On December 4, 2002 The Standard & Poor's / Investortools Municipal Bond Indices for the month of November 2002 will be produced using modified deletion criteria. Specifically, The Index Portfolio will no longer contain bonds that were not held in mutual fund portfolios priced by Standard & Poor’s at the time The Index is being calculated.

The Standard & Poor’s / Investortools Municipal Bond Index Portfolio (The Main Index Portfolio) was constructed in December 1998 and introduced as the JJ Kenny PERFORM Index in June 1999. Since its introduction, the index has undergone a name change and been expanded to include 34 indices which are composed of subsets of The Main Index Portfolio.

The Standard & Poor’s / Investortools Municipal Bond Indices have been designed to accommodate the need of managed municipal bond funds for more appropriate benchmarks. The opinions of users and prospective users have been and will continue to be the basis for the continued development of this project. It is this industry feedback that provides the basis for the decision to change the bond deletion criteria of The Main Index Portfolio.

The Main Index Portfolio is comprised of bonds that are held in the portfolios of those managed municipal bond funds that are priced by Standard & Poors. The monthly total returns of the portfolio are derived from beginning and end of month prices provided by Standard & Poor’s. Total return represents changes in market value as well as the portfolio’s periodic income. Using this same process, sector and state indices are derived from subsets of The Main Index Portfolio.

At present, Standard & Poor’s prices approximately 65% of all independently priced managed municipal bond funds for NAV calculations. The majority of the remaining bond funds receive Standard & Poor’s pricing either daily or weekly from Standard & Poor’s for backup pricing or for pricing audits. The Main Index Portfolio contains 54,687 bonds (Oct.-2002.) Market weighting is achieved by using the total par value outstanding for each bond multiplied by the market value per bond. The average growth since inception has been 416 additional bonds per month. One reason for this rate of growth is the limited deletion criteria applied to The Main Index Portfolio. Specifically, the portfolio is rebalanced monthly, component instruments are redescribed, qualifying new bonds are added and bonds that mature or are to be called within one month are removed. Bonds whose total outstanding par value falls below $2,000,000 are also removed.

Notably missing from this deletion criteria are those bonds that are no longer held by any of The Main Index's component fund portfolios. Originally, the reason for leaving these bonds in The Index was a desire to prevent bonds from leaving and then returning to The Index thereby achieving a more stable portfolio. It has become clear however, that a more representative index is achievable by deleting bonds that are no longer held in municipal bond fund portfolios Standard & Poor’s is asked to price.

The analysis of the proposed change to index deletion criteria was performed on The Main Index Portfolio and on 32 state and sector sub-indices. The historical results of the 16 months were compared to results generated by deleting those bonds from each portfolio that were not held by any portfolios at the time. The new deletion criteria reduced The Main Index Portfolio's size to 42,713 bonds as of Oct. 2002. This was a reduction in size of 11,974 bonds. The average monthly growth in the portfolio since it's inception was reduced to 138 bonds per month.

The cumulative total return for The Main Index for the 16 month period was 1.6 basis points (bps) lower using the new deletion process. For 29 of the 33 indices observed, the averages of the monthly differences in total return was less than +/- 1 bps. The average monthly difference in total return was 3 bps higher for Virginia and 2 bps lower for Texas, when the deleted bonds were excluded, while the average total return shift for the transportation and high yield indices were 5 bps higher and 2 bps lower, respectively. More significantly, deleting "not held" bonds produced average durations that were longer for The Main Index by .10 years and with the exception of three sub indices were longer for all indices in the portfolio. One of the anticipated effects of this new deletion policy is that this increase in duration for more conventionally managed funds will become more pronounced over time as bonds in the middle maturity range leave the portfolio.

The average yield shift for all indices was plus 5 bps. This was an anticipated consequence of the upward shift in duration.

Over the most recent 16 month period, the inclusion of the deleted bonds has had a minimal impact on the performance and risk characteristics of the published indices. It is anticipated however that as time progresses the impact of deleted bonds will increase as they represent a larger percentage of the total. For example, including deleted bonds added 9.6% to the market value of the index in July 2001. By October 2002 this impact had increased to 16.5%.

For additional details see the accompanying table.

The Standard & Poor's / Investortools Municipal Bond Indices and their corresponding portfolios are relatively new. Indices can be viewed at the websites listed in this report. Basic supporting data and one year histories for indices can be viewed at the same locations. Additional history and more detailed statistics are also available.

The changes to The Standard & Poor's / Investortools Municipal Bond Indices monthly deletion process are designed to produce an array of index portfolios that are more representative and more replicable for municipal fund managers. While there are no perfect benchmarks, it is anticipated that these changes will create an index portfolio that more closely mirrors the risk and performance characteristics of index users and users of portfolio/index analytics.