Fund Commentary
as of June 30, 2010
In the second quarter, the broader markets experienced unexpected turbulence due to less favorable economic data. It became quickly apparent that economic recovery would be slower than had been hoped and that job creation would trail estimates. This realization caused the Treasury and municipal markets to rally as investors sought relative safety and return. We saw bids strengthen for fixed-rate municipal notes as non-traditional buyers entered the municipal market.

The Municipal Portfolio offers institutional investors tax-exempt return and stable value. We manage the Portfolio with a focused approach to liquidity and credit quality, enabling the Portfolio to retain a strong liquidity position and a top-tier credit profile. During the quarter, the Municipal Portfolio earned an AAAm rating from Standard and Poor's. The Portfolio returned 0.04% for the three-month period.

For the municipal market, the second quarter of the calendar year marks the beginning of municipal note season, the time of year that issuers come to market to offer fixed-rate operating notes in anticipation of tax revenue. During the second quarter, we selectively purchased top-tier municipal notes in order to lock in tax-exempt returns at attractive historical tax-exempt/taxable ratios. The Fund's duration increased by a total of four days, with a weighted average life of approximately 34 days by quarter end.

 
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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.

**The tax-equivalent 7-day yield is based on an assumed tax rate of 35.0%.
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. 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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