1. Municipal Bond AAA Underlying Investment Opportunity Ian Welch 800.657.8622 Ian.Welch@raymondjames.com *Please see the end for important information regarding credit ratings

2. 2 Table of Contents The Case For AAA* Underlying Rated Municipal Bonds Market Overview Default Data Non State AAA* State AAA* Bond Insurer Ratings Strategy *Please see the end for important Information regarding credit ratings

5. Create Default Resistant Portfolio

6. Take advantage of sell side pressure

10. The outflows came on the heels of $3.41 billion of inflows (12/20/2010). The back-and-forth followed two consecutive weekly outflows that saw total net assets fall to $328.97 billion.

11. The $494.4 billion municipal bond mutual fund industry reported $5.4 billion in market losses on its holdings last week (12/20/2010), following a $7 billion loss the previous week.

12. Since the industry peaked at $527.8 billion on Oct. 20, it has bled $33.38 billion, or 6.4% of its assets.

13. Mutual funds, which own more than 17% of all municipal bonds, have been transformed from a support for munis into a depressant.

14. The first 10 months of this year, investors entrusted an additional $32.2 billion to municipal bond mutual funds, or 10% of issuance during that period.

16. Redemptions from municipal funds lately have forced portfolio managers to sell bonds to raise cash, contributing to the drubbing for municipals, which has pushed the yield on a benchmark triple-A 10-year muni bond up 63 basis points since Nov. 10 — when the drain began.

17. The four-week moving average for the period ended Dec. 15 for all municipal funds, including those that report their figures monthly, was a nearly unprecedented loss of $2.3 billion. That’s the second-highest tally ever recorded. The record was set by the four-week period that ended Dec. 8.

18. “There is no doubt that the demand side of the market has weakened,” according to R.J. Gallo, a portfolio manager at Federated Investors.

20. Given the prospects for limited economic and tax revenue recovery, the scheduled phasing-out of federal fiscal relief for the states, and the likelihood of continued state aid cuts and local property tax base weakness, pressures should continue.

21. Credit stress can in many cases become more pronounced in the coming years.

24. Bond security is very strong for most debt issuances, and is provided for in state constitutions, statutes, covenants with bondholders, and local ordinances. U.S. state and local government bonds are usually secured by a general obligation of the issuer. For local governments, this is generally accompanied by an unlimited property tax pledge and such taxes are senior to the property’s mortgage obligation. Other commonly issued municipal bonds are secured by a first lien on sales or income taxes, where there is little if any legal discretion for the taxpayer to choose not to remit the taxes owed to the government. * Source: FitchRatings, U.S. State & Local Government Bond Credit Quality: More Sparks than Fire, November 16, 2010

26. The vast majority of state government spending is for education and social services (including Medicaid), as well as, to a much lesser degree, corrections. Local government spending covers the wide array of municipal services, including public safety, health care, sanitation, transportation, and education.

27. There is a long record of governments making difficult choices to maintain budget balance while making full and timely debt service payments even in very stressful financial situations.

28. The officials managing the government’s cash, in their fiduciary role, legally cannot just choose to pay other expenses as opposed to debt service; the priority of payment is generally quite high, so that a bondholder is well positioned even in financial stress. DEBT SERVICE

31. Current Law: Interest exempt from income tax

32. Proposal: Interest taxable as income for newly-issued bonds

33. Result: This potentially could create a finite pool of tax free municipal bonds15 While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without federal tax exemption, which subjects the related interest income to federal income tax.

35. 169 AAA Non State Municipalities = $50.09 Billion total debt issued

36. For municipal bond fund shareholders, there is a dearth of bond availability…[there are] no longer enough AAA-rated bonds.”

38. AAA Municipalities Key S&P Data and Ratios 18

39. AAA Municipalities Key S&P Data and Ratios 19

40. AAA Municipalities Key S&P Data and Ratios 20

41. AAA Municipalities Key S&P Data and Ratios 21

42. AAA Municipalities Key S&P Data and Ratios – by State 22

43. 23 State AAA General Obligation Unlimited

44. U.S. States Bond Ratings: Fitch, S&P, Moody’s State Fitch Moody's S&P Alabama AA-plus Aa1 AA Alaska AA-plus Aa1 AA-plus Arizona Aa3 AA-minus Arkansas Aa1 AA California A-minus A1 A-minus Colorado Aa1 AA Connecticut AA Aa2 AA Delaware AAA Aaa AAA D. C. AA-minus A1 A-plus Florida AAA Aa1 AAA Georgia AAA Aaa AAA Hawaii AA-plus Aa1 AA Idaho AA(Lease) Aa1 AA Illinois A A1 A-plus Indiana AA-plus (Lease) Aaa AAA Iowa AAA(Implied GO) Aaa AAA Kansas AA(Lease) Aa1 AA-plus Kentucky AA-minus (Lease) Aa1 AA-minus Louisiana AA Aa2 AA-minus Maine AA-plus Aa2 AA Maryland AAA Aaa AAA Massachusetts AA-plus Aa1 AA Michigan AA-minus Aa2 AA-minus Minnesota AAA Aa1 AAA Mississippi AA-plus Aa2 AA Missouri AAA Aaa AAA Montana AA-plus Aa1 AA State Fitch Moody's S&P Nebraska AA-plus Nevada AA-plus Aa1 AA-plus New Hampshire AA-plus Aa1 AA New Jersey AA Aa2 AA New Mexico Aaa AA-plus New York AA Aa2 AA North Carolina AAA Aaa AAA North Dakota Aa1 AA-plus Ohio AA-plus Aa1 AA-plus Oklahoma AA-plus Aa2 AA-plus Oregon AA-plus Aa1 AA Pennsylvania AA-plus Aa1 AA Puerto Rico A3 BBB-minus Rhode Island AA Aa2 AA South Carolina AAA Aaa AA-plus South Dakota AA(Lease) AA Tennessee AAA Aaa AA-plus Texas AAA Aaa AA-plus Utah AAA Aaa AAA Vermont AAA Aaa AA-plus Virginia AAA Aaa AAA Washington AA-plus Aa1 AA-plus West Virginia AA Aa1 AA Wisconsin AA Aa2 AA Wyoming AA-plus Source: Bond Buyer as of July 1, 2010, State General Obligation ratings. Lease notation represents appropriation requirement Please see the end for important information regarding credit ratings

45. 25 Bond Issuer Ratings Currently, less than 10% of new municipal bond issues are insured, which is down from about 50% in 2008. (Municipal Securities Rulemaking Board)

46. Bond Issuer Ratings 26

48. Potential Future extension (2012 – beyond) of Build America Bond Program may limit supply side for tax free bonds

49. Large Defaults could create extreme selling pressure and a flight to AAA quality

50. Higher tax rates may create demand for tax-free investments

51. Sell side pressure creating inefficient market; bids not reflective of yield/ quality

53. Willingness by State’s to target senior bond debt holders

54. Legislative changes in General & Special Obligation definitions

55. Legislative changes in tax exempt status for existing bonds

56. A potential lack of federally subsidized bond programs

58. Identify yield curve advantage. 10, 20, 30 yr maturities

59. Volume trading advantage. 100M,250M + purchase size

60. Identify maximum investment amount per issue

61. Determine approximate size of end portfolio

62. Hourly monitoring of national inventory for targeted bonds

64. Disclaimer Ratings assigned by Fitch are opinions based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating. Ratings are not facts, and therefore cannot be described as being "accurate" or "inaccurate". Users should refer to the definition of each individual rating for guidance on the dimensions of risk covered by such rating. Fitch's opinions are forward looking and include analysts' views of future performance. In many cases, these views on future performance may include forecasts, which may in turn (i) be informed by non disclosable management projections, (ii) be based on a trend (sector or wider economic cycle) at a certain stage in the cycle, or (iii) be based on historical performance. As a result, while ratings may include cyclical considerations and typically attempt to assess the likelihood of repayment at "ultimate/final maturity", material changes in economic conditions and expectations (for a particular issuer) may result in a rating change. Because it involves a look into the future, Moody’s credit ratings are by nature subjective. Moreover, because long-term credit judgments involve so many factors unique to particular industries, issuers, and countries, Moody’s believes that any attempt to reduce credit rating to a formulaic methodology would be misleading and would lead to serious mistakes. That is why Moody's uses a multidisciplinary or "universal" approach to risk analysis, which aims to bring an understanding of all relevant risk factors and viewpoints to every rating analysis. Moody’s then relies on the judgment of a diverse group of credit risk professionals to weigh those factors in light of a variety of plausible scenarios for the issuer and thus come to a conclusion on what the rating should be.