Robert F. Carey, CFA Chief Investment Officer First Trust Portfolios L.P.

1. 2010 Market Update/Outlook • Robert F. Carey, CFA • Chief Investment Officer • First Trust Portfolios L.P. This report was prepared by First Trust Advisors L. P., and reflects the current opinion of the authors.  It is based upon sources and data believed to be accurate and reliable.  Opinions and forward looking statements expressed are subject to change without notice.  This information does not constitute a solicitation or an offer to buy or sell any security.

2. Money Flowing Into Equities: Block Trades Source: Bloomberg

3. Money Flowing Into Equities: Non-Block Source: Bloomberg

4. Open-end Funds Net Inflows January 2009 to Feb 2010 $50b$40b$30b$20b$10b0-$10b-$20b-$30b Bond Funds Stock Funds Jan Feb Mar Apr Jun Jul Aug Sept Oct Nov Dec Jan Feb Source: Investment Company Institute

5. Market Valuation Equation Asset Turns Margin X V = Credit Spread X X Inflation TAXES

6. Bond Spreads Over 10-Year Treasury Source: Citigroup Global Markets / Haver Analytics, Bloomberg, Merrill

7. CDS Spreads Source: CDS, Bloomberg

8. Market Valuation & S&P Chart1986 to Current Monthly Index Closes S&P 500 Index 4.23.10

9. Market Valuation & S&P Chart Cash Flow ROI S&P 500 Median CFROI Discount Rate 4.23.10

10. Globalization and Correlation

11. Correlation of Foreign Stocks to the S&P 500 Source: Bloomberg

12. AAII Bearish Index Source: Bloomberg, AAII

13. AAII Bearish Index / S&P 500 Total Return Source: Bloomberg

14. Where’s The Value? 4.23.10

16. Web Resources

17. 2010 Investment Overview • Jeffrey K. Schroeder • Senior Managing Consultant • PFM Asset Management, L.L.C.

18. Long-Term Treasury Yields Longest Bull Market in History 3.45% on 05/17/2010 Source: Bloomberg

19. Yield Curve Flattens On Concerns In Europe • Concerns, that Greece and other European countries will be unable to repay debt, led longer-term U.S. Treasury rates lower by more than 0.40% from April to May. • At the same time, short-term rates remained unchanged, leading to a flattening of the yield curve. Still, from a historical perspective, the yield curve remains steep. U.S. Treasury Yield Curve April 1, 2010 versus May 14, 2010 Source: Bloomberg

20. Yield Curve Continues To Flatten • The debt crisis in Europe weighed more heavily on long-term yields than short-term yields as the prospects for long-term growth in Europe have diminished. 10-year U.S. Treasury yields have dropped between 0.40% and 0.50% from the beginning of April, with 10-year U. S. Treasuries yielding below 3.5%. In that same period 2-year yields dropped about 0.30% to yield under 0.80%. 2-Year and 10-Year U.S. Treasury Spread May 1, 2000 – May 14, 2010 Source: Bloomberg

21. Current Short-Term Investment Rates Investment Rates as of May 17, 2010 Source: Bloomberg

22. Longer-Term Portfolios Outperform over Time • Allocation to longer-term strategies should be based on the each entity’s investment objectives, risk tolerance, and liquidity needs *Illinois Funds Money Market Fund **Source: Bloomberg, Illinois Funds Website

23. 2010 Debt Market Overview • Wendy J. Flaherty • Senior Vice President • First Trust Portfolios L.P.

24. Municipal Market Overview

25. Insurers in Transition Deterioration of once Aaa rated bond insurers has changed the market for municipalities: • Today, to obtain low interest rates and sell your bonds in the market it is necessary to have and maintain a strong underlying rating.

26. Ratings in Transition Prior to credit crisis, investors relied on insurance to enhance the value of their bonds 60% of new issues were insured at its peak. Today, less than 10% of new issues are backed by insurance. Credit ratings and understanding of municipal credit is more important today than ever before. Rating agencies are recalibrating municipal credit ratings – resulting in higher ratings for most government agencies. Why? Municipal credits default rates are so low only .03% as compared to nearly 1% in corporate bonds. What does this mean for your District? It is more important than ever to maintain financial policies and procedures that will preserve the credit quality of your District today and in the future.

27. American Recovery and Reinvestment Act of 2009 Signed into law on February 17, 2009, the ARRA created significant opportunities for school districts to finance school construction projects. The ARRA is a “Federal” law. The bonds described in the Act are those that may be issued under federal laws. The bonds must also be issued in accordance with Illinois laws, including the School Code, the Local Government Debt Reform Act, Bond Issue Notification Act and Property Tax Extension Limitation Law.

28. New Types of Bonds for School Construction Qualified School Construction Bonds Build America Bonds Recovery Zone Economic Development Bonds Qualified Zone Academy Bonds

29. Most Popular – Build America Bonds Issued Taxably vs. traditional Tax Exempt Issuer receives a 35% subsidy from the IRS Over $103 Billion in issuance since inception in April 2009 BABs provide taxable fixed income investors with a new investment option, taxable municipal debt, an alternative to corporate bonds

30. BABs Issuance Update Total BABs issued thru April 2010 is over $103 Billion!

31. BAB Deals Sold by Size

32. BAB Deals Sold by Purpose Class

33. BAB Coupons – Interest Rates BABs are issued Taxably and the Issuer receives a 35% subsidy from the IRS

34. BAB by Rating Since the majority of ratings are in the A range or better, only 2% of the issues have insurance as an added credit enhancement

35. Sample Interest Rates

36. Conclusions BABs have dramatically changed the municipal bond market Issuers have a cost effective means of funding capital expenditures Investors have a new high quality taxable debt option A temporary event? Remains to be determined: Many market participants are calling for a permanent extension The cost to the Federal government is substantial during a challenging budget environment YET many in Washington believe the Tax Credits are much more efficient than traditional tax-exemption Given the historical difference in default rates: The yield differential between BABs and corporate bonds seems counter-intuitive…will this change over time? We believe extension will be made at least through 2013