Fund Commentary
as of June 30, 2010
At its June 2010 Federal Open Market Committee meeting, the Federal Reserve decided to keep the target for the key federal funds rate at its record low of between 0% and 0.25%. The vote was 9 to 1, with Kansas City Fed president Hoenig the lone dissenter. Using a more careful tone, the Fed said that the economic recovery is "proceeding," as opposed to April's meeting when the language was "continuing to strengthen." In referring to Europe and its impact on U.S. growth, the Fed noted "financial conditions have become less supportive of economic growth...largely reflecting developments abroad."

The Government Portfolio provided a total return of 0.00% for the quarter. During the period we utilized a barbell strategy with the goal of enhancing yield while preserving liquidity. The Portfolio's overall duration is being maintained long relative to the benchmark.

There are growing worries about the general health of the economic recovery. New home construction continues to fall and new home sales are at their lowest levels since 1963. Previously owned home sales also fell as the buyer tax credit expired on April 30. Despite a recent drop, the continued high level of jobless claims points to the fact that hiring remains weak. A Business Roundtable survey brought some good news when it reported that 39% of large company CEOs said that they intended to increase hiring in the second half of the year.

 
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Not FDIC insured | May lose value | No bank guarantee

*Reinvestment date of June 30. The amount shown represents dividends paid from fund net investment income and excludes distributions from capital gain income.

Credit ratings are subject to change at any time. AAA rating by Standard & Poor’s is obtained after S&P evaluates a number of factors, including credit quality, market price, exposure and management. Money market funds rated Aaa by Moody’s are judged to be of an investment quality similar to Aaa-rated fixed income obligations, that is, they are judged to be of the best quality. Ratings are based on an evaluation of several factors including credit quality, diversification and maturity of assets in the portfolio as well as management strength and operational capabilities. This fund is on the National Association of Insurance Commissioners list of Class 1 money market mutual funds. Inclusion on the NAIC list is the result of an accounting measure involving the fund’s underlying investments, and does not constitute an assessment of quality. The NAIC listing does not represent an endorsement or recommendation of the overall fund.
An investment in the Portfolio is not insured or guaranteed by the FDIC or any other government agency. Although the Portfolio seeks to maintain a value of $1.00 per share, it is possible to lose money.
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