With the turmoil in the markets, a historic shift has been observed in the yield spread on munis, particularly Michigan municipal bonds. Munis are selling at a vast premium to Treasuries on a yield basis. We think this premium is unusual and provides some opportunities. Most notably, we observe:

• There is apparent mispricing of risk in Michigan municipal bonds. The entire market is being painted with one broad brushstroke. Michigan, as I can attest first-hand, is a very diverse state in geography and economy.

• Ratings are helpful, but not determinative. We’re carefully analyzing the issues and the municipalities individually.

• The municipal bond insurers are in turmoil. In fact, many of the insurers are junk rated.

• Tax rates are going up for many investors, and this makes municipal bonds more attractive. Of particular interest is the Health Care Bill, which adds a 3.8% Unearned Income Medicare Contribution tax on dividends, interest and capital gains in 2013. Municipal bond interest is exempt from these taxes also, making the tax-equivalent yield even more attractive to high bracket individuals.

• The current interest rate environment is unique. The yield curve is at a record steepness, and we see opportunity while staying reasonably short as protection against inflation.

• Quality is king. Not all municipal bonds posses the same level of risk, but the market seems to be pricing them that way.

• Liquidity is queen. Municipalities are facing revenue crunches, probably in the magnitude on average of -10- 15% for 2011 and 2012 and possibly longer. They need money and will borrow. We think BABs are a short term solution to the liquidity issue.

• The market is dislocated and somewhat inefficient. We are seeing ‘fire-sale’ prices on some issues. In addition, we see the lack of a central unified market presenting opportunistic buying. We buy on the bid (wholesale) for our portfolios: the spreads tend to be pretty big now.