Auto Mfg / Vehicle Parts 105.402 5.41 475 3.96

Banking 112.547 4.05 292 5.24Broadband 109.372 5.64 511 3.13Building Products 109.472 5.97 532 3.65Cable 107.358 4.85 408 4.32

Price YTW OAS Eff DurCapital Goods 108.846 4.80 414 3.46Chemicals 101.263 6.70 578 4.18CLEC NA NA NA NAConsumer Products / Tobacco 105.260 5.66 532 3.33Containers 106.501 5.51 475 4.22Diversified Telecom 109.573 5.63 435 5.61Environmental Services 104.613 5.99 493 5.43Finance 101.751 5.38 459 3.96

Price YTW OAS Eff Dur

Food / Beverage / Bottling 107.300 4.94 427 3.53Gaming 99.097 8.06 733 3.29Healthcare Facilities / Supplies 106.232 5.64 484 3.88Home Builders 109.250 4.51 362 4.41Leisure 107.072 5.13 453 3.05Lodging 107.924 4.91 418 3.67Metals / Mining 102.679 6.79 587 4.10Oil Equipment 104.365 5.55 449 4.96

Price YTW OAS Eff DurPaper & Forest Products 100.240 6.58 617 2.59Pharmaceuticals 106.528 5.43 472 3.97Publishing 90.813 8.75 928 4.17Restaurants 105.383 6.20 560 3.02Retail- Food & Drug 100.863 5.91 537 2.87Retail - Stores 103.379 6.38 554 4.26Satellite 108.726 4.15 314 4.66Secondary Oil & Gas Producers 105.989 5.85 488 4.46

Price YTW OAS Eff DurTechnology 103.393 6.93 618 3.90Textle / Apparel / Shoe 103.393 6.93 618 3.90Tower 105.201 4.41 312 5.80Utilities (Elec/Pwr/Gas) 104.782 6.18 558 3.97Wireless 100.675 7.07 487 2.67


Bonds rated below investment grade may have speculative characteristics and present significant risks beyond those of other securities, including greater credit risprice volatility, and limited liquidity in the secondary market. High yield bonds should comprise only a limited portion of a balanced portfolio.


16/28



Exhibit 24. Historical High Yield Sector Metrics

As of 2/14/13 Close As of 2/22/12 Close Rolling 3 Year Averages Rolling 3 Year Highs Rolling 3 Year LowPrice YTW OAS Eff Dur Price YTW OAS Price YTW OAS Price Y TW OAS Price YTW O

Aerospace 105.652 5.32 449 4.16 100.610 6.53 655 96.567 8.07 655 106.454 14.29 1320 69.190 5.22 3Airlines 105.862 5.27 476 2.48 101.977 7.26 675 91.621 11.98 1064 107.458 27.27 2685 59.123 5.10 4

Auto Mfg / Vehicle Parts 105.402 5 .41 475 3.96 108.809 5.16 407 91.950 10.17 930 110.769 32.04 4599 31.801 4.68 3Banking 112.547 4.05 292 5.24 103.551 6.02 463 91.586 8.99 790 114.025 35.00 5178 15.514 3.70 2Broadband 109.372 5.64 511 3.13 105.074 7.88 696 93.066 11.51 985 111.360 29.08 2762 48.670 4.86 3Building Products 109.472 5.97 532 3.65 101.921 7.75 675 90.904 10.49 914 111.088 22.56 2605 45.430 5.32 4Cable 107.358 4.85 408 4.32 108.328 5.24 448 98.568 8.09 693 109.811 19.57 2760 48.659 4.26 3


Capital Goods 108.941 4.80 414 3.46 106.649 6.87 621 99.003 8.82 719 109.653 17.46 2727 68.539 4.44 3Chemicals 101.307 6.70 578 4.18 106.636 5.55 485 95.024 8.92 755 110.137 21.19 2258 50.826 5.18 3CLEC NA NA NA NA 106.478 6.10 519 96.137 8.99 755 107.652 20.34 2212 55.494 5.00 3Consumer Products / Tobacco 105.232 5.66 532 3.33 103.821 7.15 505 96.391 9.50 804 108.024 20.91 2181 57.561 5.37 4Containers 106.698 5.51 475 4.22 104.397 6.23 537 98.655 7.98 611 108.635 13.47 1191 76.977 4.91 3Diversified Telecom 110.068 5.63 435 5.61 97.986 7.93 657 95.520 8.33 630 112.409 15.20 1325 67.365 5.17 3Environmental Services 105.193 5.99 493 5 .43 104.750 5.69 489 102.168 6.94 512 108.092 10.54 841 85.769 5.41 2

Finance 102.008 5.38 459 3.96 93.699 8.31 797 84.260 11.83 1133 102.029 29.67 4666 35.673 5.32 4As of 2/14/13 Close As of 2/22/12 Close Rolling 3 Year Averages Rolling 3 Year Highs Rolling 3 Year LowPrice YTW OAS Eff Dur Price YTW OAS Price YTW OAS Price Y TW OAS Price YTW O

Food / Beverage / Bottling 107.300 4.94 427 3.53 103.473 6.88 625 105.962 5.78 509 108.422 6.78 608 103.247 4.82 4Gaming 99.097 8.06 733 3.29 93.618 10.23 963 85.473 12.36 1171 103.403 27.50 4451 30.499 7.43 6Healthcare Facilities / Supplies 106.232 5.64 484 3.88 101.454 7.70 684 99.065 8.20 648 107.519 15.66 1430 70.600 5.23 4Home Builders 109.250 4.51 362 4.41 95.315 7.80 705 91.973 8.82 731 109.880 20.25 2104 56.862 4.31 3Leisure 107.072 5.13 453 3.05 103.013 7.96 715 94.813 10.29 923 109.493 22.73 2884 56.730 4.69 4Lodging 107.924 4.91 418 3.67 105.578 5.11 451 107.357 4.63 414 110.691 5.50 512 104.629 3.48 2Metals / Mining 102.679 6.79 587 4.10 101.585 7.17 629 96.059 8.61 689 106.003 16.90 1760 62.627 6.19 4Oil Equipment 104.365 5.55 449 4.96 103.232 6.37 511 99.235 7.99 622 107.313 16.90 1540 72.945 3.46 3


Paper & Forest Products 100.240 6.58 617 2.59 97.632 8.63 812 89.361 10.83 1036 101.509 22.29 2814 46.236 6.06 5Pharmaceuticals 106.528 5.43 472 3.97 101.901 6.92 590 97.536 8.55 673 108.742 15.54 1467 71.262 4.83 3Publishing 90.813 8.75 928 4.17 86.929 12.27 1187 80.798 12.93 1333 101.858 26.70 4678 26.318 8.30 6Restaurants 105.383 6.20 560 3.02 100.402 8.15 749 95.828 9.27 924 108.414 18.79 5236 58.398 5.17 3Retail- Food & Drug 100.863 5.91 537 2.87 98.664 7.60 687 91.454 9.13 736 101.135 16.48 1573 61.623 5.43 4Retail - Stores 103.379 6.38 554 4.26 96.636 8.17 757 91.970 9.50 783 104.476 21.12 2184 52.231 6.00 3Satellite 108.726 4.15 314 4.66 107.585 5.48 464 101.559 7.17 551 111.832 13.83 1291 73.702 3.80 2Secondary Oil & Gas Producers 105.989 5.85 488 4.46 102.875 6.97 600 98.443 8.00 605 107.614 16.68 1480 63.718 5.44 3


Technology 103.393 6.93 618 3.90 97.993 8.84 816 89.518 11.21 972 104.966 23.84 2689 43.706 6.33 5Textle / Apparel / Shoe 103.393 6.93 618 3.90 97.993 8.84 816 89.518 11.21 972 104.966 23.84 2689 43.706 6.33 5Tower 105.201 4.41 312 5.80 108.474 4.77 438 104.522 6.10 437 111.901 9.98 780 88.051 2.45 2Utilities (Elec/Pwr/Gas) 104.782 6.18 558 3.97 94.682 8.81 773 91.205 9.66 763 105.969 15.42 1348 67.442 5.99 4Wireless 100.675 7.07 487 2.67 98.307 9.30 841 98.653 8.96 803 103.272 11.07 1033 92.633 6.49 3



17/28



Exhibit 25. High Yield Sector Returns

HIGH YIELD SECTORS 1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years AgoAerospace 0.26 0.18 0.92 7.83 4.83 12.74Airlines 0.29 0.80 2.50 14.13 (2.56) 21.96Auto Mfg / Vehicle Parts 0.11 (0.23) 1.07 12.83 7.22 17.50

Banking (0.06) (0.02) 0.55 16.11 3.14 33.59Broadband 0.11 (0.17) 1.17 14.21 15.02 15.20Broadcast / Outdoor 0.67 0.19 2.67 13.60 2.14 19.15Building Products 0.27 0.22 2.08 17.04 2.52 11.64Cable 0.13 (0.12) 0.49 8.96 9.32 12.42Capital Goods 0.22 0.33 1.25 10.30 8.73 15.60Chemicals 0.18 (0.15) 1.06 8.41 4.54 16.79CLEC 0.00 0.00 0.00 5.36 6.04 12.98Consumer Products / Tobacco 0.23 0.22 1.62 11.81 5.07 12.81Containers 0.28 0.14 1.43 11.45 6.67 12.07Diversified Telecom (0.09) (0.37) (0.11) 20.64 (0.98) 13.75Environmental Services (0.20) (0.75) 1.31 10.03 5.44 15.77Finance (0.03) 0.83 2.82 15.49 3.32 23.66Food / Beverage / Bottling 0.10 (0.01) 0.78 10.22 7.34 12.58

Gaming 0.43 0.26 2.66 12.20 2.62 20.82Healthcare Facilities / Supplies 0.29 0.38 1.68 11.50 5.69 11.92Home Builders 0.09 (0.05) 1.47 18.02 (1.08) 11.54Leisure 0.10 0.04 0.47 12.12 7.56 9.93Lodging 0.22 0.38 1.31 10.83 7.10 12.41Metals / Mining 0.08 (0.03) 1.56 7.91 7.30 12.74Oil Equipment 0.13 0.43 1.28 6.40 8.78 13.13Paper & Forest Products 0.20 0.32 2.06 10.57 (4.84) 15.76Pharmaceuticals 0.20 1.08 0.69 12.24 7.97 11.02Publishing 0.46 (0.22) 0.72 6.79 (6.31) 14.97Restaurants 0.14 0.55 2.06 13.48 9.12 15.16Retail- Food & Drug 0.17 0.85 6.02 9.88 14.29 6.73Retail - Stores 0.36 0.55 1.72 10.95 4.98 13.71Satellite 0.27 0.12 0.15 9.22 10.65 11.97Secondary Oil & Gas Producers 0.25 0.17 1.18 9.01 9.61 12.75

Technology 0.36 0.29 2.34 11.16 6.08 15.36Textle / Apparel / Shoe 0.22 0.48 0.83 10.91 7.57 12.77Tower (0.04) (1.45) (2.02) 4.61 7.31 12.28Utilities (Elec/Pwr/Gas) 0.58 (0.21) 0.54 13.35 8.95 3.31Wireless 0.02 (1.27) 0.80 9.40 3.69 16.22



18/28



Exhibit 26. Emerging Markets Breakdown Prior Close Data

Price YTW OAS Eff DurEmerging Markets Sovereign Bond 118.183 4.17 246 7.46Latin America/Carribean 119.620 4.58 256 8.69Argentina 44.521 12.93 1052 8.82

Brazil 138.360 3.14 94 8.41Colombia 128.476 2.88 106 8.67Mexico 122.255 2.99 105 9.79Peru 142.752 3.44 105 11.21Venezuela 103.985 8.89 708 6.59Russian 126.682 3.06 149 6.31Turkey 124.404 3.64 186 8.06Asia 123.301 3.69 193 8.05Eastern EuropeEastern Europe 119.060 3.92 241 6.47Africa/ME 107.700 4.58 326 5.82Western EuropeWestern Europe 108.187 3.11 211 4.74South AfricaSouth Africa 115.227 3.26 176 6.74CREDIT RATING Price YTW OAS Eff DurAll BBB-Rated 124.539 3.22 146 7.82All BB-Rated 122.797 3.89 209 7.96All B-Rated 98.076 7.53 608 5.72

MATURITY Price YTW OAS Eff Dur1-5 Years 109.752 3.00 253 2.745-10 Years 116.776 3.83 239 5.9710+ Years 124.734 5.14 250 11.4220+ Years 120.619 4.88 190 13.72


Exhibit 27. Historical Emerging MarketsMetricsAs of 2/13/2013 As of 2/21/12 Close Rolling 3 Year Averages Rolling 3 Year Highs Rolling 3 Year Low

Price YTW OAS Eff Dur Price YTW OAS Price YTW OAS Price YTW OAS Price YTW OEmerging Markets Sovereign Bond 118.165 4.18 244 7.47 112.318 5.26 351 108.992 6.06 343 121.199 11.40 814 79.554 3.89 2Latin America/Carribean 119.404 4.61 256 8.69 1 13.298 5.42 341 107.031 6.36 354 122.576 11.89 862 75.346 4.36 2Argentina 44.521 12.92 1050 8.84 48.784 11.52 914 49.263 14.02 1087 66.826 37.19 3384 19.465 8.50 4

Brazil 138.360 3.16 93 8.42 134.064 3.76 165 127.648 4.89 184 142.946 10.12 670 91.588 2.78Colombia 128.476 2.89 106 8.69 125.890 3.42 177 119.968 4.76 219 136.298 10.84 763 84.702 2.63Mexico 122.255 3.00 105 9.78 121.863 3.43 172 115.143 4.41 180 129.057 8.97 582 86.405 2.73Peru 142.752 3.45 104 11.22 131.345 4.01 198 122.183 5.06 207 148.257 9.54 612 86.330 2.88Venezuela 103.000 9.03 720 6.55 76.418 13.71 1208 76.977 13.42 1088 105.430 22.40 2030 50.617 8.69 5Russian 126.803 3.07 146 6.34 120.843 4.64 308 119.134 5.33 267 130.996 11.02 857 87.793 2.61Turkey 124.163 3.68 187 8.05 110.938 5.38 377 112.403 5.61 305 130.755 13.38 1016 73.011 3.13Asia 123.259 3.73 194 8.07 122.025 4.08 228 115.640 5.47 285 130.177 10.85 819 81.561 3.13 1Eastern EuropeEastern Europe 119.331 3.89 235 6.49 110.852 5.47 388 111.412 5.89 337 123.169 12.43 904 78.907 3.52 1Africa/ME 107.654 4.60 325 5.84 108.724 4.66 333 104.239 5.87 388 113.427 12.24 1019 79.399 4.24 2Western EuropeWestern Europe 108.106 3.11 210 4.75 95.871 6.97 602 88.180 11.86 1100 108.633 39.16 3868 58.800 3.06 2South AfricaSouth Africa 115.124 3.29 176 6.76 115.037 3.74 221 110.906 4.23 210 121.606 7.97 636 91.667 2.66 1

As of 2/13/2013 As of 2/21/12 Close Rolling 3 Year Averages Rolling 3 Year Highs Rolling 3 Year LowCREDIT RATING Price YTW OAS Eff Dur Price YTW OAS Price YTW OAS Price YTW OAS Price YTW O

All BBB-Rated 124.623 3.22 144 7.83 124.090 4.05 226 118.250 4.97 225 128.713 9.78 643 89.467 2.95 1All BB-Rated 122.859 3.89 206 7.97 114.719 4.95 330 108.301 6.40 376 127.795 11.86 896 77.954 3.47 1All B-Rated 97.703 7.59 612 5.71 83.002 10.25 883 91.529 8.71 742 99.456 10.18 915 83.484 7.37 5

As of 2/13/2013 As of 2/21/12 Close Rolling 3 Year Averages Rolling 3 Year Highs Rolling 3 Year LowMATURITY Price YTW OAS Eff Dur Price YTW OAS Price YTW OAS Price YTW OAS Price YTW O1-5 Years 109.780 3.01 253 2.75 107.317 4.29 376 107.049 5.00 378 113.309 12.35 1045 87.526 2.71 25-10 Years 116.877 3.82 235 5.99 111.702 5.03 351 109.395 5.73 332 119.730 10.98 847 82.699 3.50 110+ Years 124.564 5.16 249 11.42 115.985 6.01 336 109.808 6.89 338 129.785 11.49 744 73.011 4.82 220+ Years 120.640 4.89 189 13.71 113.817 5.56 257 107.034 6.61 283 128.203 11.72 767 66.248 4.49 1


nvesting in foreign emerging markets entails greater risks than those normally associated with domestic markets, such as political, currency, economic and marketrisks.


19/28



Exhibit 28. Emerging Markets ReturnsREGIONS 1 Week MTD YTD 1 Year Ago 2 Years Ago 3 Years AgoEmerging Markets Sovereign Bond 0.16 0.07 (1.05) 12.98 8.46 12.01Latin America/Carribean 0.19 0.49 (0.75) 13.24 13.20 12.83Argentina 0.16 0.53 (7.08) (9.38) (13.96) 37.85

Brazil 0.09 0.29 (2.11) 8.16 12.99 9.86Colombia 0.09 0.27 (1.77) 9.09 14.48 12.07Mexico 0.08 0.26 (1.68) 8.36 14.26 10.63Peru 0.08 0.27 (1.90) 11.62 15.22 11.00Venezuela 0.63 1.54 4.08 35.32 15.04 19.35Russian 0.13 0.27 (2.21) 11.21 6.20 8.69Turkey 0.34 0.50 (2.24) 17.79 1.44 12.52Asia 0.27 (0.98) (2.56) 8.48 9.71 12.59Eastern Europe 0.09 0.03 (1.48) 16.63 2.15 11.26Africa/ME 0.16 0.05 0.13 7.86 6.35 10.38Western Europe (0.04) 0.09 1.75 13.00 (30.72) (13.41)South Africa 0.27 0.07 (3.19) 6.46 9.93 10.01

CREDIT RATING 1 Week MTD YTD 1 Year 2 Years Ago 3 Years Agonvestment Grade 0.09 (0.01) (1.74) 10.06 10.84 9.78Sub-Investment Grade 0.26 0.20 (0.01) 17.48 5.80 14.58All BB-Rated 0.21 (0.05) (1.55) 15.39 5.99 13.73All B-Rated 0.32 0.50 1.91 20.21 4.91 15.32

MATURITY 1 Week MTD YTD 1 Year 2 Years Ago 3 Years Ago1-5 Years 0.09 0.08 0.56 7.40 3.04 8.345-10 Years 0.11 (0.05) (0.62) 13.41 6.83 11.2810+ Years 0.23 0.19 (2.30) 15.79 13.16 14.78



20/28



Exhibit 29. U.S. Equities & Commodities Breakdown

Equities Current 5 Days Ago 1 Mon Ago 3 Mon Ago 6 Mon Ago 1 Year Ago 2 Years Ago 3 Years AS&P500 1502.42 1521.38 1492.56 1391.03 1413.49 1357.66 1315.45 1108.0DJIA 13932.20 13973.39 13712.21 12836.89 13172.76 12938.67 12212.79 10383.3NASDAQ 3146.03 3198.66 3143.18 2926.55 3073.67 2933.17 2756.42 2242.0

Russell 2000 912.08 923.76 899.24 798.38 812.56 816.50 812.96 632.25Commodities Current 5 Days Ago 1 Mon Ago 3 Mon Ago 6 Mon Ago 1 Year Ago 2 Years Ago 3 Years AVIX 15.22 12.66 12.43 15.31 15.11 18.19 20.80 19.94Gold 1575.20 1610.10 1692.70 1729.55 1654.65 1776.22 1399.13 1114.25Silver 28.57 29.80 32.24 33.35 29.84 34.27 33.09 16.24Brent Crude Futures 114.20 117.66 111.37 108.59 112.20 114.23 104.00 86.57WTI Crude Futures 92.85 97.90 97.07 89.19 98.72 106.48 99.71 86.35Natural Gas Futures 3.26 3.16 3.56 3.90 2.83 2.64 3.87 4.90Gasoline (Average Regular Unleaded) 3.78 3.71 3.31 3.43 3.72 3.58 3.17 2.65


Exhibit 30. U.S. Equities & Commodities Returns

Equities Current 5 Days Ago 1 Mon Ago 3 Mon Ago 6 Mon Ago 1 Year Ago 2 Years Ago 3 Years AS&P500 1502.42 -1.18 0.91 8.67 7.56 13.24 2.11 15.06DJIA 13932.20 -0.24 1.94 9.34 7.25 10.70 8.38 14.06NASDAQ 3146.03 -1.59 0.26 8.09 3.34 8.98 -0.79 18.15Russell 2000 912.08 -1.25 1.52 14.67 13.08 13.36 -4.17 26.86

Commodities Current 5 Days Ago 1 Mon Ago 3 Mon Ago 6 Mon Ago 1 Year Ago 2 Years Ago 3 Years AVIX 15.22 20.22 22.45 -0.59 0.73 -16.33 -26.83 -23.67Gold 1575.20 -2.17 -6.94 -8.92 -4.80 -11.32 12.58 41.37Silver 28.57 -4.13 -11.37 -14.32 -4.24 -16.64 -13.65 75.87Brent Crude Futures 114.20 -2.94 2.54 5.17 1.78 -0.03 9.81 31.92WTI Crude Futures 92.85 -5.16 -4.35 4.10 -5.95 -12.80 -6.88 7.53Natural Gas Futures 3.26 2.91 -8.52 -16.60 15.18 23.16 -15.83 -33.50Gasoline (Average Regular Unleaded) 3.78 1.80 14.23 10.17 1.75 5.64 19.24 42.79


nvesting in commodities entails significant risks. Commodity prices may be affected by a variety of factors at any time. In addition, the commodities markets aresubject to temporary distortions or other disruptions due to various factors, including lack of liquidity, participation of speculators and government intervention.

Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment.


21/28



Exhibit 31. Citigroup US Broad Investment-Grade (USBIG)Agency Index Option Adjusted Spread

Exhibit 32. Citigroup US Broad Investment-Grade (USBIGCorporate Index Option Adjusted Spread

0

20

40

60

80

100

120

140160

180

200

Feb-0

8

M

ay-0

8

Aug-0

8

Nov-0

8

Feb-0

9

M

ay-0

9

Aug-0

9

Nov-0

9

Feb-1

0

M

ay-1

0

Aug-1

0

Nov-1

0

Feb-1

1

M

ay-1

1

Aug-1

1

Nov-1

1

Feb-1

2

M

ay-1

2

Aug-1

2

Nov-1

2

Feb-1

3

O

AS

Average - 46 Current - 15

100

200

300

400

500

600

Feb-0

8

M

ay-0

8

Aug-0

8

Nov-0

8

Feb-0

9

M

ay-0

9

Aug-0

9

Nov-0

9

Feb-1

0

M

ay-1

0

Aug-1

0

Nov-1

0

Feb-1

1

M

ay-1

1

Aug-1

1

Nov-1

1

Feb-1

2

M

ay-1

2

Aug-1

2

Nov-1

2

O

AS

Average - 239Current - 135

Exhibit 33. Citigroup US Broad Investment-Grade (USBIG)High Yield Index Option Adjusted Spread

Exhibit 34. Citigroup Global Emerging Market SovereignBond Index (ESBI) Option Adjusted Spread

350

50 0

65 0

800

95 0

1100

1250

1400

1550

1700

1850

2000

2150

Feb-0

8

M

ay-0

8

Aug-0

8

Nov-0

8

Feb-0

9

M

ay-0

9

Aug-0

9

Nov-0

9

Feb-1

0

M

ay-1

0

Aug-1

0

Nov-1

0

Feb-1

1

M

ay-1

1

Aug-1

1

Nov-1

1

Feb-1

2

M

ay-1

2

Aug-1

2

Nov-1

2

Feb-1

3

O

AS Average - 801

Current - 507

100

200

300

400

500

600

700

800

Feb-0

8

M

ay-0

8

Aug-0

8

Nov-0

8

Feb-0

9

M

ay-0

9

Aug-0

9

Nov-0

9

Feb-1

0

M

ay-1

0

Aug-1

0

Nov-1

0

Feb-1

1

M

ay-1

1

Aug-1

1

Nov-1

1

Feb-1

2

M

ay-1

2

Aug-1

2

Nov-1

2

O

AS Averag e - 343 Current - 254


The indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent theperformance of any specific investment.

The indices selected by Morgan Stanley Smith Barney to measure performance are representative of broad asset classes. Morgan Stanley Smith

Barney retains the right to change representative indices at any time.


22/28



Index Definitions

Citigroup Mortgage Index - This index measures the mortgage component of the USBIG Index, comprising 30-and 15-year GN

FNMA, and FHLMC pass-throughs and FNMA and FHLMC balloon mortgages.

Citigroup US Treasury Benchmark (On-the-Run) Indexes These indexes measure total returns for the current two-, three-, fi

seven-, ten-, and 30-year on-the-run Treasuries that have been in existence for the entire month.

Citigroup US Inflation-Linked Securities Index (US-ILSI) The US-ILSI measures debentures with fixed-rate coupon payme

that adjust for inflation as measured by the Consumer Price Index (CPI). This index has a minimum maturity of one year an

minimum amount outstanding of $1 billion for both entry and exit. It is separate and distinct from our Broad Investment-Gr

(BIG) Bond Index and currently comprises Treasury securities.

Citigroup High-Yield Market Index The index includes cash-pay, deferred-interest, and Rule 144A bonds. The bonds must hav

remaining maturity of at least one year, a minimum amount outstanding of $100 million (subject to an entry criteria of $200 mill

per issue or $400 million per issuer), and a speculative-grade rating by both Moodys Investor Service and Standard & Poors. Whan issuer misses or expects to miss an interest payment or enters Chapter 11, the bonds exit the index at month-end. The returns

adjusted for the loss of a coupon payment or accrued interest.

Citigroup Global Emerging Market Sovereign Bond Index (ESBI) The index includes Brady bonds and US dollar-denomina

emerging market sovereign debt issued in the global, Yankee, and Eurodollar market, excluding loans. The bonds must hav

remaining maturity of at least one year, a minimum amount outstanding of $500 million, and a maximum rating of BBB+/Baa1

S&P or Moodys. Brady bonds, restructured in accordance to the Brady Plan, of countries with no foreign debt or whose foreign d

is not rated by S&P and Moodys are included in the ESBI. We exclude defaulted issues from the ESBI.

Investment Grade Corporate Index-is an aggregate index of all outstanding investment grade (BBB and higher) corporate bowith maturities of 1 through 100 years.

AA Corporate Rated Index - option adjusted spread to aggregate Treasuries (1 30 yr maturities). The AA Corporate Ra

Index is an aggregate index of all outstanding AA investment grade corporate bonds with maturities of 1 through 100 years. T

obligators capacity to meet its financial obligation is verystrong; with very low expectation of credit risk and very strong capacity

timely payment of financial commitments.

A Corporate Rated Index - option adjusted spread to aggregate Treasuries (1 30 yr maturities). The A Corporate Rated Inde

an aggregate index of all outstanding A investment grade corporate bonds with maturities of 1 through 100 years. The oblig

capacity to meet its financial obligation is strong. However, the obligor is more susceptible to economic swings than higher ra

issuers.

BBB Corporate Rated Index - option adjusted spread to aggregate Treasuries (1 30 yr maturities). The BBB Corporate Ra

Index is an aggregate index of all outstanding BBB investment grade corporate bonds with maturities of 1 through 100 years. T

obligors capacity to meet its financial obligations are of medium grade. The safety parameters currently appear to be sufficient,

may deteriorate over the long term.

BB Corporate Rated Index - option adjusted spread to aggregate Treasuries (1 30 yr maturities). The BB Corporate Ra

Index is an aggregate index of all outstanding BB non-investment grade corporate bonds with maturities of 1 through 100 ye

Issuers with speculative fundamentals. The obligors capacity to meet its future payments is only moderate.


23/28



B Corporate Rated Index - option adjusted spread to aggregate Treasuries (1 30 yr maturities). The B Corporate Rated Inde

an aggregate index of all outstanding B non-investment grade corporate bonds with maturities of 1 through 100 years. There is l

assurance that the obligor has the capacity to meet its financial obligation. Investors looking for higher returns often explore

category, but are exposed to high risk.

CCC Corporate Rated Index option adjusted spread to aggregate Treasuries (1 30 yr maturities). The CCC Corporate Ra

Index is an aggregate index of all outstanding CCC non-investment grade corporate bonds with maturities of 1 through 100 ye

The obligor may be in default, or at risk of default. The capacity of meeting its future obligations depends upon favorable busin

conditions. Issues rated in this category are vulnerable and of poor quality.

Emerging Market US$ Index option adjusted spread to aggregate Treasuries (1 100 yr maturities). The Emerging Mar

US$ Index is an aggregate index of outstanding US$ denominated Emerging Market bonds with maturities of 1 through 100 years

S&P 500 - The Standard & Poors 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measperformance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all m

industries. The index was developed with a base level of 10 for the 1941-43 base period.


24/28



GlossaryBasis Points (BPS) -A short hand reference to 1/100 of 1 percent (.01%). For example, a bond with a yield of 5.50% is 50 basis pohigher than a bond yielding 5.00%.

Consumer price index (CPI)- measures changes in the price level of consumer goods and services purchased by households. TCPI is defined by the United States Bureau of Labor Statistics as "a measure of the average change over time in the prices paid

urban consumers for a market basket of consumer goods and services."

Corporate Bond -A debt security issued by a corporation and sold to investors. The backing for the bond is usually the paymability of the company, which is typically money to be earned from future operations. In some cases, the company's physical as

may be used as collateral for bonds. Corporate bonds are considered higher risk than government bonds.

Cost - Includes principal and accrued interest but does not include management or transaction fees.Crude Oil WTI (West Texas Intermediate) Cushing - A crude stream produced in Texas and southern Oklahoma which seras a reference or "marker" for pricing

Coupon -The annual rate of interest payable on an interest bearing security expressed as a percentage of the principal amount.

Credit Risk -The risk that the issuer might be unable to pay interest and/or principal on a timely basis. Widely recognized raagencies, such at Moody's Investors Service and Standard & Poor's offer their assessment of an issuer's creditworthiness. Treasury securities are considered the 'safest'investment as they are backed by the 'full faith and credit' of the U.S. Government.the otherside of the scale, high yield corporate bonds are considered to have the greatest credit risk.Current Yield - Annual interest rate paid by a bond, expressed as a percentage of it's current market price. It does not reflecttotal return over the life of the bond.

Dow Jones Industrial Average (DJIA) - The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stothat are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Effective Duration - An option-adjusted measure of a bond's (or portfolio's) sensitivity to changes in interest rates. The figurcalculated as the average percentage change in a bond's value (price + accrued interest) under Treasury curve shifts of +/- 100 bpoints. It incorporates the effect of embedded options for corporate bonds and changes in prepayments for mortgaged-bac

securities.

Estimated Income Per Year - Income is derived from multiplying the coupon of each individual security within the portfolio bypar amount. This figure does not take into consideration future principal pay down or income lost from matured assets.

Federal Funds Rate - The federal funds rate is the interest rate at which depository institutions lend balances at the FedReserve to other depository institutions overnight.

Interest Rate Risk -The risk that the market value of securities might rise or fall, primarily due to changes in prevailing interates. All fixed income securities are susceptible to fluctuations in interest rates; if interest rates rise, bond prices will fall and v

versa.

LIBOR (London Interbank Offered Rate) - LIBOR is the primary benchmark used by banks, securities houses and investors tothe cost of borrowing in the money, derivatives and capital markets around the world. The rate is based on rates quoted by Brit

Bankers Association contributor banks.

Maturity Date - The date on which the principal of a fixed income security becomes due and payable to the security holder.

NASDAQ Composite Index - The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all thNASDAQ tiers: Global Select, Global Market, and Capital Market. The index was developed with a base level of 100 as of Februar

1971.


25/28



Overnight indexed swap (OIS) - is an interest rate swap where the periodic floating rate of the swap is equal to the geome

average of an overnight index rate over every day of the payment period. The index rate is typically a central bank rate or equival

for example the Federal funds rate in the US. Overnight Index Swaps are instruments that allow financial institutions to swap

interest rates they are paying without having to change the terms of contracts in place with other financial institutions. The fi

rate of OIS is typically an interest rate considered less risky than the corresponding interbank rate (LIBOR), because it is based ocentral bank rate and only the net difference in interest rates is paid at maturity of the swap so there is limited counterparty risk.

Par Amount - Is the amount of money an investor may receive once a bond matures or is called.

Perpetual Preferred Securities - A type of preferred stock that has no maturity date. Issuers of perpetual preferred stock typicwill have redemption privileges on such shares. The portfolio analytics tool we use to calculate effective duration and yiel

maturity defaults to a 50-year maturity for securities that are perpetual in nature.

Prime Rate - The prime rate is the rate that banks use to set rates on many consumer loan products. The prime rate will move updown in lock-step with the federal funds rate. It is the most widely quoted bank measure at which banks will also lend

money to their most favored customers

Secondary Market Risk -While a secondary market exists for most fixed income securities, there is no guarantee that a secondmarket will exist for a particular fixed income security. Furthermore, if a security issold prior to maturity, the price received mamore or less than face value, or the amountof the original investment.Spot Gold - Spot gold is t

reaching for yield intelligently

Documents