Broad Market Strategy Composite and Comparative Benchmarks
Annual Compound Returns for the Periods Ended December 31, 2011

We outperformed the Weighted Barclays Index by 13 basis points for the fourth quarter as the Investment Grade portion (2/3) of the portfolio exceeded its benchmark by 35 basis points while the High Yield portion of the portfolio (1/3) trailed its benchmark by 59 basis points.  The Investment Grade portion exceeded its benchmark due principally to 1) credit quality:  the BBB securities within the index (approximately 41%) outperformed the Index as a whole; however we limit our exposure to this sector to no more than 30% of our portfolio and typically have a 20-25% exposure.  This underweighting contributed 10 basis points to our outperformance; 2) industry exposure:  we limit our exposure to any one sector to 30%, and with the exception of Bank and Finance, generally have no more than a 10-15% exposure to any one industry.  Bank and Finance accounts for almost 33% of the Index, and we generally have a 20-25% exposure; this Sector underperformed the Index as a whole during the quarter and our performance benefitted 5 basis points from this underweighting; 3) although longer maturity bonds in the index outperformed shorter maturities, our intermediate term portfolio (6-8 year average maturity) benefitted 28 basis points given the significantly lower returns of the shorter term bonds in the Index. The High Yield portion trailed Barclays High Yield Index by 59 basis points.  The difference was due primarily to credit quality; we do not purchase CCC rated securities which account for approximately 17% of the Index and significantly outperformed the Index as a whole; this resulted in a 29 basis points negative impact on our performance; the remaining difference was due to the over/underperformance of sectors in the Index relative to our holdings. 

For the twelve months, our performance exceeded the Weighted Barclays Index by 99 basis points.  The Investment Grade portion of the portfolio exceeded the Barclays Index by 146 basis points.  The difference was primarily attributable to maturity (47 basis points) and our underweighting of Bank and Finance (41 basis points); somewhat offsetting these positive attributions was credit quality (14 basis points) as the BBB subsector outperformed the Index as a whole.  Security selection accounted for the remaining positive attribution. The High Yield portion outperformed its benchmark by 70 basis points.  The difference was due principally to the fact that CCC and lower rated securities underperformed the Index as a whole; this benefitted our performance by 76 basis points.  Sector performance and their under/over weighting relative to the Index accounted for the balance of our outperformance.

Our 3-year performance trailed the Weighted Benchmark by 214 basis points as the result of the 2009 performance of lower rated credits in both the Investment Grade and High Yield Sectors.  For example, CCC rated bonds were up over 90% during 2009 and our exclusion of those bonds in our portfolio led to our trailing the Weighted Benchmark during 2009 by more than 800 basis points.  Our 5-year performance approximated that of the Weighted Index while it trailed for the 10-year period and again approximated the Weighted Index for the longest period.  Our Sharpe Ratio is 13% greater than that of the Weighted Index (.81 vs. .72).

With respect to the Weighted Lipper Mutual Bond Funds Average, we exceeded that Average by 52 basis points for the quarter, 198 basis points for the year and approximated that Weighted benchmark for three years.  We exceeded that benchmark for the  5-, 10- and longer year periods.  These results reflect the fact that A Rated Bond Funds typically have significant holdings in Treasury securities, and Investment Grade Corporate Bonds have outperformed Treasuries in 15 of the last 20 years; our 100% corporate exposure has benefitted our performance over the longer term.    Our Sharpe Ratio is 28% higher than that of the Weighted Lipper Bond Funds Average (.73 versus .57).