Sincerely,

Peter M. Welber
President and Chief Executive Officer

A number of protections assure the safety of assets managed by Chevy Chase Trust. Chevy Chase Trust is required under federal law to segregate all assets held in any fiduciary capacity from Chevy Chase Trust’s general assets. All client assets at Chevy Chase Trust are kept on a separate set of books and records showing in proper detail all transactions engaged. Thus, fiduciary assets would not be subject to any claims of general creditors of Chevy Chase Trust.

Chevy Chase Trust is continually monitored to ensure the safety of client assets. On an annual basis, Chevy Chase Trust files a statement of its financial condition with, and for review by, the Office of Thrift Supervision. Additionally, Chevy Chase Trust is subject to annual internal audits of its operations and administration, as well as regular examinations by the Office of Thrift Supervision and the Securities and Exchange Commission.

Chevy Chase Trust is held to a strict fiduciary standard by the Office of Thrift Supervision. Chevy Chase Trust must act in the best interest of its clients at all times. As such, Chevy Chase Trust maintains a Code of Ethics as well as Policies and Procedures regarding the avoidance of conflicts of interests. These policies include topics such as brokerage placement practices, the investment of fiduciary funds, disclosure of material events, and the monitoring of employee personal securities transactions. Compliance with all of these policies is audited annually by Chevy Chase Trust’s internal audit staff, as well as all applicable regulatory agencies.

All managed accounts undergo rigorous reviews. Managed accounts are individually reviewed prior to their acceptance to ensure that Chevy Chase Trust can properly administer the account. Once accepted, the assets held in respective accounts are promptly evaluated. In addition to frequent reviews by the investment manager throughout the year, a formal review of the account is conducted on an annual basis. Internal auditors and federal regulatory examiners annually review this process to ensure compliance with federal regulations.

Chevy Chase Trust has a Chief Compliance Officer who is responsible for designing and implementing policies and procedures to prevent and detect securities fraud. The Chief Compliance Officer has extensive experience in banking and investments, and has an independent reporting structure that alleviates any potential conflicts of interest.

An internal audit is conducted annually by persons independent of Chevy Chase Trust. The internal auditors communicate directly to Chevy Chase Trust’s Board of Directors. In addition, Chevy Chase Trust employs Ernst & Young LLP as its external CPA firm to conduct an annual financial statement audit. Ernst & Young is a national firm with the depth and experience necessary to conduct an independent audit in accordance with the best practices of the accounting industry.

SEI Private Trust Company (“SPTC”) serves as Chevy Chase Trust’s sub-custodian. All fiduciary assets are held in a custody account in SPTC’s name, for the benefit of Chevy Chase Trust and further credit to individual clients.

As a trust institution, SEI Private Trust Company (“SPTC”) segregates assets it custodies from its own assets. By doing so, the assets in a custody account do not become the assets of SPTC, but remain the assets of the customers. Thus, in the unlikely event of SPTC’s insolvency, SPTC’s creditors would have no legal claim to such assets.

The assets are held at the Depository Trust Company or the Federal Reserve or the Bank of New York, depending upon the depository eligibility of each asset. Account balances are reconciled twice a week, as well as at month end. Reconciliation of items over 5 days old is highlighted and escalated to Chevy Chase Trust management for resolution.

Chevy Chase Trust Company ensures the safety of client assets by segregating the investment and cash functions. Portfolio managers are not able to move cash for any client accounts, nor are they permitted to process any transactions to client accounts other than securities trades.

Account Administrators are able to process cash transactions, but controls are in place to ensure that they act only on the instructions of authorized signers for each account.

Chevy Chase Trust’s sub-custodian, SEI Private Trust, issues annual SAS-70 Reports on Controls Placed in Operations and Tests of Operating Effectiveness. These reports, which both describe the controls in place and document their testing by independent auditors, are reviewed by the management of Chevy Chase Trust. The reports are also reviewed by the Office of Thrift Supervision during its annual examination of Chevy Chase Trust.

Chevy Chase Trust has a Management Committee that consists of the senior managers of the Company. The Committee meets monthly to review and approve the activities of the prior month – new and closed accounts, discretionary account distributions, account reviews, investment performance, investment policy changes, financial results, compliance activities, audit reports and regulatory issues. The Management Committee is chartered by, and reports directly to, Chevy Chase Trust’s Board of Directors, which meets to review and ratify the activities of the Management Committee.

Chevy Chase Trust maintains both Professional (Errors & Omissions) and Directors and Officers Liability insurance. Each policy has total coverage of $25,000,000. Chevy Chase Trust has never had to make a claim under either policy. Chevy Chase Trust also carries excess liability insurance policies in the amount of $65,000,000. In addition, Chevy Chase Trust’ sub-custodian, SEI Private Trust, carries Errors & Omissions Insurance coverage of $50,000,000.