Smith Affiliated Capital (SAC) is a registered investment advisor specializing in separate account fixed income. Our strategy for all funds incorporates the articulation and management of the client’s asset/liability mix, balancing liquidity needs with the generation of long-term gains. In the spirit of risk aversion and principal protection, SAC uses only call-protected, investment-grade securities.

Past results are not a guarantee of future results or trends. Smith Affiliated Capital claims compliance with the Global Investment Performance Standards (GIPS®).

SAC's Investment Committee does not employ the use of derivative instruments such as options, futures, or swap agreements nor does it employ leveraging techniques or lend client portfolio securities to any broker, dealer, or financial institution in order to earn income return. The investment committee's goal is to seek the highest level of liquidity given the above mentioned investment policies and strategies.

Composite Methodology

SAC makes every effort to place each account in an appropriate composite. Inclusion in the composite depends on several factors. SAC does not use model portfolios in its composite reporting. The basic rule for inclusion is the ability to align the new account with the similar traits and characteristics of those accounts currently within the composite. New accounts do not enter into a taxable composite until a minimum of a full three months of SAC management. Tax-exempt accounts enter a tax-exempt composite after a three- to six-month period under management at SAC.

All returns have been calculated on an asset-weighted basis in U.S. dollars. The dispersion of the composite's individual annual account returns is measured as the standard deviation, expressed in basis points, over the preceding 12 months when at least 5 portfolios are continuously present. For the periods 1996 through 1999 composite returns are equal-weighted and without a dispersion measure, and therefore not in compliance with GIPS.

The investment results reported (performance results can be obtained by contacting SAC) represent gross historical performance numbers calculated after transaction costs but prior to the deduction of management fees, except where clearly indicated as being 'net of fees,' which are reported after the deduction of management fees. The investment advisory fees charged by SAC are described in Part II of its Form ADV. Since fees are deducted quarterly, the compounding effect will increase the impact of fees by an amount directly related to the gross account performance. For example, an account with a 1.0% annualized investment management fee -- deducted quarterly and with a five-year annualized performance of 10% before fees -- will have net annualized performance of 8.93%. SAC's fee is negotiated with the client, depending on account size, reporting requirements and other variables.

Indices

Index performance is included to provide a comparative indication of the performance of securities of the types in which accounts may invest. Indices are not actively managed and do not reflect transaction costs, management fees or other expenses. They do not reflect the risk profiles or the investment approaches used in the accounts that make up the SAC composites.

For certain strategies, SAC employs a mix of the below-listed indices in order to more accurately reflect the risk and liquidity needs of the portfolios in those strategies. The makeup of these market composites is defined in the individual strategy descriptions found by clicking on the Taxable and Tax-Exempt links above.

91-Day T-bill Index

Barclays Capital Government Index (BCG)

Barclays Capital Government Intermediate Index (BCGI)

Barclays Capital 1-3 Year Government Index

Barclays Capital Government/Credit Intermediate Index (BCGCI)

Barclays Capital Government/Credit Index (BCGC)

Barclays Capital Aggregate Intermediate Index

Barclays Capital Municipal Bond Index (BCMB)

Barclays Capital 7-Year General Obligation Index

Merrill Lynch 1-3 Year Government/Corporate Index

Merrill Lynch 3-7 Year Municipal Bond Index

Merrill Lynch Global Index

Standard and Poor's 500

Please contact Matthew Smith, President, for the complete documentation, including fully GIPS-compliant presentations, on these or any of our other composite products, or for information regarding the standards used in presenting the performance data on this sheet.