Economic Outlook provided by Vining Sparks during their session in the Executive Track during the 9th Annual Police Officers' Credit Union Conference.

1. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Q2 2012 Economic Outlook
The Sputtering Economy
Why the U.S. Economy Has Not Achieved Escape Velocity Coming out of the Great Recession
Presented by:
Craig Dismuke
Chief Economic Strategist
cdismuke@viningsparks.com

2. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
One Year Later, Even Lower Yields
Treasury Yield Curve
Source: Bloomberg, Vining Sparks
6
Average Since 1990
5
4
June 2011
3
-130 bps
2 2% June 2012
1 1%
0
FF 3M 1 2 3 5 7 10 30
6/19/2012 Page 2

3. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Weak U.S. Economy, Fed Action, Greece,
Treasury Yields
Sources: Bloomberg, Vining Sparks
3.5
Operation Twist
3.0 “Late 2014”
2.5
2.0 “Mid 2013”
U.S. Downgrade Payrolls Disappoint
1.5 GDP Revision
Spain Comes into Focus
Greek Plan Strong Payroll Report
1.0 Involves No Greece Defaults
New Money FOMC More Neutral
0.5 Dovish FOMC
0.0
M J J A S O N D J F M A
6/19/2012 Page 3

4. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Expectations Drop Further
Fed Funds Futures Contracts
Source: Bloomberg, Vining Sparks
2.5
June 2012
June 2011
2.0
1.5
1.0
0.5%
0.5
0.0
A M J J A S O N D J F M A M J J A S O N D J F M A M J J A
2012 2013 2014
6/19/2012 Page 4

5. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Growth Continues to Be Moderate
GDP Growth QoQ Annualized
Source: Bureau of Economic Analysis, Vining Sparks
3.8 3.9 3.8
3.0
2.5 2.3
1.7 1.8 1.9
1.3
0.4
-0.7
-6.7
Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
6/19/2012 Page 5

6. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Recovery Not As Robust As Others
Change In GDP from Beginning of Recessions
Source: Bureau of Economic Analysis, Vining Sparks
20%
July 1981 Recession
July 1990 Recession
15% March 2001 Recession
December 2007 Recession
Percentage of Peak GDP
10%
5%
0%
-5%
-10%
-8 -6 -4 -2 0 2 4 6 8 10 12 14 16
Quarters from Beginning of Recession
6/19/2012 Page 6

7. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Deleveraging Continues, More to Come
Household Debt as a Percentage of Disposable Income
Sources: Federal Reserve, Vining Sparks
140%
Peak: 129%
130%
120%
110% Current:
100% 112%
90%
Average 1985-2000: 83%
80%
70%
Average 1962-1984: 63%
60%
50%
1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012
6/19/2012 Page 7

8. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Confidence Rebounded, Still Low
Consumer Confidence
Sources: Conference Board, University of Michigan, Vining Sparks
120 160
110 140
100 120
University of Michigan
Conference Board
Long-Term Average
90 100
80 80
70 60
60 40
50 Conference Board 20
Great Recession Debt Ceiling Debate
University of Michigan
40 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
6/19/2012 Page 8

9. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Rising Equity Prices Lifting Spirits
Household Net Worth - Financial Assets
Sources: Federal Reserve, Bloomberg, Vining Sparks
15,000 58
Peak: $55.4 T
14,000 56
-7.7% Current: $52.3 T
Household Net Worth (Trillions)
Dow Jones Industrial Average
13,000 54
+99.7%
12,000 52
11,000 50
10,000 48
9,000 46
Dow Jones Industrial Average
8,000 Quarter-End 44
Nadir: $44.2 T Household Net Worth – Financial Assets
7,000 42
6,000 40
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
6/19/2012 Page 9

10. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Payroll Growth Has Been Inconsistent
Monthly Change in Nonfarm Payrolls
Sources: BLS, Vining Sparks
700
Monthly Change in Nonfarm Payrolls
3-Month Average
500
300
Thousands
100
3-Month Average Growth 96k
-100
12-Month Average Growth 149k
Current Total Nonfarm Payrolls 133.0 MM
-300
Pre-Recession Total Nonfarm Payrolls 138.0 MM
Net Difference -5.0 MM
-500
2010 2011 2012
6/19/2012 Page 10

11. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Unemployment Rate Dropping
Headline Unemployment Rate
Source: Bureau of Labor Statistics, Vining Sparks
12%
Peak: 10.0%
10%
Current: 8.2%
8%
6%
4% Not in the
Labor Force Employed
2% 10% Peak 82.7 MM 138.4 MM
May 2011 85.7 MM 139.6 MM
May 2012 87.9 MM 142.0 MM
0%
1982 1987 1992 1997 2002 2007 2012
6/19/2012 Page 11

12. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Fundamental Shift in Labor Market
Jobs/Population Ratio
Source: Bureau of Labor Statistics, Vining Sparks
65%
= [(Full Time x 1) + (Self Emp. x 1) + (Part Time x .5)] / Total Civilian Pop.
64%
63%
62%
61%
60%
59%
58% 57.48%
57%
56%
1982 1987 1992 1997 2002 2007 2012
6/19/2012 Page 12

13. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Earnings Growth Has Been Weak
Average Hourly Earnings YoY
Source: Bureau of Labor Statistics, Vining Sparks
5.0
4.5
4.0
Average Hourly Earnings (YoY)
3.5
3.0%
3.0
2.5
2.0 1.7%
1.5
1.0
0.5
0.0
1985 1990 1995 2000 2005 2010
6/19/2012 Page 13

14. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Real Disposable Income Growth Weak
Disposable Personal Income Growth
Sources: Bureau of Economic Analysis, Vining Sparks
10%
8%
6%
4% 3.5%
2%
0%
0.9%
-2%
-4%
-6%
Disposable Personal Income (3M/3M Ann.)
-8%
Disposable Personal Income, Adjusted for Inflation (3M/3M Ann.)
-10%
2009 2010 2011 2012
6/19/2012 Page 14

15. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Cannot Use Home Equity This Time
Household Net Worth - Real Estate
Sources: Federal Reserve, Bloomberg, Vining Sparks
250
2003 – 2007 17
230 Home Prices Up 54%
210
$2.2 Trillion Extracted 15
Household Net Worth - Trillions
S&P CaseShiller Home Prices
190
13
170
$13.5 T 11
150
130 9
110 $6.3 T
7
90
Household Net Worth – Real Estate 5
70
S&P CaseShiller Home Price Index
50 3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
6/19/2012 Page 15

16. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Housing Suppressing Investment
Gross Private Investment (Chained SAAR)
Sources: Bureau of Economic Analysis, Vining Sparks
$1,400
Non-Residential Investment in Equipment
Non-Residential Investment in Structures
$1,200 Residential Investment
$1,000
Billions
6.3% of GDP
$800
$600
$400 2.3%
$200
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
6/19/2012 Page 16

17. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Home Sales Up, Still Low
New And Existing Homes Sales
Sources: National Assoc. of Realtors, Vining Sparks
8,000
1,400 Existing Home Sales
New Home Sales 7,000
Existing Home Sales in Thousands (SAAR)
New Home Sales in Thousands (SAAR)
1,200
6,000
1,000
5,000
800 4.62 MM
4,000
600 3,000
400 343k 2,000
200 1,000
0 0
2003 2005 2007 2009 2011
6/19/2012 Page 17

18. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Permits Up, Still Very Low
Total Building Permits by Type
Sources: U.S. Commerce Department, Vining Sparks
2,500
2,263k Total Single Family Permits
Multi-Family Permits
2,000
1,500
Thousands
1,000
723k Total
500
0
2000 2002 2004 2006 2008 2010 2012
6/19/2012 Page 18

19. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Non-Distressed Prices Finding Support
CoreLogic Home Price Indices
Sources: CoreLogic, Vining Sparks
20%
15%
10%
5%
0%
-5%
-10%
-15% National Home Price Index
National Home Price Index, Excluding Distressed
-20%
2002 2004 2006 2008 2010 2012
6/19/2012 Page 19

20. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Must Work through Excess Supply
Home Inventory by Type
Sources: National Association of Realtors, Mortgage Bankers Association, Vining Sparks
10
Shadow Inventory (MBA)
9 Existing Home Inventory
8 New Home Inventory
7 Applying 12-Month
Rate of Change
6
Millions
5
4 Pre-Bubble Level
3 Pre-Bubble Level
2
1
0
2000 2002 2004 2006 2008 2010 2012 2014 2016
6/19/2012 Page 20

21. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Significant Risks to Economic Stability
 Europe: A Debt Crisis and a Recession
 Year-End Fiscal Cliff
 Unwinding Monetary Accommodation
 Oil Prices
 Possibility of Inflation
6/19/2012 Page 21

22. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Debt Continues to Grow
2011 Estimated Budget Deficit as a Percentage of GDP
Sources: European Commission Est., Vining Sparks
2
0
Deficit
-2
-4 -3.0%
-6
-8
-10
Maastricht Treaty Requirement
-12
6/19/2012 Page 22

23. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Debt Continues to Grow
Debt as a Percentage of GDP Greece (159%)
Sources: Eurostats, Vining Sparks, Q3 2011 Est.
140
Italy
120 (120%)
Portugal
100 (110%)
80
Euro Area (87%)
60
Spain
40 (66%)
Ireland
20 (105%)
Maastricht Treaty Requirement
0
2002 2003 2004 2005 2006 2007 2008 2009 2010
6/19/2012 Page 23

24. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
A Double Dip Makes Matters Worse
GDP (YoY)
Sources: Eurostats, Vining Sparks, Q3 2011 Est.
10
8
6
4
2
0
-2
Greece
-4 Portugal
Ireland
-6 Spain
-8 Italy
Euro Area
-10
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
6/19/2012 Page 24

25. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
U.S. Fiscal Policymakers Face Tough Choices
U.S. Debt and Total GDP
Sources: Treasury, Bureau of Economic Analysis, Vining Sparks
18
Total GDP
16
Total U.S. Debt Outstanding
14 Debt Ceiling
12
Trillions
10
8
6
4
2
0
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
6/19/2012 Page 25

26. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Year-End Fiscal Cliff
 Expiration of Bush Tax Cuts
 Expiration of Payroll Tax Cut
 Extension of Unemployment Insurance
 $1.2 Trillion in Automatic Fiscal Cuts
 Total: E3.5% GDP
 $16.4 Trillion Debt Ceiling Will Be Hit
 Moody’s, S&P, and Fitch Warnings
6/19/2012 Page 26

27. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Monetary Policy: Accommodative
 Fed Funds Target Rate – 0.00% to 0.25%
 Fed Funds Rate Projections – “Late 2014”
 Grown Balance Sheet: $2.88 Trillion
 Operation Twist Ongoing, Ends June 2012
 Longer Average Maturity
 Talking Frequently about Housing
 New Quantitative Easing Tabled for Now
 Slightly More Hawkish Tone in April
6/19/2012 Page 27

28. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Projections Reveal Minor Shifts in Fed Sentiment
Federal Funds Target Projections by FOMC Members
Sources: Federal Reserve Appropriate Pace of Policy Firming Chart, Vining Sparks
5.0
April FOMC Projection (Average)
4.5 January FOMC Projection (Average)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2012 2013 2014 Longer Run
6/19/2012 Page 28

29. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Inflation Expectations Anchored
Implied Future Inflation Rates
Source: Bloomberg, Vining Sparks
2.8
2.6
10-Year TIPs Breakeven Rate
2.4 2.13%
2.2
2.0
1.8
1.6 1.69%
5-Year TIPs Breakeven Rate
1.4
1.2
1.0
F M A M J J A S O N D J F M A M
6/19/2012 Page 29

30. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Projections Are Historically Unreliable
Federal Reserve GDP Projections and Actual GDP
Sources: Federal Reserve (Green Books and SEP), Vining Sparks
6
1 Year before Period
5 2 Years before Period
4
3
2
Actual
1
0
-1
-2 Average Variance from Actual
-3
1 Year before Period: 1.3
2 Years before Period: 1.8
-4
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
6/19/2012 Page 30

31. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
A Tough Exit for the FOMC
 No Evidence of Rapid Economic Growth
 Risks Creating Significant Market Volatility
 Fed has been biggest buyer of Treasuries
 $1.9 trillion in excess holdings to sell or let pay down
 Longer yields are very low, in part because of Fed’s stance
 *Drives Mortgage Rates Higher
 Increases Government’s Borrowing Cost
 Unwinds Spread Tightening in Other Sectors
6/19/2012 Page 31

32. Recap Weak Growth Consumption Investment Risks to Stability Monetary Policy
Summary
 Consumption Is Modest, but Household Finances Still Face
Long-Term Headwinds
 Watch Earnings and Disposable Income Growth
 Housing Is Poised to Be Accretive to Growth, Still Need to
Work through Foreclosure and Shadow Inventories
 Watch Shadow Inventory and Building Permits
 Overall Growth Will Continue to Be Modest
 Risks to Economic Stability Are Significant
 Exiting Accommodative Policies Will Be Very Tenuous for Fed –
Unlikely to Do So Soon
6/19/2012 Page 32

33. INTENDED FOR INSTITUTIONAL INVESTORS ONLY. The information included herein has been obtained from sources deemed
reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any
and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been
prepared for general information purposes only and does not consider the specific investment objectives, financial situation and
particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks
information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of
investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is
dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the
projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned.
Member FINRA/SIPC.
6/19/2012 Page 33

34. Portfolio Strategies – Q2 2012
Presented by:
Craig Dismuke
Chief Economic Strategist
cdismuke@viningsparks.com

35. Portfolio Strategies – Rate Environment
Fed Funds Futures Contracts
Source: Bloomberg, Vining Sparks
1.00
5/31/2012
0.90
4/30/2012
0.80 3/30/2012
2/29/2012
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
6/19/2012 Page 35

36. Portfolio Strategies – Rate Environment
Treasury Yield Curve
Source: Bloomberg, Vining Sparks
3.5
6/7/2012
3.0
4/30/2012
5/31/2011
2.5
2.0
1.65
1.5
1.0
0.71
0.5 0.28
0.0
1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y
6/19/2012 Page 36

37. Portfolio Strategies – Rate Environment
2s10s Spread
Source: Bloomberg, Vining Sparks
350
300
250
200
150
2s10s Spread (137)
100
Average
+/- 1 SD
50
0
Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12
6/19/2012 Page 37

38. Portfolio Strategies – Rate Environment
2s5s Spread 5s10s Spread
Source: Bloomberg, Vining Sparks Source: Bloomberg, Vining Sparks
180 160
160 140
140
120
120
100 100
80 80
60 60
40 5s10s Spread (94)
2s5s Spread (43) 40
20 Average Average
0 20
+/- 1 SD +/- 1 SD
-20 0
Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
6/19/2012 Page 38

39. Portfolio Strategies – Rate Environment
2s3s Spread 3s5s Spread
Source: Bloomberg, Vining Sparks Source: Bloomberg, Vining Sparks
70 120
2s3s Spread (11)
60
Average 100
50 +/- 1 SD
80
40
30 60
3s5s Spread (32)
20
40 Average
10 +/- 1 SD
20
0
-10 0
Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
5s7s Spread 7s10s Spread
Source: Bloomberg, Vining Sparks Source: Bloomberg, Vining Sparks
90 90
80 80
70 70
60 60
50 50
40 40
5s7s Spread (38)
30 30
Average 7s10s Spread (56)
20 +/- 1 SD 20
Average
10 10 +/- 1 SD
0 0
Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
6/19/2012 Page 39

40. Portfolio Strategies – Relative Value
5Y Bullet Spread / 5Y Treasury
Source: Vining Sparks
180
Agency Spread (31)
160 Average
+/- 1 SD
140
120
100
80
60
40
20
Treasury
0
Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
6/19/2012 Page 40

41. Portfolio Strategies – Relative Value
5Y NC 1Y Spread / 5Y Bullet
Source: Vining Sparks
120
Callable Spread (11)
Average
100 +/- 1 SD
80
60
40
20
Bullet
0
Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
6/19/2012 Page 41

42. Portfolio Strategies – Relative Value
15Y CC MBS Spread / 5Y Treasury
Source: Bloomberg, Vining Sparks
350
MBS Spread (96)
Median
300
+/- 1 SD
250
200
150
100
50
Treasury
0
Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
6/19/2012 Page 42

43. Portfolio Strategies – Relative Value
15Y CC MBS Spread / 5Y NC 1Y
Source: Bloomberg, Vining Sparks
120
MBS
100
80
60
40
20
Spread (54)
0 Median
+/- 1 SD
Callable Agency
-20
Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
6/19/2012 Page 43

44. Portfolio Strategies – Relative Value
15Y 4.00 Minus 30Y 4.00 MBS Price
Source: Bloomberg, Vining Sparks
6.0
30 Year Price Diff. (-0.31)
Median
5.0
+/- 1 SD
4.0
3.0
2.0
1.0
0.0
15 Year
-1.0
Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12
6/19/2012 Page 44

45. Portfolio Strategies – Relative Value
15Y 5.00 Minus 15Y 3.50 MBS Price
Source: Bloomberg, Vining Sparks
7.0
3.50% MBS Price Diff. (2.06)
Median
6.0
+/- 1 SD
5.0
4.0
3.0
2.0
1.0
5.00% MBS
0.0
Aug-10 Feb-11 Aug-11 Feb-12
6/19/2012 Page 45

46. Portfolio Strategies – Relative Value
Sector Yield Curves - Short End
Source: Vining Sparks
2.00
1.80 Treasuries
Agency Bullets
1.60
Agency 1Y Callables
1.40
PAC CMOs
1.20 Sequential CMOs
1.00 Corporates ('A' Rated)
Municipals (Taxables)
0.80
SBA (Premium Pool)
0.60
0.40
0.20
0.00
3M 1 2 3
6/19/2012 Page 46

47. Portfolio Strategies – Relative Value
Sector Yield Curves - Belly
Source: Vining Sparks
4.00
3.50
Treasuries
Agency Bullets
3.00
Agency 1Y Callables
PAC CMOs
2.50
Sequential CMOs
2.00 Corporates ('A' Rated)
Municipals (Taxables)
1.50 MBS (15 Year)
MBS (30 Year)
1.00
0.50
0.00
3 4 5 6 7 8 9 10
6/19/2012 Page 47

48. Portfolio Strategies – Relative Value
Sector Yield Curves - Long End
Source: Vining Sparks
6.00
5.50
Treasuries
5.00
Agency Bullets
4.50 Agency 1Y Callables
4.00 PAC CMOs
Sequential CMOs
3.50
Corporates ('A' Rated)
3.00 Municipals (Taxables)
2.50
2.00
1.50
1.00
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
6/19/2012 Page 48

49. Portfolio Strategies
A. Rate Environment
1. Low interest rates
2. Fed on hold – Staying in cash or overnights will be painful
3. Asymmetric interest rate risk
4. Yield curve has flattened, with the steepest part beyond 7 years
B. Sector Relative Value
1. Agency spreads are tight
2. MBS spreads are fairly tight, but prepay and extension risks are concerns
3. Corporate and municipal spreads remain relatively attractive
4. With long yields as low as they are, short-amortizing products with lockout make most sense
C. Concentration Risks
1. Longer maturity agencies
2. Mortgages with significant prepayment risk
1. Higher coupons
2. Fast prepays causing lower book yields
3. Longer maturity mortgages with too much extension risk or price volatility
4. Excessive short-term cashflow
6/19/2012 Page 49

50. Portfolio Strategies
D. Portfolio Strategies
1. Optimize*
2. Invest cash
3. Push short cashflows out to 2013 and beyond when economics make sense
4. Consider sector swaps to take advantage of cross-sector relative value
5. Swap out of extension and/or prepayment risks in MBS
6. Reduce line items through odd-lot cleanups
6/19/2012 Page 50

51. Optimize: Finding the Best Sector Allocation
9.4% 14.1% 30.1% 65.0%
83.2% 80.3% 66.8% 33.7%
6/19/2012 Page 51

52. Invest Cash: The Cost of Waiting Is too High
6/19/2012 Page 52

53. Example Strategy
6/19/2012 Page 53

54. Example Strategy: Buy/Sell Details
6/19/2012 Page 54

55. Example Strategy: Cashflows
6/19/2012 Page 55

56. Example Strategy: Results
A. Give Up 32 BPS Income
B. Take $10K Loss on $54 Million Transaction
C. Go into Sectors with Better Spreads
D. Dramatically Reduce Price Volatility (-7.63% +300)
E. Shortens Interest Rate Sensitivity
F. Push $5 Million of Cashflow from 2012 to 2017
6/19/2012 Page 56

57. INTENDED FOR INSTITUTIONAL INVESTORS ONLY. The information included herein has been obtained from sources deemed
reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any
and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been
prepared for general information purposes only and does not consider the specific investment objectives, financial situation and
particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks
information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of
investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is
dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the
projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned.
Member FINRA/SIPC.