From Turmoil to Recovery, What’s Next? Jean McGowan, CFA February 16, 2010

2 Trailing 12 Months and Annualized Trailing 3 Years Total Return U.S. Treasury Bonds Underperformed in 2009 Source: Factset, Barclays Capital. Longer dated Treasuries trailed the short end of the curve for the year as prices came in putting upward pressure on yields as economic conditions slowly started to improve. For the three-year period Treasuries have performed well across the board with the 5-year leading the way, as the economy struggled.

33 Yield of the 10-Year Treasury Source: Bloomberg

4 Yield Curve Change The Yield Curve Steepened as the Economic Outlook Improved Source: Factset. The Treasury yield curve remains upward sloping with yields rising across the curve as better economic news has resulted in more risk tolerance from investors who are looking outside of Treasuries for increased yield.

5 Source: Factset, EcoWin, Evergreen Investments. Monetary policy continues to remain very accommodative with the real Fed Funds rate well below its average as the Federal Reserve continues to target the Fed Funds rate between 0% and.25%. Economics – Real Fed Funds Rate

66 Modest Rate Increases this Year? Source: Bloomberg

7 Investors Appetite for Yield Pushed Broader Fixed Income Indices Higher Trailing 12 Months and Annualized Trailing 3 Years Total Return Source: Factset, Barclays Capital, JP Morgan. Corporate high yield outperformed all other bond sectors over the past twelve months while Treasuries underperformed other bond sectors over the past year. Mortgage backed securities led the way over the trailing three-year period.

8 Source: Factset, Barclays Capital, Evergreen Investments. The relationship between municipal yields and Treasury yields inverted in 2008 and only recently displayed signs of converging. Municipal vs. Treasury Yields Source: Barclays Capital, Bloomberg

9 Virginia GO vs. Treasury Yields Source: Bloomberg

10 Corporate Spreads are Nearing the Long Term Average

11 Source: Factset, EcoWin, Evergreen Investments. Baa Corporate Spread30 Yr Fixed Mortgage Spread Source: Factset, Evergreen Investments. Investment grade corporate spreads continued to move lower during the fourth quarter as more investors looked to garner additional yield on their assets. Mortgage rates were volatile during the quarter but ended 2008 below mid 2007 levels. Fixed Income – Credit Market Indicators (Corporate & Mortgage Spreads)

12 The High Yield Market Returned More than 50% in 2009 CSFB HIGH YIELD SPREAD Data as of December 31, Sources: CSFB.

13 Yield Spreads are Ahead of the Decline in Default Rates SPREADS vs. DEFAULT RATES Data as of December 31, 2009 respectively. Sources: CSFB, Moody’s Investors Service.

14 Strong Equity Market Performance in 2009 Trailing 12 Months and Annualized Trailing 3 Years Total Return Source: Factset. The past year has seen strong performance from most of the major equity indices both domestically and internationally. Despite these positive trailing 12-month returns, the three-year numbers across styles and market caps still show a deficit due to the 2008 market collapse.

15 Source: Factset, EcoWin, Evergreen Investments. The forward P/E multiple remained slightly above its long term average at the end of December as the S&P 500 continued to rise in price off the March lows. S&P 500 Price/Earnings

16 Outlook for 2010 The financial markets are no longer cheap, but still have upside potential. Downside risk remains if the economic recovery is weaker than expected Returns are likely to be more muted this year and security selection will be very important within all asset classes. Volatility is likely to remain high as concerns about the economic growth, the employment picture, the legislative agenda and the Federal Reserve may weigh on the market. A sustained modest economic recovery should support moderately positive returns across most asset classes.